UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-KSB

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
                     For the year ended December 31, 2000.

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required] For the transition period _________ to _________.

                          Commission file Number 0-9940

                              THE FINX GROUP, INC.
           (Name of small business issuer as specified in its charter)
                     (Formerly Known as Fingermatrix, Inc.)

            New York                                     13-2854686
(State or other jurisdiction of             (IRS Employer Identification Number)
 incorporation or organization)

249 Saw Mill River Road, Elmsford, New York                      10523
(Address of principal executive offices)                       (Zip Code)

         Issuer's telephone number, including area code: (914) 592-5930

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, par value 0.01 per share
                                (Title of class)

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

         Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not 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. [ ]

         The issuer's revenues for the year ended December 31, 2000 were
$3,218,000.

         The aggregate market value of the common equity held by non-affiliates
of the Registrant as of April 2, 2001 was approximately $1.942 million computed
on the basis of the reported sale price per share ($0.58) of such stock on
the National Association of Securities Dealers, Inc.'s Over the Counter Bulletin
Board. Shares of Common Stock held by each officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.

         Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes X   No ___

DOCUMENTS INCORPORATED BY REFERENCE:  None

Transitional Small Business Disclosure Format (check one):  Yes ___  No X

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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACT, INCLUDED IN THIS
ANNUAL REPORT ON FORM 10-KSB, INCLUDING WITHOUT LIMITATION THE STATEMENTS UNDER
"RISK FACTORS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" ARE, OR MAY BE, FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT").

WITHOUT LIMITING THE FOREGOING, (I) THE WORDS "BELIEVES," "ANTICIPATES,"
"PLANS," "EXPECTS," "INTENDS," "ESTIMATES" AND SIMILAR EXPRESSIONS ARE INTENDED
TO IDENTIFY FORWARD-LOOKING STATEMENTS AND (II) FORWARD-LOOKING STATEMENTS
INCLUDE ANY STATEMENTS WITH RESPECT TO THE POSSIBLE FUTURE RESULTS OF THE
COMPANY, INCLUDING ANY PROJECTIONS OR DESCRIPTIONS OF ANTICIPATED REVENUE
ENHANCEMENTS OR COST SAVINGS. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND
UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS, WHICH MAY CAUSE THE ACTUAL
RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY, OR INDUSTRY RESULTS, TO BE
MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE, OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.

SUCH FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: THE COMPANY'S HISTORY OF
LOSSES AND CASH FLOW DEFICITS; NEED FOR ADDITIONAL FINANCING TO FUND OUR PRESENT
AND PROPOSED BUSINESS ACTIVITIES; DEPENDENCE ON PRESENT EXECUTIVE OFFICERS AND
KEY PERSONNEL TO MANAGE OUR PRESENT AND PROPOSED BUSINESS OPERATIONS AND OUR
ABILITY TO INTEGRATE NEW OFFICERS AND KEY PERSONNEL; DEPENDENCE UPON AN
EXCLUSIVE DISTRIBUTION AGREEMENT FOR THE FUTURE OPERATIONS OF SECURED PORTAL
SYSTEMS, INC. ("SECURED PORTALS"); DEPENDENCE UPON PATENT PROTECTION FOR THE
PROPOSED ACTIVITIES OF FMX CORP. ("FMX"); THREAT THAT TECHNOLOGICAL CHANGE COULD
RENDER CERTAIN OF OUR PRODUCTS AND PROPOSED PRODUCTS OBSOLETE OR
NON-COMPETITIVE; INABILITY TO PREDICT MARKET ACCEPTANCE FOR OUR PROPOSED
PRODUCTS; INTENSE COMPETITION OF THE BUSINESS IN WHICH WE INTEND TO ENGAGE;
THREAT THAT E-COMMERCE PRODUCTS AND SERVICES MAY BECOME SUBJECT TO GOVERNMENT
REGULATION; THE THREAT THAT OUR E-COMMERCE WEBSITES ARE SUBJECT TO COMPUTER
SECURITY RISKS, THE RISKS RELATING TO LEGAL PROCEEDINGS AND OTHER FACTORS BOTH
REFERENCED AND NOT REFERENCED IN THIS ANNUAL REPORT ON FORM 10-KSB, INCLUDING
THOSE SET FORTH UNDER "RISK FACTORS." ALL SUBSEQUENT WRITTEN AND ORAL
FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS
BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS
CONTAINED THROUGHOUT THIS ANNUAL REPORT ON FORM 10-KSB.

2000 Finx Group Merger

The Board of Directors of Fingermatrix, Inc. ("Fingermatrix"), a New York
Corporation formed on May 12, 1976, determined that it would be in the best
interests of Fingermatrix to reincorporate Fingermatrix in Delaware and that
such reincorporation would be accomplished through the merger of Fingermatrix
with and into its wholly-owned subsidiary, The Finx Group, Inc. ("The Finx
Group", the "Company" or the "Registrant"), a Delaware Corporation formed on
June 6, 2000 ("The 2000 Finx Group Merger"). On June 23, 2000, the Fingermatrix
Board of Directors approved a merger agreement between Fingermatrix and The Finx
Group (the "2000 Finx Group Merger Agreement"), which became effective as of
July 14, 2000 upon the written consent of a majority of the Fingermatrix
shareholders consisting of The Trinity Group, Inc. ("Trinity"), a privately
owned Delaware corporation owned by The Trinity Group-I, Inc. ("Trinity-I") and
five other shareholders. Trinity-I is owned by Lewis S. Schiller (Mr. Lewis
Schiller), Fingermatrix's and The Finx Group's Chairman and Chief Executive
Officer.

The Board of Directors fixed the close of business on June 30, 2000 as the
record date for purposes of consummating the terms of the 2000 Finx Group Merger
Agreement. Fingermatrix reported the 2000 Finx Group Merger in an Information
Statement under Section 14 of the Securities and Exchange Act of 1934 and on or
about July 14, 2000, such Information Statement was sent to the shareholders of
record as of June 30, 2000.

On June 30, 2000, Fingermatrix had 20,000,000 shares of Common Stock, 114,403
shares of Series A 2% Voting Convertible Preferred Stock (convertible into
84,978,548 shares of Common stock) and 1,000 shares of Series B 4% Preferred
Stock issued and outstanding. On

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June 30, 2000, The Finx Group had authorized capital stock consisting of
50,000,000 shares of Common Stock, par value $.01 per share, of which no shares
were issued or outstanding and 1,000,000 shares of Series A 4% Preferred Stock,
par value $.01 per share, of which 1,000 shares were issued and outstanding and
were owned by Trinity.

Pursuant to the 2000 Finx Group Merger Agreement, each outstanding ten shares of
Fingermatrix Common Stock was automatically converted into the right to receive
one share of The Finx Group's fully paid and non-assessable common stock. Each
outstanding share of Fingermatrix Series A 2% Voting Convertible Preferred Stock
was automatically converted into 742.8 shares of Fingermatrix Common Stock and
then each outstanding ten shares of such Fingermatrix Common Stock was
automatically converted into the right to receive one share of The Finx Group's
fully paid and non-assessable common stock. Each outstanding share of
Fingermatrix Series B 4% Preferred Stock automatically converted into the right
to receive one share of The Finx Group's fully paid and non-assessable Series A
4% Preferred Stock. Each outstanding option or warrant to purchase ten shares of
Fingermatrix Common Stock was converted into an option to purchase one share of
The Finx Group's Common Stock. The By-Laws of Fingermatrix continued in force as
the By-Laws of The Finx Group and the directors and officers of The Finx Group
are the same as those of Fingermatrix.

1999 SES Merger

On April 28, 1999, Fingermatrix consummated an Agreement and Plan of
Reorganization (the "1999 SES Merger Agreement") with Trinity. Pursuant to the
1999 SES Merger agreement, Fingermatrix acquired from Trinity in a reverse
merger (the "1999 SES Merger") all of the issued and outstanding shares of
capital stock of SES Acquisition Corp. ("SES") (a then wholly owned subsidiary
of Trinity) in exchange for 85% of Fingermatrix's equity and voting power
consisting of 1,057,160 shares (10,571,607 shares prior to the July 14, 2000 1
for 10 reverse split) of Common Stock and 93,654 shares of Series A Preferred
Stock (convertible into 6,956,693 shares (69,566,934 shares prior to the July
14, 2000 1 for 10 reverse split) of Common Stock).

Upon the conclusion of the 1999 SES Merger, by virtue of SES's ownership of all
of the issued and outstanding shares of capital stock of Sequential Electronic
Systems, Inc. ("Sequential"), and S-Tech, Inc. ("S-Tech") and 39.1% of the
issued and outstanding shares of capital stock of FMX Corp. ("FMX"),
Fingermatrix succeeded to the ownership of these entities, which became second
tier subsidiaries of Fingermatrix. The former stockholders of Fingermatrix
retained a 10% ownership interest in Fingermatrix consisting of 942,839 shares
(9,428,393 shares prior to the July 14, 2000 1 for 10 reverse split) of Common
Stock.

The 1999 SES Merger is accounted for as a reverse acquisition, with SES being
the acquiring company for accounting purposes, whereby the equity of SES, as the
predecessor company, and Fingermatrix, as the acquired company, have been
recapitalized and the accompanying financial statements, and any financial data
included herein, reflect the results of operations of Fingermatrix and SES from
the date of the 1999 SES Merger forward and the results of operations and cash
flows of SES prior to the date of the 1999 SES Merger.

The Finx Group

The Finx Group holds controlling investments in its subsidiaries that operate,
or intend to operate, in seven distinct business segments. The Finx Group's
business is conducted by Mr. Lewis Schiller, who is employed as the Company's
Chief Executive Officer and President, and Grazyna B. Wnuk ("Ms. Wnuk"), who is
employed as the Company's Vice-President. Both Mr. Schiller and Ms. Wnuk are
members of the Company's Board of Directors on which Mr. Schiller serves as its
Chairman and Ms. Wnuk serves as its Secretary.

Mr. Schiller and Ms. Wnuk, along with strategically assigned consultants,
provide The Finx Group's subsidiaries with management, financial, legal and
administrative services. Commencing July 1, 2000, The Finx Group charges its
subsidiaries, a monthly consulting

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fee for the services provided to them. During 2000, such intersegment consulting
fees for the year ended December 31 2000 aggregated $450,000.

The seven separately identified business segments that The Finx Group manages
are as follows:

      -Electro-Mechanical and Electro-Optical Products
      -Specialized Vending Machines and Avionics Equipment
      -Fingerprint Identification Technologies
      -Secured Entrance Systems (Ingress/Egress)
      -Internet Marketing
      -Web Based Development Solutions
      -Application Service Provider

Electro-Mechanical and Electro-Optical Products

Electro-Mechanical and Electro-Optical Products reflects the activities of
Sequential Electronic Systems, Inc. ("Sequential"), a Delaware Company formed in
1985. As a result of the 1999 SES Merger, The Finx Group owns all of
Sequential's issued and outstanding common stock. The Finx Group also owns all
of Sequential's issued and outstanding preferred stock, which gives The Finx
Group the right to elect a majority of Sequential's board of directors.

During 2000 and 1999 the revenues of Sequential were $2.406 million and $2.056
million, respectively. Sequential is engaged in the design, manufacture and
assembly of precision electro-mechanical and electro-optical products and
devices for sale to commercial and governmental customers throughout the United
States. Among such products and devices are optical encoders, encoded motors and
limit programmers. Optical encoders are utilized by manufacturers whose
manufacturing processes require highly accurate positioning of manufactured
components. Encoders are also used as position sensors on computer numerically
controlled machinery and equipment, in packaging machinery for industries such
as food packaging and paper products manufacturing and as measurement devices on
certain medical equipment. The encoders manufactured by Sequential are also sold
to the U.S. Government for a variety of military uses including position
transducers for the Multi-Launch Rocket System and the Patriot Missile Defense
System. Sequential's encoders are also utilized in the NEXRAD weather system as
position transducers on the system's radar antennas. Sequential's
high-resolution encoders provide azimuth and elevation data on the National
Aeronautics and Space Administration's telemetry tracking antennas that are
located around the world and used to track missiles, rockets and satellites.

Sequential's optical encoders and encoded motors are sold to the U.S. Government
for military applications as well as to other industrial customers for a variety
of control applications. The encoded motors that are manufactured by Sequential
are used as a capstan drive in weather map recorders and state of the art
instrumentation tape recorders for the purpose of providing precise speed
control in order to reduce distortion in recording. These recorders have many
applications including use in anti-submarine warfare detection systems and in
seismic measurement recording systems purchased by the U.S. Government.
Sequential is a sole source for an instrumentation-encoded motor used by the
U.S. Navy. Commercial applications of encoders fall into the category of
designing units with unique form factors or operating characteristics. In
addition, Sequential markets a standard line of encoders for commercial
applications.

Because both the government and commercial applications of the technology in
Sequential's products are highly specialized, there are a limited number of
competitors for Sequential's high-resolution encoders, which utilize a highly
specialized technology. However, many of the competitors of Sequential have
greater financial, technical, manufacturing, marketing and other resources.
Sequential faces competition from numerous companies engaged in the manufacture
and sale of encoders, including BEI Sensors and Systems Co., Computer Optical
Products, Inc., Danpher Controls, Dynamics Research Corp. and Encoder Products
Co.

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Specialized Vending Machines and Avionics Equipment

Specialized Vending Machines and Avionics Equipment reflects the activities of
S-Tech, Inc. ("S-Tech"), a Delaware Company formed in 1992. As a result of the
1999 SES Merger, The Finx Group owns all of S-Tech's issued and outstanding
common stock. The Finx Group also owns all of S-Tech's issued and outstanding
preferred stock, which gives The Finx Group the right to elect a majority of
S-Tech's board of directors.

During 2000 and 1999 the revenues of S-Tech were $401,000 and $567,000,
respectively. S-Tech designs and manufactures two specialized product lines
consisting of specialized vending machines and avionics equipment. "Specialized
Vending" is an industry term used to describe a vending product that utilizes
electronic circuitry and/or computer software. Among the vending machines
manufactured by S-Tech are prepaid telephone debit card machines, bill payment
kiosks, information kiosks, and stamp vending machines. S-Tech has supplied such
vending machines to a variety of customers, including Con Edison, Netsmart
Technologies, Inc. (as a sub-contractor for San Diego Gas & Electric Co.),
Objectsoft Corp. (as a subcontractor for New York City), NYNEX, Kuwait Telecard,
Pace Communications Corp., Cable and Wireless, and Kinko's.

The avionics equipment designed and manufactured by S-Tech is marketed
principally to the U.S. Government. These products consist of synchro repeater
cockpit instruments and oil pressure transmitters. In addition, S-Tech bids from
time to time for the supply of products in connection with U.S. Department of
Defense contracts, which products are manufactured to the technical
specifications provided by the Department of Defense. The majority of the
avionics products manufactured by S-Tech require S-Tech to have a qualified
products list ("QPL") designation, which is a designation granted to government
suppliers who comply with the U.S. Government's system requirements. These
products must obtain a QPL designation before such products are eligible for
sale to the U.S. Government. S-Tech is currently attempting to expand the number
of its products, which are QPL designated.

Many of S-Tech's competitors have far greater financial, technical,
manufacturing, marketing and other resources. While the majority of avionics
products sold by S-Tech require vendors to qualify and obtain a QPL designation
before they are eligible to bid and sell such products, S-Tech faces competition
from several companies engaged in this business, among which are Allied Signal
Corp., Amatek Corp. and Aircraft Instrumentation Corp. The vending products
manufactured and sold by S-Tech face competition from numerous competitors
inasmuch as the vending machine industry is highly competitive. Among such
competitors are Opal Manufacturing Ltd., Advanced Games & Engineering, Inc.,
Vendtek Industries, Inc., and Technik Manufacturing, Inc. S-Tech seeks to
diminish the impact of such competition by supplying products that are custom
designed to suit the needs of its customers.

Fingerprint Identification Technologies

Fingerprint Identification Technologies reflects the activities of FMX, Corp.
("FMX"), a Delaware Company formed in 1996. As a result of the 1999 SES Merger,
The Finx Group owns 39.1% of FMX's issued and outstanding common stock. Michael
Schiller, FMX's Chief Technical Officer and brother to Mr. Lewis Schiller owns
49.9%, Mr. Lewis Schiller owns 4%. Ms. Wnuk owns 2% and members of Mr. Lewis
Schiller's family own the remaining 5%. The Finx Group also owns all of FMX's
issued and outstanding preferred stock, which gives The Finx Group the right to
elect a majority of FMX's board of directors.

FMX is a development stage company engaged in the design and development of
state-of-the-art fingerprint identification hardware and software systems with a
threefold target market of Internet access, law enforcement identification and
commercial and governmental access control. Potential applications for this
technology include access control systems for banks, airports and industrial and
government facilities, voter registration and electoral anti-fraud systems,
welfare and social program identification systems, immigration control, suspect
booking, prisoner and detainee movement and release control systems, and
sensitive employment authorization systems. In addition a miniaturized

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variation of the fingerprint scanner is being developed which can be integrated
with security access systems for the Internet.

The products and systems being developed by FMX consist of both hardware and
software components. Hardware components are comprised of a scanner, computer,
printer and controls. Some of these components are or will be manufactured by
FMX. FMX intends to acquire some of the hardware components to be utilized in
its systems from independent suppliers and manufacturers. FMX intends to
assemble these components in its facility at such time, if any, as it develops
commercially viable systems utilizing its fingerprint identification technology.
The software to be utilized in these systems includes proprietary computer
programs, which are designed to enhance recognition identification with a
greater degree of accuracy than existing technologies.

FMX intends to complete the development of certain systems, which have been
partially engineered and tested. Among these systems are electronic fingerprint
identification systems known as "CHECK/ONE," "CHECK/TEN" and the "Booking
Station." The "CHECK/ONE" system is being developed as a single fingerprint
access system intended for use in access control and other identification
verification applications. This application is designed to allow for the
enrollment of the fingerprints of individuals, assignment of a PIN or other
identifying characteristic to enrollees and use of the combination of PIN and
fingerprints to gain access to certain areas or privileges. This system is
intended for commercial, industrial and governmental applications where secure
control of access is required. The "CHECK/TEN' system is being developed as a
live scanning "kiosk" system designed specifically for use by law enforcement
agencies. This system is designed to quickly scan, record and generate ten-print
cards for use with suspects and other subjects. This system is designed for
quick and easy integration into existing computer network operations and
utilizes industry-standard PC's, which are linked to a scanning module. FMX
intends to market the "CHECK/TEN" system to law enforcement agencies. The
"Booking Station" is also being developed for law enforcement agencies. This
system will be required to comply with applicable Federal Bureau of
Investigation ("FBI") specifications and standards relating to accuracy,
repeatability, grey scale analysis and speed of operation.

To date, several prototypes of these systems have been produced. In the event
the Company is able to provide FMX with sufficient additional funding, FMX
intends to complete the development of these systems and "beta-test" these
systems with the FBI and other law enforcement agencies. While FMX anticipates
that it would complete the engineering, development and testing of these systems
within a few months after it receives sufficient funding, the Company cannot
provide any assurances as to whether FMX will be provided with a sufficient
amount of funding or, if so, whether or when such developmental, engineering and
testing activities would be completed, whether the test results would be
successful, or whether or when any revenues or profits from sales of such
products would be derived.

If and when FMX develops any commercially viable system or product utilizing
such proprietary fingerprint identification technology, it intends to market any
such product or system initially for law enforcement and access control
applications. FMX intends to engage sales representatives and distributors to
assist with the marketing of any such product or system, to participate in trade
shows and to seek to market such products or systems in partnership with major
law enforcement system original equipment manufacturers. Inasmuch as FMX has not
developed any such product or system, which may be marketed, the Company cannot
provide any assurance as to the success of any such marketing efforts or the
degree of acceptability that any such product or system may achieve in the
marketplace.

