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

                               FORM 10-KSB
               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 31, 2001           Commission File
                                                     Number 0-12172

                             LINCOLN LOGS LTD.
              (Name of small business issuer in its charter)

         New York                                      14-1589242
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                      Identification No.)

              5 Riverside Drive, Chestertown, New York 12817
           (Address of principal executive offices) (Zip Code)

                Issuer's telephone number: (518) 494-5500

      Securities registered under Section 12(b) of the Exchange Act:

                                              Name of Each Exchange
Title of Each Class                            on Which Registered
      NONE                                            NONE

      Securities registered under Section 12(g) of the Exchange Act:

                       Common Stock, $.01 par value
                             (Title of Class)

                          Share Purchase Rights
                             (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 in response to
    Item 405 of Regulation S-B contained in this form, and no
    disclosure will be contained, to the best of the registrant's
    knowledge, in definitive proxy or information statements
    incorporated by reference in Part III of this Form 10-KSB or any
    amendment to this Form 10-KSB. [X]

    Issuer's revenues for the fiscal year ended January 31, 2001
    were $10,355,914.

    The aggregate market value of voting stock held by non-affiliates
    of the registrant as of April 25, 2001 was approximately $257,000.
    The number of shares of Common Stock of the registrant outstanding
    on April 25, 2001 was 7,255,059.

                                    1

<PAGE>
                                  PART I


ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

Lincoln Logs Ltd. is primarily engaged in the business of designing,
manufacturing and marketing a broad line of log and panelized homes to be
erected by custom builders and "do-it-yourself" buyers. The Company planes
cants into finished logs at its own manufacturing facilities in Chestertown,
New York and delivers to its customers by truck trailer a weather-tight log
home or panelized shell package which includes logs or pre-engineered
structural wall panels, prefabricated roof trusses, oriented strand board,
dimensional lumber, windows, doors, roof shingles, nails, caulking,
between-log sealant, blueprints and construction notes. The Company also
provides its customers with services related to the sale of its housing
packages, such as the preparation of customized blueprints.

The Company was incorporated in New York in 1977 and has the following
wholly-owned subsidiaries: Thermo-Home Inc., a New York corporation through
which the Company's panelized homes were previously manufactured and marketed
(the manufacture and marketing operations of the Company's panelized homes were
integrated into the operation of Lincoln Logs Ltd. during the fiscal year
ended January 31, 1988); Lincoln Logs International Ltd., a New York
corporation which was created to act as a domestic international sales
corporation, but is inactive and Lincoln Holding Corp., a Delaware
corporation, which was formed to hold the registered trademark "Lincoln".
Unless the context otherwise requires, the term "Company" refers to Lincoln
Logs Ltd. and its subsidiaries.


PRODUCTS

The Company's products include 100 standard models of log homes ranging in
size from 560 square feet to 4,000 square feet and in price from
approximately $20,200 to $160,900.  A majority of the Company's sales are of
log homes to be occupied as primary residences by the buyers.

The Company has a product line for the panelized housing market
utilizing a pre-engineered structural wall panel system, which when assembled
with other standard building components, allows for the construction of a
non-log, conventional home.  This product line is referred to
as the Thermo-Home(R) system.  Sales of this product line were approximately
15% of total sales in fiscal year 2001.

The Company also has a product line for the solarium/sunspace market
utilizing architectural arches which, when assembled with other standard
building components, will permit the construction of room additions for log
and conventional homes.  The product line is referred to as Lincoln
Solarium (TM).  Sales of this product line were approximately 2% of total
sales in fiscal year 2001.

Fifty percent (50%) of the purchase price of the building package is usually
received prior to the Company manufacturing any of the solid timber components
or the pre-engineered structural wall panels. The complete log home
shell package or panelized home package is shipped via truck trailers and
delivered to a customer upon payment of the balance of the purchase price.
International sales are against letters of credit, or receipt of full payment
prior to shipment.

The Company markets its products in the United States through a network of
approximately 60 independent sales representatives in approximately 25 states,
three independent representatives in foreign countries, and two Company owned
and operated sales centers, one in northern New York and the other in northern
California.  Both Company owned sales centers are staffed by employee
salespersons.  Each of the Company's independent sales representatives has a
written agreement with the Company that specifies the representative's sales
territory and provides for the payment of a commission ranging from 13% to
17.5% of the purchase price for the log home shell package. A majority of
the Company's independent sales representatives have purchased and erected one
of the Company's log homes for use as a sales model.  The Company maintains a
cooperative advertising program for independent sales representatives pursuant
to which the Company shares up to fifty percent (50%) of the cost of advertising
undertaken by qualified sales representatives to a maximum of 2.5% of their
respective sales volume.
                                   2
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Substantially all of the Company's sales have been to customers in the United
States, with the remainder to customers in Japan, Israel, Korea and Europe
(collectively less than 5% in each fiscal year).

SOURCES AND AVAILABILITY OF RAW MATERIALS

The Company manufactures its log components from rough-sawn eastern white pine
cants and western cedar cants.  The cants are milled to various dimensions to
produce the Company's finished product, that is, cants milled to various
profiles.  The pine cants are purchased from several mills in the region of
the Company's facilities in Chestertown, New York; cedar cants are purchased
from several mills in northern California and Oregon.  Occasionally, finished
logs for delivery to some of the Company's customers in the western United
States are milled by an unaffiliated company on a subcontract basis.  Logs
constitute approximately 24% of the dollar value of a typical log home shell
package.

Other components of the Company's log home shell package are purchased from
several suppliers.  These components include prefabricated roof trusses,
windows, doors, nails, sheathing, dimensional lumber, shingles, caulking,
and between-log sealant.  The Company has not recently experienced any
significant supply shortages, and does not anticipate any such shortages
in the near future based upon currently available information.  Alternative
sources of raw materials are readily available to the Company.

COMPETITION

The Company believes that there are approximately 350 firms engaged in the
sale of log home materials, of which approximately 125 firms sell log home
packages or kits and are in direct competition with the Company.

The Company's principal competitors are: Real Log Homes, Northeastern Log
Homes, Beaver Mountain Log Homes, Kuhns Bros. and Jim Barna Log Systems.
The Company believes that its competitive position with respect to those
firms is favorable, especially in the areas of quality of product, price,
appearance, and energy efficiency.

EMPLOYEES

As of January 31, 2001, the Company employed 60 persons, all of whom are full
time employees.

The Company has never had a work stoppage and regards its employee relations
as satisfactory. Employees are not covered by collective bargaining agreements.

PATENTS

The Company does not possess any patents covering the system utilized to
erect a Lincoln Logs solid timber home or any of the components thereof. On
June 27, 1989, the Company was granted two patents related to its
Thermo-Home(R) panelized wall system.  The first of these patents covers the
construction of the wall panel and the method by which the panels interlock
with one another.  The second patent relates to the process for manufacturing
the prefabricated wall panel sections.
                                    3
<PAGE>

TRADEMARKS

The Company has registered the trademarks LINCOLN LOGS LTD.(R)(and design),
THERMO LOG(R), CASHCO(R), THERMO-HOME(R), CHECKMATE(R), LINCOLN-SEAL(R), and
WEATHERBLOC(R) (and design) in the United States Patent and Trademark Office.
The Company has registered the words "THE ORIGINAL LINCOLN LOG" in the
following states: Alaska, Arkansas, Arizona, California, Connecticut,
Delaware, Idaho, Iowa, Illinois, Indiana, Kansas, Kentucky, Louisiana,
Maryland, Massachusetts, Mississippi, Missouri, Montana, Nebraska, New
Jersey, New Mexico, New York, Oklahoma, Oregon, Pennsylvania, South Carolina,
South Dakota, Tennessee, Utah, Vermont, Washington and Wyoming.  Canadian
trademarks issued to the Company are "LINCOLN LOGS LTD." (and design),
"EARLY AMERICAN LOG HOMES" (and design), "THERMO-HOME," "LINCOLN-SEAL" and
"STACK 'N BUILD."  The Company also owns the federally registered trademark
"Lincoln" in the United States.  Although these trademarks are believed by
the Company to have commercial value, it is the Company's opinion that the
invalidation of any of these trademarks would not have a material adverse
effect on the Company.

The Company has agreed pursuant to the settlement of 1982 litigation alleging
trademark infringement and unfair competition not to use the phrase "Lincoln
Log Homes" either as a trademark or in any manner other than in a purely
textual sense (e.g., "Lincoln Log" homes).

RESEARCH AND DEVELOPMENT

No expenditures were made by the Company for research and development during
the fiscal years ended January 31, 2001 or 2000.

GOVERNMENT REGULATIONS

Compliance with federal, state and local regulations that have been enacted
or adopted to regulate the discharge of materials into the environment, or
otherwise relating to the protection of the environment, has not had in the
past, and the Company believes will not have in the future, a material effect
upon the capital expenditures, earnings or competitive position of the
Company.

State and local regulations have been adopted with respect to the materials
utilized in the construction and various other aspects of residential housing.
The Company believes that its products comply with all material regulations
relating thereto.

ITEM 2.  DESCRIPTION OF PROPERTY

The Company owns several parcels of real estate located in New York and
California, respectively, as follows:
     (a)  New York

     (1)  An approximately 8.5 acre parcel of land on Riverside
          Drive, Chestertown, New York, on which are located the
          Company's executive offices, consisting of a 6,000 square
          foot log building, a 2,000 square foot log building, and the
          Company's production facilities, consisting of two milling
          machines located in a 10,200 square foot metal building,
          a 10,440 square foot metal-framed, open storage structure,
          a 4,800 square foot, log-sided pole shed, and a 14,000 square
          foot Thermo-Home(R) and log building containing corporate offices,
          storage and fabricating facilities for the Companys' Thermo-Home(R)
          product line.  The remainder of the 8.5 acre parcel is utilized by
          the Company for outside storage of cants, logs and building
          materials used in the Company's log home and panelized shell
          packages.

                                     4
<PAGE>

     (2)  An approximately one-half acre parcel of land on Riverside Drive,
          Chestertown, New York, on which is located a brick commercial
          building consisting of approximately 13,000 square feet which
          houses a movie theatre, retail and apartment space, that is leased,
          in part,to third party individuals.

     (3)  An approximately 19 acre parcel of undeveloped land on Route 8,
          Chestertown, New York, which is utilized by the Company for outside
          storage of cants and logs.

     (4)  An approximately one acre parcel of land on Pine Street,
          Chestertown, New York, on which is located a 7,680 square foot
          building which was previously used as a manufacturing facility
          for the Company's Thermo-Home(R) product line and is currently used
          for additional storage of building materials for this product line.

     (5)  An approximately .75 acre parcel of land in Wevertown, New York, on
          which is located the Company's former Northern Regional Sales Office
          in a 3,150 square foot log home erected by the Company.  This land
          and home is currently offered for sale.

     (6)  An approximately 1.4 acre parcel of land in Lake George, New York on
          which is located the Company's new Northern Regional Sales Office in
          a 3,050 square foot log home erected by the Company.

     (7)  In addition, the Company owns two parcels of undeveloped land in
          Northeastern, New York totaling approximately 50 acres which the
          Company has determined are unnecessary for its business and which
          it intends to sell, and a third parcel of approximately .8 acre
          of undeveloped land in Northeastern New York acquired by the
          Company for potential future use.

     (b)  California

The Company owns an approximately one acre parcel of land in Auburn,
California, on which are located the Company's Western Regional Sales Offices
in a 4,000 square foot western cedar log home and a 2,500 square foot
western cedar log home planed in the Weatherbloc(R) clapboard style.

As collateral for its Series B Convertible Subordinated Debentures dated
January 30, 1998, the Company has granted mortgages on the parcels specified
in Paragraphs (a)(1)-(5) and (b) of this Item 2.  As collateral for a loan
obtained by the Company in February 2001 the Company has granted a mortgage
on the parcel of land and building specified in Paragraph (a)(6) of this
Item 2.


ITEM 3.  LEGAL PROCEEDINGS

     (a)  Other Matters. The Company is defending certain
          claims in the ordinary course of and incidental to the Company's
          business.  In the opinion of the Company's management, the
          ultimate settlement of these claims will not exceed amounts
          provided for in the consolidated financial statements.


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

     Inapplicable.

                                   5


<PAGE>

                               PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     (a)  The Company's Common Stock is traded over-the-counter.
          The following sets forth the range of the closing bid prices for
          the Company's Common Stock for the period February 1, 1999
          through January 31, 2001. Such prices represent dealer
          quotations, do not represent actual transactions, and do not
          include retail mark-ups, mark-downs or commissions. Such prices
          were determined from information provided by a majority of the
          market makers for the Company's Common Stock, including the
          underwriter for such securities of the Company.

