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

                                   FORM 10-KSB

(Mark One)

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2001


[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

        For the transition period from ______________  to  ______________


                                                 Commission file number 33-6505D


                                  MORLEX, INC.
                 (Name of small business issuer in its charter)

Colorado                                                    84-1028977
(State or other jurisdiction                              (I.RS. employer
of incorporation or organization)                       identification number)

999 Walt Whitman Road, 3rd Floor, Melville, NY                   11747
(Address of principal executive offices)                      (Zip Code)

Issuer's telephone number, including area code:  (631) 421-3600

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

Securities registered under Section 12(g) of the Exchange Act: Common Stock,
$.001 par value.

Check whether the Issuer (1) has 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 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

State issuer's revenues for its most recent fiscal year. None

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days: Unknown

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. On March 7, 2002, there were 971,765
shares of the issuer's common stock issued and outstanding.

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE

Transitional Small Business Disclosure Format (Check one): Yes [_]; No [X]


<PAGE>


                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

     Morlex, Inc. (the "Company", "Morlex" or the "Registrant") was incorporated
in the State of Colorado on April 23, 1986.

     Prior to incorporation, the Company had no prior operating history and was
formed as what is commonly known as a blind pool. The Company has been seeking
the acquisition of, or merger with, an existing company. Otherwise, during the
last five years, the Company has had no active business, has no employees, and
is currently considered a development stage company. The following details
Company events outside the ordinary course of business over the last two fiscal
years:

     On June 14, 1999, the Company filed a Registration Statement under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") on Form 10-SB,
pursuant to which the Company sought to register its Common Stock under the
Exchange Act. The Registration Statement became effective on August 14, 1999.

     On November 1, 2000, the Board of Directors, by unanimous consent in lieu
of a meeting, resolved to approve a reverse stock split whereby each issued and
outstanding share of Common Stock was converted into 0.001927029 of a share of
Common Stock, and directed that the matter be submitted to the shareholders of
the Company, for their approval, at a Special Meeting of the Shareholders held
December 5, 2000. On December 5, 2000, the shareholders of the Company, by
majority vote, approved the reverse stock split.

Selection of Opportunities

     The analysis of new business opportunities has and will be undertaken by or
under the supervision of the officers and directors of the Registrant. The
Registrant has unrestricted flexibility in seeking, analyzing and participating
in potential business opportunities. In its efforts to analyze potential
acquisition targets, the Registrant will consider the following kinds of
factors:

     (a)  Potential for growth, indicated by new technology, anticipated market
          expansion or new products;

     (b)  Competitive position as compared to other firms of similar size and
          experience within the industry segment, as well as within the industry
          as a whole;

     (c)  Strength and diversity of management, either in place or scheduled for
          recruitment;

                                       2

<PAGE>


     (d)  Capital requirements and anticipated availability of required funds to
          be provided by the Registrant or from operations, through the sale of
          additional securities, through joint ventures or similar arrangements
          or from other sources;

     (e)  The cost of participation by the Registrant as compared to the
          perceived tangible and intangible values and potentials;

     (f)  The extent to which the business opportunity can be advanced;

     (g)  The accessibility of required management expertise, personnel, raw
          materials, services, professional assistance and other required items;
          and

     (h)  Other relevant factors.

     In applying the foregoing criteria, no one of which will be controlling,
management will attempt to analyze all factors and circumstances and make a
determination based upon reasonable investigative measures and available data.
Potentially available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. Due to the Registrant's extremely limited
capital available for investigation and management's limited experience in
business analysis, the Registrant may not discover or adequately evaluate
adverse facts about the opportunity to be acquired.

Form of Acquisition

     The manner in which the Registrant participates in an opportunity will
depend upon the nature of the opportunity, the respective needs and desires of
the Registrant and the promoters of the opportunity, and the relative
negotiating strength of the Registrant and such promoters.

     It is likely that the Registrant will acquire its participation in a
business opportunity through the issuance of common stock or other securities of
the Registrant. Although the terms of any such transaction cannot be predicted,
it should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"),
depends upon the issuance to the shareholders of the acquired company of at
least 80 percent of the common stock of the combined entities immediately
following the reorganization. If a transaction were structured to take advantage
of these provisions rather than other "tax free" provisions provided under the
Code, all prior shareholders would retain 20% or less of the total issued and
outstanding shares. This could result in substantial additional dilution to the
equity of those who were shareholders of the Registrant prior to such
reorganization.