The fingerprint identification technology being developed by FMX is the subject
of several United States patents issued to the Company, including a broad patent
awarded in March 2001 covering significant advances in electronic finger
printing. While the Company believes that patent and other intellectual property
protection is important to the proposed activities of FMX, no assurance is
provided as to the scope or validity of any existing or future patents or other
intellectual property rights of FMX.

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On July 24, 2000, FMX delivered its fingerprint scanning device to the U.S.
State Department in Washington, D.C. for evaluation for varied applications
within the State Department including providing access control to a secured
entrance system that was delivered by Secured Portals to the State Department on
the same date. FMX is awaiting the results of such evaluation.

If and when FMX develops a commercially viable product or system, it will face
competition from many companies with other types of biometric or other
fingerprint identification products or systems, most of whom have far greater
financial, technical, manufacturing, marketing and other resources than FMX.
Subsequent to December 31, 2000, a broad patent was issued to FMX covering three
dimensional fingerprint imaging.

Secured Entrance Systems (Ingress/Egress)

Secured Entrance Systems reflects the activities of Secured Portal Systems, Inc.
("Secured Portals"). Secured Portals is a Delaware Company formed in August 1999
whereby The Finx Group owns 89% of Secured Portals' issued and outstanding
common stock, Mr. Lewis Schiller owns 4%, Ms. Wnuk owns 2% and members of Mr.
Lewis Schiller's family own the remaining 5%. The Finx Group also owns all of
Secured Portals' issued and outstanding preferred stock, which gives The Finx
Group the right to elect a majority of Secured Portals' board of directors.

Secured Portals was formed for the purpose of entering into an agreement with a
subsidiary of Georal, GIL Security Systems, Inc. ("GIL"). Georal designed,
developed and has commenced the marketing of an unattended secure entrance and
egress system designed to prevent or restrict access to buildings and facilities
(the "Georal Security Systems"). The Georal Security Systems are designed to
operate with a variety of detection software to prevent access to buildings and
facilities by individuals who are in possession of weapons, metals, bombs, or
drugs or are not able to identify themselves properly. The Georal Security
Systems utilize a proprietary software system designed and owned by Georal in
conjunction with a specially designed secure portal entry door or chamber. The
Georal Security System does not require an attendant to monitor or operate the
system. To date, the Georal Security Systems have been marketed to a limited
number of customers. The Georal Security System is currently installed at the
American Airlines terminals located in Dallas-Ft. Worth Airport, Chicago's
O'Hare Airport and Newark International Airport, at a CitiBank facility located
in Englewood, New Jersey and in the visitor's facility at the prison at Rikers
Island, New York. Georal manufactures the Georal Security Systems at its
facility located in Whitestone, New York.

On September 13, 1999, Secured Portals entered into an exclusive licensing
agreement with GIL pursuant to which Secured Portals was engaged as the
exclusive distributor for the Georal Security Systems for a term commencing as
of September 1, 1999 and expiring on August 31, 2009 (the "Georal Exclusive
Licensing Agreement"), to certain categories of customers specified in the
Georal Exclusive Licensing Agreement, including certain agencies of the federal
government, embassies, department stores and retail stores located in the United
States, the State of Israel, NCR Corp. and Sun Microsystems.

As an inducement to obtain the Georal Exclusive Licensing Agreement, the Company
also entered into a stock purchase agreement with GIL on September 13, 1999 (the
"GIL Stock Purchase Agreement") pursuant to which the Company issued to GIL
14,134 shares of its Series A Preferred Stock (convertible into 1,049,873 shares
(10,498,735 shares prior to the July 14, 2000 1 for 10 reverse split) of Common
Stock) of which 997,737 shares were in exchange for the licensing rights and
52,136 shares were in exchange for 1,000,000 shares of the outstanding common
stock of GIL. The GIL Shares represented 1% of the outstanding common stock of
GIL at the time the Company entered into the GIL Stock Purchase Agreement.

Secured Portals proposed activities consist of the marketing and distribution of
the Georal Security Systems to both those customers for which it has exclusive
distribution rights and to others as to which it has non-exclusive rights to
distribute the Georal Security Systems. Many of the customers to whom Secured
Portals will seek to market the

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Georal Security Systems will be domestic and foreign government purchasers as
well as commercial users.

The Company believes that the Georal Security System is unique in that it
operates without any requirement for the presence or supervision of an
attendant, is the only unattended secured entrance system approved by the
Federal Aviation Administration and the only such system with a Government
Security Access number for high security facilities. Nevertheless, the Georal
Security System will face competition from numerous companies that restrict or
control access to defined areas, including manufacturers of magnometer or
attended operated entrance portals or systems. In addition, because Secured
Portals intends to distribute the Georal Security Systems to government
agencies, it will be required to establish itself as a reliable vendor and
otherwise meet qualifications and standards established by the government with
respect to its vendors. Many of the entities with which Secured Portals will
compete for such government business have established products and reputation
and credibility with the government.

In March 2001, the Georal Security System passed preliminary U.S. State
Department forced entry and ballistics tests. The systems require final
certification for possible procurement for use in U.S. embassies, consulates and
other governmental installations both in the U.S. an abroad.

Internet Marketing

Internet Marketing reflects the activities of Starnet365.com, Inc.
("Starnet365.com"). During 2000, Starnet365.com's revenues were $367,000.
Starnet365.com is a Delaware company that was originally organized as Cue
365.com, Inc. on April 20, 2000 by Trinity. On May 25, 2000, Trinity changed
Cue365.com, Inc.'s name to Starnet365.com, Inc. and effected a spin-off of
Starnet365.com as a result of which The Finx Group owns 69.5% of
Starnet365.com's issued and outstanding common stock, Starnet365.com's
executives and employees own 22.05% (including 6.11% and 4.28% owned
respectively by Mr. Lewis Schiller and Ms. Wnuk) and members of Mr. Lewis
Schiller's family own the remaining 8.45%. The Finx Group also owns all of
Starnet365.com's issued and outstanding preferred stock, which gives The Finx
Group the right to elect a majority of Starnet365.com's board of directors.

Starnet365.com is an internet multi-level marketing company whose most
significant product is the Qode engine, a web based software component
comprising the largest UPC coded data base which enables its users to
comparative shop products related to the UPC codes. Starnet365.com also sells a
series of on-line training programs consisting of a series of integrated "Earn
While You Learn", on-line training programs that are intended to teach marketing
and recruiting techniques as well as certain tax and legal aspects of running a
home-based business. Starnet365.com also markets replicated web sites, which
Starnet365.com intends to load with non-branded merchandise, enabling
individuals quickly and inexpensively to own their own on-line E-Commerce
website. In addition, Starnet365.com generates revenues from web site enrollment
fees, monthly web hosting fees, and transaction processing fees related to the
sale of merchandise on the websites.

Starnet365.com's primary competition is expected to come from two sources:
E-Commerce and network marketing. Starnet365.com believes that most network
marketing companies have an Internet presence. However, the majority of such
presence, exists in two forms: (1) advertising where ultimate marketing is still
face-to-face, and (2) the sale of link sites whereby blank sites are sold and
the purchaser must build the site and link other companies' products to the
site. Starnet365.com believes that it can differentiate Starnet365.com by
providing representatives with websites that directly sell actual products and
services. Starnet365.com can further differentiate itself from other network
marketing programs by offering unprecedented training and mentoring.

Starnet365.com intends to provide its independent representatives with an
opportunity to own and operate an E-Commerce website offering a variety of
products and services. An individual attempting to establish an E-Commerce
business on his own could spend over $100,000 for web development, employees,
other technical costs and added overhead. In addition, such an individual would
incur ongoing costs for taking orders, processing transactions

                                       8
<PAGE>

and maintaining technical support for web hosting activities. Starnet365.com
intends to offer a completely integrated E-Commerce business for a fraction of
the cost that an individual would incur to establish an E-Commerce business on
their own.


Application Service Provider

On July 27, 2000, the Company concluded an agreement to acquire a controlling
interest in Shopclue.com, Inc. d/b/a Retail Drive ("Shopclue.com" or "Retail
Drive") in exchange for 1,000,030 shares of the Company's Common Stock.
Shopclue.com is a Delaware Company organized in July 1999. During 2000
Shopclue.com's revenues were $64,000 of which $44,000 were generated from the
date of acquisition through December 31, 2000. The Company purchased the
Shopclue.com common shares from family members of Lewis S. Schiller, the
Company's Chief Executive Officer and Vice Chairman of its Board of Directors.
As of the date of the acquisition, Shopclue.com had an excess of liabilities
over assets of $768,000 and the common shares issued to acquire Shopclue.com
were valued at $4 million, resulting in a purchase price that was in excess of
net assets by $4.768 million. Because the acquisition was consummated between
related parties, the excess purchase price cannot be recorded as goodwill and as
a result, the Company incurred non cash expense for of $4.768 million. As of
December 31, 2000, the Company owned 34.24% of Shopclue.com's common stock and
all of its issued and outstanding preferred stock which gives the Company the
right to elect a majority of the Shopclue.com board of directors. Shopclue.com
is included as a part of the Company's consolidated statements of operations and
consolidated statement of financial position due to the effective control as
evidenced by interlocking management and The Finx Group's ownership of a series
of Shopclue.com's preferred stock that gives the Company the right to elect a
majority of the Shopclue.com board of directors.

Shopclue.com is an Application Service Provider that enables small- and
medium-sized businesses to establish an advanced online presence rapidly and
inexpensively using Shopclue.com's software through its interactive Internet
mall known as Retail Drive. The software used by Shopclue.com allows its
customers to create, edit and maintain advanced, interactive websites without
having any prior knowledge of web-based programming languages. Shopclue.com's
Retail Drive interactive website is presently utilized by more than 350
merchants. Shopclue.com is headquartered in Armonk, New York. Blake Schiller,
the son of Lewis S. Schiller, The Finx Group's chief executive officer and
vice-chairman, developed the Shopclue.com concept and remains a significant
shareholder of Shopclue.com and will continue to serve as an executive of
Shopclue.com.

Web Based Development Solutions

On July 27, 2000, the Company acquired a 23.42% equity interest in Biz Chase,
Inc. ("Biz Chase") from Trinity. Biz Chase, a Delaware company organized in July
2000, is included as a part of the Company's consolidated statements of
operations and consolidated statement of financial position due to the effective
control as evidenced by interlocking management and The Finx Group's ownership
of a series of Biz Chase's preferred stock that gives the Company the right to
elect a majority of the Biz Chase board of directors. Biz Chase's concept was
developed by Blake Schiller, the founder of Shopclue.com, and provides
Shopclue.com with its software under a licensing agreement. Effective September
30, 2000, Biz Chase received common stock shares of Shopclue.com representing
19% of Shopclue.com's outstanding common stock shares in exchange for the
assumption of $897,000 of notes payable that Shopclue.com owed to related
parties. Biz Chase has developed a wholesale web based development solution that
provides a simple, affordable and feature rich online solution for small
businesses. In March 2001, Bizchase granted a license to Starnet365.com giving
Starnet365.com the right to sell software developed by Bizchase to the
multi-level marketing industry. The Bizchase software was developed and also
licensed to Retail Drive. Revenues are generated through activation and hosting
fees.

Research and Development

During 2000, the Company incurred $156,000 of identified research and
development expense, all of which was charged to operations.

                                       9
<PAGE>

Employees

The Company currently employs approximately 50 persons, including the executive
officers of The Finx Group and its subsidiaries. None of the Company's employees
are represented by a union and management considers relations with its employees
to be good.

RISK FACTORS

We Have a History of Losses and Cash Flow Deficit

Operating losses have increased during the two years ended December 2000 and as
of December 31, 2000 the Company has a stockholders deficiency of $6.514
million. We expect to incur additional losses during the time period in which
the Company is developing products and markets for its subsidiaries and we
cannot be assured of when, if ever, our operations will become profitable or the
extent of any future profitability. We also cannot be assured that the current
trends of negative cash flow and increased losses and expenses (including
compensation expense charges that may result from the issuance of our securities
in the future) will not continue or, if so, for how long.


Limited Market for Our Common Stock

Currently, our Common Stock trades on the National Association of Securities
Dealers Automated Quotation System Over-the- Counter Bulletin Board (the "NASDAQ
Bulletin Board"). By its nature, the NASDAQ Bulletin Board is a limited market
and investors may find it more difficult to dispose of our securities, which are
owned by them. Currently, we do not meet the financial and other requirements
for a NASDAQ SmallCap, listing. Apart from specific financial criteria that we
would have to comply with in order to obtain such listing, there are other
corporate governance criteria that must be satisfied in order to obtain any such
listing. Among such corporate governance requirements is the requirement that
there be no disparity in the voting rights of the holders of the Common Stock.
At the present time, Trinity owns all of the outstanding shares of our Series B
Preferred Stock. The holder of our Series B Preferred Stock has the right to
elect a majority of the Board of Directors. The NASDAQ may consider the issuance
of the Series B Preferred Stock as a violation of their voting rights rules and
policy. The failure to comply with NASDAQ's voting rights rules or policy or any
of its other applicable regulations relating to transactions engaged in by us
may result in sanctions. Any such actions by NASDAQ could further limit the
market for our Common Stock.

Trading in Our Securities May Be Restricted Due to Compliance with Applicable
Penny Stock Regulations

Broker-dealer practices in connection with transactions in "penny stocks" are
regulated by certain penny stock rules and regulations adopted by the SEC. Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
NASDAQ provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market. These rules also impose additional sales practice
requirements on broker-dealers which sell such securities to persons other than
established customers or institutional accredited investors. For transactions
covered by this rule, broker-dealers must also make a special suitability
determination for the purchaser and receive the purchaser's written consent to
the transaction prior to a sale. Consequently, the application of this rule to
the trading of our Common Stock may affect the ability or willingness of
broker-dealers to sell our securities and adversely affect market liquidity for
such securities.

                                       10
<PAGE>

Our Company is Subject to Control by a Principal Stockholder

Trinity Group, Inc. ("Trinity") has advanced significant funds to the Company
and its subsidiaries and owns a controlling interest in the Company. Trinity is
solely owned by Trinity Group-I, Inc. ("Trinity-I"), which is solely owned by
Lewis S. Schiller, Chairman of the Board and Chief Executive Officer of the
Company. All of the shares of Trinity-I owned by Mr. Schiller are pledged to an
entity controlled by Carol Schiller, the wife of Lewis S. Schiller. In addition,
Carol Schiller, Douglas Schiller, Linda Schiller and Blake Schiller, the adult
children of Lewis S. and Carol Schiller, own a significant interest in the
Company's outstanding Common Stock. In addition, Trinity owns all of our
outstanding Series B Preferred Stock, which entitles it to elect a majority of
our Board of Directors. This concentration of ownership and voting rights could
delay or prevent a change of control. In addition, Lewis S. Schiller could elect
to sell all, or a substantial portion, of his equity interest in Trinity-I to a
third party. In the event of such a sale by Mr. Schiller, such third party may
be able to control the affairs of the Company in the same manner that Mr.
Schiller is able to do so by virtue of his ownership of Trinity-I. Any such sale
may adversely affect the market price of the Common Stock and could adversely
affect our business, financial condition or results of operations.

A Significant Portion of the Net Proceeds of Any Potential Financing May Be Used
for the Payment of Related Party and Other Indebtedness and for Salaries of
Executives and Key Personnel

Trinity, Trinity-I and Carol Schiller have advanced significant funds to the
Company and its subsidiaries. A portion of the proceeds of any potential
financing may be used to repay some or all of the amounts owed to these related
parties. In addition, it is possible that a substantial portion of the proceeds
from any potential financing would be allocated for general corporate purposes,
including working capital, would be used to pay the salaries of certain of our
officers and other key personnel.

We Require Additional Financing for Our Business Activities

We currently have limited operating capital and inability of the Company to
obtain a significant financing may adversely affect our business and no
assurances are made that any such financing will occur, or that if any financing
is completed that additional financing will not be required.

We May Use a Significant Portion of the Proceeds from this Offering to Fund New
Businesses

A significant portion of the proceeds received from any financing would be
expended on companies which have little or no current operating history. We
cannot provide assurances that, despite the expenditure of a substantial portion
of the net proceeds of any potential financing for the future operations of
these entities, that their operations will prove successful.

We Have Granted Significant Benefits Under Certain Existing and Proposed
Employment Agreements

Lewis S. Schiller, Chairman of the Board and Chief Executive Officer of the
Company, and Grazyna B. Wnuk, Vice President, Secretary and a Director of the
Company, have substantially agreed to the terms of proposed employment
agreements with the Company that provide significant benefits to each of them.
The terms of these agreements were determined by the management of the Company,
certain of whom are also parties to these agreements.

The Proposed Activities of FMX Will Be Dependent Upon Patent Protection

We believe that patent protection of the fingerprint identification technology
being developed by FMX will be essential to its planned future business
operations. The success of FMX's future operations will also depend, in part,
upon our ability to maintain its trade secrets, not infringing upon the
intellectual property or proprietary rights of others and preventing others from
infringing upon FMX's intellectual property and

                                       11
<PAGE>

proprietary rights. We will only be able to protect FMX's intellectual property
and proprietary rights from unauthorized use by others to the extent that FMX's
intellectual property and proprietary rights are valid and enforceable under
patents that FMX has or may obtain in the future or are otherwise effectively
maintained as trade secrets.

Presently, such technology is the subject of six United States patents including
a broad patent awarded in March 2001 covering significant advances in electronic
finger printing. We have not filed for and do not have patent protection for
such technology in any foreign country. We cannot be assured that others have
not already obtained, or will not in the future obtain, patent protection for
fingerprint identification technologies which are the same as or substantially
similar to the fingerprint identification technology of FMX. We also cannot be
assured that the pending United States and foreign patent applications, or any
future United States or foreign patent applications which we may file in
connection with such technology, will result in issued patents or that if any
such patents issue, that the scope or validity of such patents, or the existing
United States patents referred to above, will not be challenged in the future
(or that the scope of any such patents will prevent third parties from
developing competing products).

In addition, we cannot be assured that litigation which may be commenced by
others to challenge our existing or any future patents relating to our
fingerprint identification technology can be successfully defended by us. The
expenses involved in litigation regarding patent protection, and the length of
time that may be spent in attempting to resolve the claims in any such
litigation, can be significant and we cannot estimate any such future defense,
enforcement or licensing costs regarding patent infringement claims. Any such
costs could materially adversely affect FMX's planned operations. FMX will,
therefore, be subject to the risks of adverse claims in litigation alleging
infringement of the intellectual property rights of others by any patents
relating to its fingerprint identification technology. In addition, the costs of
prosecuting and maintaining FMX's current patents and patent applications, as
well as the costs of seeking to enforce any of such patents against third party
infringers, are substantial. If FMX is unsuccessful in obtaining patent
protection or if claims of infringement are made against it which it is unable
to successfully defend or obtain licenses for, or if FMX is not able to prevent
third parties from infringing its patent or other intellectual property rights,
our proposed business will be materially adversely affected. FMX will also rely
on maintaining the confidentiality of certain trade secrets and other
proprietary know-how relating to its fingerprint identification technology. FMX
will try to protect this information by entering into confidentiality agreements
with others who may be required to have access to such information. Any person
or entity that is a party to any such confidentiality agreement could breach
such agreement and improperly disclose such information to FMX's competitors or
our competitors could learn of such information independently. If any material
trade secret, know-how or other proprietary information relating to FMX's
fingerprint identification technology were to be improperly disclosed or
otherwise obtained by a competitor, FMX's planned business operations could be
materially adversely affected.

We intend to enter into an employment agreement with Michael Schiller which
will, among other things, contain a non-compete covenant in our favor in the
event of the termination of Mr. Schiller's employment with us and a covenant to
assign to us all inventions and ideas which are conceived by Mr. Schiller during
his employment with us. We cannot provide any assurances as to whether or when
we will consummate any such agreement with Mr. Schiller.