                                                  High Bid    Low Bid

Quarter Ended April 30, 1999        Common Stock     .22        .1875

Quarter Ended July 31, 1999         Common Stock     .45        .45

Quarter Ended October 31, 1999      Common Stock     .50        .3125

Quarter Ended January 31, 2000      Common Stock     .50        .50

Quarter ended April 30, 2000        Common Stock     .9375      .50

Quarter ended July 31, 2000         Common Stock    1.00        .33

Quarter ended October 31, 2000      Common Stock     .40        .1875

Quarter ended January 31, 2001      Common Stock     .50        .125


     (b)  The approximate number of holders of the Common Stock
          of the Company as of April 25, 2001 was 2,150.

     (c)  No cash dividends were declared by the Company during
          the fiscal years ended January 31, 2001 and 2000.  While the
          payment of dividends rests within the discretion of the Board of
          Directors, it is not anticipated that cash dividends will be paid
          in the foreseeable  future, as the Company intends to retain
          earnings, if any, for use in the development of its business.
          The payment of dividends is contingent upon the Company's future
          earnings, if any, the Company's financial condition and its
          capital requirements, general business conditions and other
          factors.

                                    6
<PAGE>


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Net sales for the fiscal year ended January 31, 2001 ("fiscal 2001") were
$10,355,914 compared to $12,028,193 in the fiscal year ended January 31, 2000
("fiscal 2000").  Fiscal 2001 total revenues represent a decrease of
$1,672,279, or approximately 14% less than fiscal 2000.

In fiscal 2001, as compared to fiscal 2000, total units shipped decreased by
28% while the average sales value per unit shipped increased by 17%.  The
decrease in units shipped was principally the result of unfavorable weather
conditions during May, June, July and August 2000 (fiscal 2001), particularly
in the Northeastern region of the United States.  These unfavorable weather
conditions were due to unusually heavy rains, which caused many customers
to postpone deliveries.  Because customers postponed deliveries, the
contractors who were engaged to build these homes took other jobs to fill
their work schedules.  When the Company's customers were prepared to accept
delivery of their packages their contractors were often not available.
These situations lead to additional postponements of customer deliveries.
Complicating an already shortened building season was the onset of an early,
cold winter.  Consequently, many customers postponed their construction
project until spring 2001 (fiscal 2002).  The increase in sales value per
unit shipped was the result of an increase in size of the home building
packages purchased in the current fiscal year and the impact of a price
increase put into effect at the beginning of fiscal 2001.

Gross profit was 42% of net sales in fiscal 2001, or $4,332,422.  In fiscal
2000, gross profit was 44% of net sales, or $5,256,549.  Gross profit
decreased from fiscal 2000 due to increases in material costs, labor costs
and indirect manufacturing costs.  Material costs were affected due to rising
prices of certain raw materials, particularly the principal component of the
log home package.  The increase in labor and indirect manufacturing costs
was due to increased employment, increased design and engineering expenses
related to the larger homes being sold and a re-alignment of certain costs
to the manufacturing process that previously were designated as administrative
expenses.

Total operating expenses of $4,513,416, or 44% of net sales, have increased
$100,282 from the fiscal 2000 amount of $4,413,134, or 37% of net sales.
The overall increase in total operating expenses was approximately 2%.
Sales commissions consist of amounts paid to both the Company's employee sales
persons and its independent dealers throughout the country.  Total sales
commissions decreased $288,380, or 17%, in fiscal 2001 from fiscal 2000.
The decrease in commissions, 17%, exceeded the decrease in sales revenue, 14%,
because certain independent dealers and employee sales representatives did not
earn bonus commissions for meeting or exceeding sales volume targets in fiscal
2001 as they had in fiscal 2000.  Sales commissions, however, remained
the same as a percentage of net sales, 14% in both fiscal years.  The increase
in selling, general and administrative expenses from fiscal 2000 of $388,662
was aproximately 14% and was primarily due to an increase in personnel costs,
professional fees and advertising, marketing and promotion costs.

                                 7

<PAGE>


Interest expense in fiscal 2001 and 2000 totaled $56,658 and $73,855,
respectively.  The decrease in interest expense was $17,197, or 23%.
Cash paid for interest during fiscal 2001 and fiscal 2000 was $55,636 and
$84,644, respectively.  The decrease in interest expense was principally due
to repayments of interest bearing advances made to the Company in prior years.
Also, fiscal 2001 did not include a non-cash charge for the amortization of
debt discount.  In fiscal 2000, interest expense included a non-cash
charge related to the amortization of debt discount attributable to a
beneficial conversion feature of the Series B Convertible Subordinated
Debentures (the "Series B Debentures") issued by the Company in Januray 1998,
and during the first quarter of fiscal 1999 (see Note 4 to the Consolidated
Financial Statements for more information related to the Series B Debentures).
The amount amortized related to the debt discount attributable to the
beneficial conversion feature of the Series B Debentures was $4,547 in fiscal
year 2000. This amount was amortized over the original term of the Series B
Debentures, or 15 months, using the effective yield method.


LIQUIDITY AND CAPITAL RESOURCES

As of January 31, 2001, the Company had negative working capital, as current
liabilities exceeded current assets by $1,286,854, compared with negative
working capital of $891,242 at January 31, 2000, a decrease of $395,612.
At January 31, 2001, the Company had stockholders' equity of $669,765,
as compared to $837,316 at January 31, 2000, a decrease of $167,551 as the
result of the current year's loss.  As of January 31, 2000, the Company's
working capital deficiency had improved $917,7346 from the end of the
previous fiscal year.  Cash was provided primarily by operations in fiscal
2001.  During fiscal 2000, cash was provided principaly by operations and
the issuance of long-term debt.

In fiscal 2001, the Company's operations provided cash in the amount of
$209,105 compared to the previous year when operations provided cash in
the amount of $616,684.  Overall, the Company experienced a decrease in its
cash position of $70,080 in fiscal 2001, compared with an increase of $132,785
in fiscal 2000.  In fiscal 2001, funds were generated from the Company's
operations, particularly increases in customer deposits and accounts payable.
These funds were used principally to purchase inventories, repay amounts due to
related parties and to make additions to property, plant and equipment including
the continued construction of a new sales model home.  Funds generated in fiscal
2000 from operating income of $843,415 and the issuance of the Series C
Convertible Subordinated Debentures (the "Series C Debentures") were principally
used to repay long-term debt and notes payable, to increase inventories and for
additions to property, plant and equipment.


                                 8

<PAGE>


In February 1999, the Company authorized and issued $300,000 of Series
C Debentures.  In July 1999, a certain shareholder/officer/director converted
$250,000 of the Series C Debentures into common stock of the Company.  In March
2001, holders of $160,000 of Series B Convertible Subordinated Debentures agrees
to extend the maturity date of those debentures from May 2001 until May 2003.
This subsequent event has been reflected in the accompanying financial
statements.

The Company has operated without a working capital credit facility for the
past eleven years.  The Company has had intermittent conversations with a
commercial lender about a working capital credit facility during the past
two years.  In contemplation of the possible need to secure a credit
facility, the Company, when authorizing the issuance of the Series B Debentures
and Series C Debentures provided for the consideration of commercial bank
financing up to $750,000 to be senior to the Series B Debentures and Series C
Debentures in a mortgage consolidation, modification and extension agreement.
In February 2001, the Company received a $225,000 loan from a commercial
lender and collateralized the related note by granting a mortgage on the
Company's newly constructed sales model home.  The Company intends to
pursue a working capital credit facility from a commercial lender as its
operations improve.

THe Company operates in an industry that is subject to cyclical economics.
It is seasonal in nature, it is sensitive to weather conditions and relies
upon the timely performance of independent outsiders, such as building
permit reviewing agencies, to complete its revenue generating activity.
These factors have not changed for the Company throughout its 24-year
history.  While the Company incurred a net loss in fiscal 2001 and has
a working capital deficiency at its year end date, its stockholders
equity is positive and its backlog of contracts for future delivery
increased by approximately $5,000,000 over the previous year to $18,310,000.
Management is confident about the Company's prospects for its core business.

Management believes that the fiscal year 2001 loss was caused principally
by adverse weather conditions, and that the increase in the amount by which
current liabilities exceed current assets is largely due to seasonal timing
for the settlement of debts.  Management's plan related to future operations
contemplates increases in sales revenue from the delivery of its backlog and
new contracts, continuing to exercise effective management practices and
sound cost control measures.  The Company has had a history of funding
provided by related party individuals, who, together with customer deposits
and extended payment terms from major vendors during the winter season, have
supported its operations.  Although their can be no assurance of future support
from these sources should the need arise, confidence in the future of the
Company by these partiees remains high.  Should the Company experience a
reduction in its sales activity, in vendor assistance, or internal financing,
its liquidity could be further reduced, which may make it difficult for the
Company to continue to operate.

Customer contracts with respect to which there were deposits on hand at the
end of fiscal 2001 represent, if all were to be delivered in fiscal 2002,
potential revenues of approximately $18,310,000 as compared with potential
fiscal 2001 revenues at the end of fiscal 2000 of $13,749,000.  Actual revenues
realized in fiscal 2001 from the sale of home building packages and solariums
amounted to $10,355,914.  Actual revenues realized in fiscal 2001 were lower
than potential revenues based on contracts and deposits on hand at January 31,
2000, due to customers who were unable to accept their delivery during fiscal
2001 principally due to adverse weather conditions and unavailability of their
contractors.  Fiscal 2002 potential revenues are contingent on various factors,
including general economic conditions, weather, interest rates and the climate
for new housing construction during calendar 2001, as well as the Company's
ability to continue operations and to expand into new market areas.

                                   9


<PAGE>


Inventories at January 31, 2001 were $1,148,453 as compared with $845,174 at
January 31, 2000, an increase of $303,279.  This increase in inventory is the
result of the postponement of shipments from fiscal 2001 to fiscal 2002 (as
described above), which caused the Company to stockpile cants and lumber for
the winter, and the Company's continued purchase of raw material inventory
in anticipation of the demands of its delivery schedule in fiscal 2002.

Trade accounts receivable were $140,440 at January 31, 2001, which represents
a decrease of $9,958, or 7%, from the amount of $150,398 as of January 31,
2000.  These receivables are primarily generated by customers who elect to
use the Company's short-term bridge financing plan known as Cashco (R).  The
balance due at year-end can vary significantly from year to year, depending
upon the number of customers choosing to use the program for shipments in the
last few months of the fiscal year.


CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

It should be noted that in this Management's Discussion and Analysis or Plan
of Operations contians "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, and are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995.  The terms "believe", "anticipate", "intend", "goal",
"ex[ect" and similar expressions may identify forward-looking statements.
These forward-looking statements represent the Company's current expectations
or beliefs concerning future events.  The matters covered by these statements
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those set forth in the forward-looking statements,
including the Company;s dependence on weather-related factors, introduction
and customer acceptance of new products, the impact of competition and price
erosion, as well as supply and manufacturing constraints and other risks and
uncertainties.  The foregoing list should not be construed as exhaustive, and
the Company disclaims any obligation subsequently to revise any forward-looking
statements to reflect events or circumstances after the date of such statements,
or to reflect the occurrence of anticipated or unanticipated events.  The
Company wishes to caution reasers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made.



                                  10


<PAGE>


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS


Financial Accounting Standards Board ("FASB")Statement No. 133, "Accounting
for Derivative Instruments and Hedging Activities," issued in June 1998 and
effective for all fiscal quarters of fiscal years beginning after June 15,
1999, with earlier applicaion permitted, requires companies to recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value.  In June, 1999, FASB
issued Statement of Financial Accounting Standards ("SFAS") No. 137,
"Accounting for Derivative Instruments and Hedging Activities-Deferral of
the Effective Date of FASB Statement No. 133-an amendment of FASB Statement
No. 133" which delayed the effective date of SFAS No. 133 to fiscal years
beginning June 15, 2000.  Management has evaluated the impact of the
application of the new rules on the Company's Consolidated Financial
Statements and concluded that there will be no impact on its results of
operations or its financial position.

Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in
Financial Statements", issued in December 1999 by the Securities and Exchange
Commission summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
SAB No. 101A , issued in March 2000, and SAB No. 101B, issues in June 2000, both
delay the implementation of SAB No. 101.  The Company is required to implement
SAB No. 101 no later than the fourth fiscal quarter of the current fiscal year.
Management haas evaluated the impact of the application of the new rules on
the Company's Consolidated Financial Statements and concluded that there will
be no impact on its results of operations or its financial position.

Financial Accounting Standards Interpretation No. 44 ("FIN 44"),
"Accounting for Certain Transactions Involving Stock Compensation - an
Interpretation of APB Opinion No. 25", issued in March 2000 and effective
July 1, 2000, but certain conclusions in FIN 44 cover specific events that
occurred after either December 15, 1998 or January 12,2000, clarifies the
application of APB Opinion No. 25. and, among other issues, clarifies the
definition of an employee for purposes of applying APB Opinion No. 25; the
criteria for determining whether a plan qualifies as a non-compensatory
plan; the accounting consequences of various modifications to the terms
of previously fixed stock options or awards; and the accounting for an
exchange of stock compensation awards in a business combination.  The
Company has applied applicable provisions of FIN 44, which did not have
a material effect on the Company's Consolidated Financial Statements.







                                     11
<PAGE>



ITEM 7.  FINANCIAL STATEMENTS

                   Index to Financial Statements

                                                              Page

Report of Independent Accountants                               13

Consolidated balance sheets as of
    January 31, 2001 and 2000                                   14

Consolidated statements of operations for the years
    ended January 31, 2001 and 2000                             16

Consolidated statements of changes in stockholders'
    equity (deficiency) for the years ended January
    31, 2001 and 2000                                           17

Consolidated statements of cash flows for the years
    ended January 31, 2001 and 2000                             18

Notes to consolidated financial statements
    January 31, 2001 and 2000                                   19


























                                    12





<PAGE>


                         Report of Independent Accountants


To the Board of Directors and
Stockholders of Lincoln Logs Ltd.


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, changes in stockholders' equity
(deficiency), and cash flows present fairly, in all material respects, the
financial position of Lincoln Logs Ltd. and Subsidiaries (the "Company") at
January 31, 2001 and 2000, and the results of their operations and their cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.  These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits.  We
conducted our audit of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming
the Company will continue as a going concern.  As discussed in
note 16 to the consolidated financial statements, as of and for the year
ended January 31, 2001, current liabilities exceed current assets, and the
Company has incurred an operating loss.  These factors raise substantial
doubt about the Company's ability to continue as a going concern.  Management's
plans in regard to these matters are also described in note 16.  The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


                                       /s/  PricewaterhouseCoopers LLP

Albany, New York
March 16, 2001







                                    13



<PAGE>


                      LINCOLN LOGS LTD. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                          JANUARY 31, 2001 and 2000



                                   ASSETS

                                                        2001         2000

CURRENT ASSETS:
  Cash and cash equivalents                        $   286,226  $   356,306
  Trade accounts receivable, net of allowance
    for doubtful accounts of $16,000 in 2001
    and $1,963 in 2000                                 140,440      150,398
  Inventories                                        1,148,453      845,174
  Prepaid expenses and other current assets            548,952      428,350
  Mortgage and note receivable                          18,758        1,922
                                                     ---------    ---------
   Total current assets                              2,142,829    1,782,150
                                                     ---------    ---------
PROPERTY, PLANT AND EQUIPMENT:
 Cost                                                5,498,322    5,355,640
 Less accumulated depreciation                      (3,422,714)  (3,491,173)
                                                     ---------    ---------
   Property, plant and equipment- net                2,075,608    1,864,467
                                                     ---------    ---------
OTHER ASSETS:
  Mortgage and note receivable                          70,409       69,553
  Assets held for resale                               113,298       27,314
  Cash surrender value of life insurance                98,348       96,390
  Deposits and other assets                            136,389          933
  Intangible assets, net of accumulated
    amortization of $77,134 in 2001 and $75,284
    in 2000                                                ---        1,850
                                                      --------      --------
   Total other assets                                  418,444       196,040
                                                      --------      --------
TOTAL ASSETS                                       $ 4,636,881   $ 3,842,657
                                                    ==========    ==========





See accompanying notes to consolidated financial statements.

                           ( continued )


                                   14


<PAGE>

                      LINCOLN LOGS LTD. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS,(continued)
                          JANUARY 31, 2001 and 2000

                       LIABILITIES AND STOCKHOLDERS' EQUITY

                                                          2001        2000
CURRENT LIABILITIES:
  Current installments of long-term debt               $   26,046  $    5,706
  Trade accounts payable                                1,003,098     558,800
  Customer deposits                                     1,511,860   1,276,963
  Accrued salaries and wages                              103,659      64,508
  Accrued income taxes                                      1,374       7,700
  Due to related parties                                   97,802     221,449
  Accrued expenses                                        685,844     538,266
                                                        ---------   ---------
    Total current liabilities                           3,429,683   2,673,392

LONG-TERM DEBT, net of current installments:
  Convertible subordinated debentures:
   Related parties                                        200,000     200,000
   Others                                                  10,000      20,000
  Notes payable-Related parties                           183,349         ---
  Other                                                    45,736      15,559
Other long-term liability                                  98,348      96,390
                                                        ---------   ---------
    Total liabilities                                   3,967,116   3,005,341
                                                       ----------  ----------
Commitments and contingencies

STOCKHOLDERS' EQUITY:
  Preferred stock, $.01 par value;
   authorized 1,000,000 shares; issued
   and outstanding -0- shares                                ---        ---
  Common stock, $.01 par value; authorized 10,000,000
   shares; issued 7,759,299 shares in 2001 and 2000        77,593     77,593
  Additional paid-in capital                            5,681,554  5,681,554
  Accumulated deficit                                  (4,204,947)(4,037,396)
                                                       ----------- ----------
                                                        1,554,200  1,721,751
  Less cost of 504,240 shares common
    stock in treasury                                    (884,435)  (884,435)
                                                        ----------  ---------
    Total stockholders' equity                            669,765    837,316
                                                        ----------  ---------
TOTAL LIABILITIES AND
 STOCKHOLDERS'EQUITY                                 $  4,636,881 $3,842,657
                                                        =========  =========

See accompanying notes to consolidated financial statements.

                                     15

<PAGE>


                              LINCOLN LOGS LTD. AND SUBSIDIARIES
                             CONSOLIDATED STATEMENTS OF OPERATIONS
                         FOR THE YEARS ENDED JANUARY 31, 2001 and 2000


                                                  2001         2000


NET SALES                                    $10,355,914  $12,028,193

COST OF SALES                                  6,023,492    6,771,644
                                               ---------   ---------

GROSS PROFIT                                   4,332,422    5,256,549
                                               ---------   ---------

OPERATING EXPENSES:
  Commissions                                  1,430,258   1,718,638
  Selling, general and administrative          3,083,158   2,694,496
                                               ---------   ---------
     Total operating expenses                  4,513,416   4,413,134
                                               ---------   ---------

INCOME (LOSS) FROM OPERATIONS                   (180,994)    843,415
                                               ---------   ----------

OTHER INCOME (EXPENSE):
  Interest income                                 27,473      29,392
                                                ---------  ----------
  Interest expense:
    Amount attributable to beneficial
     conversion feature and warrants                 ---    (  4,547)
    All other                                   ( 56,658)   ( 69,308)
                                                ---------- ----------
       Total interest expense                   ( 56,658)   ( 73,855)
                                                ----------  ----------
  Other                                           55,037      20,253
                                                ----------- ----------
   Total other income (expense) - net             25,852     (24,210)
                                                ---------   ---------
INCOME (LOSS) BEFORE INCOME TAXES               (155,142)    819,205

INCOME TAXES                                      12,409       8,036
                                               ----------   ----------
NET INCOME (LOSS)                            $  (167,551)   $ 811,169
                                              ============  ==========

PER SHARE DATA:
  Basic earnings (loss) per share            $   (0.02)     $   0.13
                                              ===========   ==========

  Diluted earnings (loss) per share          $   (0.02)    $    0.11
                                              ===========   ==========





See accompanying notes to consolidated financial statements.

                                     16


<PAGE>


<TABLE>

                                  LINCOLN LOGS LTD. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                             FOR THE YEARS ENDED JANUARY 31, 2001 and 2000

                                     Common Stock
                                    <S>         <S>      <S>            <S>            <S>      <S>
                                                                                              Total
                                   Number       Par    Additional                             stockholders'
                                     of        value     paid-in     (Accumulated   Treasury  equity
                                   shares      amount    capital       deficit)       stock   (deficiency)
                                  -------     -------  ----------    ----------    ---------  -------------
                                     <C>        <C>       <C>            <C>            <C>           <C>
Balance at January 31, 1999      6,046,299   $ 60,463  $ 5,418,104    $(4,848,565)  $(884,435)  $(254,433)

Common stock issued upon exercise
  of stock options                     500          5           75            ---         ---          80

Debt converted to common
  stock                          1,712,500     17,125      262,875            ---         ---     280,000

Amount assigned to subordinated
  debenture warrants                   ---        ---          500            ---         ---         500

Net income - 2000                      ---        ---        ---          811,169         ---     811,169
                                 ----------   ---------  ---------     ------------   --------- ----------
Balance at January 31, 2000      7,759,299   $  77,593  $5,681,554    $(4,037,396)  $ (884,435) $ 837,316

Net (loss)- 2001                       ---         ---         ---     (  167,551)       ---    ( 167,551)
                                -----------     -------  ----------   -----------     --------  ---------
Balance at January 31, 2001      7,759,299     $77,593  $5,681,554    $(4,204,947)  $ (884,435) $ 669,765
                                ==========     ======== ===========    ============   ========= =========

See accompanying notes to consolidated financial statements.

                                                           17


</TABLE>


<PAGE>
                      LINCOLN LOGS LTD. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED JANUARY 31, 2001 and 2000
                                              2001          2000
OPERATING ACTIVITIES:
Net income (loss)                        $   (167,551)  $   811,169
Adjustments to reconcile net income
 (loss) to net cash provided by
 operating activities:
  Depreciation and amortization               116,449       144,549
  Amortization of amount assigned to
    beneficial conversion feature and
    debt discounts attributable to warrants       ---         4,547
  (Gain)/Loss on sale of assets                (9,714)        6,025
  Changes in operating assets and liabilities:
  Decrease in trade accounts receivable         9,958       110,811
  (Increase) in inventories                  (303,279)     (251,860)
  (Increase) decrease in prepaid expenses
   and other current assets                  (120,602)       89,128
  (Increase) decrease in deposits and
    other assets                              (52,107)          689
  Increase (decrease)in trade
   accounts payable                            444,298     (272,079)
  Increase (decrease) in customer deposits     234,897      (11,162)
  Increase (decrease) in accrued expenses,
   payroll, related taxes and withholdings     186,729      (88,421)
  (Decrease) increase in due to related
   parties                                    (123,647)      67,327
  (Decrease) increase in accrued income taxes   (6,326)       6,650
                                              --------      --------
Net cash provided by operating activities      209,105      616,684
                                              ---------     --------
INVESTING ACTIVITIES:
  Additions to property, plant and equipment  (261,992)    (265,386)
  Proceeds from sale of assets                     ---       10,300
  Proceeds from the sale of assets held
    for resale                                  10,000          ---
  Payments received on mortgage receivable       1,762        1,515
  Issuance of notes receivable                 (70,000)         ---
  Repayments of notes receivable                50,546          ---
                                              ---------    ---------
    Net cash (used) by investing activities   (269,684)    (252,882)
                                              ---------    ----------
FINANCING ACTIVITIES:
  Proceeds from issuance of common stock upon
    exercise of stock options                      ---           80
  Proceeds from issuance of debentures             ---      310,000
  Repayments of notes payable                      ---     (125,435)
  Repayments on loan against cash
    surrender value of life insurance              ---      (83,574)
  Net increase in cash surrender value of
    insurance policy                               ---          304
  Repayments of long-term debt                  (9,501)    (332,392)
                                             ----------    ---------
Net cash (used) provided by
  financing activities                          (9,501)    (231,017)
                                             ----------    ---------
Net (decrease) increase in cash
 and cash equivalents                          (70,080)     132,785

Cash and cash equivalents at beginning
 of period                                     356,306      223,521
                                             ---------     ---------
Cash and cash equivalents at end
 of period                                   $ 286,226    $ 356,306
                                             ==========   ==========
See accompanying notes to consolidated financial statements.