                                       3
<PAGE>


     The present shareholders of the Registrant will likely not have control of
a majority of the voting shares of the Registrant following a reorganization
transaction. As part of such a transaction, all or a majority of the
Registrant's directors may resign and new directors may be appointed without any
vote by shareholders.

     In the case of an acquisition, the transaction may be accomplished upon the
sole determination of management without any vote or approval by shareholders.
In the case of a statutory merger or consolidation involving the Company, it
will likely be necessary to call a shareholders' meeting and obtain the approval
of the holders of a majority of the outstanding shares. The necessity to obtain
such shareholder approval may result in delay and additional expense in the
consummation of any proposed transaction and will also give rise to certain
appraisal rights to dissenting shareholders. Most likely, management will seek
to structure any such transaction so as not to require shareholder approval.

     It is anticipated that the investigation of specific business opportunities
and the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial cost for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity, the
costs theretofore incurred in the related investigation would not be
recoverable. Furthermore, even if an agreement is reached for the participation
in a specific business opportunity, the failure to consummate that transaction
may result in the loss to the Registrant of the related costs incurred.

Reports to Security Holders

     The Company electronically files yearly (10-KSB) and quarterly (10-QSB)
reports with the Commission. Other reports are filed with the Commission where
the Company's situation materially changes. All such reports filed with the
Commission by the Company can be found on the Commission's internet site,
http://www.sec.gov.

ITEM 2. DESCRIPTION OF PROPERTY

     The Company neither rents nor owns any properties. The Company currently
has no policy with respect to investments or interests in real estate, real
estate mortgages or securities of, or interests in, persons primarily engaged in
real estate activities.


ITEM 3. LEGAL PROCEEDINGS

     There are not presently any pending legal proceedings to which the
Registrant is a party or as to which any of its property is subject.


                                       4
<PAGE>


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

     There were no matters submitted to a vote of shareholders during the fourth
quarter of the fiscal year covered by this report.


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     A. Market for Common Stock. The Company is not aware of any market activity
in its stock during the fiscal year ended December 31, 2001.

     B. Holders. On March 7, 2002, there were 275 holders of 971,765 shares of
the Company's common stock.

     C. Dividends. The Registrant has not paid any cash dividends during either
the fiscal year ended December 31, 2000 or December 31, 2001 and does not
anticipate or contemplate paying dividends in the foreseeable future. It is the
present intention of management to utilize all available funds for the
development of the Registrant's business.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The Registrant was formed on April 23, 1986 for the purpose of investing in
any and all types of assets, properties and businesses. On September 10, 1986,
the Commission granted effectiveness to a Registration Statement on Form S-18,
filed by the Registrant in the Colorado Regional Office. The Plan of Operation
of the Registrant is briefly described below and further described in Item 1 of
this Form 10-KSB.

     As of December 31, 2001, the Registrant had cash of $145 and no other
assets. As of December 31, 2001, the Registrant had total liabilities of $1,500
and total stockholders deficiency of $1,355. As of December 31, 2000, the
Registrant had cash of $683 and no other assets. As of December 31, 2000, the
Registrant had total liabilities of $1,500 and total stockholders deficiency of
$817. Prior to the consummation of a potential business acquisition as described
in Item 1 of this Form 10-KSB, management does not expect that the Registrant
will have any significant capital requirements or will purchase any significant
equipment or that there



                                       5
<PAGE>

will be significant changes in the number of Registrant's employees.

     The Registrant has not conducted any active operations for at least the
last five years, except for the registration and sale of its securities. The
Registrant's assets consist of a limited amount of cash. No revenue has been
generated by the Registrant over the last three years. The Registrant will not
have significant operations until, if ever, such time as it effects an
acquisition.

     The Company filed, on June 14, 1999, a Registration Statement under the
Exchange Act, on Form 10-SB, pursuant to which the Company sought to register
its Common Stock under the Exchange Act. That Registration Statement became
effective on August 14, 1999.