Rapid Technological Change Could Render Certain of Our Products and Proposed
Products Obsolete or Non-Competitive

Major technological changes can occur rapidly in the security, fingerprint
identification and E-commerce industries. It is entirely possible that newer
technologies, techniques or products will be developed with more capabilities
and better performance than our present and proposed products. The development
by competitors of new or improved technologies, techniques or products may make
our present or planned products obsolete or non-competitive.

                                       12
<PAGE>

We Cannot Predict Market Acceptance for Our Proposed Products

Any products that we may develop in the future utilizing the security,
fingerprint identification and website marketing ideas, techniques or
technologies which are the subject of the proposed activities of Secured
Portals, FMX or Bizchase may not gain market acceptance. The degree of
acceptance of any such products that we may develop in the future will depend
upon numerous factors, including demonstration of the advantages, uniqueness and
reliability of such products, their cost effectiveness, the potential barriers
to market entry by alternative products, marketing and distribution support and
the financial ability and credibility of such entities.

The Business in Which We Intend to Engage in is Subject to Intense Competition

We will face intense competition from numerous companies which are developing,
producing and marketing products for securing access to buildings and
facilities, products incorporating fingerprint identification technologies for
law enforcement and other secure access purposes and products for website
marketing which will directly compete with the proposed products of Secured
Portals, FMX and Shopclue.com. We currently face competition from other
companies engaged in the manufacture and sale of products similar to those
manufactured and sold by Sequential and S- Tech.

We intend to distribute a security access or entrance system to customers which
include government and other institutional purchasers who have been serviced by
vendors, which have established and tested security products and systems that
have become recognized and accepted in this industry. The type of security
system that we will offer to our customers is subject to technological change
and compliance with product specifications established by our intended
customers. Likewise, products utilizing biometrics or fingerprint technologies
for identification, access control and security face similar problems from law
enforcement agencies and other institutional customers to whom our proposed
products utilizing our fingerprint identification technology will be marketed.
New entrants in this industry must establish product reliability through testing
and use in order to gain widespread commercial acceptance of such products.
Products and services which are designed to be marketed through the use of the
Internet will depend upon the widespread acceptance and use of the Internet as
an effective medium of commerce by consumers. The rapid growth of commercial
on-line business is a recent phenomenon and the demand for new products and
services offered over the Internet is subject to a high level of uncertainty and
a number of factors, including concerns about transaction security, continued
development of the necessary technological infrastructure and the development of
complimentary services and products. Competitors in the area of website
marketing will include, among others, established Internet companies such as
Amazon.com, E-Bay, Imall.com, ShopNow and Yahoo.

Most of our competitors have far greater financial, technical, personnel and
other resources than we do and that we expect to have in the foreseeable future.
We cannot provide any assurances that we will be able to compete effectively
with any of such competitors.

E-commerce Products and Services May Become Subject to Government Regulation

On-line commerce is new and rapidly changing and Federal and state regulations
relating to the Internet and on-line commerce is evolving. Currently, there are
few laws or regulations directly applicable to the Internet or on-line commerce
on the Internet and the laws governing the Internet that exist remain largely
unsettled. The Federal Trade Commission and other governmental authorities have
proposed regulations to govern the collection and use of personal information
that may be obtained from customers or visitors to websites. Inasmuch as the
marketing of products and services over the Internet is relatively new, we
cannot be assured that any proposed product or service offered by us to Internet
users will comply with existing or future Federal or state government
regulations. In addition, the secure transmission of confidential information
over the Internet will be essential in maintaining consumer confidence in
certain of our proposed products and systems that will be marketed to Internet
users. Any breach of security or other misappropriation or misuse of the
personal information of the users of any of our

                                       13
<PAGE>

proposed Internet products or services could significantly harm our proposed
business and subject us to liability, including liability for claims based on
unauthorized purchases, impersonation or other similar fraud claims. It is
possible that advances in computer capabilities, new discoveries or other
developments could result in a compromise or breach of the technologies proposed
to be utilized by us to protect customer transaction data. We cannot provide any
assurances that we will be able to comply with any future governmental
regulations which may apply to our proposed Internet businesses.

The Board of Directors May Issue Additional Preferred Stock in the Future

We are authorized to issue up to 1,000,000 shares of preferred stock, $.01 par
value (the "Preferred Stock"). The Preferred Stock may be issued in one or more
series, the terms of which may be determined at the discretion of our Board of
Directors, without further approval of the stockholders. Among the rights of the
holders of any additional Preferred Stock that may be authorized by the Board of
Directors are rates of dividends, voting rights, terms of redemption, amounts
payable upon liquidation, sinking fund provisions and conversion rights. One of
the effects of any such additional Preferred Stock that may be issued in the
future may be to enable the Board of Directors to render more difficult or to
discourage an attempt to obtain control of the Company by means of a tender
offer, proxy contest, merger or otherwise and thereby protect the continuity of
our current management. The terms of any such additional Preferred Stock that
may be issued in the future could adversely affect the rights of the holders of
Common Stock. Accordingly, the issuance of any such shares of Preferred Stock
may discourage bids for the Common Stock or adversely affect the market price of
the Common Stock.

A Substantial Number of Our Shares of Common Stock Will Be Available for Future
Sale in the Public Market

Currently we have 12,787,885 shares of our Common Stock outstanding. Except for
the 942,839 shares of our Common Stock all of the remaining 11,845,074
outstanding shares of Common Stock are "restricted securities" as that term is
defined in Rule 144 promulgated under the Securities Act and in the future may
be sold only pursuant to an effective Registration Statement under the
Securities Act, in compliance with the exemption provisions of Rule 144 or
pursuant to another exemption under the Securities Act. The aforementioned
942,839 shares of our Common Stock are freely tradable without restriction or
further registration under the Securities Act. Approximately 8,970,170 of the
restricted shares will be eligible for sale, without registration under Rule 144
(subject to certain volume limitations prescribed by such Rule) commencing on
April 29, 2001. Furthermore, any shares that are issued upon the exercise of any
outstanding warrants or options will be eligible for sale, without registration
under Rule 144 (subject to the aforementioned volume restrictions of the Rule)
following the expiration of two years from the date of issuance.

In addition, we have granted "piggy-back" registration rights with respect to
the 1,049,8745 shares of Common Stock issued to obtain the Georal Exclusive
Licensing GIL, "piggy-back" registration rights with respect to the 1,000,032
shares of Common Stock issued to Blake Schiller upon consummation of the
acquisition of Shopclue.com. Upon registration, all shares, which are registered
will become fully tradable without restriction.

Furthermore, the Company has options and warrants to purchase 1,757,000 shares
of common stock. 300,000 of such warrants carry cashless provisions and will be
eligible for sale, without registration under Rule 144 (subject to certain
volume limitations prescribed by such Rule) commencing on April 29, 2001. We
cannot predict the effect, if any, that sales of any of such shares of Common
Stock or the availability of such shares of Common Stock for sale will have on
the market prices for the Common Stock prevailing from time to time.

We Do Not Intend to Pay Any Dividends on the Common Stock in the Foreseeable
Future

We currently intend to retain all future earnings, if any, to finance our
current and proposed business operations and we do not anticipate paying any
cash dividends on our Common Stock in the foreseeable future. The holder of our
Series B Preferred Stock have

                                       14
<PAGE>

rights senior to the holders of Common Stock with respect to any dividends. We
may also incur indebtedness in the future that may prohibit or effectively
restrict the payment of cash dividends on our Common Stock.

Two of Our Subsidiaries Have Outstanding Significant Delinquent Payroll Taxes
Due

Sequential and S-Tech have an aggregate of $525,000 of delinquent payroll taxes.
Such delinquencies could have an adverse impact on the Company's ability to
obtain additional financing.

The Liability of Our Officers and Directors to Us and Our Shareholders is
Limited

The applicable provisions of the Delaware Business Corporation Law ("BCL") and
our Certificate of Incorporation limit the liability of our officers and
directors to us or our shareholders for monetary damages for breaches of their
fiduciary duties to us, with certain exceptions, and for other specified acts or
omissions of such persons. In addition, the applicable provisions of the BCL and
of our Certificate of Incorporation and By-Laws provide for indemnification of
such persons under certain circumstances. As a result of these provisions,
shareholders may be unable to recover damages against our officers and directors
for actions taken by them which constitute negligence, gross negligence or a
violation of their fiduciary duties and may otherwise discourage or deter our
shareholders from suing our officers or directors even though such actions, if
successful, might otherwise benefit us and our shareholders.

Dependence on Key Suppliers

Should any of the Company's key suppliers experience difficulty in providing
product in a timely manner, this could adversely effect the Company's revenues
and reputation in the market. Additionally, the failure on the part of these
suppliers to develop and manufacture or supply new or enhanced products or
software that meet or anticipate technological changes on a timely and
cost-competitive basis could have a materially adverse effect on the Company's
financial condition and results of operations.

Reliance on Management

While investors have voting rights, they will not be able to take a direct role
in the management of the Company. The success of the Company and the business of
the Company is contingent on the judgment and expertise of the directors and
officers of the Company and its subsidiaries and on the Company being able to
retain its senior management team, some of who are approaching retirement age.

Dependence on Key Personnel

The Company's success will also depend to a significant extent upon the skills
of certain key personnel. The Company's failure to attract replacement or
additional qualified employees or to retain the services of key personnel could
adversely affect the Company's business.

Limited Liquidity

Each investor should be fully aware of the long-term nature of his investment in
the Units and the lack of liquidity of his investment. Because the Common Stock
are being sold in reliance upon an exemption from the 1933 Securities Act
("Act") and applicable state securities laws, the Units may not be re-sold
unless they are subsequently registered under the Act and applicable state
securities laws or an opinion of counsel satisfactory to the Company is
delivered to the Company to the effect that such registration is not required.
Although it may be possible under certain circumstances for an investor to
dispose of the Units owned by him, he would need to comply with the provisions
of Rule 144 which requires a minimum holding period of one year. Holders of the
Units may not be able to liquidate their investments in the event of an
emergency or for any other reason. In addition, the transfer of the Units Stock
may result in adverse tax consequences to the transferor.

                                       15
<PAGE>

Computer Viruses

The growth of the Internet has also seen the unwelcome growth of computer
viruses. Whilst many of these viruses inflict nuisance value when attacking
there are a growing number of malicious viruses that can bring down whole
computer systems. There is no guarantee that the Company will not fall victim to
viruses or that its business will not be severely affected or prevent the
services from operating completely.

Starnet Will Be Subject to Regulatory Scrutiny of Network Marketing Systems

Our proposed network marketing model is subject to a variety of governmental
laws and regulations generally directed at ensuring that product sales are made
to consumers of the products and that compensation and advancement within a
marketing organization is based on sales of products rather than investment in
the organization. These laws and Federal Trade Commission ("FTC") regulations
include the federal securities laws, matters administered by the FTC and various
state anti-pyramid and business opportunity laws. Although we believe that our
proposed business has been designed to be in compliance with all such laws and
regulations, our proposed business will be subject to the risk that, in one or
more of our future markets, our marketing system or the conduct of certain
independent representatives could be found not to be in compliance with
applicable laws or regulations. Failure by our business or independent
representatives to comply with these laws and regulations could have a material
adverse effect on our business in a particular market or in general. The cost of
compliance, in any event, is likely to be significant and could impact adversely
on our profits, if any. As of the date of this Memorandum we have not received
an opinion of counsel affirming the legality of our network marketing model and
no assurance is given that we will receive such opinion in the future.

We Could Be Subject to Potential Uninsured Liability

The network marketing business as well as electronic commerce involve
potentially significant risks of statutory, contractual and common law
liability. We intend to obtain liability, property and business interruption
insurance. We may not have sufficient funds with which to purchase and/or
maintain such insurance. We plan to operate in a professional and prudent manner
to reduce potential liability. Nevertheless, an uninsured claim against us, if
successful and of sufficient magnitude, could have a material adverse effect on
us. In addition, the lack of or the inability to obtain insurance of the type
and in the amounts required could impair our ability to enter into certain
contracts, which may be, in certain instances, conditioned upon the availability
of adequate insurance coverage.

Item 2. Description of Properties.

Sequential manufactures its products in a 15,000 square foot facility located in
Elmsford, New York which is leased from an independent third party pursuant to a
month to month lease. Our principal executive offices are also located at these
premises. S-Tech manufactures its products in a 7,300 square foot facility
located in West Babylon, New York which is leased from an independent third
party pursuant to a month to month lease. We believe that the manufacturing
facilities of Sequential and S-Tech are adequate for their activities in the
foreseeable future. Both Sequential and S-Tech utilize subcontractors in
connection with certain of the design and production activities associated with
the manufacture of their products.

FMX currently occupies approximately 2,000 square feet of Sequential's Elmsford,
New York facility. It utilizes this facility for purposes of its current
research and development activities. At such time, if any, as FMX develops any
commercially viable products or systems, FMX intends to subcontract the
manufacture of its products. Nonetheless, FMX may be required to expand and/or
relocate its facilities.

Secured Portal Systems conducts its activities at Sequential's Elmsford, New
York facilities. SPS intends to lease offices in Boca Raton, Florida from an
independent third party.

                                       16
<PAGE>

Shopclue.com and Bizchase, Inc. conduct their activities at 80 Business Park
Drive, Suite 308, Armonk, New York 10504 where it currently occupies
approximately 1,200 square foot office facility, which is leased from an
independent third party pursuant to a lease which expires on December 31, 2002.

The Finx Group and Starnet365.com conduct their business in Boca Raton, Florida
in space provided the Company's Chief Executive Officer at no cost to the
company.

Item 3. Legal Proceedings.

We are not involved in any legal proceedings that management believes would
adversely affect our business, results of operations or financial condition.

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

No matter was submitted during the fourth quarter of 1999 to a vote of security
holders, through the solicitation f proxies or otherwise.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

The Company's Common Stock is traded on the National Association of Securities
Dealers, Inc.'s Over the Counter Bulletin Board ("OTC Bulletin Board") under the
symbol "FINX". The following table sets forth, for the periods indicated, the
quarterly range of the high and low closing bid prices per share of our Common
Stock as reported by the OTC Bulletin Board Trading and market services. Such
bid quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.

                                     Bid Prices
                                     ----------
Current period from             High            Low
                                ----            ---
 January 1, 2001 to
 April March 31, 2001          $2.00           $0.50

Quarter ended

March 31, 2000                $10.00           $3.10
June 30, 2000                  $5.60           $1.88
September 30, 2000             $6.25           $2.25
December 31, 2000              $2.63           $0.63

March 31, 1999                 $0.75           $0.26
June 30, 1999                  $4.30           $0.50
September 30, 1999             $6.70           $1.80
December 31, 1999              $5.70           $2.50


We have authorized 50,000,000 of our $0.01 par value common stock. As of March
29, 2001, there were approximately 2,700 holders of record of the Company's
common stock.

The Company has not paid dividends on common stock and does not anticipate
paying dividends in the foreseeable future. The Company intends to retain future
earnings, if any, to finance the expansion of its operations and for general
corporate purposes, including future acquisitions.

During 1999, the Company issued to Trinity 1,000 shares of its Series A
Preferred Stock. The Series A Preferred Stockholders are entitled to annual
dividends of 4% per share, currently $40 per annum. The Series A Preferred Stock
has the right to vote upon all matters as the Common Stockholders and gives
Trinity the right to elect a majority of the Board of Directors of the
Registrant.

As of the date of this report, 11,845,046 shares of the Company's Common Stock
are eligible for sale under Rule 144 promulgated under the Securities Act of
1933, as amended, subject to certain limitations included in said Rule. In
general, under Rule

                                       17
<PAGE>

144, a person (or persons whose shares are aggregated), who has satisfied a
one-year holding period, under certain circumstances, may sell within any
three-month period, a number of shares which does not exceed the greater of one
percent of the then outstanding Common Stock or the average weekly trading
volume during the four calendar weeks prior to such sale. Rule 144 also permits,
under certain circumstances, the sale of shares without any quantity limitation
by a person who has satisfied a two-year holding period and who is not, and has
not been for the preceding three months, an affiliate of the Company.



Item 6. Management's Discussion and Analysis of Financial Condition and
        Results of Operations

THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS MAY BE DEEMED TO INCLUDE FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THAT INVOLVE RISK AND
UNCERTAINTY. ALTHOUGH MANAGEMENT BELIEVES THAT ITS EXPECTATIONS ARE BASED ON
REASONABLE ASSUMPTIONS, IT CAN GIVE NO ASSURANCE THAT ITS EXPECTATIONS WILL BE
ACHIEVED.

THE IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER FROM THOSE IN
THE FORWARD-LOOKING STATEMENTS HEREIN (THE "CAUTIONARY STATEMENTS") INCLUDE,
WITHOUT LIMITATION: THE COMPANY'S HISTORY OF LOSSES AND CASH FLOW DEFICITS;
POTENTIAL LACK OF CONTROL OVER THE OPERATIONS OF SPS AND FMX; NEED FOR
ADDITIONAL FINANCING TO FUND OUR PRESENT AND PROPOSED BUSINESS ACTIVITIES;
DEPENDENCE ON PRESENT EXECUTIVE OFFICERS AND KEY PERSONNEL TO MANAGE OUR PRESENT
AND PROPOSED BUSINESS OPERATIONS AND OUR ABILITY TO INTEGRATE NEW OFFICERS AND
KEY PERSONNEL; LACK OF MARKETING OR SALES EXPERIENCE; DEPENDENCE UPON AN
EXCLUSIVE DISTRIBUTION AGREEMENT FOR THE FUTURE OPERATIONS OF SPS; DEPENDENCE
UPON PATENT PROTECTION FOR THE PROPOSED ACTIVITIES OF FMX; THREAT THAT
TECHNOLOGICAL CHANGE COULD RENDER CERTAIN OF OUR PRODUCTS AND PROPOSED PRODUCTS
OBSOLETE OR NON-COMPETITIVE; INABILITY TO PREDICT MARKET ACCEPTANCE FOR OUR
PROPOSED PRODUCTS; INTENSE COMPETITION OF THE BUSINESS IN WHICH WE INTEND TO
ENGAGE; THREAT THAT E-COMMERCE PRODUCTS AND SERVICES MAY BECOME SUBJECT TO
GOVERNMENT REGULATION; THE RISKS RELATING TO LEGAL PROCEEDINGS, AS WELL AS OTHER
RISKS REFERENCED FORM TIME TO TIME IN THE COMPANY'S FILINGS WITH THE SEC. ALL
SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE
COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR
ENTIRETY BY THE CAUTIONARY STATEMENTS. THE COMPANY DOES NOT UNDERTAKE ANY
OBLIGATION TO RELEASE PUBLICLY ANY REVISIONS TO SUCH FORWARD-LOOKING STATEMENTS
TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS.

Results of Operations

As more fully disclosed in the footnotes to the financial statements,
Fingermatrix has four identifiable business segments. The following table sets
forth the results of operations of these segments for 2000 and 1999.


                                       18
<PAGE>

For the years ended December 31,                    2000              1999
--------------------------------------------------------------------------
Revenues:
Electro-Mechanical and Electro-
 Optical Products                              2,406,000         2,056,000
Specialized Vending Machines
 and Avionics Equipment                          401,000           567,000
Fingerprint Identification Technologies                -                 -
Secured Entrance Systems (Ingress/Egress               -                 -
Internet Marketing                               367,000                 -
Web Based Development Solutions                        -                 -
Application Service Provider                      44,000                 -
Corporate                                        450,000                 -
Intersegment charges                            (450,000)                -
--------------------------------------------------------------------------
Total revenues                                 3,218,000         2,623,000
==========================================================================

For the years ended December 31,                    2000              1999
--------------------------------------------------------------------------
Operating loss:
Electro-Mechanical and Electro-
 Optical Products                                (58,000)       (1,427,000)
Specialized Vending Machines
 and Avionics Equipment                         (478,000)         (456,000)
Fingerprint Identification Technologies         (296,000)         (218,000)
Secured Entrance Systems (Ingress/Egress)       (201,000)          (78,000)
Internet Marketing                              (669,000)                -
Web Based Development Solutions                 (448,000)                -
Application Service Provider                    (312,000)                -
--------------------------------------------------------------------------
                                              (2,462,000)       (2,179,000)
Corporate costs and expenses                  (5,732,000)         (967,000)
Intersegment charges                                   -                 -
--------------------------------------------------------------------------
Total operating loss                          (8,194,000)       (3,146,000)
==========================================================================

The operations of each of the business segments is discussed separately as
follows:

Electro-Mechanical and Electro-Optical Products

The Electro-Mechanical and Electro-Optical Products segment comprises the
activities of Sequential, which is primarily engaged in the design, manufacture
and assembly of precision electro-mechanical and electro-optical products and
devices for sale to commercial and governmental customers throughout the United
States. Among such products and devices are optical encoders, encoded motors and
limit programmers.