                                     18

<PAGE>


                    LINCOLN LOGS LTD. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       JANUARY 31, 2001 and 2000

Note 1.  Business Description

Lincoln Logs Ltd. and subsidiaries (the "Company"), headquartered in
Chestertown, N.Y., is a leading supplier of high quality solid
wall (log) home building packages.  The Company's main products are log
home packages and insulated, panelized-wall home building systems.
Products are represented, sold and serviced through a 60 member National
Dealer Network and two Company owned and operated sales centers in northern
New York and northern California.  The Company's principal markets are in
the northeastern and northwestern regions of the United States.

The Company purchases approximately 37% of the materials necessary
to construct the log home and panelized home packages from five suppliers.
These five suppliers provided 9%, 9%, 7%, 6% and 6% of purchases for the
year ended January 31, 2001, respectively.  Alternative sources of raw
materials are readily available.

The Company's fiscal year ends on January 31.  As used hereafter, 2001
refers to the fiscal year ended January 31, 2001, and 2000 refers to the
fiscal year ended January 31, 2000.


Note 2.  Summary of Significant Accounting Policies

(a) Principles of Consolidation.   The consolidated financial
statements include the accounts of Lincoln Logs Ltd. and its
wholly-owned subsidiaries. All significant inter-company balances
and transactions have been eliminated in consolidation.

The Company's subsidiaries, Thermo-Home, Inc., Lincoln Holding
Corp. and Lincoln Logs International Ltd. are currently inactive.

(b) Inventories.   Inventories are valued at the lower of cost (on
a first-in, first-out basis) or market. Substantially all of inventory
represents raw materials.  Inventories are stated net of a reserve
for obsolescence in the amount of $18,000 at January 31, 2000 and
$36,000 at January 31, 2000, respectively.

(c) Revenue Recognition.   Revenue from the sale of log home
packages is recognized when substantially all of the package has been
delivered.  Customers are normally required to pay a 10% deposit upon
contract signing, and a second payment of 40% at the pre-cut stage, which
is 45-60 days before delivery. The balance of 50% is due on delivery. The
foregoing percentages may change when one of the Company's financing plans
is utilized.

(d) Depreciation.  Depreciation of plant and equipment is
computed on a straight-line basis over the estimated useful lives
of the assets, which range from five to thirty-one years.

				              19

<PAGE>

                      LINCOLN LOGS LTD. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                       JANUARY 31, 2001 and 2000



Note 2.  Summary of Significant Accounting Policies (Continued)

(e) Income Taxes.   Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled.  The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the period that includes the
enactment date.

(f) Comprehensive Income.  On February 1, 1998, the Company adopted Statement
of Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive
Income.  SFAS No. 130 establishes standards for reporting and presentation
of comprehensive income and its components in a full set of financial
statements.  The Company does not presently have any elements of other
comprehensive income as outlined in SFAS No. 130, and consequently, there is
no difference between net income (loss) and comprehensive income (loss).

(g) Intangible Assets.  Intangible assets represent primarily trademarks
that are being amortized over five year periods.  Amortization expense for
2001 and 2000 was $1,850 and $7,400, respectively.

(h) Earnings (Loss) Per Share.   Basic earnings (loss) per share is computed
by dividing net earnings (loss) by the weighted average number of common
shares outstanding during the respective periods.  The weighted average number
of common shares used to compute basic earnings (loss) per share was
7,759,299 for the year ended January 31, 2001 and 6,414,949 for the year
ended January 31, 2000.

Diluted earnings (loss) per share is computed based on the weighted average
number of common shares outstanding during the respective periods and
includes the number of additional common shares that would have been
outstanding if potentially dilutive common shares had been issued.  Convertible
subordinated debentures are assumed to have been converted into common stock
at the beginning of the period after giving retroactive effect to the
elimination of interest expense, net of income tax effect, applicable to
the convertible subordinated debentures.  Stock options and warrants are
included in the computation using the treasury stock method if the effect
is dilutive.  Diluted (loss) per share is the same as basic (loss) per
share for the year ended January 31, 2001 because the effect of including
stock options, warrants and the assumed conversion of the subordinated
debentures would be anti-dilutive.

The numerator in the calculation of diluted earnings (loss) per share
for the years ended January 31, 2001 and 2000 was determined as follows:

                                                  2001        2000
                                                 ------       ------
   Net income (loss) used to calculate basic
     earnings per share                         $(167,551)  $ 811,169
   Add back interest expense related to
     convertible debentures                           ---      30,947
                                                 ---------   ---------
   Numerator for calculation of diluted earnings
     (loss) per share                           $(167,551)  $ 842,116
                                                 ========   ==========

                                       20

<PAGE>


                          LINCOLN LOGS LTD. AND SUBSIDIARIES
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                            JANUARY 31, 2001 and 2000



Note 2.   Summary of Significant Accounting Policies (Continued)

The denominator in the calculation of diluted earnings (loss) per share
for the years ended January 31, 2001 and 2000 was determined as follows:

                                                   2001         2000
                                                  ------       ------
   Weighted average outstanding shares used
     to calculate basic earnings (loss)
     per share                                   7,759,299   6,414,949
   Add shares issuable assuming conversion
     of convertible debentures                         ---   1,162,500
   Add shares issuable assuming exercise of
     outstanding stock options                         ---     192,314
                                                 ----------   ---------
   Denominator for calculation of diluted
     earnings (loss) per share                   7,759,299   7,769,763
                                                 =========   ==========

Basic earnings (loss) per share                  $  (0.02)   $   0.13
                                                    =====        ====

Diluted earnings (loss) per share                $  (0.02)   $   0.11
                                                    =====        ====

There were 812,500 stock purchase warrants outstanding at
January 31, 2001 and January 31, 2000, respectively, that were not
included in the computation of diluted earnings per share for the
full-year periods as their effect was anti-dilutive.  Further, share
issuable assuming conversion of convertible debentures and shares
issuable assuming exercise of outstanding stock options at January 31,
2001 were not included in the computation of diluted (loss) per share
for the year then ended as their effect was anti-dilutive.

(i)  Advertising Costs.  Advertising costs are expensed when the
advertisement is first run and amounted to $505,491 and $383,056 in
2001 and 2000, respectively.  The Company has prepaid advertising costs
of $77,444 and $63,969 at January 31, 2001 and 2000, respectively.
These amounts are included in Prepaid expenses and other current assets
in the accompanying consolidated financial statements.

(j) Cash and Cash Equivalents.   Cash and cash equivalents are
composed of cash in bank accounts and certificates of deposit
with maturities of three months or less.  For purposes of the
statements of cash flows, the Company considers all highly liquid
debt instruments with original maturities of three months or less
to be cash equivalents.  The Company maintains several bank accounts
in two banks located in New York and California.  At January 31, 2001
and 2000, bank balances exceeded FDIC insurance coverage by $293,990
and $591,092, respectively.

(k) Use of Estimates in the Preparation of Financial Statements.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and 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.


				          21

<PAGE>

                         LINCOLN LOGS LTD. AND SUBSIDIARIES
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                            JANUARY 31, 2001 and 2000



Note 2.   Summary of Significant Accounting Policies (Continued)

(l) Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of.  Long-lived assets and certain identifiable intangibles are
reviewed for impairment when events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable.  Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by an asset.  If
such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount
of the assets exceeds the fair value of the assets.  Assets to be
disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.  As of January 31, 2001 and 2000,
the Company had no impaired long-lived assets.

(m) Stock Option Plans.  The Company accounts for its incentive
stock option plan and non-qualified stock option plan in
accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees", and
related interpretations.  As such, compensation expense would be recorded
on the date of grant only if the current market price of the underlying
stock exceeded the exercise price.  Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation",
which was adopted by the Company as of February 1, 1996, permits entities
to recognize the fair value of all stock-based awards on the date of grant
as an expense over the vesting period.  Alternatively, SFAS No. 123
allows entities to continue to apply the provisions of APB Opinion No.
25 and provide pro forma net income and pro forma earnings per
share disclosures for the employee stock option grants made as if the
fair-value-based method defined in SFAS No. 123 had been applied.

Note 3.  Property, Plant and Equipment

A summary of property, plant and equipment at January 31, 2001
and 2000 is as follows:

                              Estimated
                             Useful Lives          2001     2000
                                                   ----     ----

Land                                          $  835,241  $  784,800
Buildings and improvements   15 - 31 years     2,338,757   2,357,822
Machinery and equipment        5 - 7 years       703,197     637,970
Furniture and fixtures         5 - 7 years     1,471,850   1,420,446
Transportation equipment           5 years       149,277     154,602
                                               ---------   ---------
                                              $5,498,322  $5,355,640
                                               =========   =========

Depreciation expense for the years ended January 31, 2001
and 2000 was $114,599 and $137,149, respectively.

Assets held for resale of $113,298 and $27,314 at January 31, 2001
and 2000, respectively, consists primarily of non-operating real
estate, which is carried at the lower of cost or estimated fair
value less costs to sell.


					         22

<PAGE>


                          LINCOLN LOGS LTD. AND SUBSIDIARIES
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                            JANUARY 31, 2001 and 2000


Note 4.  Indebtedness

Long-term debt at January 31, 2001 and 2000 consists of the
following:

                                                   2001          2000
                                                   ----          ----

Note payable at 7.9% payable in monthly
installments through April 2004, collateralized
by a vehicle                                      $  13,923   $  17,540

Series B Convertible Subordinated Debentures
originally due May 15, 1999, extended to May 15,
2003 (except for one $10,000 debenture extended
to May 15, 2001), with nominal annual interest
at 12% payable quarterly                             170,000     170,000

Series C Convertible Subordinated Debentures
due February, 2002 with annual interest at 12%
payable quarterly                                    50,000       50,000

Note Payable - Related party due August 15, 2002,
with nominal annual interest at 12% payable
monthly, unsecured, principal due at maturity        83,349          ---

Note payable - Related party due August 15, 2003,
with nominal annual interest at 12% payable
monthly, unsecured, principal due at maturity       100,000          ---

Obligations under capital leases, net of interest
payable through July 2005                            47,859        3,725
                                                 ------------ ----------
Total long-term debt                                465,131      241,265
    Less current installments                      ( 26,046)    (  5,706)
                                                 ------------ -----------
Long-term debt, net of current installments      $  439,085  $   235,559
                                                 ============ ===========

Through January 31, 2001, the Company has authorized and issued $600,000 of
Series B Convertible Subordinated Debentures (the "B" Debentures), and
$300,000 of Series C Convertible Subordinated Debentures (the "C" Debentures)
(all of the aforementioned series of convertible debentures are collectively
known as the "Debentures").  The Debentures bear interest, payable quarterly,
at an annual rate of 12%.  The B Debentures were originally due on May 15,
1999, and the C Debentures are due on February 25, 2002.



					        23

<PAGE>


                          LINCOLN LOGS LTD. AND SUBSIDIARIES
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                            JANUARY 31, 2001 and 2000


Note 4.  Indebtedness (Continued)

The B Debentures may be redeemed by the Company at its option, in
whole or in part, at any time on or after January 30, 1998.  The C Debentures
may be redeemed by the Company at its option, in whole or in part, at any time
on or after April 25, 1999.  The holders of the B Debentures have the right,
upon appropriate notice, to convert the Debentures, in $10,000 units, into
shares of the Company's common stock at the rate of one (1) share for each
$.20 of principal amount.  The holders of the C Debentures have the right, upon
appropriate notice, to convert the C Debentures, in $10,000 units, into shares
of the Company's common stock at the rate of one (1) share for each $.16 of
principal amount.  The B Debentures also have detachable stock purchase
warrants, giving the holder the right, over a five-year period, to purchase
shares of the Company's common stock at the quoted market price of the Company's
common stock, $.375 on the commitment date.  The total number of shares of
common stock originally subject to warrants was 1,500,000, fifty (50%) percent
of the number of shares subject to conversion.  As of January 31, 2001 and 2000,
there were 812,500 warrants outstanding, respectively.  The Debentures are
collateralized by a security interest granted by the Company in the assets of
the Company and by mortgages on certain parcels of real property owned by the
Company, which are located in Chestertown, New York and Auburn, California.

As discussed above, the original maturity date of the B Debentures was May 15,
1999.  Prior to May 15, 1999, holders of B Debentures with a face amount of
$200,000 agreed to extend the maturity date to May 15, 2001.  In February
2001, holders of B debentures with a face amount of $160,000 agreed to extend
the maturity date to May 15, 2003.  During fiscal year 1999, $275,000 of B
Debentures were converted into common stock of the Company, and 687,500 shares
of the Company's common stock were issued upon the exercise of warrants related
to the $275,000 of B Debentures that were converted.  In January 2000, $125,000
of B Debentures were repaid.