Plan of Operation

     The Company has not realized any revenues from operations, and its plan of
operation for the next twelve months shall be to continue its efforts to locate
suitable acquisition or merger candidates. Although it is currently anticipated
that the Company can satisfy its cash requirements, and that no additional funds
need be raised, for at least the next twelve months, the Company can provide no
assurance that it can continue to satisfy its cash requirements for such period.

Results of Operations

     The Company has not conducted any active operations in the past fiscal
year, except for its efforts to locate suitable acquisition or merger
transactions. No revenue has been generated by the Company during such period,
and it is unlikely the Company will have any revenues unless it is able to
effect an acquisition of, or merger with, an operating company, of which there
can be no assurance.

ITEM 7. FINANCIAL STATEMENTS

<TABLE>
                          Index to Financial Statements

<S>                                                                             <C>
Independent Auditors' Report                                                    F-2

Financial Statements:

     Balance Sheets as of December 31, 2001 and 2000                            F-3


     Statements of Operations for the Cumulative Period During the Development
     Stage (January 1, 2000 to December 31, 2001) and for the Years Ended
     December 31, 2001 and 2000                                                 F-4

     Statement of Changes in Shareholders' Equity (Deficit) for the two Years
     Ended December 31, 2001 (the Cumulative Period During the Development
     Stage)                                                                     F-5

     Statement of Cash Flows for the Cumulative Period During the Development
     Stage (January 1, 2000 to December 31, 2001) and for the Years Ended
     December 31, 2001 and 2000                                                 F-6

Notes to Financial Statements                                                   F-7
</TABLE>


                                       6
<PAGE>


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

     On February 9, 2001, the Registrant filed a report with the Commission on
Form 8-K in connection with the resignation of Scott & Guilfoyle as its
independent accountants and the engagement of Lazar Levine & Felix LLP as its
new independent accountants for the fiscal year ended December 31, 2000.

     There are not and have not been any disagreements between the Registrant
and any of its accountants on any matter of accounting principles, practices or
financial statement disclosure, and the Registrant continues to maintain Lazar
Levine & Felix LLP, as their accountants.

                                    PART III

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

     A. Identification of Directors and Executive Officers. The current officers
and directors will serve for one year or until their respective successors are
elected and qualified. They are:
                                              DATE OF
NAME                                     AGE  ELECTION  POSITION
----                                     ---  --------  --------

Charles T. Gould                         50   4/5/91    Chairman of the Board of
4562 S. Ouray Way                                       Directors
Aurora, CO 80015

Lawrence E. Kaplan                       58   7/29/98   President, Treasurer and
999 Walt Whitman Road                                   Director
Melville, NY 11747

Steven J. Goodman                        62   7/29/98   Secretary and Director
5000 Carden Beach, #521
Christian Sted, St. Croix
U.S. Virgin Islands 00820


                                       7
<PAGE>


     Charles T. Gould. Mr. Gould has been a director of the Company since April
1991. He is presently a Stock Broker and Trader with Charles Schwab in Denver,
Colorado. Prior to Mr. Gould's employment with Charles Schwab & Co., he served
as an Environmental Production Worker with Interel Environmental in Englewood,
Colorado.

     Lawrence E. Kaplan. Mr. Kaplan has served as President, Treasurer and a
director of the Company since July, 1998. Mr. Kaplan is a registered
representative, officer, director, president and sole stockholder of G-V Capital
Corp., an NASD-registered broker/dealer. Mr. Kaplan is also director of
Directrix, Inc, a publicly traded company that is a provider of network
origination and digital video asset management and distribution services,
catering primarily to the entertainment industry. Mr. Kaplan is also on the
Board of many private companies.

     Steven J. Goodman. Mr. Goodman has served as Secretary and a director of
the Company since July, 1998. Mr. Goodman was a consultant for Tessa Financial
Group, Inc. from August 1995 until July, 1998. From 1991 through March, 1995,
Mr. Goodman was West Coast Managing Director of Creative Business Strategies, a
financial corporate consulting firm. Mr. Goodman served as a director of Javelin
Systems, Inc., a public company listed on NASDAQ from January, 1996 until
December, 2000.