Sequential's revenues for 2000 increased $350,000,or 17%, from $2.056 million
for 1999 to $2.406 million for 2000. Sequential's 2000 gross profit was
$696,000, or 28.9%. Sequential's 1999 gross profit was $545,000, or 26.5% of
sales. For 1999, Sequential's operating loss includes a $972,000 charge for
uninsured inventory losses, which were the result of a flood. Sequential's other
operating expense decreased $247,000, or 24.5% from $1.001 million for 1999 to
$754,000 for 2000. The 2000 operating expense includes $90,000 of management
fees charged by The Finx Group. As a result of the above, Sequential's operating
loss decreased by $1.369 million, or 95.9%, from $1.427 million for 1999 to
$58,000 for 2000.

Specialized Vending and Avionics Equipment

The Specialized Vending and Avionics Equipment comprises the activities of
S-Tech, which designs and manufactures two specialized product lines consisting
of specialized vending

                                       19
<PAGE>

machines and avionics equipment. "Specialized Vending" is an industry term used
to describe a vending product that utilizes electronic circuitry and/or computer
software. Among the vending machines manufactured by S-Tech are prepaid
telephone debit card machines, bill payment kiosks, information kiosks, and
stamp vending machines.

S-Tech's revenues for 2000 decreased $166,000,or 29.2%, from $567,000 for 1999
to $401,000 for 2000. S-Tech's gross profit was a negative $299,000, or 74.5% of
sales for 2000 and $101,000, or 17.8% of sales, for 1999.. S-Tech's cost of
sales included charges for increased slow moving inventory reserves of $400,000,
or 99.7% of sales, for 2000 and $258,000, or 45.5% of sales, for 1999. S-Tech's
operating expense decreased $177,000, or 49.7% from $356,000 for 1999 to
$179,000 for 2000. S-Tech's operating expense included $3,000 of research and
development costs. As a result of the above, S-Tech's operating loss increased
by $22,000, or 4.8%, from $456,000 for 1999 to $478,000 for 2000.

Fingerprint Identification Technologies

The Fingerprint Identification Technologies segment comprises the activities of
FMX, which was formed in 1996 to continue with the development of products and
systems utilizing a proprietary and patented electronic fingerprint
identification technology originally conceived by Fingermatrix. The fingerprint
identification technology being developed and utilized by FMX is a fingerprint
identification scanning technology utilized for a variety of access control and
law enforcement purposes. Applications for this technology include access
control systems for banks, airports and industrial and government facilities,
voter registration and electoral anti-fraud systems, welfare and social program
identification systems, immigration control, suspect booking, prisoner and
detainee movement and release control systems, and sensitive employment
authorization systems.

FMX did not have any revenues or gross profits for 2000 and 1999. FMX's
operating expenses, and therefore its operating losses, increased $78,000, or
38.8%, from $218,000 for 1999 to $296,000 for 2000. During 2000 the expenses
include $90,000 of management fees charged by The Group. The remaining costs
consist primarily salaries to FMX's president and consulting fees to engineers.

Secured Entrance Systems (Ingress/Egress)

The Secured Entrance Systems segment comprises the activities of Secured
Portals. Secured Portal's proposed activities consist of the marketing and
distribution of the Georal Security Systems to both those customers for which it
has exclusive distribution rights and to others as to which it has non-exclusive
rights to distribute the Georal Security Systems. Many of the customers to whom
Secured Portals will seek to market the Georal Security Systems will be domestic
and foreign government purchasers as well as commercial users. In March 2001,
the Georal Security System passed preliminary U.S. State Department forced entry
ballistics tests. The systems require final certification for possible
procurement for use in U.S. embassies, consulates and other governmental
installations both in the U.S. an abroad.

Secured Portals did not have any revenues or gross profits during 2000 or 1999.
Secured Portals operating expense, and therefore its net operating loss
increased $123,000, or 157.6%, from $78,000 for 1999 to $201,000 for 2000.
During 2000, Secured Portal's operating expense included $90,000 of management
fees charged by The Finx Group.

Internet Marketing

Internet Marketing reflects the activities of Starnet365.com. Starnet365.com is
an Internet multi-level marketing company whose most significant product is the
Qode engine, a web based software component comprising the largest UPC coded
data base, which pays commissions and which enables its users to comparative
shop in excess of 7 million products related to the UPC codes. Starnet365.com
also sells a series of on-line training programs consisting of a series of
integrated "Earn While You Learn", on-line training programs that are intended
to teach marketing and recruiting techniques as well as certain tax and legal
aspects of running a home-based business. Starnet365.com also

                                       20
<PAGE>

markets replicated web sites, which Starnet365.com intends to load with
non-branded merchandise, enabling individuals quickly and inexpensively to own
their own on-line E-Commerce website. In addition, Starnet365.com generates
revenues from web site enrollment fees, monthly web hosting fees, and
transaction processing fees related to the sale of merchandise on the websites.

During 2000, Starnet365.com generated revenues of $367,000 resulting in gross
profits of $329,000, or 89.6%. A significant portion of Starnet365.com's
revenues in 2000 were sales of tutorials which have a low cost of sales
component. Other revenues were from the sale of logo items. Operating expenses
of Starnet 365.com for 2000 were $998,000 which included $82,000 of research and
development related to web design and development, $295,000 of selling expense,
primarily commissions on product sales, $90,000 of management fees charged by
The Finx Group and $522,000 of other general and administrative costs, which
were primarily legal and consulting fees required to establish the marketing
plan. As a result of the above, Starnet365.com incurred an operating loss of
$669,000 for 2000.

Application Service Provider

Application Service Provider reflects the activities of Shopclue.com.
Shopclue.com is an Application Service Provider that enables small- and
medium-sized businesses to establish an advanced online presence rapidly and
inexpensively using Shopclue.com's software through its interactive Internet
mall known as Retail Drive. The software used by Shopclue.com allows its
customers to create, edit and maintain advanced, interactive websites without
having any prior knowledge of web-based programming languages. Shopclue.com's
Retail Drive interactive website is presently utilized by more than 350
merchants.

The consolidated statement of operations for 2000 only includes Shopclue.com's
operating activities from the date of acquisition through December 31, 2000.
During 2000, Shopclue.com's total revenues were $64,000 of which $44,000 is
included in the consolidated results resulting in $32,000 of gross profit.
Shopclue.com's total operating expense for 2000 was $933,000 of which $538,000
is included in the consolidated results. Shopclue.com's operating expense
includes $72,000 of research and development costs and a significant amount of
salaries paid to software developers and marketers. Shopclue.com's total
operating loss for 2000 amounted to $901,000 of which $311,000 is included in
the consolidated results.

Web Based Development Solutions

Web Based Development Solutions reflects the activities of Biz Chase. Biz Chase
has developed a wholesale web based development solution that provides a simple,
affordable and feature rich online solution for small businesses. In March 2001,
Bizchase granted a license to Starnet365.com giving Starnet365.com the right to
sell software developed by Bizchase to the multi-level marketing industry. The
Bizchase software was developed and also licensed to Retail Drive. Revenues are
generated through activation and hosting fees.

Biz Chase was organized and acquired in July 2000 and did not have any revenues
or gross profits during 2000. Biz Chase's operating expense, and therefore its
net operating loss for 2000 was $448,000. Operating expense included $90,000 of
management fees charged by The Finx Group, $52,000 of depreciation and
amortization related to computer equipment and software development costs and
$306,000 of other general administrative costs, a significant portions of which
is the cost of software developers.

Corporate costs and expenses

Corporate costs and expenses comprise the expenses of The Finx Group, the
holding company. During 2000, The Finx Group recorded $450,000 of management
fees charged to its subsidiaries. All of such management fees are eliminated in
the consolidated results of operations. The Finx Group's 2000 operating expense
amounted to $6.182 million. In 2000, The Finx Group incurred non cash expense
for the issuance of stock to acquire

                                       21
<PAGE>

Shopclue.com. The Company purchased the Shopclue.com common shares from family
members of Lewis S. Schiller, The Finx Group's Chief Executive Officer and
Chairman of its Board of Directors. As of the date of the acquisition,
Shopclue.com had an excess of liabilities over assets of $768,000 and the common
shares issued to acquire Shopclue.com were valued at $4 million, resulting in a
purchase price that was in excess of net assets by $4.768 million. Because the
acquisition was consummated between related parties, the excess purchase price
cannot be recorded as goodwill and as a result, The Finx Group incurred non cash
expense of $4.768 million. Other non cash expense items included $161,000
related to the issuance of non employee stock options and $28,000 from the
issuance of stock to pay certain commissions of its subsidiary, Sequential.
Other significant operating expense items included $148,000 from the write-off
of deferred offering costs related to an unconsummated private placement
offering of The Finx Group's preferred stock, $400,000 in accrued and unpaid
salaries owed to Lewis Schiller and Grazyna Wnuk, The Finx Group's officers,
$124,000 of legal fees, $119,000 of accounting and auditing fees, $114,000 of
consulting fees and $66,000 of public relations costs.

As a result of the 1999 SES Merger and its treatment as a reverse acquisition,
all of the activities of Fingermatrix, the predecessor company, prior to the
April 28, 1999 SES Merger were recapitalized into equity and are not reflected
in the results of operations. As a result, the 1999 operating expense, and
therefore the operating loss, of the holding company, of $967,000 reflects only
the expense and costs incurred from April 28, 1999 through December 31, 1999.
Significant operating expense for 1999 includes accrued and unpaid salaries of
$200,000 owed to Lewis Schiller and Grazyna B. Wnuk, $188,000 of legal fees and
$181,000 of consulting fees

Significant Non-Operating Components of Net Loss

Interest Expense and Financing Fees

Interest expense and financing fees for 2000 includes $163,000 related to
Sequential's revolving line of credit and $45,000 related to Sequential'
delinquent payroll taxes. Interest expense and financing fees for 1999 is
$205,000 related to Sequential's revolving line of credit.

On July 28, 1997, Sequential obtained a two-year revolving line of credit from
FINOVA Capital Corporation, formerly United Credit Corporation (the "FINOVA Line
of Credit"). The original FINOVA Line of Credit provided for a borrowing base
equal to the lesser of 75% of eligible accounts receivable or $350,000, required
payment of a 1% annual facility fee of $3,500, a 1% monthly commitment fee of
$3,500, against which monthly interest, exclusive of interest on any over
advances, is applied. The annual monthly interest rate on the FINOVA Line of
Credit is the greater of 18.5% or the prime rate in effect in New York City plus
10%, and is payable monthly. The FINOVA Line of Credit is collateralized by all
of the assets of Sequential. On March 27, 1998, the FINOVA Line of Credit was
amended allowing an increase from 75% to 80% of eligible accounts receivable for
purposes of calculating the borrowing base, and extended the term of the
agreement from July 31, 1999 to December 31, 1999. On August 3, 1998, the FINOVA
Line of Credit was further amended allowing an increase in the borrowing base to
a maximum of $400,000, and further extended the term of the agreement to July
31, 2000. From August 3, 1998 until August 27, 1999, Trinity had a $200,000
participating interest in the FINOVA Line of Credit. On August 28, 1999, Trinity
guaranteed Sequential's performance under the FINOVA Line of Credit and provided
FINOVA Capital Corporation with a collateral security deposit of approximately
$468,000 and simultaneously therewith, Trinity's participation in the FINOVA
Line of Credit ended. In August 1999, Trinity-I increased the cash collateral to
approximately $523,000 on which Trinity-I receives from FINOVA a return on the
cash collateral in an amount equal to the greater of the prime rate of Citibank,
N.A., plus 6% or 14.5% per annum. Subsequent to December 31, 2000, the Company
determined that FINOVA declared bankruptcy and the Company is attempting to
establish a replacement line of credit.

                                       22
<PAGE>

Interest Expense and Factoring Fees, Related Parties

Interest expense and financing fees on related party notes increased $253,000
from $84,000 for 1999 to $337,000 for 2000. The Company and its subsidiaries
incur interest expense on advances from Trinity, advances from Universal
International, Inc., a company owned by Grazyna Wnuk, an officer of the Company,
a loan from E. Gerald Kay, a former director, and advances from Blake Schiller
and Carol Schiller, both immediate family members of Lewis Schiller, an officer
of the company. In addition S-Tech incurs interest expense and factoring fees
pursuant to a factoring agreement with Trinity Factoring Corp., a financing
company owned by Lewis Schiller. Total outstanding advances from such related
parties as of December 31, 2000 and 1999, aggregated $4.208 million and $1.532
million. Interest accrued on such notes are generally calculated at 9% and as of
December 31, 2000 $332,000 of such interest remains unpaid.

Minority Interest in Loss of Consolidated Subsidiaries

The minority interest represents the losses of its subsidiaries that have been
apportioned to the minority interest holders. The amount of loss apportioned to
the minority interest holders is limited to the amount of investment that such
minority holders have made into the subsidiaries. For 2000 and 1999, the
minority interest portion of such losses was $113,000 and $116,000,
respectively, and as of December 31, 2000, cumulative amounts of minority
interest in the losses of consolidated subsidiaries in excess of minority equity
interests was $967,000.

Extraordinary Loss on Debt Extinguishments

The Company extinguished certain obligations with no cash flow impact. On April
28, 1999 certain creditors of the Company accepted 6,346 shares of Series A
Preferred Stock in exchange for their aggregate debt of $648,000. Using the
Black-Scholes option valuation formula, the 6,346 Series A Preferred shares were
valued at $1.077 million, resulting in $429,000 of compensation expense. On July
20, 1999, the Company settled amounts owed to the former landlord of the Company
by making cash payments of $70,000, issuing a note payable for $45,000 and
issuing 268 Series A Preferred shares. Using the Black-Scholes option valuation
formula, the 268 Series A Preferred shares were valued at $46,000. The total
consideration given to the landlord, including the calculated value of the
Series A Preferred shares exceeded the amounts owed to the former landlord by
approximately $26,000. All of such excess is attributed to the valuation of the
Series A Preferred shares and was recorded as compensation expense from the
issuance of stock, and presented in the financial statements as an extraordinary
item. As of December 31, 2000, all of such Series A Preferred Shares were
converted into common stock.

Net Loss

As a result of the above, the Company incurred a consolidated net loss of $8.579
million, or $1.27 per common share, for 2000 and $3.774 million, or $2.28 per
common share for 1999.


Financial Condition - Liquidity and Capital Resources

As of December 31, 2000 the Company had a working capital deficiency of $6.911
million. Approximately $5.140 million of such deficiency relates to amounts owed
to related parties, including accrued and unpaid salaries of $600,000 owed to
Lewis Schiller and Grazyna Wnuk, $4.54 million owed in the aggregate to Trinity,
its controlling stockholder, Universal International, Inc., a company owned by
Grazyna Wnuk, E. Gerald Kay, a former director, and members of Lewis Schiller's
family, for advances and loans made to fund the operations of the Company.

During 2000, the Company used $1.489 million for operating activities and
$251,000 for investing activities and generated $1.665 million from financing
activities. Two of the Company's subsidiaries, Sequential and S-Tech have an
aggregate of $525,000 of delinquent payroll taxes. Such delinquencies could have
an adverse impact on the Company's ability

                                       23
<PAGE>

to obtain financing. The Company has issued its stock in order to make its
recent acquisitions and is pursuing various financing sources with which to fund
future operating activities. In March 2001, the Company initiated a private
placement offering of its common stock, however, as of April 13, 2001, the
Company has not received closed any sales of securities and no assurances can be
given that any proceeds will be derived from such offering.

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the liquidation of
liabilities in the normal course of business. However, the Company has a history
of net losses for the two years ended December 31, 2000 and as of December 31,
2000 has a working capital deficiency of $6.911 million and capital deficiency
of $6.514 million. During 2000 and 1999 the Company has relied on financial
support from its controlling stockholder, Trinity and other related parties.
Management is currently seeking additional financing; however no assurances can
be made that such financing will be consummated. The continuation of the Company
as a going concern is dependent upon its ability to obtain financing, and to use
the proceeds from any such financing to increase its business to achieve
profitable operations. The accompanying financial statements do not include any
adjustments that would result should the Company be unable to continue as a
going concern.

Item 7. Financial Statements and Supplementary Data

The information required by Item 7. is included as Exhibit 99.1 to this Form
10-KSB.

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

Effective for its fiscal year commencing January 1, 2000, the Company has
changed its independent auditors from Cornick, Garber & Sandler, LLP (the
"Former Accountant") to Moore Stephens, PC (the "New Accountant").

The Former Accountant was dismissed. The report of the Former Accountant for the
consolidated balance sheet of The Finx Group, Inc. (formerly known as
Fingermatrix, Inc.) and its subsidiaries as of December 31, 1999, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for each of the two years in the period ended December 31, 1999
did not contain an adverse opinion or a disclaimer of an opinion, nor was it
modified as to audit scope or accounting principles. The opinion was, however,
qualified by the assumption that the Company will continue as a going concern on
the basis that; (1) the Company has a history of declining revenues and of net
losses for the two years ended December 31, 1999, (2) as of December 31, 1999
the Company has a working capital deficiency of $2.241 million and a capital
deficiency of $2.117 million and (3) the Company has relied on continuing
financial support from its controlling stockholder. The opinion of the Former
Accountant as of December 31, 1999 states that these conditions raise
substantial doubt about the Company's ability to continue as a going concern.

The decision to change accountants was approved by the Company's Board of
Directors. The Company has no audit committee.

During each of the two years in the period ended December 31, 1999 and the
subsequent interim period since December 31, 1999, there were no disagreements
with the Former Accountant on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure. None of the
events described in Item 304 (a)(i)(v) of Regulation S-K promulgated under the
Securities Act of 1933, as amended, occurred during the Company's two most
recent fiscal years and the subsequent interim period since December 31, 1999.

The New Accountant was engaged on July 19, 2000 to audit the Company's financial
statements for its year ended December 31, 2000.

                                       24
<PAGE>

PART III

Item 9. Directors and Executive Officers of the Registrant

Directors and Management

Officers are elected by, and serve at the pleasure of, the board of directors.
Set forth below is information concerning the directors and executive officers
of the registrant as of the date hereof.

Name                   Age               Position with the Company
------------------------------------------------------------------
Lewis S. Schiller       70               Chief Executive Officer,
                                          President and Chairman of the Board
Grazyna B. Wnuk         37               Secretary, Vice-President and Director


Lewis S. Schiller was appointed Chairman of the Board, Chief Executive Officer
and President of the Company on April 28, 1999. Mr. Schiller is also Chairman of
the Board and a director of Sequential, S-Tech, FMX, Secured Portals, Starnet,
Shopclue and Bizchase and is Chief Executive Officer of Secured Portals,
Starnet, Shopclue and Bizchase. Mr. Schiller also serves as Chairman of the
Board and Chief Executive Officer of Trinity-I. For more than five years prior
to his resignation on April 2, 1998, Mr. Schiller served as Chairman of the
Board, Chief Executive Officer and a director of The Sagemark Companies, Ltd.,
formerly Consolidated Technology Group Ltd., a public company, and as Chairman
of the Board, Chief Executive Officer and a director of Sagemark's public and
privately held subsidiaries. In April 1995, Mr. Schiller was appointed a
director of Fingermatrix pursuant to Fingermatrix's Bankruptcy Plan of
Reorganization, which was approved by the Federal Bankruptcy Court at such time.
In March 1996, the Federal Bankruptcy Court confirmed a Plan of Reorganization
for Fingermatrix and Mr. Schiller resigned as a director of Fingermatrix in
October 1996.