On July 29, 1999, a shareholder, officer and director, who owned B Debentures
and C Debentures exercised his right to convert his holdings into common
stock of the Company.  The face amount of the B Debentures converted into
common stock of the Company was $30,000.  The face amount of the C Debentures
converted into common stock of the Company was $250,000.  The Company issued
1,712,500 shares (150,000 shares related to the conversion of the B Debentures
and 1,562,500 shares related to the conversion of the C Debentures) and paid
accrued interest to the date of conversion.

In December 2000, the Company issued a Note Payable to an officer, director
and shareholder of the Company in the amount of $83,349 bearing interest,
payable monthly, at a rate of 12% and due on August 15, 2002.  The note is
unsecured.  The proceeds of the note were used to make a deposit on a new
piece of equipment that is being specially built but is not completed
nor in service at January 31, 2001.  The total cost of the new piece of
equipment is $130,000.  Subsequent to January 31, 2001, the Company entered
into a capital lease transaction with an unrelated third party to finance the
$130,000 purchase price.  As part of this transaction $33,349 of this Note
payable was repaid.

In December 2000, the Company issued a Note Payable to an officer, director
and shareholder of the Company in the amount of $100,000 bearing interest,
payable monthly, at a rate of 12% and due on August 15, 2003.  The note is
unsecured.  The proceeds of the note were used to acquire a parcel of
real property.

The principal amount of future maturities of long-term debt
by fiscal year are as follows:

Year ending January 31:             Amount

                 2002           $   26,046
                 2003              149,563
                 2004              273,597
                 2005               11,343
                 2006                4,582
                                ----------
                                $  465,131
                                ==========





					       24
<PAGE>


                            LINCOLN LOGS LTD. AND SUBSIDIARIES
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                            JANUARY 31, 2000 and 1999


Note 4.  Indebtedness (Continued)


Assets under capital leases represent copiers, facsimile machines, computers
and blueprinting equipment.  The costs, accumulated depreciation and
depreciation expense are included with owned assets in Note 3.
The details are as follows:

                                              2001        2000
                                              ----        ----
          Costs                              $55,692      $10,995
          Accumulated Depreciation           $(9,584)     $(5,399)
          Depreciation Expense               $ 4,185      $ 2,191


The future minimum lease payments for obligations under capital leases
are as follows:

  Year ending January 31,                       Amount
                                                ------
               2002                            $17,372
               2003                             15,647
               2004                             11,333
               2005                             11,333
               2006                              4,722
                                                -------
               Total                           $60,407
               Less Interest                   (12,548)
                                                -------
               Obligations Under
                 Capital Leases                $47,859
                                                ======

Note 5.  Income Taxes

A summary of components of the provision for income taxes for the
years ended January 31, 2001 and 2000 is as follows:

                                  Current       Deferred   Total

Year ended January 31, 2001:
   Federal                        $ 7,547        $    --  $ 7,547
   State                            4,862             --    4,862
                                   ------         ------   ------
                                  $12,409        $    --  $12,409
                                   ======         ======   ======

Year ended January 31, 2000:
   Federal                        $    --        $    --  $    --
   State                            8,036             --     8,036
                                   ------         ------    ------
                                  $ 8,036        $    --   $ 8,036
                                   ======         ======    ======



                                     25
<PAGE>



                      LINCOLN LOGS LTD. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                          JANUARY 31, 2001 and 2000



Note 5.  Income Taxes (Continued)

The Company realized a tax benefit of $261,893 in 2000 through
the use of net operating loss carryforwards.  The Company has
Federal net operating loss carry-forwards for income tax purposes
of approximately $3,441,300; $340,937 expire in 2007, $815,639
in 2008, $343,959 in 2009, $372,862 in 2010, $73,806 in 2011,
$309,698 in 2012, $1,067,736 in 2013 and $116,663 in 2021.

A portion of the company's net operating losses are limited on an
annual basis pursuant to the Internal ReEvenue Code, due to certain
changes in ownership and equity transactions.

The effective income tax rates of 8% and 1% for 2001
and 2000, respectively, differ from the statutory Federal
income tax rate for the following reasons:

                                     2001           2000
                                     ----           ----
Statutory tax rate                   (34.0)%        34.0%
Nondeductible amortization              --           1.2
Non-deductible meals and
  entertainment expenses               2.1           1.0
State income taxes, net of federal
  tax benefit                          2.1            .9
Change in deferred tax asset
  valuation allowance                 23.4         (37.7)
Other non-deductible expenses         14.4           1.6
                                      -----         ------
                                       8.0%          1.0%
                                      =====         ======

For the years ended January 31, 2001 and 2000, the Company has no
deferred income tax expense as a result of the changes in
temporary differences for the year.  The tax effects of temporary
differences that give rise to deferred tax assets and deferred
tax liabilities as of January 31, 2001 and 2000 are presented
below:

                                                      2001       2000
                                                      ----       ----

Deferred tax assets:
Vacation accrual                               $     1,475    $    ---
Inventories, principally due to additional
 costs inventoried for tax purposes pursuant
 to the Tax Reform Act of 1986                      16,251      16,744
Allowance for doubtful accounts                      5,440         667
Other liabilities                                   18,700      32,569
Net operating loss carryforward                  1,170,042   1,130,770
                                                 ---------   ---------
Total gross deferred tax assets                  1,211,908   1,180,750
   Less valuation allowance                     (1,189,459) (1,153,155)
                                                ----------  ----------
Net deferred tax asset                              22,449      27,595

Deferred tax liability:
Property, plant and equipment - principally
 due to differences in depreciation methods        (22,449)    (27,595)
                                                  ---------   ---------
Net deferred taxes                             $        --        --
                                                  =========    =========

The valuation allowance for deferred tax assets as of February 1,
2000 and 1999 was $1,153,155 and $1,462,232, respectively.  The
net change in the total valuation allowance was an increase of
$36,304 in fiscal 2001 and a decrease of $309,077 in fiscal 2000.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized.  The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible.  Management
considers the projected future taxable income and tax planning strategies in
making this assessment.


                                    26
<PAGE>


                      LINCOLN LOGS LTD. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                      JANUARY 31, 2001 and 2000


Note 6.  Employee Benefit Plan

The Company has a contributory defined contribution 401(k) savings plan
covering all eligible employees who elect to participate.  The Company
matches 100% of employee contributions up to a maximum of 3% of compensation.
Contributions by the Company for 2001 and 2000 amounted to $42,210 and $29,742,
respectively.

Note 7.  Lease Commitments

The Company is party to several non-cancelable operating leases
for various machinery and equipment.  Total rent expense incurred
by the Company during 2001 and 2000 was $38,290 and $25,514, respectively.
The aggregate future minimum operating lease payments at January 31, 2001
are as follows:

Year ending January 31:
            2002         $ 28,372
            2003           18,275
            2004           13,356
            2005              794
                            ------
            Total        $ 60,797
                           =======

Note 8.  Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets at January 31, 2001 and
2000 consist of the following:

                                  2001           2000
                                --------       --------
Commission advances            $  99,590      $  87,543
Prepaid design work              157,277        106,444
Prepaid insurance                 10,200         35,511
Prepaid advertising and shows    126,399         95,602
Miscellaneous receivables         21,099         25,537
Prepaid property taxes            33,582         29,380
Prepaid health insurance          31,453            ---
Other                             69,352         48,333
                                --------       --------
   Total                       $ 548,952      $ 428,350
                                ========      =========


                                      27
<PAGE>



                      LINCOLN LOGS LTD. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                      JANUARY 31, 2001 and 2000





Note 9.  Accrued Expenses

Accrued expenses at January 31, 2001 and 2000 consist of the
following:

                                   2001           2000
                                 --------       --------
Accrued commissions             $  78,390      $  53,604
Accrued backorders                283,277         95,955
Accrued interest                      600            600
Accrued sales awards               34,500         50,800
Deposits - cancelled contracts     19,283         41,470
Accrued Warranty                   55,000         96,074
Other                             214,794        199,763
                                 --------       --------
   Total                        $ 685,844      $ 538,266
                                =========      =========


Note 10.  Related Party Transactions

Due to related parties consists of amounts payable to the Company's officers
and directors.  Such amounts totaling $97,802 and $221,449 at January 31,
2001 and 2000, respectively, relate to unreimbursed business travel expenses,
interest expense and other expenses.

As described in Note 4, the Company authorized the issuance of $600,000 of B
Debentures on January 15, 1998.  The Company issued $340,000 of the B Debentures
in a private placement on January 30, 1998 of which $330,000 was exchanged for
notes outstanding by certain noteholders who were officers and directors of the
Company at that time, and issued a further $260,000 of B Debentures between
March 1, 1998 and April 30, 1999 of which $240,000 was purchased by officers,
a director and immediate family members of the director.  Of the $570,000 of
B Debentures issued to related parties, $275,000 was converted into common stock
on April 20, 1998 and another $30,000 was converted into common stock on
July 29, 1999.

As also discussed in Note 4, the Company issued $300,000 of C Debentures in a
private placement during February, 1999, all of which were purchased by an
officer, director and immediate family members of the director.  Of the
$300,000 of C Debentures issued to related parties, $250,000 was
converted into common stock on July 29, 1999.

Finally, as discussed in Note 4, the Company issued two Notes Payable to
related parties in the amounts of $100,000 and $83,349, respectively.
Subsequent to January 31, 2001, $33,349 was repaid on one note with the
proceeds of a capital lease.

                                    28


<PAGE>


                     LINCOLN LOGS LTD. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                      JANUARY 31, 2001 and 2000



Note 11.  Mortgage Receivable

The mortgage, due from a former officer and employee of the Company, bears
an interest rate of 6% and is due over a term of 35 years.  The mortgage
balance at January 31, 2001 and 2000 was $69,713 and $71,475, respectively.

The future aggregate mortgage receipts at January 31, 2001 are as follows:

  Year ending January 31:
              2002      $  2,736
              2003         2,199
              2004         2,335
              2005         2,479
              2006         2,632
           Thereafter     57,332
                         -------
              Total     $ 69,713
                         ========

Note 12.  Stock Options

Under the terms of the Company's Stock Option Plan, incentive
stock options may be granted to purchase shares of common stock
at a price not less than the fair market value at the date of
grant, and non-qualified stock options may be granted at a price
(including a below-market price) determined by the Company's
Board of Directors or the Committee which administers the plan.
Stock option activity during the last two years is summarized
as follows:

                                                      Average Option
                               Number of Shares       Price Per Share
                           ----------------------- -----------------------
                           Qualified Non-Qualified Qualified Non-Qualified
                           --------- ------------- --------- -------------
Balance at January 31, 1999   20,000       182,000     $ .16     $ .19
Granted during year          186,000            --       .16        --
Cancelled during year        (24,000)           --      (.16)       --
Exercised during year           (500)           --      (.16)       --
                              ------       -------     -----      -----
Balance at January 31, 2000  181,500       182,000     $ .16     $ .19
Granted during year              ---            --        --        --
Cancelled during year        (22,000)           --      (.16)       --
Exercised during year            ---            --        --        --
                              -------       -------     -----    -----
Balance at January 31, 2001  159,500       182,000     $ .16     $ .19
                             ========      ========     =====    =====

All outstanding stock options are exercisable as of January 31, 2001.
Stock options expire 10 years from the date they are granted (except in
the case of an incentive stock option awarded to a person owning 10% or
more of the Company's stock, in which case the term is limited to five
years) and vest upon grant.  The weighted average remaining contractual
life of the outstanding options as of January 31, 2001 is 6.5 years.

The pro forma disclosures required under SFAS No. 123 are not presented
for 2001 as such information is the same as the reported net loss and
loss per share.  Had the Company accounted for its Stock Option Plan
using the fair-value method for fiscal 2000 the Company's net income
would have been approximately $787,000


                                   29


<PAGE>

                     LINCOLN LOGS LTD. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                      JANUARY 31, 2001 and 2000




Note 12.  Stock Options (continued)

The weighted average fair value of each option granted under the Stock Option
Plan during fiscal 2000 was $0.13.  the fair value of each option grant was
estimated on the date of the grant using the Black-Sholes model with the
following weighted average assumptions: the risk-free interest rate was 6.0%;
the expected volatility of the market price of the Company's Common Stock was
181%; and the expected average term of the granted options was seven years.
There was no expected dividend yield for th options granted.

Note 13.  Commitments and Contingencies

(a) Warranty Claims.  The Company issues a one hundred year
warranty on all log components sold when a complete log home
package is purchased. The amount reserved for warranty claims
as of January 31, and January 31, 2000 was $55,000 and $96,074,
respectively.

(b) Litigation. The Company is defending certain other claims
incurred in the normal course of business. In the opinion of
the Company's management, the ultimate settlement of these
claims will not have a material effect on the consolidated
financial statements.

(c) Sales/Use Tax.  In March 1999, the Company received a notification
from the State of Massachusetts Department of Revenue (the "State)
which indicated that the State was contemplating an assessment for
sales/use taxes on log home packages sold into the State during the past
three years.  The Company does not believe that it was responsible for
collecting and remitting sales/use taxes on sales made into Massachusetts
because, among other reasons, it did not have employees in the State nor does
it own or rent tangible property there.  Further, the Company's sales
contract specifically requires its customers to be responsible for the
payment of any applicable sales/use tax.

Subsequent to completing a field audit related to this matter in May 2000,
the State formally notified the Company of the State's intention to assess
sales/use tax.  The State's total potential assessment is approximately
$149,000 plus interest and penalties.  The Company has contested the
assessment and has submitted a Request for Settlement Consideration with the
State's Office of Dispute Resolution.  The Company has accrued an amount that
approximates the State's assessment.  Should the Company be unsuccessful in
its arguments to the State with regard to eliminating or mitigating the
assessment, the company intends to vigorously pursue the collection of any
sales/use tax assessment from its Massachusetts customers who are contractually
liable for any such payment.

Note 14.  Supplementary Disclosure of Cash Flow Information

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

Cash paid during the year for:
   Interest                     $  55,636   $  84,644
                                 ========   =========
   Income taxes                 $  18,735   $     468
                                 ========   =========

Included in the above amounts are $39,351 and $70,672 in 2001 and 2000,
respectively, for cash paid for interest to related parties.

Non-cash investing and financing activities:

During Fiscal 2001, the following transactions occurred:

The Company entered into capital leases for certain machinery and equipment
in the total amount of $50,019.

The Company recorded an increase in the cash surrender value of an insurance
policy on the life of the Company's founder and also recorded an increase
in the related liability in the same amount.


                                   30



<PAGE>

                     LINCOLN LOGS LTD. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                      JANUARY 31, 2001 and 2000


Note 14.  Supplementary Disclosure of Cash Flow Information (continued)


The Company removed from its books a fully depreciated piece of equipment
with a cost and related accumulated depreciation in the amounts of $6,325.

The Company reclassified its former New York sales model home and related
land, with a cost of $263,003, related accumulated depreciation of $176,733
and a net book value of $86,270, from Property, Plant & Equipment to
Assets Held for Resale.  The Company no longer uses this home as a sales
model since constructing a new model home nearby.  The former model home
and land have been listed with a real estate agent for sale.

The Company recorded a Note Payable for $100,000 and a related increase in
Land of $100,000 representing the purchase price of a piece of land and
funds advanced to the Company by an officer, director and shareholder in
order to make that purchase.

The Company recorded a Note payable for $83,349 and a related increase in
Deposits and Other Assets representing a deposit on a new piece of
equipment that is being specially built but is not completed nor in
service at January 31, 2001.

During Fiscal 2000, the following transactions occurred:

The Company recorded an increase in the cash surrender value of an insurance
policy on the life of the Company's founder and also recorded an increase
in the related liability in the same amount.

The Company recorded an increase in transportation equipment of $20,040
and a related increase in long-term debt in the same amount representing the
financed portion of the purchase of a new truck.

The Company recorded an increase in B Debentures in the amount of $4,047,
an increase in additional paid-in capital of $500 and a charge to interest
expense of $4,547 related to the amortization of debt discount attributable
to warrants associated with the B Debentures.

The Company recorded an increase of $17,125 in common stock, an increase of
$262,875 in additional paid-in capital and a corresponding reduction of
debt of $280,000 as the result of the exercise of the right of conversion
of a certain B Debenture and C Debenture holder.

Note 15.  Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate that value.

(a) Cash and Cash Equivalents, Accounts Receivable, Notes
Receivable, Cash Surrender Value of Life Insurance, Accounts
Payable, Customer Deposits, Accrued Expenses and Debt.
The carrying amounts of cash and cash equivalents, accounts receivable,
cash surrender value of life insurance, accounts payable, customer
deposits, accrued expenses and debt approximate fair value
because of their  short term maturities and because the debt bears interest
that approximate applicable market rates.

(b) Mortgage receivable.  Based on borrowing rates and terms more commonly
made available by independent mortgage lenders, the fair value of the
mortgage receivable (including current installments) is approximately
$62,400 compared to its carrying amount of $69,713.


                                    31



<PAGE>

                       LINCOLN LOGS LTD. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                      JANUARY 31, 2001 and 2000



Note 15.  Fair Value of Financial Instruments (continued)


Fair value estimates are made at a specific point in time, based
on relevant market information and information about the
financial instrument.  These estimates are subjective in nature
and involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision.  Changes in
assumptions could significantly affect the estimates.

Note 16.  Liquidity and Management's Plan of Continuing Operations

As of and for the year ended January 31, 2001, current liabilities of the
Company exceeded current assets by approximately $1,286,854 and the Company
incurred a net loss of $167,551.  The Company has not been successful in
securing a working capital credit facility from commercial lenders or
governmental agency sources.  Funds generated by operations, together with
the assistance of major vendors who have provided extended payment terms to
the Company have supported its operations during fiscal year 2001, and are
expected to do so in fiscal 2002 as well.  Even though the Company has
operated under these same conditions for the past ten years, there is,
however, no assurance that the Company will be able to continually generate
adequate funds from these sources.  A reduction in the Company's sales
activity or a reduction in vendor assistance could further reduce its
liquidity and make it difficult for the Company to continue to operate.
Management's plans related to future operations contemplate increases in
sales revenue and continued cost control efforts.

Note 17.   Subsequent Events

In February 2001, the Company secured a bank loan in the amount of $225,000
and issued a related mortgage on its new sales model home in New York.  The
interest rate is the prime lending rate as published in the Wall Street Journal
on the first day of each month plus 2%.  Monthly payments are $1,875 plus
interest commencing April 2001 through March 2011.  The proceeds of the loan
are used for working capital purposes.

In March 2001, the Company entered into a capital lease transaction in the
amount of $130,000 to finance the purchase of a new piece of manufacturing
equipment.  The terms of the lease call for 36 monthly payments of $3,945
commencing April 2001.  As part of this transaction, the Company received
$83,349 as reimbursement for the initial deposit placed on the equipment.
As discussed in Note 4, the Company issued a note payable to finance the
initial deposit.  Of the $83,349 received from the lease proceeds, the
Company repaid $33,349 of the Note Payable and used the remaining $50,000
for working capital purposes.











                                    32

<PAGE>





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

     None.


                                  PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

                               DIRECTORS

The Company's directors are elected at each Annual Meeting of Shareholders.
The directors currently serving on the Compnay's Board of Directors are set
forth in the table below:
                         Year first
                         Elected a  Position with the Company
Name of Director    Age  Director   (other than as a director)
----------------    ---  --------   ---------------------------
Leslie M. Apple      51   2000     Special Administrative Assistant to
                                      the President
Richard C. Farr      72   1982     Special Administrative Assistant to
                                      the President
Samuel J. Padula     77   1985     Special Administrative Assistant to
                                      the President
Steven Patlin        60   2000     Special Administrative Assistant to
                                      the President
Reginald W. Ray, Jr. 71   1982     Special Administrative Assistant to
                                      the President
John D. Shepherd     55   1982     Chairman of the Board; President and Chief
                                      Executive Officer
William J. Thyne     51   1999     Executive Vice President and Chief
                                      Financial Officer; Treasurer,
                                      Secretary

Business Experience
-------------------

   Leslie M. Apple has since January 1995 been a Partner and practicing
attorney in the Albany, New York law firm of Whiteman, Osterman & Hanna.
From 1982 through December 1997 Mr. Apple was a Director of the Company.
From January 1987 through December 1997, Mr. Apple had been a Special
Administrative Assistant to the president, and from May 1997 until
December 1997 Mr. Apple was a member of the Company's Office of the
Chief Executive.  Mr. Apple resigned from all positions with the Company
in December 1997 and has had no affiliation with the Company until he
was appointed to a vacant seat on the Board of Directors and the position
of Special Administrative Assistant to the President on November 30,
2000.

   Richard Farr was, until his resignation from those offices on July 8, 1997,
Chairman of the Board of the Company since January 1990 and President and
Treasurer of the Company since December 1991.  Mr. Farr was the Company's Chief
Executive Officer from December 1991 to May 1997, at which time he became a
Member of the Office of Chief Executive, which position he resigned on July 8,
1997.  Mr. Farr has also been Chairman and Chief Executive Officer of Farr
Investment Company, a private investment firm in West Hartford, Connecticut,
for more than the past five years.  From January 1987 to December 1991, Mr.
Farr was a Special Administrative Assistant to the President, a position he has
resumed since his resignation in July 1997.

                                    33

<PAGE>



   Samuel J. Padula has been President and Chief Executive Officer of Padula
Construction Corp., a real estate development and construction firm in
Oceanport, New Jersey, for more than the past five years.  Since January 1987,
Mr. Padula has been a Special Administrative Assistant to the President.  Mr.
Padula was, until his resignation from that office in December 1997, a member
of the Company's Office of the Chief Executive since May 1997.

   Steven Patlin has been and continues to be an independent dealer of
Lincoln Logs Ltd. since June 1985.  Mr Patlin served as an independent
consultant to the Company on sales and marketing matters from January
1998 through February 1999.  From March 1999 through February 2000 Mr.
Patlin served as Vice president of Sales for Lincoln Logs Ltd. at which
time he resigned that position.  Mr. Patlin has been Vice President and
Treasurer of Patlin Enterprises Inc. a distributor of home maintenance
products, for more than the past five years.  Mr. Patlin was appointed to
a vacant seat on the Board of Directors on February 4, 2000.

   Reginald W. Ray, Jr. has been President of The Hunter Corporation, a
holding company in Sherborn, Massachusetts, for more than the past
five years.  Since January 1987, Mr. Ray has been a Special Administrative
Assistant to the President.

   John D. Shepherd has been Chairman of the Board, President and Chief
Executive Officer of the Company since December 1997.  Mr. Shepherd was
also Treasurer of the Company from December 1997 until February 2001.  Mr.
Shepherd has been President of Sweetbrier Ltd., an equestrian facility, for
more than the past five years.  From January 1987 until May 1997, Mr.
Shepherd has been a Special Administrative Assistant to the President, and
from May 1997 until December 1997 Mr. Shepherd was a member of the Company's
Office of the Chief Executive.

    William J. Thyne, CPA, has been Chief Financial Officer and Secretary since
January 1998.  Mr. Thyne was also elected to the additional position of
Executive Vice President in September 1999, and Treasurer in February 2001.
Prior to joining the Company Mr. Thyne was Chief Financial Officer of John B.
Garret, Inc., a distributor of medical supplies and equipment and a provider
of Medicare Part B services in Guilderland, New York from August 1996 to
January 1998.  Prior to that position, Mr. Thyne was Vice President, Finance
and Chief Financial Officer of Reliable Racing Supply, Inc., a wholesale and
retail distributor of specialized ski equipment and mail order catalog retailer
of ski equipment and apparel in Glens Falls, New York from July 1995 to August
1996.  Mr. Thyne was appointed to a vacant seat on the Board of Directors on
November 30, 1999.

   No director holds any directorship in a company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934 or
subject to the requirements of Section 15(d) of such Act.  No director holds
any directorship in a company registerd as an investment company under the
Investment Company Act of 1940 other than Mr. Farr who is a Trustee of the
Scottish Widows International Fund.

                                   34
<PAGE>


The Board of Directors has established an Audit Committee, a Compensation
Committee and a Strategy Committee.  The Audit Committee, whose function is to
oversee the Company's financial reporting systems, consists of Messrs. Apple,
Ray and Padula.  The Compensation Committee, whose function is to review and
make recommendations to the Board on executive compensation, consists of
Messrs. ray, Padula and Farr.  The Strategy Committee, whose function is to
make recommendations to the Board on the future business direction of the
Company, consists of Messrs. Farr, Apple and Patlin.  The Company does not
have a standing nominating committee or any committee performing a similar
function.  During the fiscal year ended January 31, 2001 there were three
meetings of the Audit Committee.