Grazyna B. Wnuk ("Ms. Wnuk") was appointed Vice-President and Secretary of the
Company on April 28, 1999. Ms. Wnuk was appointed a Director of the Company on
November 19, 1999. Ms. Wnuk also serves as an officer and/or director of FMX,
Secured Portals, Shopclue.com, Bizchase, Trinity and Trinity-I. For more than
five years prior to her resignation on April 2, 1998, Ms. Wnuk served as
Secretary and a director of Sagemark and all of its public and privately held
subsidiaries.

Lewis S. Schiller, Ms. Wnuk and E, Gerald Kay received appointments to the board
upon the resignations of Thomas T. Harding, Gordon R. Molesworth, Seth M. Lukash
and Fred I. Sonnenfeld on April 28, 1999. During the 4th Quarter of 2000, Jay
miller and Sy Flug were appointed to the Board of Directors. In the 1st Quarter
of 2001, Messrs. Kay, Miller and Flug resigned from the company's board of
directors. The Company was informed by Messrs. Kay, Miller and Flug that they
would not be able to provide attention to the Company's affairs due to other
business requirements.

                                       25
<PAGE>

Item 10. Executive Compensation

Set forth below is information concerning the Company's Chief Executive Officer
and other executive officers who received or accrued compensation from the
Company and its subsidiaries in excess of $100,000 (on an annualized basis)
during 2000 and 1999.
<TABLE>
<CAPTION>

                                                         Awards           Payouts
                                                         ------           -------
                            Annual Compensation              Securi-
                            -------------------              ties
                                          Other    Restri-   Under-             All
                                          Annual   stricted  lying     LTIP     Other
Name and Principal                        Compen-  Stock     Options/  Payouts  Compen-
 Position            Year  Salary  Bonus  sation   Awards     SARs(#)   ($)     sation($)
------------------   ----  ------  -----  -------  ------    --------  -------  ---------
<S>                  <C>   <C>     <C>    <C>      <C>       <C>       <C>      <C>

Lewis S. Schiller,
 Chief Executive
 Officer and
 President
 since April 28,    2000 $250,000(1)  --      --       --         --        --       --
 1999               1999 $125,000(1)  --      --       --         --        --       --

Grazyna B. Wnuk,
 Secretary since    2000 $150,000(2)  --      --       --         --        --       --
 April 28, 1999     1999  $75,000(2)  --      --       --         --        --       --

</TABLE>

(1) Mr. Lewis S. Schiller's annual salary of $250,000 was approved by the Board
of Directors effective July 1, 1999. The compensation listed for 2000 represents
a full years salary and the compensation listed for 1999, represents such salary
from July 1, 1999 through December 31, 1999. None of Lewis S. Schiller's salary
was paid to him during 2000 or 1999 and all such unpaid amounts were accrued as
an expense of 2000 in the Company's financial statements.

(2) Ms. Wnuk's annual salary of $150,000 was approved by the Board of Directors
effective July 1, 1999. The compensation listed for 2000 represents a full years
salary and the compensation listed for 1999, represents such salary from July 1,
1999 through December 31, 1999. None of Ms. Wnuk's salary was paid to her during
2000 or 1999 and all such unpaid amounts were accrued as an expense of 2000 in
the Company's financial statements.

Employment Agreements

         As of December 31, 2000, the Company has not entered into the
employment agreements with either Lewis S. Schiller or Grazyna B. Wnuk that were
previously negotiated as disclosed in the prior year 10KSB. The Company
anticipates that it will negotiate new terms and conditions for contracts with
Lewis S. Schiller and Ms. Wnuk at a future date. Such new negotiations are
contemplated to include employment terms and conditions for both The Finx Group
and its subsidiaries

Item 11. Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth certain information regarding the
beneficial ownership of our Common Stock as of December 31, 2000 by: (i) each of
our executive officers and directors; (ii) each person whom we know to be the
beneficial owner of more than 5% of our outstanding Common Stock; and (iii) all
of our officers and directors as a group.

         Unless otherwise indicated, to our knowledge, all persons listed below
have sole voting and investment power with respect to their shares of Common
Stock, except to the extent applicable law gives spouses shared authority. Any
shares of Common Stock that an individual or group has the right to acquire
within sixty (60) days after December 31, 2000 pursuant to the exercise of
warrants or options are deemed to be outstanding for the purpose of computing
the percentage ownership of such person or group, but are not deemed

                                       26
<PAGE>

outstanding for the purpose of calculating the percentage owned by any other
person listed below.
<TABLE>
<CAPTION>

                                          Amount and                      Percent of
Name and address of                        Nature of                     Common Stock
Beneficial Owner                        Beneficial Owner                 Outstanding(1)
---------------------------------------------------------------------------------------
<S>                                     <C>                              <C>

Officers and Directors
----------------------
Lewis S. Schiller
21346 St. Andrews Blvd.
Suite 137
Boca Raton, FL 33433                        5,269,480                        45.8%(2)

Grazyna B. Wnuk
21634 Club Villa Terrace
Boca Raton, FL 33433                        1,209,535                        10.5%(3)

Officer and directors as
 a group (2 persons)                        6,479,015                        56.3%

Other Beneficial Owners
-----------------------
The Trinity Group I, Inc.
21346 St. Andrews Blvd.
Suite 137
Boca Raton, FL 33433                        5,269,480                        45.8%

Allan Risi
GIL Security Systems, Inc.
150-38 12th Avenue
Whitestone, NY 11357                        1,049,874                         9.1%

Blake Schiller
84 Business Park #202
Armonk, NY 10504                            1,040,455                         9.0%

Gordon Molesworth
1091 W. Calle Excesio
Green Valley, AZ 85614                      1,069,071                         8.3%(4)

Carol Schiller
One Butler Road
Scarsdale, NY 10583                           981,569                         8.5%
</TABLE>

(1) The "Percent of Common Stock Outstanding" is based on the 11,507,885 shares
of Common Stock outstanding as of December 31, 2000 and the assumption that the
related beneficial owner had converted or exercised all potential Common Stock
related to that beneficial owner.

(2) Lewis S. Schiller, by virtue of his ownership of all of the outstanding
shares of capital stock of Trinity-I, may be deemed the beneficial owner of the
shares of Common Stock owned by Trinity-I.

(3) Grazyna B. Wnuk's percentage of beneficial common stock owned does not
include shares of Common Stock owned by Trinity-I, of which Ms. Wnuk is an
officer and director, as to which she disclaims beneficial ownership.

(4) Includes 39,071 directly owned and 1,030,000 related to options and warrants
exercised subsequent to December 31, 2000.

                                       27
<PAGE>

Item 12. Certain Relationships and Related Transactions

The Company and its subsidiaries incur interest expense on advances from
Trinity, advances from Universal International, Inc., a company owned by Grazyna
Wnuk, an officer of the Company, a loan from E. Gerald Kay, a former director,
and advances from Blake Schiller and Carol Schiller, both immediate family
members of Lewis Schiller, an officer of the company. In addition S-Tech incurs
interest expense and factoring fees pursuant to a factoring agreement with
Trinity Factoring Corp., a financing company owned by Lewis Schiller. Total
outstanding advances from such related parties as of December 31, 2000 and 1999,
aggregated $4.208 million and $1.532 million. Interest accrued on such notes are
generally calculated at 9% and as of December 31, 2000 $332,000 of such interest
remains unpaid. Interest expense and financing fees on related party notes was
$337,000 and $84,000 for 2000 and 1999, respectively.

On April 28, 1999, Fingermatrix consummated an Agreement and Plan of
Reorganization (the "1999 SES Merger Agreement") with Trinity. Pursuant to the
1999 SES Merger agreement, Fingermatrix acquired from Trinity in a reverse
merger (the "1999 SES Merger") all of the issued and outstanding shares of
capital stock of SES Acquisition Corp. ("SES") (a then wholly owned subsidiary
of Trinity) in exchange for 85% of Fingermatrix's equity and voting power
consisting of 1,057,160 shares (10,571,607 shares prior to the July 14, 2000 1
for 10 reverse split) of Common Stock and 93,654 shares of Series A Preferred
Stock (convertible into 6,956,693 shares (69,566,934 shares prior to the July
14, 2000 1 for 10 reverse split) of Common Stock). Subsequent to the 1999 SES
Merger, Trinity transferred an aggregate of 370,046 shares (3,700,457 shares
prior to the July 14, 2000 1 for 10 reverse split) of the Common Stock and
32,780 shares of Series A Preferred Stock (convertible into an aggregate of
2,434,898 shares 984 (24,348,984 shares prior to the July 14, 2000 1 for 10
reverse split) shares of Common Stock) owned by it to the folliwng individuals
and amounts: Carol Schiller (116,281 shares (1,162,811 shares prior to the July
14, 2000 1 for 10 reverse split) of Common Stock and 10,302 shares of Series A
Preferred Stock); Douglas Schiller (31,733 shares (317,332 shares prior to the
July 14, 2000 1 for 10 reverse split) of Common Stock and 2,810 shares of Series
A Preferred Stock); Linda Schiller (31,733 shares (317,332 shares prior to the
July 14, 2000 1 for 10 reverse split) of Common Stock and 2,810 shares of Series
A Preferred Stock); (31,733 shares (317,332 shares prior to the July 14, 2000 1
for 10 reverse split) of Common Stock and 2,810 shares of Series A Preferred
Stock); and Grazyna B. Wnuk (158,565 shares (1,585,650 shares prior to the July
14, 2000 1 for 10 reverse split) of Common Stock and 14,048 shares of Series A
Preferred Stock), in exchange for the equity interests of such individuals in
Trinity. Carol Schiller is the wife of Lewis S. Schiller, Chairman of the Board
and Chief Executive Officer of the Company, Douglas Schiller, Linda Schiller and
Blake Schiller are Mr. Schiller's adult children and Grazyna B. Wnuk is a
director of the Company. Trinity is wholly owned by Trinity-I, which, in turn,
is wholly owned by Lewis S. Schiller. Mr. Schiller disclaims the beneficial
ownership of the shares of Common Stock and Series A Preferred Stock owned by
Carol Schiller, Douglas Schiller, Linda Schiller and Blake Schiller. Mr.
Schiller and Ms. Wnuk are the sole officers and directors of Trinity and
Trinity-I. Mr. Schiller has pledged all of the shares of Trinity-I to SES
Holdings Corp. ("SESH") as collateral security for a prior debt to SESH. SESH is
controlled by Carol Schiller. Carol Schiller, Douglas Schiller, Linda Schiller,
Blake Schiller and Grazyna B. Wnuk each have "piggy-back" registration rights
with respect to the aforementioned shares of Common Stock owned and to be issued
to them upon the conversion of the aforementioned shares of Series A Preferred
Stock.

In July 1999, the Company issued to Trinity all 1,000 of the shares of its
Series A Preferred Stock pursuant to which Trinity has the right to elect the
majority of the Board of Directors. As of the date hereof, Lewis S. Schiller,
Grazyna B. Wnuk and E. Gerald Kay are Trinity's designees to the Board of
Directors.

In connection with the 1999 SES Merger, the Company exchanged shares of the
Series A Preferred Stock for indebtedness aggregating $648,000. P.T. Dolak
Permei ("Permei"), an Indonesian company, was one of the Company's then
creditors and exchanged an aggregate of $230,833 of such indebtedness for 2,259
shares of Series A Preferred Stock (convertible into an aggregate of 1,677,985
(167,799 post split) shares of Common Stock).

                                       28
<PAGE>

In July 1997, as amended in March and August 1998, Sequential entered into a
loan agreement with a lender pursuant to which such lender extended a $400,000
line of credit to Sequential. The line of credit is secured by Sequential's
accounts receivable, equipment, inventory, intangibles, and other assets. In
August 1998, Lewis S. Schiller entered into an agreement with such lender (the
"Participation Agreement") pursuant to which he agreed to provide, jointly with
such lender, a portion of the funds advanced to Sequential under such loan
agreement. Subsequently, in August 1999, Trinity-I entered into a collateral
security agreement (the "Collateral Security Agreement") with such lender
pursuant to which it deposited the sum of $467,500 (the "Cash Collateral") with
such lender as security for Sequential's obligations under the aforementioned
loan agreement and, simultaneously therewith, the Participation Agreement was
terminated. Trinity-I subsequently increased the Cash Collateral to $522,500.
Trinity-I currently receives from such lender a return on the Cash Collateral in
an amount equal to the greater of the prime rate of CitiBank, N.A., plus 6% or
14.5% per annum.

In July 1999, the Company settled amounts due for unpaid rent owed to the
Company's former landlord. Included in this settlement was the issuance by the
Company of a series of notes payable to the landlord in the principal amount of
$45,000, which notes are payable in nine installments, the last of which is due
in April 2000. Lewis S. Schiller, Chief Executive Officer and Chairman of the
Board, personally guaranteed these notes. The remaining balance of $25,000 due
on such notes is currently in default.

On September 13, 1999, Secured Portals entered into an exclusive licensing
agreement with GIL pursuant to which Secured Portals was engaged as the
exclusive distributor for the Georal Security Systems for a term commencing as
of September 1, 1999 and expiring on August 31, 2009 (the "Georal Exclusive
Licensing Agreement"), to certain categories of customers specified in the
Georal Exclusive Licensing Agreement, including certain agencies of the federal
government, embassies, department stores and retail stores located in the United
States, the State of Israel, NCR Corp. and Sun Microsystems. As an inducement to
obtain the Georal Exclusive Licensing Agreement, the Company also entered into a
stock purchase agreement with GIL on September 13, 1999 (the "GIL Stock Purchase
Agreement") pursuant to which the Company issued to GIL 14,134 shares of its
Series A Preferred Stock (convertible into 1,049,873 shares (10,498,735 shares
prior to the July 14, 2000 1 for 10 reverse split) of Common Stock) of which
997,737 were in exchange for the licensing rights and 52,136 were in exchange
for 1,000,000 shares of the outstanding common stock of GIL. Under these
agreements, Trinity, Carol Schiller, the wife of Lewis S. Schiller, and Grazyna
B. Wnuk, an officer and director of the Company, agreed not to publicly sell any
of the shares of Common Stock owned by them unless and to the extent that GIL
publicly sells any of the shares of Common Stock acquired by it upon the
conversion of the shares of Series A Preferred Stock owned by it unless 50% or
more of the shares issued for the license are registered under the Securities
Act or such shares become eligible for public sale under Rule 144(k) under the
Securities Act.

On July 27, 2000, the Company concluded an agreement to acquire a controlling
interest in Shopclue.com, Inc. d/b/a Retail Drive ("Shopclue.com" or "Retail
Drive") in exchange for 1,000,030 shares of the Company's Common Stock. The
Company purchased the Shopclue.com common shares from family members of Lewis S.
Schiller, the Company's Chief Executive Officer and Vice Chairman of its Board
of Directors. As of the date of the acquisition, Shopclue.com had an excess of
liabilities over assets of $768,000 and the common shares issued to acquire
Shopclue.com were valued at $4 million, resulting in a purchase price that was
in excess of net assets by $4.768 million. Because the acquisition was
consummated between related parties, the excess purchase price cannot be
recorded as goodwill and as a result, the Company incurred non cash expense for
of $4.768 million.

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

(a) Exhibits - See Exhibit Index for the Exhibits filed as part of or
incorporated by reference into this Report.

(b) Reports on Form 8-K

    (i) None.

                                       29
<PAGE>

SIGNATURES

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

THE FINX GROUP, INC.

/s/ Lewis S. Schiller
---------------------
Chief Executive Officer
April 13, 2001

In accordance with the Exchange Act, this report has been signed below by the
following person on behalf of the registrant and in the capacities and on the
dates indicated.

/S/ Lewis S. Schiller
---------------------
Chief Executive Officer,
  Chairman of the Board,
  President,
  Director and
  Chief Accounting Officer

April 13, 2001


/S/ Grazyna B. Wnuk
-------------------
Secretary, Vice-President and Director

April 13, 2001


                                       30
<PAGE>

Index to Exhibits

Exhibit No.      Description of Document
----------       -----------------------
(3)(i)           Amended and Restated Certificate of Incorporation.(1)
(3)(ii)          By-laws.(1)
(10.1)           Stock Purchase Agreement to acquire Shopclue.com, Inc.(2)
(10.2)           Stock Purchase Agreement to acquire Bizchase, Inc.(2)
(21)             Subsidiaries of the registrant.
(99.1)           Financial Statements

(1) Incorporated by reference to Form 8-K dated April 28, 1999.
(2) Incorporated by reference to Form 10QSB for the quarter ended June 30, 2000.


                                       31
<PAGE>

Exhibit (21)
Subsidiaries of the Registrant

1.    Sequential Electronic Systems, Inc., a Delaware company organized in 1985.
2.    S-Tech, Inc., a Delaware company organized in 1992.
3.    FMX Corp., a Delaware company organized in 1996.
4.    Secured Portal Systems, Inc., a Delaware company organized in 1999.
5.    Starnet365.com, Inc., a Delaware company organized in 2000.
6.    Shopclue.com, Inc., a Delaware company organized in 1999.
7.    Bizchase, Inc., a Delaware company organized in 2000.


                                       32
<PAGE>

Exhibit (99.1)
Consolidated Financial Statements

The following exhibit comprises the Financial Statements and Supplementary Data
as specified by Item 7 of Part II of Form 10-KSB.


                                       33
<PAGE>





                      The Finx Group, Inc. and Subsidiaries
                        Consolidated Financial Statements
                                December 31, 2000





                                      F-1
<PAGE>

The Finx Group, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheet
As of December 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>                                                                           <C>
ASSETS
CURRENT ASSETS:
Cash                                                                              $5,000
Accounts receivable, net                                                         312,000
Inventory, net                                                                 1,104,000
Prepaid expense and other current assets                                          83,000
----------------------------------------------------------------------------------------
Total current assets                                                           1,504,000
----------------------------------------------------------------------------------------
Property, plant and equipment, cost                                            2,537,000
Less accumulated depreciation                                                 (2,409,000)
----------------------------------------------------------------------------------------
Net                                                                              128,000
----------------------------------------------------------------------------------------
Other assets:
Security deposits                                                                 29,000
Patents                                                                           10,000
Software development costs                                                       230,000
----------------------------------------------------------------------------------------
Total other assets                                                               269,000
----------------------------------------------------------------------------------------
Total assets                                                                  $1,901,000
========================================================================================
LIABILITIES AND CAPITAL DEFICIENCY
----------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable                                                              $1,466,000
Accrued payroll                                                                  946,000
Accrued payroll taxes                                                            472,000
Customer deposits                                                                121,000
Other current liabilities                                                        248,000
Revolving line of credit                                                         622,000
Accrued interest expense, related parties                                        332,000
Notes payable, related parties                                                 4,208,000
----------------------------------------------------------------------------------------
Total current liabilities                                                      8,415,000
----------------------------------------------------------------------------------------
Commitments and contingencies
----------------------------------------------------------------------------------------
CAPITAL DEFICIENCY:
----------------------------------------------------------------------------------------
Preferred stock, $.01 par value; 1,000,000 shares authorized;
 1,000 shares issued and outstanding
Common stock, $.01 par value; 50,000,000 shares authorized;
 11,507,885 shares issued and outstanding                                        115,000
Additional paid in capital, common stock                                      12,521,000
Accumulated earnings (deficit)                                               (19,150,000)
----------------------------------------------------------------------------------------
Capital deficiency                                                            (6,514,000)
----------------------------------------------------------------------------------------
TOTAL LIABILITIES AND CAPITAL DEFICIENCY                                      $1,901,000
========================================================================================
</TABLE>
See notes to consolidated financial statements.