                                 EXECUTIVE OFFICERS

   The executive officers of the Company, each of whom was elected by the Board
of Directors of the Company to serve in the capacities set forth below opposite
their names, and, except as otherwise noted, are currently serving until the
next Annual Meeting of Shareholders, are as follows:

Name               Age   Office(s)
----               ---   ---------
John D. Shepherd    55   Chairman of the Board; President and Chief Executive
                         Officer

William J. Thyne    51   Executive Vice President and Chief Financial Officer;
                         Treasurer; Secretary

Jeffry J. LaPell    40   Vice President - Sales

David M. Patton     52   Vice President - operations

   John D. Shepherd has been Chairman of the Board, President and Chief
Executive Officer since his election to those offices in December 1997.
Mr. Shepherd also served as the Company's Treasurer from December 1997
until February 2001.  Mr. Shepherd has been President of Sweetbrier Ltd., an
equestrian facility, for more than the past five years. Since January 1987
until his election to his present offices with the Company, Mr. Shepherd had
been a Special Administrative Assistant to the President, and from May 1997
until December 1997, a member of the Company's Office of the Chief
Executive.

   William J. Thyne, CPA, has been Chief Financial Officer and Secretary since
January 1998.  Mr. Thyne was also elected to the additional position of
Executive Vice President in September 1999, and Treasurer in February 2001.
Prior to joining the Company Mr. Thyne was Chief Financial Officer of John B.
Garret, Inc., a distributor of medical supplies and equipment and a provider of
Medicare Part B services in Guilderland, New York from August 1996 to January
1998.  Prior to that position, Mr. Thyne was Vice President, Finance and Chief
Financial Officer of Reliable Racing Supply, Inc., a wholesale and retail
distributor of specialized ski equipment and mail order catalog retailer of ski
equipment and apparel in Glens Falls, New York from July 1995 to August 1996.

                                    35

<PAGE>


   Jeffry J. LaPell has been Vice President - Sales since re-joining the
Company in December 1999.  Prior to re-joining the company Mr. LaPell was
Director of Sales for Asperline Log Homes, Inc., a wholly owned subsidiary of
Imagineering Services, Inc., in Lock Haven, Pennsylvania from December 1998 to
December 1999.  Prior to that position, and for more than five years, Mr. LaPell
was employed by Lincoln Logs ltd. in various sales positions the most recent of
which was National Sales Manager.

   David M. patton has been Vice President - Operations since December 1999.
 Prior to becoming Vice President - Operations, Mr. Patton was Product Manager,
a position he held since joining the Company in April 1996.  Prior to joining
the Company, Mr. Patton was a self-employed general contractor specializing
in the construction of log homes.


                          COMPLIANCE WITH SECTION 16(a) OF THE
                            SECURITIES EXCHANGE ACT OF 1934


   Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors who beneficially own more than ten percent (10%) of
the Company's Common Stock to file initial reports of ownership and reports
of changes of ownership with the Securities and Exchange Commission.  Executive
officers, directors and greater than ten percent (10%) beneficial owners are
required by Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file.

   The Company believes that its executive officers, directors and greater than
ten percent (10%) beneficial owners complied with all applicable Section 16(a)
filing requirements during and with respect to the fiscal year ended January 31,
2001.


ITEM 10.  EXECUTIVE COMPENSATION


                          EXECUTIVE COMPENSATION

   The table below sets forth all annual and long-term compensation paid by
the Company through the latest practicable date to the Chief Executive Officer
of the Company and to all executive officers of the Company who received total
annual salary and bonus in excess of $100,000 for services rendered in all
capacities to the Company and its subsidiaries during the fiscal years ended
January 31, 2001, January 31, 2000  and January 31, 1999.






                                    36


<PAGE>


<TABLE>




                            SUMMARY COMPENSATION TABLE

               LONG-TERM COMPENSATION - ANNUAL COMPENSATION AWARDS
                                           Long-term Compensation
             Annual Compensation                  Awards
             ------------------            ----------------------

     <S>          <S>     <S>       <S>          <S>          <S>          <S>          <S>          <S>
     (a)          (b)     (c)       (d)          (e)          (f)          (g)          (h)          (i)
                                                                                                      All
                                                 Other       Restricted                              Other
Name and                                         Annual      Stock         Options/     LTIP         Compen-
Principle         Year    Salary    Bonus      Compensation  Award(s)      SAR's        Payout       Sation
Position                   ($)       ($)           ($)        ($)            (#)          ($)          ($)
---------------------------------------------------------------------------------------------------------------
     <C>          <C>       <C>      <C>           <C>        <C>             <C>         <C>         <C>
John D. Shepherd, 2001 78,000.00    0.00          5,000.00(5) 0.00                0      0.00         9,877.00 (2)
Chief Executive   2000 78,000.00    0.00          5,000.00(5) 0.00                0      0.00         7,501.00 (3)
Officer (1)       1999 78,000.00    0.00          5,000.00(5) 0.00                0      0.00         3,943.00 (4)

</TABLE>
------------------------------
(1)  Mr. Shepherd was elected Chief Executive Officer in December 1997.  From
     May 1997 until December 1997, Mr. Shepherd was a member of the Office of
     Chief Executive.  Prior to May 1997, and since June 1982, Mr. Shepherd
     has been a director of the Company.
(2)  This amount consists of $1,250 paid for directors' meetings fees, $2,340
     of matching funds contributed to the Company's 401(k) Plan, $6,016 for
     interest paid on amounts advanced to the Company and $271 paid for term
     life insurance.
(3)  This amount consists of $3,750 paid for directors'meeting fees, $3,480 of
     matching funds contributed to the Company's 401(k) Plan and $271 paid for
     term life insurance.

(4)  This amount consists of $2,500 paid for directors' meeting fees, $243
     paid for term life insurance and $1,200 for interest paid on an amount
     advanced to the Company.
(5)  These amounts represent an annual salary of $5,000 paid to the directors
     of the Company.


Employee Savings Plan

   The Company maintains a defined contribution salary reduction plan (the
"Plan") pursuant to Section 401(k) of the Internal Revenue Code of 1986 (as
amended from time to time, the "Internal Revenue Code") for all employees who
have completed one year of service with the Company.  Thirty-nine of the
Company's employees are currently eligible to participate in the Plan, twenty-
eight of whom have elected to participate.  Employees participating in the Plan
may elect to defer compensation up to a maximum permitted by the Internal
Revenue Code.  The Company contributes on behalf of each participating employee
a percentage, determined annually by the Company based upon the profits of the
Company, of compensation (as defined by the Plan) to the Plan.  Aggregate annual
additions on behalf of any employee may not exceed the lesser of 25% or such
employee's compensation for any given year or $7,000 (as adjusted for increases
in the cost of living as prescribed by regulations by the Secretary of the
Treasury, $10,500 for the 2000 calendar year).  Contributions to the Plan made
by the Company are 20% vested after a participating employee completes three
years of service with the Company and continues to vest at the rate of an
additional 20% over each of the following four years of employment.


                                   37



<PAGE>



   During the fiscal years ended January 31, 2001, 2000 and 1999, $56,653,
$104,814 and $120,314, respectively, were paid to employees of the Company upon
their separation from service to the Company pursuant to the Plan.

Directors' Compensation

   During the fiscal year ended January 31, 2001 each Director received a $5,000
annual salary and also received $1,250 for each directors meeting they attended.
Further, members of committees of the Board of Directors received $500 for each
committee meeting attended.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
                   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                             OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

  The following table identifies each person known to the Company to be the
beneficial owner of more than five percent of the Company's Common Stock and
sets forth the number of shares of the Company's Common Stock beneficially
owned by each such person and the percentage of the shares of the Company's
outstanding Common Stock owned by each such person.
                          Number of Shares              Percent of Out-
                          of common Stock               standing Common
                          of the Company                Stock of the Company
Name and Address          Beneficially Owned            Beneficially Owned
Of Beneficial Owner       as of April 25, 2001          as of April 25, 2001
-------------------       ----------------------        ----------------------
Richard C. Farr               1,423,302 (1)                    14.87%
40 Colony Road
W. Hartford CT 06117

John D. Shepherd              6,153,961 (2)                    64.29
1020 Sport Hill Road
Easton, CT 06612

  (1)  Includes (i) 75,000 shares subject to options which are exercisable
       within 60 days and (ii) 312,500 shares subject to warrants which are
       exercisable within 60 days.

  (2)  Includes (i) 250,000 shares of the Company's Series B Convertible
       Subordinated Debentures owned by Mrs. Susan Shepherd, his wife, which
       are convertible within 60 days, as to which Mr. Shepherd disclaims
       beneficial ownership, (ii) 125,000 shares subject to warrants owned by
       Mrs. Susan Shepherd which are exercisable within 60 days, as to which
       Mr. Shepherd disclaims beneficial ownership, (iii) 125,000 shares subject
       to the Company's Series B Convertible Subordinated Debentures owned
       jointly by Mr. Herman R. Shepherd and Mrs. Carol R. Shepherd, his father
       and mother, which are convertible within 60 days, as to which Mr.
       Shepherd disclaims beneficial ownership, (iv) 62,500 shares subject to
       warrants owned jointly by Mr. Herman R. Shepherd and Mrs. Carol R.
       Shepherd which are exercisable within 60 days, as to which Mr. Shepherd
       disclaims beneficial ownership, (v) 125,000 shares subject to the
       Company's Series B Convertible Subordinated Debentures owned by Mrs.
       Carol R. Shepherd, his mother, which are convertible within 60 days, as
       to which Mr. Shepherd disclaims beneficial ownership, (vi) 62,500 shares
       subject to warrants owned by Mrs. Carol R. Shepherd which are exercisable
       within 60 days, as to which Mr. Shepherd disclaims beneficial ownership,
       (vii) 50,000 shares subject to the Company's Series B Convertible
       Subordinated Debentures owned by Mr. Jason Tunik, his son, which are
       convertible within 60 days, as to which Mr. Shepherd disclaims beneficial
       ownership, (viii) 25,000 shares subject to warrants owned by Mr. Jason
       Tunik which are exercisable within 60 days, as to which Mr. Shepherd
       disclaims beneficial ownership, (ix) 312,500 shares subject to the
       Company's Series C Convertible Subordinated Debentures owned by Mr.
       Herman R. Shepherd and Mrs. Carol R. Shepherd, his father and mother,
       which are convertible within 60 days, as to which Mr. Shepherd discliams
       beneficial ownership.

                                    38
<PAGE>




Security Ownership of Management

  The following table sets forth the number of shares of the Company's Common
Stock beneficially owned by each director of the Company and all directors and
officers of the Company as a group and the percentage of the shares of the
Company's outstanding Common Stock owned by each director of the Company and
all directors and officers of the Company as a group.  Except as otherwise
noted, the named individual has sole voting power and sole investment power
over the securities.

                        Number of Shares           Percent of Out-
                        of Common Stock            standing Common
                        of the Company             Stock of the Company
                        Beneficialy Owned          Beneficially Owned
Name                    as of April 25, 2001       as of April 25, 2001
---------------         ----------------------     ----------------------
Richard C. Farr           1,423,302 (4)                   14.87%
Samuel J. Padula            373,743 (1)(2)                 3.90%
Reginald W. Ray, Jr.        219,304 (1)(3)                 2.29%
John D. Shepherd          6,153,961 (5)                   64.29%
William J. Thyne            296,085 (6)                    3.09%
David Patton                 34,400 (7)                     .36%
Steven Patlin                85,100 (8)                     .89%
Jeffry LaPell                30,400                         .32%
Leslie M. Apple              77,104 (9)                     .81%
All officers and
directors as a group
(9 persons)               8,693,399 (10)                  90.83%





                                     39



<PAGE>





  (1)  Includes 30,000 shares subject to options which are exercisable within
       60 days.

  (2)  Includes (i) 2,100 shares owned jointly by Mr. Padula with his wife,
       Mrs. Eleanor Padula, with whom Mr. Padula shares voting and investment
       power (ii) 263,603 shares held by Mrs. Padula as to which Mr. Padula
       disclaims beneficial ownership, and (iii)75,000 shares subject
       to warrants owned by Mrs. Padula which are exercisable within 60 days as
       to which Mr. Padula disclaims beneficial ownership.

  (3)  Includes 11,602 shares owned by Mr. Ray's wife as to which Mr. Ray
       disclaims beneficial ownership.

  (4)  Includes (i) 75,000 shares subject to options which are exercisable
       within 60 days and (iii) 312,500 shares subject to warrants which are
       exercisable within 60 days.

  (5)  Includes (i) 250,000 shares of the Company's Series B Convertible
       Subordinated Debentures owned by Mrs. Susan Shepherd, his wife,which
       are convertible within 60 days, as to which Mr. Shepherd disclaims
       beneficial ownership, (ii) 125,000 shares subject to warrants owned by
       Mrs. Susan Shepherd which are exercisable within 60 days, as to which
       Mr. Shepherd disclaims beneficial ownership, (iii) 125,000 shares subject
       to the Company's Series B Convertible Subordinated Debentures owned
       jointly by Mr. Herman R. Shepherd and Mrs. Carol R. Shepherd, his father
       and mother, which are convertible within 60 days, as to which Mr.
       Shepherd disclaims beneficial ownership, (iv) 62,500 shares subject to
       warrants owned jointly by Mr. Herman R. Shepherd and Mrs. Carol R.
       Shepherd which are exercisable within 60 days, as to which Mr. Shepherd
       disclaims beneficial ownership, (v) 125,000 shares subject to the
       Company's Series B Convertible Subordinated Debentures owned by Mrs.
       Carol R. Shepherd, his mother, which are convertible within 60 days, as
       to which Mr. Shepherd discliams beneficial ownership, (vi) 62,500 shares
       subject to warrants owned by Mrs. Carol R. Shepherd which are exercisable
       within 60 days, as to which Mr. Shepherd disclaims beneficial ownership,
       (vii) 50,000 shares subject to the Company's Series B Convertible
       Subordinated Debentures owned by  Mr. Jason Tunik, his son, which are
       convertible within 60 days, as to which Mr. Shepherd disclaims beneficial
       ownership, (viii) 25,000 shares subject to warrants owned by Mr. Jason
       Tunik which are exercisable within 60 days, as to which Mr. Shepherd
       disclaims beneficial ownership, (ix) 312,500 shares subject to the
       Company's Series C Convertible Subordinated Debentures owned by Mr.
       Herman R. Shepherd and Mrs. Carol R. Shepherd, his father and mother,
       which are convertible within 60 days, as to which Mr. Shepherd discliams
       beneficial ownership.


  (6)  Includes (i) 10,000 shares subject to options which are exercisable
       within 60 days, (ii) 100,000 shares subject to the Company's Series
       B Convertible Subordinated Debentures which are convertible within 60
       days, and (iii) 50,000 shares subject to warrants which are exercisable
       within 60 days, excludes (iv) 50,000 shares subject to the Company's
       Series B Convertible Subordinated Debentures owned by Mrs. Glenn E.
       Thyne, his wife, which are convertible within 60 days, as to which
       Mr. Thyne disclaims beneficial ownership, and (v) 25,000 shares subject
       to warrants owned by Mrs. Glenn E. Thyne which are exercisable within
       60 days, as to which  Mr. Thyne disclaims beneficial ownership.


                                    40



<PAGE>



  (7)  Includes 4,000 shares subject to options which are exercisable
       within 60 days.

  (8)  Includes (i) 10,000 shares subject to options which are exercisable
       within 60 days, (ii) 50,000 shares subject to the Company's Series
       B Convertible Subordinated Debentures, owned jointly with his
       wife, Leslie Patlin, which are convertible within 60 days, and
       (111) 25,000 shares subject to warrants which are exercisable
       within 60 days.

  (9)  Includes (i) 25,000 shares subject to options which are exercisable
       within 60 days, (ii) 1,000 shares owned by Leslie M. Apple, P.C., a
       professional corporation of which Mr. Apple is the sole shareholder.

  (10) Includes (i) 184,000 shares subject to options, which are exercisable
       within 60 days, (ii) 750,000 shares subject ot the Company's Series
       B Convertible Subordinated Debentures which are convertible within
       60 days, (iii) 687,500 shares subject to warrants which are exercisable
       within 60 days, and (iv) 315,500 shares subject to the Company's
       Series C Convertible Subordinated Debentures, which are exercisable
       within 60 days.

There are no arrangements known to the Company the operation of which may at a
subsequent date result in a change in control of the Company.



ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  Description of certain transactions and agreements to which the Company and
certain officers and directors of the Company are parties are set forth below.

   During the fiscal years ended January 31, 2001 and 2000, the following
transcations with officers, directors and shareholders occurred:

  During March and April 1998, John D. Shepherd(1) and William J. Thyne(1)
purchased $210,000(1) and $20,000(1), respectively, Series B Convertible
Subordinated Debentures (the "B Debentures") at 100% par value.  In May
1998, Mr. Shepherd purchased $30,000 of B Debentures held by Samuel J. Padula.

   In February 1999, John D. Shepherd purchased $300,000(1) of Series C
Convertible Subordinated Debentures (the "C Debentures") at 100% par value.


  In April 1999, William J. Thyne purchased $10,000 of B Debentures at
100% par value.

   On July 29, 1999, John D. Shepherd converted $30,000 of B Debentures
into 150,000 shares of the Company's common stock and $250,000 of C
Debentures into 1,562,500 shares of the Company's common stock.

   On December 27, 1999 the Company repaid Mr. Richard C. Farr $125,000
for the B Debenture held by him.  On January 21, 2000 the Company paid
$9,860 to Mr. Farr which represented all accrued interest related to the
B Debenture repaid to him on December 27, 1999.

   On December 31, 1999 the Company sold an automobile with a book value
of $5,660 to Mr. Richard C. Farr for $18,042.

   During fiscal 2001, the Company repaid Mr. Richard C. Farr $103,000 of
advances he had made to the Company in prior years.  Also during fiscal
2001, the Company made interest payments to Mr. Farr related to advances
that he had made to the Company in prior years totaling $18,350.46.  The
advances bear interest at the annual rate of 12%.

   On December 8, 2000, Mr. John D. Shepherd advanced to the Company $83,349
for the purpose of placing a deposit for the purchase of a new milling machine.
The advance is evidenced by a Note bearing interest at 12% and is due August 15,
2002.  On March 14, 2001, the Company repaid Mr. Shepherd $33,349 of the total
amount advanced to the Company.  Related to this Note, the Company has paid
Mr. Shepherd interest payments in the amount of $2,926.

   On December 28, 2000, Mr. John D. Shepherd advanced to the Company
$100,000 for the purpose of purchasing a piece of land in Kingston, NY.
The advance is evidenced by a Note bearing interest at 12% and is due
August 15, 2003.  Related to this Note, the Company has paid Mr. Shepherd
interest payments in the amount of $3,090.

--------------------------------------------------
(1)  Includes debentures held by family members of the named officer/director/
   shareholder.

                                   41
<PAGE>






ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits.

                           INDEX TO EXHIBITS TO
                     ANNUAL REPORT ON FORM 10-KSB OF
                            LINCOLN LOGS LTD.
                FOR THE FISCAL YEAR ENDED JANUARY 31, 2001

Exhibit
Number                    Exhibit Description

3.1  Restated Certificate of Incorporation of the Registrant, as amended,
filed as Exhibit 3.1 for the Registrant's Annual Report on Form 10-K for
the fiscal year ended January 31, 1990, filed with the Securities and
Exchange Commission on May 1, 1990, and incorporated herein by this
reference.

3.2  By-Laws of the Registrant, as amended, filed as Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended January
31, 1988, filed with the Securities and Exchange Commission on May 2, 1988,
and incorporated herein by this  reference.

4.1  Rights Agreement dated as of February 17, 1989 between Lincoln Logs
Ltd. and Continental Stock Transfer & Trust Company, filed as Exhibit 4.1
to the Registrant's Current Report on Form 8-K dated February 17, 1989,
filed with the Securities and Exchange  Commission on February 24, 1989 and
incorporated herein by this reference.

4.2 Form of SERIES B CONVERTIBLE SUBORDINATED DEBENTURES filed as Exhibit
4.2 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 1998, filed with the Securities and Exchange Commission
on or about May 24, 1999 and incorporated herein by this reference.

4.3 Form of WARRANT TO PURCHASE COMMON STOCK filed as Exhibit 4.3 to the
Registrant's Annual Report on form 10-K for the fiscal year ended January
31, 1998, filed with the Securities and Exchange Commission on or about
May 24, 1999 and incorporated herein by this reference.

4.4  Form of SERIES C CONVERTIBLE SUBORDINATED DEBENTURE files as Exhibit 4.4
to the Registrant's Annual Report on form 10-K for the fiscal year ended
January 31, 1999, filed with the Securities and Exchange Commission on May 28,
1999 and amended on June 7, 1999 and incorporated herein by reference.

10.1 Employment Agreement with Richard Considine dated as of March 12,
1986, as amended, filed as Exhibit 10.1 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended January 31, 1992, filed with the
Securities and Exchange Commission on April 30, 1992, and incorporated
herein by this reference.

10.2 Purchase Agreement dated as of March 11, 1987 by and among Cedar 1,
Inc., B&C Lumber Company d/b/a Construction Suppliers, Inc., Leonard
Chapdelaine and Juanita Chapdelaine and Lincoln Logs Ltd., as amended by an
Addendum to Purchase Agreement dated March 11, 1987, a 2nd Addendum to
Purchase Agreement (undated) and a Third Addendum to Purchase Agreement
dated April 3, 1987, filed as Exhibit 2.1 to the Registrant's Form 8-K
Current Report, Date of Report: April 6, 1987, and incorporated herein by
this reference.

10.3 Non-Competition Agreement dated as of April 3, 1987 by and among
Lincoln Logs Ltd., Paul Bunyan Land & Timber Company of California, Inc.,
Blue Ox Land & Timber Company, Inc. d/b/a Construction Suppliers and
Leonard Chapdelaine and Juanita Chapdelaine, filed as Exhibit 2.2 to
the Registrant's Form 8-K Current Report, Date of Report: April 6, 1987,
and incorporated herein by this reference.

10.4 Stock Purchase, Deferred Compensation, Retirement and Loan Agreement
dated as of May 21, 1993 between Lincoln Logs Ltd. and Richard Considine,
filed as Exhibit 10.1 to the Registrant's  Quarterly Report on Form 10-QSB
for the quarter ended April 30, 1993, and incorporated herein by this
reference.

10.5 Non-competition Agreement dated as of May 21, 1993 between Lincoln
Logs Ltd. and Richard Considine, filed as Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended April 30, 1993, and
incorporated herein by this reference.

10.6 Shareholder Voting Agreement dated as of May 21, 1993 between Lincoln
Logs Ltd. and Richard Considine, filed as Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended April 30, 1993, and
incorporated herein by this reference.

21.  List of Subsidiaries.
The registrant has the following subsidiaries:

1. Thermo-Home, Inc., a New York corporation
2. Lincoln Logs International Ltd., a New York corporation
3. Lincoln Holding Corp., a Delaware corporation



     (b)  Reports on Form 8-K.

           None



                                    42
<PAGE>




                               SIGNATURES

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

                           LINCOLN LOGS LTD.

                           By: /s/ John D. Shepherd
                              --------------------
                              John D. Shepherd,
                              Chairman of the Board, President
                              and Chief Executive Officer


                           Dated:  April 30, 2001

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

(i)   Principal Executive Officer:
       /s/ John D. Shepherd
      --------------------
      John D. Shepherd,
      Chairman of the Board, President
       and Chief Executive Officer
       Dated: April 30, 2001

(ii)  Principal Financial Officer:
       /s/ William J. Thyne
      -----------------------
      William J. Thyne,
      Executive Vice President,
      Chief Financial Officer,
      Secretary and Treasurer
      Dated:  April 30, 2001



               [ Signatures continued on next page ]


                                 43
<PAGE>




(iii) A Majority of the Board of Directors:

      /s/ Richard C. Farr                     April 28, 2001
      ------------------------
      Richard C. Farr

       /s/ Samuel J. Padula                   April 18, 2001
      ------------------------
      Samuel J. Padula


      ------------------------
      Reginald W. Ray, Jr.

       /s/ John D. Shepherd                   April 30, 2001
      ------------------------
      John D. Shepherd

       /s/ William J. Thyne                   April 30, 2001
      -----------------------
      William J. Thyne

       /s/ Steve Patlin                       April 19, 2001
      ------------------------
      Steven Patlin


       /s/ Leslie M. Apple                    April 25, 2001
      ------------------------
      Leslie M. Apple





                                    44