F-2
<PAGE>

The Finx Group, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
<TABLE>
<CAPTION>
<S>                                                            <C>            <C>
For the Year Ended December 31,                                      2000           1999
----------------------------------------------------------------------------------------
Sales                                                          $3,218,000     $2,623,000
Cost of goods sold                                              2,008,000      1,920,000
----------------------------------------------------------------------------------------
                                                                1,210,000        703,000
Changes in reserve for obsolete and slow moving inventory        (400,000)      (258,000)
----------------------------------------------------------------------------------------
Gross profit                                                      810,000        445,000
----------------------------------------------------------------------------------------
Inventory damaged in flood                                              -        972,000
Non cash expense from issuance of stock options                   161,000              -
Non cash expense, stock issued for acquisition                  4,768,000              -
Non cash expense for stock issued to pay obligations               28,000              -
Write-off deferred offering costs                                 148,000              -
Depreciation and amortization                                      90,000         39,000
Bad debt expense                                                   52,000          3,000
Research and development                                          156,000              -
Selling expense                                                   687,000        282,000
Other general and administrative expenses                       2,914,000      2,295,000
----------------------------------------------------------------------------------------
Operating expenses                                              9,004,000      3,591,000
----------------------------------------------------------------------------------------
Operating loss                                                 (8,194,000)    (3,146,000)
Other income                                                       47,000              -
Interest expense and financing fees, related parties             (337,000)       (84,000)
Interest expense and financing fees                              (208,000)      (205,000)
Minority interest in loss of consolidated subsidiaries            113,000        116,000
----------------------------------------------------------------------------------------
Loss before extraordinary item                                 (8,579,000)    (3,319,000)
Extraordinary loss on debt extinguishment                               -       (455,000)
----------------------------------------------------------------------------------------
Net loss                                                      $(8,579,000)   $(3,774,000)
========================================================================================

Weighted average shares outstanding                             6,745,089      1,661,129
========================================================================================

Net loss per common share - Basic and fully diluted:
 Loss before extraordinary items                                   $(1.27)        $(2.00)
 Extraordinary loss on debt extinguishment                              -          (0.28)
----------------------------------------------------------------------------------------
 Net loss per common share                                         $(1.27)        $(2.28)
========================================================================================
</TABLE>
See notes to consolidated financial statements.


                                      F-3
<PAGE>

The Finx Group, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
<S>                                                           <C>            <C>
For the Year Ended December 31,                                      2000           1999
----------------------------------------------------------------------------------------
CASH FLOWS - OPERATING ACTIVITIES:
----------------------------------------------------------------------------------------
Net loss                                                      $(8,578,000)   $(3,774,000)
Reconcile operating cash flows:
Changes in the reserve for obsolete and slow moving inventory     400,000        258,000
Inventory damaged in flood                                              -        971,000
Non cash expense from issuance of stock options                   161,000              -
Non cash expense, stock issued for acquisition                  4,768,000              -
Non cash expense for stock issued to pay obligations               28,000              -
Write-off deferred offering costs                                 148,000              -
Depreciation and amortization                                      98,000         55,000
Bad debt expense                                                   52,000          3,000
Minority interest in loss of subsidiaries                        (113,000)      (116,000)
Extraordinary loss on debt extinguishment                               -        455,000
Other adjustments                                                   5,000         87,000
Changes in assets and liabilities:
Accounts receivable, net                                          118,000       (171,000)
Inventory, net                                                   (228,000)      (269,000)
Prepaid expense and other current assets                            7,000          6,000
Other assets                                                       14,000          6,000
Accounts payable                                                  540,000        469,000
Accrued payroll                                                   392,000        298,000
Accrued payroll taxes                                             217,000        200,000
Customer deposits                                                 105,000         16,000
Other current liabilities                                          85,000         59,000
Accrued interest expense, related parties                         292,000         22,000
----------------------------------------------------------------------------------------
Cash provided by (used in) operating activities                (1,489,000)    (1,425,000)
----------------------------------------------------------------------------------------

CASH FLOWS - INVESTING ACTIVITIES:
----------------------------------------------------------------------------------------
Capital expenditures                                              (15,000)        (5,000)
Cash of acquired subsidiary                                         8,000              -
Advances to related parties                                      (147,000)             -
Repayments from related parties                                   199,000              -
Patent costs                                                      (10,000)        (2,000)
Software development costs                                       (285,000)        (3,000)
Other investing activities                                         (1,000)             -
----------------------------------------------------------------------------------------
Cash used in investing activities                                (251,000)       (10,000)
----------------------------------------------------------------------------------------
                                                                              (continued)
</TABLE>
See notes to consolidated financial statements.


                                      F-4
<PAGE>

The Finx Group, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
<S>                                                             <C>            <C>
For the Year Ended December 31,                                      2000           1999
----------------------------------------------------------------------------------------
CASH FLOWS - FINANCING ACTIVITIES:
----------------------------------------------------------------------------------------
Deferred offering costs                                          (148,000)             -
Advances from related parties                                   2,438,000      1,172,000
Repayments to related parties                                    (543,000)             -
Proceeds from subsidiaries private placement offering             160,000              -
Offering costs for private placement offering                     (48,000)             -
Net advances (repayments) on revolving line of credit            (158,000)       313,000
Other financing activities                                        (36,000)        16,000
----------------------------------------------------------------------------------------
Cash provided by financing activities                           1,665,000      1,501,000
----------------------------------------------------------------------------------------

Increase (decrease) in cash                                       (75,000)        66,000
Cash at beginning of period                                        80,000         14,000
----------------------------------------------------------------------------------------
Cash at end of period                                              $5,000        $80,000
========================================================================================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
----------------------------------------------------------------------------------------
Cash paid during the year for:
Interest                                                         $253,000       $129,000
Income taxes                                                            -              -
----------------------------------------------------------------------------------------

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
----------------------------------------------------------------------------------------
For the year ended December 31, 2000
----------------------------------------------------------------------------------------
</TABLE>
The Company consummated the Shopclue.com, Inc. acquisition whereby certain
assets and liabilities, for which there was no cash flow impact, were
consolidated into the balance sheet, including $18,000 of accounts receivable,
$2,000 of prepaid expenses, $14,000 of net property, plant and equipment,
$13,000 of security deposits, $27,000 of accounts payable, $167,000 of accrued
expenses, $585,000 of notes payable, related party and $44,000 of other current
liabilities.

The Company granted aggregate of 330,000 non-employee stock options, which,
using the Black-Scholes option valuation formula, had a value of $161,000.

The Company issued 1,000,030 shares of common stock to acquire Shopclue.com,
Inc. resulting in $4.768 million of non cash research and development expense.

The Company issued 10,000 shares of common stock in order to settle an
obligation of Sequential Electronic Systems, Inc., its wholly owned subsidiary.
Such shares, using the Black-Scholes option valuation formula, had a value of
$28,000.

                                                                    (continued)
See notes to consolidated financial statements.


                                      F-5
<PAGE>

The Finx Group, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows

For the year ended December 31, 1999
--------------------------------------------------------------------------------
On April 28, 1999, the Company consummated the 1999 SES Merger, through a share
exchange accounted for as a reverse acquisition, with SES being the acquiring
company for accounting purposes. In accounting for the 1999 SES Merger, the
equity of SES, as the acquiring company, and Fingermatrix, as the acquired
company, was re-capitalized and the financial statements reflect the results of
operations and cash flows of the Company and SES from the date of the reverse
acquisition forward. The financial statements prior to the date of the 1999 SES
Merger reflect the results of operations and cash flows of SES. As a result of
the transaction, as of April 28, 1999 the predecessor company's assets and
liabilities for which there is no cash flow impact were consolidated into the
balance sheet, including $90,000 of property, plant and equipment, $98,000 of
patent costs, $344,000 of accounts payable, $109,000 of accrued expenses and
$425,000 of subordinated debt.

During 1999, the Company extinguished certain obligations with no cash flow
impact. On April 28, 1999 certain creditors of the Company accepted 6,346 shares
of Series A Preferred Stock in exchange for their aggregate debt of $648,000.
The 6,346 Series A Preferred shares are convertible into 4,713,809 common shares
of the Company and using the Black-Scholes option valuation formula, such shares
were valued at $1.077 million, resulting in $429,000 of compensation expense
from issuance of the stock. On July 20, 1999, the Company settled amounts owed
to the former landlord of the Company by making cash payments of $70,000,
issuing a note payable for $45,000 and issuing 268 Series A Preferred shares.
The 268 Series A Preferred shares are convertible into 199,070 common shares of
the Company's common stock and using the Black-Scholes option valuation formula,
such shares were valued at $46,000. The total consideration given to the
landlord, including the calculated value of the Series A Preferred shares,
exceeded the amounts owed to the former landlord by approximately $26,000. All
of such excess is attributed to the valuation of the Series A Preferred shares
and was recorded as compensation expense from the issuance of stock, and
presented in the financial statements as an extraordinary item.

On September 13, 1999, the Company issued to GIL Security Systems, Inc. 14,134
shares of its Series A Preferred Stock in payment of the purchase price for the
licensing agreement and 1,000,000 shares of the common stock of GIL,
representing 1% of GIL's outstanding common stock, pursuant to a stock purchase
agreement between the Company and GIL.
                                                                    (concluded)
See notes to consolidated financial statements.


                                      F-6
<PAGE>

The Finx Group, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Statement of Changes in Capital Deficiency - Year Ended December 31, 1999
----------------------------------------------------------------------------------------------------------------------
<S>             <C>            <C>         <C>            <C>            <C>      <C>         <C>           <C>
                                                          Preferred               Additional      Accumu-
                Preferred      Common      Preferred         Excess      Common      Paid-in      lated
                   Shares      Shares            Par         of Par         Par      Capital      Deficit        Total
----------------------------------------------------------------------------------------------------------------------
Balance at Dec-
ember 31, 1998          -   9,428,400              -              -     $94,000   $7,913,000  $(6,779,000)  $1,228,000
Issuance of Common
 and Series A
 Preferred Shares
 for Reverse
 acquisition       93,654  10,571,600         $1,000              -     106,000     (797,000)           -     (690,000)
Series B Preferr-
 ed shares issued
 to The Trinity
 Group-I, Inc.      1,000           -              -*             -           -            -            -            -
Series A Preferr-
 ed shares issued
 for payment of
 subordi nated
 debt               6,346           -              -*     1,084,000           -            -            -    1,084,000
Series A Preferr-
 ed shares issued
 for payment to
 a trade creditor     268           -              -*        46,000           -            -            -       46,000
Series A Preferr-
 ed shares issued
 to acquire exlcu-
 sive distribution
 rights            14,134           -              -*             -           -            -            -            -
Accrued dividends
 on preferred stock     -           -              -*             -           -            -      (11,000)     (11,000)
Net loss for the
 year ended
 December 31, 1999      -           -              -              -           -            -   (3,774,000)  (3,774,000)
----------------------------------------------------------------------------------------------------------------------
Balance at Dec-
 ember 31, 1999   115,402  20,000,000          1,000      1,130,000      200,000   7,116,000  (10,564,000)  (2,117,000)
======================================================================================================================
</TABLE>

*-amount is less than $1,000.

See notes to consolidated financial statements.


                                      F-7
<PAGE>

The Finx Group, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Statement of Changes in Capital Deficiency - Year Ended December 31, 2000
----------------------------------------------------------------------------------------------------------------------
<S>             <C>            <C>         <C>            <C>            <C>      <C>             <C>       <C>
                                                          Preferred               Additional      Accumu-
                Preferred      Common      Preferred         Excess      Common      Paid-in      lated
                   Shares      Shares            Par         of Par         Par      Capital      Deficit        Total
----------------------------------------------------------------------------------------------------------------------
Balance at Dec-
 ember 31, 1999   115,402  20,000,000          1,000      1,130,000      200,000   7,116,000  (10,564,000)  (2,117,000)
Convert Series A
 Preferred Stock
 to Common       (114,402) 84,978,548         (1,000)    (1,130,000)     850,000     281,000            -            -
1 for 10
 reverse split          - (94,480,693)             -              -     (945,000)    945,000            -            -
----------------------------------------------------------------------------------------------------------------------
                    1,000  10,497,855              -*             -      105,000   8,342,000  (10,564,000)  (2,117,000)
Issuance of
 non-employee
 stock options          -           -              -              -            -     161,000            -      161,000
Stock issued for
 payment of a
 subsidiaries
 obligations            -      10,000              -              -            -*     28,000            -       28,000
Stock issued
 to acquire
 Shopclue.com, Inc.     -   1,000,030              -              -       10,000   3,990,000            -    4,000,000
Accrued dividends
 on preferred stock     -           -              -              -            -           -       (7,000)      (7,000)
Net loss for the
 year ended
 December 31, 2000      -           -              -              -            -           -   (8,579,000)  (8,579,000)
----------------------------------------------------------------------------------------------------------------------
Balance at
 December 31, 2000  1,000  11,507,885              -*             -      115,000  12,521,000  (19,150,000)  (6,514,000)
======================================================================================================================
</TABLE>

*-amount is less than $1,000.

See notes to consolidated financial statements.


                                      F-8
<PAGE>

The Finx Group, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

1. Summary of Significant Accounting Policies

Background

2000 Finx Group Merger

The Board of Directors of Fingermatrix, Inc. ("Fingermatrix"), a New York
Corporation formed on May 12, 1976, determined that it would be in the best
interests of Fingermatrix to reincorporate Fingermatrix in Delaware and that
such reincorporation would be accomplished through the merger of Fingermatrix
with and into its wholly-owned subsidiary, The Finx Group, Inc. ("The Finx
Group", the "Company" or the "Registrant"), a Delaware Corporation formed on
June 6, 2000 ("The 2000 Finx Group Merger"). On June 23, 2000, the Fingermatrix
Board of Directors approved a merger agreement between Fingermatrix and The Finx
Group (the "2000 Finx Group Merger Agreement"), which became effective as of
July 14, 2000 upon the written consent of a majority of the Fingermatrix
shareholders consisting of The Trinity Group, Inc. ("Trinity"), a privately
owned Delaware corporation owned by The Trinity Group-I, Inc. ("Trinity-I") and
five other shareholders. Trinity-I is owned by Lewis S. Schiller (Mr. Lewis
Schiller), Fingermatrix's and The Finx Group's Chairman and Chief Executive
Officer.

The Board of Directors fixed the close of business on June 30, 2000 as the
record date for purposes of consummating the terms of the 2000 Finx Group Merger
Agreement. Fingermatrix reported the 2000 Finx Group Merger in an Information
Statement under Section 14 of the Securities and Exchange Act of 1934 and on or
about July 14, 2000, such Information Statement was sent to the shareholders of
record as of June 30, 2000.

On June 30, 2000, Fingermatrix had 20,000,000 shares of Common Stock, 114,403
shares of Series A 2% Voting Convertible Preferred Stock (convertible into
84,978,548 shares of Common stock) and 1,000 shares of Series B 4% Preferred
Stock issued and outstanding. On June 30, 2000, The Finx Group had authorized
capital stock consisting of 50,000,000 shares of Common Stock, par value $.01
per share, of which no shares were issued or outstanding and 1,000,000 shares of
Series A 4% Preferred Stock, par value $.01 per share, of which 1,000 shares
were issued and outstanding and were owned by Trinity.

Pursuant to the 2000 Finx Group Merger Agreement, each outstanding ten shares of
Fingermatrix Common Stock was automatically converted into the right to receive
one share of The Finx Group's fully paid and non-assessable common stock. Each
outstanding share of Fingermatrix Series A 2% Voting Convertible Preferred Stock
was automatically converted into 742.8 shares of Fingermatrix Common Stock and
then each outstanding ten shares of such Fingermatrix Common Stock was
automatically converted into the right to receive one share of The Finx Group's
fully paid and non-assessable common stock. Each outstanding share of
Fingermatrix Series B 4% Preferred Stock automatically converted into the right
to receive one share of The Finx Group's fully paid and non-assessable Series A
4% Preferred Stock. Each outstanding option or warrant to purchase ten shares of
Fingermatrix Common Stock was converted into an option to purchase one share of
The Finx Group's Common Stock. The By-Laws of Fingermatrix continued in force as
the By-Laws of The Finx Group and the directors and officers of The Finx Group
are the same as those of Fingermatrix.

1999 SES Merger

On April 28, 1999, Fingermatrix consummated an Agreement and Plan of
Reorganization (the "1999 SES Merger Agreement") with Trinity. Pursuant to the
1999 SES Merger agreement, Fingermatrix acquired from Trinity in a reverse
merger (the "1999 SES Merger") all of the issued and outstanding shares of
capital stock of SES Acquisition Corp. ("SES") (a then wholly owned subsidiary
of Trinity) in exchange for 85% of Fingermatrix's equity and voting power
consisting of 1,057,160 shares (10,571,607 shares prior to the July 14, 2000 1
for 10 reverse split) of Common Stock and 93,654 shares of Series A Preferred
Stock


                                      F-9
<PAGE>

(convertible into 6,956,693 shares (69,566,934 shares prior to the July 14, 2000
1 for 10 reverse split) of Common Stock).

Upon the conclusion of the 1999 SES Merger, by virtue of SES's ownership of all
of the issued and outstanding shares of capital stock of Sequential Electronic
Systems, Inc. ("Sequential"), and S-Tech, Inc. ("S-Tech") and 39.1% of the
issued and outstanding shares of capital stock of FMX Corp. ("FMX"),
Fingermatrix succeeded to the ownership of these entities, which became second
tier subsidiaries of Fingermatrix. The former stockholders of Fingermatrix
retained a 10% ownership interest in Fingermatrix consisting of 942,839 shares
(9,428,393 shares prior to the July 14, 2000 1 for 10 reverse split) of Common
Stock.

The 1999 SES Merger is accounted for as a reverse acquisition, with SES being
the acquiring company for accounting purposes, whereby the equity of SES, as the
predecessor company, and Fingermatrix, as the acquired company, have been
recapitalized and the accompanying financial statements, and any financial data
included herein, reflect the results of operations of Fingermatrix and SES from
the date of the 1999 SES Merger forward and the results of operations and cash
flows of SES prior to the date of the 1999 SES Merger.

Debt Exchange

Simultaneously with the 1999 SES Merger, certain creditors of the Company
exchanged $984,000 of indebtedness held by them for an aggregate of 6,436 Shares
of Series A Preferred Stock (convertible into 4,713,809 shares of Common Stock)
pursuant to an agreement entered into between Fingermatrix and the creditors on
April 28, 1999 (the "Debt Exchange Agreement").

Change of Control

As a consequence of the 1999 SES Merger, Trinity became Fingermtrix's
controlling stockholder. Simultaneously with the 1999 SES Merger, the then
members of the Fingermatrix Board of Directors resigned and Lewis S. Schiller,
E. Gerald Kaye and Joel Brown were appointed to the Board of Directors.

Further, the then Fingermatrix officers resigned and Lewis S. Schiller became
Chairman of the Board and Chief Executive Officer of Fingermatrix and Grazyna B.
Wnuk became the Vice-President and Secretary of Fingermatrix. Subsequently,
Grazyna B. Wnuk replaced Joel Brown on the Board of Directors following his
resignation on November 19, 1999.

Subsequent to the 1999 SES Merger, Fingermatrix issued 1,000 shares of a newly
created series of Preferred Stock (the "Series B Preferred Stock") to Trinity.
The Series B Preferred Stock gives Trinity the right to elect a majority of the
Fingermatrix Board of Directors.

The Finx Group

The Finx Group holds controlling investments in its subsidiaries that operate,
or intend to operate, in seven distinct business segments. The Finx Group's
business is conducted by Mr. Lewis Schiller, who is employed as the Company's
Chief Executive Officer and President, and Grazyna B. Wnuk ("Ms. Wnuk"), who is
employed as the Company's Vice-President. Both Mr. Schiller and Ms. Wnuk are
members of the Company's Board of Directors on which Mr. Schiller serves as its
Chairman and Ms. Wnuk serves as its Secretary. In addition, Mr. Schiller and Ms.
Wnuk serve as executive officers and or as directors for the subsidiaries of The
Finx Group.

Mr. Schiller and Ms. Wnuk, along with strategically assigned consultants,
provide The Finx Group's subsidiaries with management, financial, legal and
administrative services. Commencing July 1, 2000, The Finx Group charges its
subsidiaries, a monthly consulting fee for the services provided to them. During
2000, such intersegment consulting fees for the year ended December 31 2000
aggregated $450,000.


                                      F-10
<PAGE>

The seven separately identified business segments that The Finx Group manages
are as follows:

      -Electro-Mechanical and Electro-Optical Products
      -Specialized Vending Machines and Avionics Equipment
      -Fingerprint Identification Technologies
      -Secured Entrance Systems (Ingress/Egress)
      -Internet  Marketing
      -Web Based Development Solutions
      -Application Service Provider

Electro-Mechanical and Electro-Optical Products

Electro-Mechanical and Electro-Optical Products reflects the activities of
Sequential Electronic Systems, Inc. ("Sequential"), a Delaware Company formed in
1985. As a result of the 1999 SES Merger, The Finx Group owns all of
Sequential's issued and outstanding common stock. The Finx Group also owns all
of Sequential's issued and outstanding preferred stock, which gives The Finx
Group the right to elect a majority of Sequential's board of directors.
Sequential is engaged in the design, manufacture and assembly of precision
electro-mechanical and electro-optical products and devices for sale to
commercial and governmental customers throughout the United States.

Specialized Vending Machines and Avionics Equipment

Specialized Vending Machines and Avionics Equipment reflects the activities of
S-Tech, Inc. ("S-Tech"), a Delaware Company formed in 1992. As a result of the
1999 SES Merger, The Finx Group owns all of S-Tech's issued and outstanding
common stock. The Finx Group also owns all of S-Tech's issued and outstanding
preferred stock, which gives The Finx Group the right to elect a majority of
S-Tech's board of directors. S-Tech designs and manufactures two specialized
product lines consisting of specialized vending machines and avionics equipment.

Fingerprint Identification Technologies

Fingerprint Identification Technologies reflects the activities of FMX, Corp.
("FMX"), a Delaware Company formed in 1996. As a result of the 1999 SES Merger,
The Finx Group owns 39.1% of FMX's issued and outstanding common stock. Michael
Schiller, FMX's Chief Technical Officer and brother to Mr. Lewis Schiller owns
49.9%. Mr. Lewis Schiller owns 4%. Ms. Wnuk owns 2% and members of Mr. Lewis
Schiller's family own the remaining 5%. The Finx Group also owns all of FMX's
issued and outstanding preferred stock, which gives The Finx Group the right to
elect a majority of FMX's board of directors. FMX is a development stage company
engaged in the design and development of state-of-the-art fingerprint
identification hardware and software systems with a threefold target market of
Internet access, law enforcement identification and commercial and governmental
access control.

Secured Entrance Systems (Ingress/Egress)

Secured Entrance Systems (Ingress/Egress) reflects the activities of Secured
Portal Sytems, Inc. ("Secured Portals"). Secured Portals is a Delaware Company
formed in August 1999 whereby The Finx Group owns 89% of Secured Portals' issued
and outstanding common stock, Mr. Lewis Schiller owns 4%, Ms. Wnuk owns 2% and
members of Mr. Lewis Schiller's family own the remaining 5%. The Finx Group also
owns all of Secured Portals' issued and outstanding preferred stock, which gives
The Finx Group the right to elect a majority of Secured Portals' board of
directors. Secured Portals was formed for the purpose of entering into an
agreement with a subsidiary of Georal, GIL Security Systems, Inc. ("GIL").
Georal designed, developed and has commenced the marketing of an unattended
secure entrance and egress system designed to prevent or restrict access to
buildings and facilities (the "Georal Security Systems"). On September 13, 1999,
Secured Portals entered into an exclusive licensing agreement with Georal
pursuant to which Secured Portals was engaged as the exclusive distributor for
the Georal Security Systems for a term commencing as of September 1, 1999 and
expiring on August 31, 2009 (the "Georal Exclusive Licensing Agreement"), to
certain categories of customers specified in the


                                      F-11
<PAGE>

Georal Exclusive Licensing Agreement, including certain agencies of the federal
government, embassies, department stores and retail stores located in the United
States, the State of Israel, NCR Corp. and Sun Microsystems. As an inducement to
obtain the Georal Exclusive Licensing Agreement, the Company also entered into a
stock purchase agreement with GIL on September 13, 1999 (the "GIL Stock Purchase
Agreement") pursuant to which the Company issued to GIL 14,134 shares of its
Series A Preferred Stock (convertible into 1,049,873 shares (10,498,735 shares
prior to the July 14, 2000 1 for 10 reverse split) of Common Stock) of which
997,737 shares were in exchange for the licensing rights and 52,136 shares were
in exchange for 1,000,000 shares of the outstanding common stock of GIL. The GIL
Shares represented 1% of the outstanding common stock of GIL at the time the
Company entered into the GIL Stock Purchase Agreement. Secured Portals proposed
activities consist of the marketing and distribution of the Georal Security
Systems to both those customers for which it has exclusive distribution rights
and to others as to which it has non-exclusive rights to distribute the Georal
Security Systems. Many of the customers to whom Secured Portals will seek to
market the Georal Security Systems will be domestic and foreign government
purchasers as well as commercial users.

Internet Marketing

Internet Marketing reflects the activities of Starnet365.com, Inc.
("Starnet365.com"). Starnet365.com is a Delaware company that was originally
organized as Cue 365.com, Inc. on April 20, 2000 by Trinity. On May 25, 2000,
Trinity changed Cue365.com, Inc.'s name to Starnet365.com, Inc. and effected a
spin-off of Starnet365.com as a result of which The Finx Group owns 69.5% of
Starnet365.com's issued and outstanding common stock, Starnet365.com's
executives and employees own 22.05% (including 6.11% and 4.28% owned
respectively by Mr. Lewis Schiller and Ms. Wnuk) and members of Mr. Lewis
Schiller's family own the remaining 8.45%. The Finx Group also owns all of
Starnet365.com's issued and outstanding preferred stock, which gives The Finx
Group the right to elect a majority of Starnet365.com's board of directors.
Starnet365.com is an internet multi-level marketing company whose most
significant product is the Qode engine, a web based software component
comprising the largest UPC coded data base which enables its users to
comparative shop products related to the UPC codes. Starnet365.com also sells a
series of on-line training programs consisting of a series of integrated "Earn
While You Learn", on-line training programs that are intended to teach marketing
and recruiting techniques as well as certain tax and legal aspects of running a
home-based business. Starnet365.com also markets replicated web sites, which
Starnet365.com intends to load with non-branded merchandise, enabling
individuals quickly and inexpensively to own their own on-line E-Commerce
website. In addition, Starnet365.com generates revenues from web site enrollment
fees, monthly web hosting fees, and transaction processing fees related to the
sale of merchandise on the websites.

Application Service Provider

On July 27, 2000, the Company concluded an agreement to acquire a controlling
interest in Shopclue.com, Inc. d/b/a Retail Drive ("Shopclue.com" or "Retail
Drive") in exchange for 1,000,030 shares of the Company's Common Stock.
Shopclue.com is a Delaware Company organized in July 1999. During 2000
Shopclue.com's revenues were $64,000 of which $44,000 were generated from the
date of acquisition through December 31, 2000. The Company purchased the
Shopclue.com common shares from family members of Lewis S. Schiller, the
Company's Chief Executive Officer and Vice Chairman of its Board of Directors.
As of the date of the acquisition, Shopclue.com had an excess of liabilities
over assets of $768,000 and the common shares issued to acquire Shopclue.com
were valued at $4 million, resulting in a purchase price that was in excess of
net assets by $4.768 million. Because the acquisition was consummated between
related parties, the excess purchase price cannot be recorded as goodwill and as
a result, the Company incurred non cash expense for of $4.768 million. As of
December 31, 2000, the Company owned 34.24% of Shopclue.com's common stock and
all of its issued and outstanding preferred stock which gives the Company the
right to elect a majority of the Shopclue.com board of directors. Shopclue.com
is included as a part of the Company's consolidated statements of operations and
consolidated statement of financial position due to the effective control as
evidenced by interlocking management and The Finx Group's ownership of a series
of Shopclue.com's preferred stock that gives the Company the right to elect a
majority of the Shopclue.com board of directors. Shopclue.com is an Application
Service Provider


                                      F-12
<PAGE>

that enables small- and medium-sized businesses to establish an advanced online
presence rapidly and inexpensively using Shopclue.com's software through its
interactive Internet mall known as Retail Drive. The software used by
Shopclue.com allows its customers to create, edit and maintain advanced,
interactive websites without having any prior knowledge of web-based programming
languages. Shopclue.com's Retail Drive interactive website is presently utilized
by more than 350 merchants. Shopclue.com has more than 30 employees and is
headquartered in Armonk, New York. Blake Schiller, the son of Lewis S. Schiller,
The Finx Group's chief executive officer and vice-chairman, developed the
Shopclue.com concept and remains a significant shareholder of Shopclue.com and
will continue to serve as an executive of Shopclue.com.

Web Based Development Solutions

On July 27, 2000, the Company acquired a 23.42% equity interest in Biz Chase,
Inc. ("Biz Chase") from Trinity. Biz Chase, a Delaware company organized in July
2000, is included as a part of the Company's consolidated statements of
operations and consolidated statement of financial position due to the effective
control as evidenced by interlocking management and The Finx Group's ownership
of a series of Biz Chase's preferred stock that gives the Company the right to
elect a majority of the Biz Chase board of directors. Biz Chase's concept was
developed by Blake Schiller, the founder of Shopclue.com, and provides
Shopclue.com with its software under a licensing agreement. Effective September
30, 2000, Biz Chase received common stock shares of Shopclue.com representing
19% of Shopclue.com's outstanding common stock shares in exchange for the
assumption of $897,000 of notes payable that Shopclue.com owed to related
parties. Biz Chase has developed a wholesale web based development solution that
provides a simple, affordable and feature rich online solution for small
businesses. In March 2001, Bizchase granted a license to Starnet365.com giving
Starnet365.com the right to sell software developed by Bizchase to the
multi-level marketing industry. The Bizchase software was developed and also
licensed to Retail Drive. Revenues are generated through activation and hosting
fees.

Basis of Presentation

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the liquidation of
liabilities in the normal course of business. However, the Company has a history
of net losses for the two years ended December 31, 2000 and as of December 31,
2000 has a working capital deficiency of $6.911 million and capital deficiency
of $6.514 million. During 2000 and 1999 the Company has relied on financial
support from its controlling stockholder, Trinity and other related parties.
Management is currently seeking additional financing; however no assurances can
be made that such financing will be consummated. The continuation of the Company
as a going concern is dependent upon its ability to obtain financing, and to use
the proceeds from any such financing to increase its business to achieve
profitable operations. The accompanying financial statements do not include any
adjustments that would result should the Company be unable to continue as a
going concern.


Principles of Consolidation

The consolidated financial statements include the accounts of Fingermatrix and
its subsidiaries for which it has direct voting control or effective control.
Intercompany balances and transactions are eliminated in consolidation.

Use of Estimates

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amount of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Significant estimates include
the net realizable value of inventories, the allowance for doubtful accounts and
depreciation and amortization, among others.


                                      F-13
<PAGE>

Cash

The Company considers all highly liquid instruments purchased with an original
maturity of three months or less to be cash equivalents.

Inventories

Inventories are stated at the lower of cost or estimated net realizable value.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Expenditures for maintenance
and repairs are charged against income. Depreciation is provided on the
straight-line basis over the useful lives of the assets, which range from three
to seven years.

Software Development Costs

Software Development Costs are stated at cost and include expenses incurred by
the Company to maintain, monitor and manage the Company's website. The Company
recognizes website development costs in accordance with Statement of Position
("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." As such, the Company expenses all costs incurred
that relate to the planning and post implementation phases of development. Costs
incurred in the development phase are capitalized and recognized over the
product's estimated useful life if the product is expected to have a useful life
beyond one year. Costs associated with repair or maintenance of the existing
site or the development of website content are included in product development
expense in the statement of operations. The software development costs will be
amortized using the straight-line method over two years. Amortization of
software development costs was $55,000 for 2000

Patents

Patents are carried at cost less accumulated amortization, which is calculated
on a straight-line basis over the assets estimated useful life of 17 years.
Amortization expense related to patents was $11,000 for 1999. No such patent
costs or related amortization existed for 1998. During a review of possible
impairment of long-lived assets, it was determined that the recoverability of
the costs associated with the patents acquired as a part of the 1999 SES Merger
was unlikely and $87,000 of such costs were written-off in 1999 and the
remaining $5,000 was written-off in 2000. The existing patent costs are related
to a new broad patent, issued subsequent to December 31, 2000 and as such no
amortization was recorded on this new patent for 2000.

Long-Lived Assets

Long-lived assets are reviewed for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. If such review indicates that the carrying amount of
long-lived assets is not recoverable, the carrying amount of such assets is
reduced to the estimated recoverable value.

Revenue Recognition

The Company recognizes revenues when goods are shipped to its customers or when
services have been performed.

Income Taxes

The Company accounts for income taxes using the asset and liability approach.
The measurement of deferred tax assets is reduced, if necessary, by the amount
of any tax benefits that, based on available evidence, management does not
expect to be realized.


                                      F-14
<PAGE>

Minority Interest

The minority interest represents the losses of its subsidiaries that have been
apportioned to the minority interest holders. The amount of loss apportioned to
the minority interest holders is limited to the amount of investment that such
minority holders have made into the subsidiaries. For 2000 and 1999, the
minority interest portion of such losses was $113,000 and $116,000,
respectively, and as of December 31, 2000, cumulative amounts of minority
interest in the losses of consolidated subsidiaries in excess of minority equity
interests was $967,000.

Loss Per Share

Basic loss per share is computed by dividing net loss by the weighted average
number of common shares outstanding during the year. Diluted loss per share is
computed by adjusting outstanding shares, assuming conversion of all dilutive
potential common shares. At December 2000, the Company has outstanding options
and warrants to purchase an aggregate of 3,037,000 of which 1,280,000 were
exercised in March of 2001. The potential common shares from the exercise of
options and warrants are not included for purposes of calculating fully diluted
loss per share because their inclusion would be anti-dilutive.

Fair Value of Financial Instruments - The carrying values of financial
instruments included in current assets and liabilities approximate fair values
due to the short-term maturities of these instruments. The fair value of the
Company's other long-term assets is estimated to approximate net book value.

Concentrations of Credit Risk - Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist principally of
cash and money market funds and accounts receivable. The Company places its cash
and money market funds with high quality financial institutions and as of
December 1999 does not have any deposits with financial institutions in excess
of federally insured limits. The Company's sales to the U.S. Department of
Defense approximated $1,279,000, or 40% of total sales for 2000 and $919,000, or
35% of total sales for 1999. Accounts receivable on such sales as of December
31, 2000 approximated $120,000, or 38% of total net accounts receivable.

2. Inventories

A summary of inventories as of December 31, 2000 is as follows:

Raw materials                 $1,700,000
Work-in-process                  512,000
Finished goods                   630,000
----------------------------------------
Cost                           2,842,000
Reserve for obsolete
 and slow moving inventory    (1,738,000)
----------------------------------------
Net                           $1,104,000
========================================

A portion of the raw material inventory is held for the manufacture of certain
products not produced by the Company in recent years. The inventory is recorded
at net realizable value, which is less than its cost. Management is seeking
contracts for these products as the Company re-enters these markets. However,
since the outcome of these efforts is not certain, it is at least reasonably
possible that the Company's estimates could change in the future and additional
inventory reductions would be required. The Company's charge to income for the
write-down of inventory for 2000 and 1999 was $400,000 and $258,000,
respectively. Additionally, during 1999, the Company incurred uninsured
inventory losses of $972,000 resulting from flood damages caused by a hurricane.


                                      F-15
<PAGE>

3. Accounts Receivable

A summary of trade accounts receivable as of December 31, 2000 is as follows:

U.S. Government                           $120,000
Other                                      243,000
Allowance for doubtful accounts            (51,000)
--------------------------------------------------
Net                                       $312,000
==================================================

Changes in the allowance for doubtful accounts for 2000 are as follows:

Balance at beginning of year               $10,000
Current year provision                      52,000
Write-offs                                  (8,000)
Recoveries                                  (3,000)
--------------------------------------------------
Balance at end of year                     $51,000
==================================================

4. Property, Plant and Equipment

A summary of property, plant and equipment as of December 31, 2000 is as
follows:

Machinery and equipment                     $1,892,000
Furniture and fixtures                         318,000
Tools and dies1                                 45,000
Leasehold improvements                         104,000
Computer equipment                              88,000
------------------------------------------------------
Total cost                                   2,537,000
Accumulated depreciation and amortization   (2,409,000)
------------------------------------------------------
Net                                           $128,000
======================================================

Depreciation and amortization on property, plant and equipment for 2000 and 1999
was $43,000 and $72,000, respectively.

5. Notes Payable, Related Party

The Company and its subsidiaries incur interest expense on advances from
Trinity, advances from Universal International, Inc., a company owned by Grazyna
Wnuk, an officer of the Company, a loan from E. Gerald Kay, a former director,
and advances from Blake Schiller and Carol Schiller, both immediate family
members of Lewis Schiller, an officer of the company. In addition S-Tech incurs
interest expense and factoring fees pursuant to a factoring agreement with
Trinity Factoring Corp., a financing company owned by Lewis Schiller. Total
outstanding advances from such related parties as of December 31, 2000 and 1999,
aggregated $4.208 million and $1.532 million. Interest accrued on such notes are
generally calculated at 9% and as of December 31, 2000 $332,000 of such interest
remains unpaid. Interest expense and financing fees on related party notes was
$337,000 and $84,000 for 2000 and 1999, respectively.

6. Revolving Line of Credit

         On July 28, 1997, Sequential obtained a two-year revolving line of
credit from FINOVA Capital Corporation, formerly United Credit Corporation (the
"FINOVA Line of Credit"). The original FINOVA Line of Credit provided for a
borrowing base equal to the lesser of 75% of eligible accounts receivable or
$350,000, required payment of a 1% annual facility fee of $3,500, a 1% monthly
commitment fee of $3,500, against which monthly interest, exclusive of interest
on any over advances, is applied. The annual monthly interest rate on the FINOVA
Line of Credit is the greater of 18.5% or the prime


                                      F-16
<PAGE>

rate in effect in New York City plus 10%, and is payable monthly. The FINOVA
Line of Credit is collateralized by all of the assets of Sequential. On March
27, 1998, the FINOVA Line of Credit was amended allowing an increase from 75% to
80% of eligible accounts receivable for purposes of calculating the borrowing
base, and extended the term of the agreement from July 31, 1999 to December 31,
1999. On August 3, 1998, the FINOVA Line of Credit was further amended allowing
an increase in the borrowing base to a maximum of $400,000, and further extended
the term of the agreement to July 31, 2000. From August 3, 1998 until August 27,
1999, Trinity had a $200,000 participating interest in the FINOVA Line of
Credit. On August 28, 1999, Trinity guaranteed Sequential's performance under
the FINOVA Line of Credit and provided FINOVA Capital Corporation with a
collateral security deposit of approximately $468,000 and simultaneously
therewith, Trinity's participation in the FINOVA Line of Credit ended. In August
1999, Trinity-I increased the cash collateral to approximately $523,000 on which
Trinity-I receives from FINOVA a return on the cash collateral in an amount
equal to the greater of the prime rate of Citibank, N.A., plus 6% or 14.5% per
annum. Subsequent to December 31, 2000, the Company determined that FINOVA
declared bankruptcy and the Company is attempting to establish a replacement
line of credit. Interest expense and factoring fees on the line of credit for
2000 and 1999 were $163,000 and $205,000.

7. Capital Stock

The Company has authorized 50,000,000 shares of $.01 par value Common Stock. As
of December 31, 2000, the Company has 11,507,885 shares issued and outstanding.
In addition, 3,037,000 of the authorized shares are reserved for outstanding
warrants and options to purchase the company's Common Stock. The Company has not
declared dividends on its Common Stock.

The Company has authorized 1,000,000 of preferred stock. As of December 31,
2000, the company has designated and issued 1,000 as the Series A Preferred
Stock. All of the Series A Preferred Stock is owned by Trinity and such shares
give Trinity the right to elect a majority of the Company's Board of Directors.
Each share of the Series A Preferred Stock entitles the holder to annual
dividends at the rate of 4%. Accrued dividends on the issued and outstanding
shares of the Series A Preferred Stock as and for the year ended December 31,
2000 were less than $1,000.

Prior to June 30, 2000, the Company had designated a separate Series A
Convertible Preferred Stock. As of December 31, 2000, all of such convertible
preferred stock has been converted. Accrued dividends on such preferred stock is
$17,0000 as of December 31, 2000.

8. Stock Options and Warrants

Stock Options - of December 2000, the Company has outstanding options to
purchase in the aggregate 2,568,500 shares of the company's common stock of
which 825,000 are exercisable at $0.01 per share, 1,743,500 are exercisable at
$0.50 per share. The option to purchase 825,000 shares at $0.01 and 150,000
shares at $0.50 per share carry cashless exercise provisions. A summary of the
Company's fixed stock options for the years ended December 31, 2000 is as
follows:
                                                         Weighted
                                                          Average
                                                         Exercise
                                           Shares           Price
-----------------------------------------------------------------
Outstanding at beginning of year          975,000          $0.085
Granted                                 1,593,500          $0.500
Exercised                                      --              --
Forfeited                                      --              --
-----------------------------------------------------------------
Outstanding at end of year              2,568,500          $0.342
=================================================================
Options exercisable at year end         2,668,500          $0.342
=================================================================


                                      F-17
<PAGE>

Stock Purchase Warrants

The Company has had outstanding for all of 2000 and 1999 warrants to purchase
135,000 shares of the Company's Common Stock for $10 per share with an
expiration date of July 2001, warrants to purchase 455,000 shares of the
Company's Common Stock for $0.01 per share with an expiration date of July 2001.
No warrants were issued or exercised during 2000 and 1999.

9. Related Party Transactions

The Company and its subsidiaries incur interest expense on advances from
Trinity, advances from Universal International, Inc., a company owned by Grazyna
Wnuk, an officer of the Company, a loan from E. Gerald Kay, a former director,
and advances from Blake Schiller and Carol Schiller, both immediate family
members of Lewis Schiller, an officer of the company. In addition S-Tech incurs
interest expense and factoring fees pursuant to a factoring agreement with
Trinity Factoring Corp., a financing company owned by Lewis Schiller. Total
outstanding advances from such related parties as of December 31, 2000 and 1999,
aggregated $4.208 million and $1.532 million. Interest accrued on such notes are
generally calculated at 9% and as of December 31, 2000 $332,000 of such interest
remains unpaid. Interest expense and financing fees on related party notes was
$337,000 and $84,000 for 2000 and 1999, respectively.

On April 28, 1999, Fingermatrix consummated an Agreement and Plan of
Reorganization (the "1999 SES Merger Agreement") with Trinity. Pursuant to the
1999 SES Merger agreement, Fingermatrix acquired from Trinity in a reverse
merger (the "1999 SES Merger") all of the issued and outstanding shares of
capital stock of SES Acquisition Corp. ("SES") (a then wholly owned subsidiary
of Trinity) in exchange for 85% of Fingermatrix's equity and voting power
consisting of 1,057,160 shares (10,571,607 shares prior to the July 14, 2000 1
for 10 reverse split) of Common Stock and 93,654 shares of Series A Preferred
Stock (convertible into 6,956,693 shares (69,566,934 shares prior to the July
14, 2000 1 for 10 reverse split) of Common Stock). Subsequent to the 1999 SES
Merger, Trinity transferred an aggregate of 370,046 shares (3,700,457 shares
prior to the July 14, 2000 1 for 10 reverse split) of the Common Stock and
32,780 shares of Series A Preferred Stock (convertible into an aggregate of
2,434,898 shares 984 (24,348,984 shares prior to the July 14, 2000 1 for 10
reverse split) shares of Common Stock) owned by it to the folliwng individuals
and amounts: Carol Schiller (116,281 shares (1,162,811 shares prior to the July
14, 2000 1 for 10 reverse split) of Common Stock and 10,302 shares of Series A
Preferred Stock); Douglas Schiller (31,733 shares (317,332 shares prior to the
July 14, 2000 1 for 10 reverse split) of Common Stock and 2,810 shares of Series
A Preferred Stock); Linda Schiller (31,733 shares (317,332 shares prior to the
July 14, 2000 1 for 10 reverse split) of Common Stock and 2,810 shares of Series
A Preferred Stock); (31,733 shares (317,332 shares prior to the July 14, 2000 1
for 10 reverse split) of Common Stock and 2,810 shares of Series A Preferred
Stock); and Grazyna B. Wnuk (158,565 shares (1,585,650 shares prior to the July
14, 2000 1 for 10 reverse split) of Common Stock and 14,048 shares of Series A
Preferred Stock), in exchange for the equity interests of such individuals in
Trinity. Carol Schiller is the wife of Lewis S. Schiller, Chairman of the Board
and Chief Executive Officer of the Company, Douglas Schiller, Linda Schiller and
Blake Schiller are Mr. Schiller's adult children and Grazyna B. Wnuk is a
director of the Company. Trinity is wholly owned by Trinity-I, which, in turn,
is wholly owned by Lewis S. Schiller. Mr. Schiller disclaims the beneficial
ownership of the shares of Common Stock and Series A Preferred Stock owned by
Carol Schiller, Douglas Schiller, Linda Schiller and Blake Schiller. Mr.
Schiller and Ms. Wnuk are the sole officers and directors of and Trinity-I. Mr.
Schiller has pledged all of the shares of Trinity-I to SES Holdings Corp.
("SESH") as collateral security for a prior debt to SESH. SESH is controlled by
Carol Schiller. Carol Schiller, Douglas Schiller, Linda Schiller, Blake Schiller
and Grazyna B. Wnuk each have "piggy-back" registration rights with respect to
the aforementioned shares of Common Stock owned and to be issued to them upon
the conversion of the aforementioned shares of Series A Preferred Stock.

In July 1999, the Company issued to Trinity-I all 1,000 of the shares of its
Series A Preferred Stock pursuant to which Trinity-I has the right to elect the
majority of the Board of Directors. As of the date hereof, Lewis S. Schiller,
Grazyna B. Wnuk and E. Gerald Kay are Trinity's designees to the Board of
Directors.


                                      F-18
<PAGE>

In connection with the 1999 SES Merger, the Company exchanged shares of the
Series A Preferred Stock for indebtedness aggregating $648,000. P.T. Dolak
Permei ("Permei"), an Indonesian company, was one of the Company's then
creditors and exchanged an aggregate of $230,833 of such indebtedness for 2,259
shares of Series A Preferred Stock (convertible into an aggregate of 1,677,985
(167,799 post split) shares of Common Stock).

In July 1997, as amended in March and August 1998, Sequential entered into a
loan agreement with a lender pursuant to which such lender extended a $400,000
line of credit to Sequential. The line of credit is secured by Sequential's
accounts receivable, equipment, inventory, intangibles, and other assets. In
August 1998, Lewis S. Schiller entered into an agreement with such lender (the
"Participation Agreement") pursuant to which he agreed to provide, jointly with
such lender, a portion of the funds advanced to Sequential under such loan
agreement. Subsequently, in August 1999, Trinity-I entered into a collateral
security agreement (the "Collateral Security Agreement") with such lender
pursuant to which it deposited the sum of $467,500 (the "Cash Collateral") with
such lender as security for Sequential's obligations under the aforementioned
loan agreement and, simultaneously therewith, the Participation Agreement was
terminated. Trinity-I subsequently increased the Cash Collateral to $522,500.
Trinity-I currently receives from such lender a return on the Cash Collateral in
an amount equal to the greater of the prime rate of CitiBank, N.A., plus 6% or
14.5% per annum.

In July 1999, the Company settled amounts due for unpaid rent owed to the
Company's former landlord. Included in this settlement was the issuance by the
Company of a series of notes payable to the landlord in the principal amount of
$45,000, which notes are payable in nine installments, the last of which is due
in April 2000. Lewis S. Schiller, Chief Executive Officer and Chairman of the
Board, personally guaranteed these notes. The remaining balance of $25,000 due
on such notes is currently in default.

On September 13, 1999, Secured Portals entered into an exclusive licensing
agreement with GIL pursuant to which Secured Portals was engaged as the
exclusive distributor for the Georal Security Systems for a term commencing as
of September 1, 1999 and expiring on August 31, 2009 (the "Georal Exclusive
Licensing Agreement"), to certain categories of customers specified in the
Georal Exclusive Licensing Agreement, including certain agencies of the federal
government, embassies, department stores and retail stores located in the United
States, the State of Israel, NCR Corp. and Sun Microsystems. As an inducement to
obtain the Georal Exclusive Licensing Agreement, the Company also entered into a
stock purchase agreement with GIL on September 13, 1999 (the "GIL Stock Purchase
Agreement") pursuant to which the Company issued to GIL 14,134 shares of its
Series A Preferred Stock (convertible into 1,049,873 shares (10,498,735 shares
prior to the July 14, 2000 1 for 10 reverse split) of Common Stock) in exchange
for 1,000,000 shares of the outstanding common stock of GIL. Under these
agreements, Trinity, Carol Schiller, the wife of Lewis S. Schiller, and Grazyna
B. Wnuk, an officer and director of the Company, agreed not to publicly sell any
of the shares of Common Stock owned by them unless and to the extent that GIL
publicly sells any of the shares of Common Stock acquired by it upon the
conversion of the shares of Series A Preferred Stock owned by it unless 50% or
more of GIL's shares of Common Stock are registered under the Securities Act or
such shares become eligible for public sale under Rule 144(k) under the
Securities Act.

On July 27, 2000, the Company concluded an agreement to acquire a controlling
interest in Shopclue.com, Inc. d/b/a Retail Drive ("Shopclue.com" or "Retail
Drive") in exchange for 1,000,030 shares of the Company's Common Stock. The
Company purchased the Shopclue.com common shares from family members of Lewis S.
Schiller, the Company's Chief Executive Officer and Vice Chairman of its Board
of Directors. As of the date of the acquisition, Shopclue.com had an excess of
liabilities over assets of $768,000 and the common shares issued to acquire
Shopclue.com were valued at $4 million, resulting in a purchase price that was
in excess of net assets by $4.768 million. Because the acquisition was
consummated between related parties, the excess purchase price cannot be
recorded as goodwill and as a result, the Company incurred non cash expense for
of $4.768 million.


                                      F-19
<PAGE>

10. Income Taxes

The Company, as of December 31, 2000, has available approximately $48.873
million of net operating loss carry forwards to reduce future Federal and state
income taxes. In addition, the Company has available investment tax credit and
research tax credit carry forwards in excess of $500,000. However, it is not
currently probable that the related deferred tax assets will be realized by
reducing future taxable income during the carry forward period and as such, a
valuation allowance has been computed to offset in its entirety the deferred tax
asset attributable to the net operating loss and tax credits. The net operating
loss carry forwards expire as follows:

   Year of                   Net operating loss
  expiration                carry forward amount
------------------------------------------------
     2001                         $4,048,000
     2002                          5,384,000
     2003                          5,163,000
     2004                          5,616,000
     2005                          2,207,000
     2006                          3,144,000
     2007                          3,023,000
     2008                          2,044,000
     2009                          1,851,000
     2010                          2,050,000
     2011                          3,171,000
     2012                            194,000
     2013                          1,080,000
     2014                          1,319,000
     2015                          8,579,000
--------------------------------------------
                                 $48,873,000
============================================

Pursuant to section 382 of the Internal Revenue Code, the annual utilization of
these loss carry forwards is limited as a result of the changes in stock
ownership, which have occurred during 2000 and 1999, and may be further limited
if substantial changes in the Company ownership were to occur.

11. Extraordinary Loss on Debt Extinguishment

On April 28, 1999 certain creditors of the Company accepted 6,346 shares of
Series A Preferred Stock in exchange for their aggregate debt of $648,000. The
6,346 Series A Preferred shares were convertible into 471,381 common shares
(4,713,809 common shares prior to the July 14, 2000 1 for 10 reverse split) of
the Company and using the Black-Scholes option valuation formula, such shares
were valued at $1.077 million, resulting in $429,000 of expense from issuance of
the stock. On July 20, 1999, the Company settled amounts owed to the former
landlord of the Company by making cash payments of $70,000, issuing a note
payable for $45,000 and issuing 268 Series A Preferred shares. The 268 Series A
Preferred shares were convertible into 19,907 common shares (199,070 common
shares prior to the July 14, 2000 1 for 10 reverse split) of the Company's
Common Stock and using the Black-Scholes option valuation formula, such shares
were valued at $46,000. The total consideration given to the landlord, including
the calculated value of the Series A Preferred Shares, exceeded the amounts owed
to the former landlord by approximately $26,000. All of such excess is
attributed to the valuation of the Series A Preferred shares and was recorded as
expense from the issuance of stock, and is presented in the financial statements
as an extraordinary item.


                                      F-20
<PAGE>

12. Segment Information

Statement of Financial accounting standards No. 131, "Disclosure about Segments
of an Enterprise and Related Information" established standards for the
reporting of information about operating segments and defines operating segments
as components of an enterprise for which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. The Company's
chief operating decision maker is Lewis S. Schiller, the Company's Chief
Executive Officer, who evaluates the Company's businesses based upon the
separate financial statements and information of the underlying subsidiaries of
the Company. Based on the above evaluation, the Company has identified seven
separate reportable business segments as follows:

   (1)      Electro-Mechanical and Electro-Optical Products
   (2)      Specialized Vending Machines and Avionics Equipment
   (3)      Fingerprint Identification Technologies
   (4)      Secured Entrance Systems (Ingrterss/Egress)
   (5)      Internet  Marketing
   (6)      Web Based Development Solutions
   (7)      Application Service Provider

The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies. There are no
intersegment sales but there are intersegment advances and related interest
charges, and management fees charged by The Finx Group, all of which are
eliminated in the consolidated financial statements.

<TABLE>
<CAPTION>
<S>                                                   <C>               <C>
For the years ended December 31,                             2000              1999
-----------------------------------------------------------------------------------
Revenues
--------
Electro-Mechanical and Electro- Optical Products      $2,406,000        $2,056,000
Specialized Vending Machines and Avionics Equipment      401,000           567,000
Internet Marketing                                       367,000                 -
Application Service Provider                              44,000                 -
Corporate                                                450,000                 -
Intersegment charges                                    (450,000)                -
----------------------------------------------------------------------------------
Total revenues                                         3,218,000         2,623,000
==================================================================================

For the years ended December 31,                             2000              1999
-----------------------------------------------------------------------------------
Operating loss
--------------
Electro-Mechanical and Electro- Optical Products         (58,000)       (1,427,000)
Specialized Vending Machines and Avionics Equipment     (478,000)         (456,000)
Fingerprint Identification Technologies                 (296,000)         (218,000)
Secured Entrance Systems (Ingress/Egress)               (201,000)          (78,000)
Internet Viral Marketing                                (669,000)                -
Web Based Development Solutions                         (448,000)                -
Application Service Provider                            (312,000)                -
----------------------------------------------------------------------------------
                                                      (2,462,000)       (2,179,000)
Corporate costs and expenses                          (5,732,000)         (967,000)
----------------------------------------------------------------------------------
Total operating loss                                  (8,194,000)       (3,146,000)
==================================================================================
</TABLE>


                                      F-21
<PAGE>

<TABLE>
<CAPTION>
<S>                                                      <C>               <C>
For the years ended December 31,                             2000              1999
-----------------------------------------------------------------------------------
Interest expense
----------------
Electro-Mechanical and Electro- Optical Products         (335,000)         (254,000)
Specialized Vending Machines and Avionics Equipment       (84,000)          (23,000)
Fingerprint Identification Technologies                   (28,000)           (7,000)
Secured Entrance Systems (Ingress/Egress)                 (12,000)                -
Internet Viral Marketing                                  (20,000)                -
Web Based Development Solutions                           (57,000)                -
-----------------------------------------------------------------------------------
                                                         (536,000)         (284,000)
Corporate costs and expenses                              (67,000)          (15,000)
Intersegment charges                                       58,000            10,000
-----------------------------------------------------------------------------------
Total interest expense                                   (545,000)         (289,000)
===================================================================================

For the years ended December 31,                             2000              1999
-----------------------------------------------------------------------------------
Net loss
-----------------
Electro-Mechanical and Electro- Optical Products         (342,000)       (1,671,000)
Specialized Vending Machines and Avionics Equipment      (551,000)         (479,000)
Fingerprint Identification Technologies                  (323,000)         (225,000)
Secured Entrance Systems (Ingress/Egress)                (213,000)          (79,000)
Internet Viral Marketing                                 (689,000)                -
Web Based Development Solutions                          (505,000)                -
Application Service Provider                              (66,000)                -
-----------------------------------------------------------------------------------
                                                       (2,689,000)       (2,454,000)
Corporate costs and expenses                           (5,777,000)         (981,000)
Minority interest in loss of subsidiaries                 113,000           116,000
Extraordinary loss on debt extinguishment                       -          (455,000)
Intersegment charges                                     (226,000)                -
-----------------------------------------------------------------------------------
Total net loss                                         (8,579,000)       (3,774,000)
===================================================================================

For the years ended December 31,                             2000              1999
-----------------------------------------------------------------------------------
Depreciation and amortization
-----------------------------
Electro-Mechanical and Electro- Optical Products            8,000            18,000
Specialized Vending Machines and Avionics Equipment             -             7,000
Fingerprint Identification Technologies                         -                 -
Secured Entrance Systems (Ingress/Egress)                       -                 -
Internet Viral Marketing                                    9,000                 -
Web Based Development Solutions                            52,000                 -
Application Service Provider                                6,000                 -
-----------------------------------------------------------------------------------
                                                           75,000            25,000
Corporate                                                  23,000            30,000
-----------------------------------------------------------------------------------
Total depreciation and amortization                        98,000            55,000
===================================================================================
</TABLE>


                                      F-22
<PAGE>

<TABLE>
<CAPTION>
<S>                                                   <C>               <C>
For the years ended December 31,                             2000              1999
-----------------------------------------------------------------------------------
Assets
------
Electro-Mechanical and Electro- Optical Products        1,823,000         1,702,000
Specialized Vending Machines and Avionics Equipment       351,000           591,000
Fingerprint Identification Technologies                    10,000             5,000
Secured Entrance Systems (Ingress/Egress)                       -             1,000
Internet Viral Marketing                                  334,000                 -
Web Based Development Solutions                         1,080,000                 -
Application Service Provider                              207,000                 -
-----------------------------------------------------------------------------------
                                                        3,805,000         2,299,000
Corporate                                              12,505,000         8,077,000
Intersegment investments                              (12,906,000)       (8,007,000)
Intersegment receivables                               (1,503,000)         (397,000)
For the years ended December 31,                             2000              1999
-----------------------------------------------------------------------------------
Total assets                                            1,901,000         1,972,000
===================================================================================
</TABLE>


F-23