     B. Significant Employees. None.

     C. Family Relationships. Charles T. Gould is the husband of Lanne Lancaster
and the brother of Kaylene Veron. Ms. Lancaster served as the Vice President and
Secretary of the Company from March, 1989 until July, 1998. Presently, she is
the record owner of 1,524 shares of Common Stock of the Company. Ms. Veron
served as a director of the Company from March, 1989 until July, 1998.
Presently, Ms. Veron owns no shares of the Company.

     D. Involvement in Certain Legal Proceedings. There have been no events
under any bankruptcy act, no criminal proceedings and no judgments, injunctions,
orders or decrees material to the evaluation of the ability and integrity of any
director, executive officer, promoter or control person of Registrant during the
past five years.


                                       8
<PAGE>


     E. Compliance With Section 16(a). The Company believes that all required
Forms 3 and 4 were furnished to the Registrant during the fiscal year ended
December 31, 2001.


ITEM 10. EXECUTIVE COMPENSATION

     No compensation has been paid or accrued to any officer or director of the
Registrant since 1994. Except as otherwise indicated in Item 12, the current
officers and directors are not being compensated by the Registrant. The
Registrant has no current intent to issue shares of its common stock to
management in connection with an acquisition. However, the Registrant may
subsequently deem the issuance of shares to management for services rendered in
connection with an acquisition to be fair and reasonable to the Registrant and
its public shareholders in light of the services rendered. In the event any
shares are issued for services rendered by management they shall be issued in
such an amount as the Board of Directors deems fair and reasonable to the
Registrant and its public shareholders and in compliance with management's
fiduciary duties under state law. Officers and directors will be reimbursed for
actual out-of-pocket expenses incurred on behalf of the Registrant as approved
by the Board of Directors.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     A. Security Ownership of Certain Beneficial Owners. The following persons
are known to the Registrant to be officers, directors and beneficial owners of
more than five percent of the Registrant's common stock as of March 15, 2002:

Name and Address             Amount and Nature of
of Beneficial Owner          Beneficial Ownership (1)          Percent of Class
-------------------          ------------------------          ----------------

Charles T. Gould (2)              229,818                         30.6%
4562 S. Ouray Way
Aurora, CO 80015

Lawrence E. Kaplan                229,815                         30.6%
999 Walt Whitman Road
Melville, NY 11747

Steven J. Goodman                 229,815                         30.6%
5000 Carden Beach
St. Croix, USVI 00820

ALL OFFICERS AND
DIRECTORS AS A
GROUP (3 Individuals)             689,448                         91.9%


                                       9
<PAGE>

----------
(1)  Unless otherwise indicated herein and subject to applicable community
     property laws, each stockholder has sole voting and investment power with
     respect to all shares of Common Stock beneficially owned by such
     stockholder and directly owns all such shares in such stockholder's sole
     name. Within sixty (60) days of the date of this filing, none of the above
     persons has the right to acquire any further shares of the Registrant's
     common stock from options, warrants, rights, conversion privileges or other
     similar arrangement.

(2)  Includes 1,524 shares of Common Stock owned by stockholder's spouse.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     None.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     A. Exhibits:

          3.1 Certificate of Incorporation - incorporated by reference to
     Exhibit 3.1 to Registration Statement on Form S-18.

          3.2 Amended and Restated By-Laws - incorporated by reference to
     Exhibit 3.2 to Form 10-KSB filed on March 29, 2001.

     B. Reports on Form 8-K. On November 22, 2000 Scott & Guilfoyle ("S&G")
submitted their resignation as the Registrant's independent accountant, to be
effective November 22, 2000. On December 18, 2000 the Registrant engaged Lazar
Levine & Felix LLP ("LL&F") as its independent auditors for its fiscal year
ending December 31, 2000. On February 9, 2001, the Registrant filed a report on
Form 8-K in connection with this change in its independent accountant. No other
reports on Form 8-K were filed by the Registrant during the fourth quarter of,
or at any time during, the fiscal year of 2000.


                                       10
<PAGE>


                                  EXHIBIT INDEX

          3.1 Registrant's Certificate of Incorporation filed as Exhibit 3.1 to
     Registrant's Registration Statement on Form S-18.

          3.2 Registrant's Amended and Restated By-Laws - filed as Exhibit 3.2
     to Registrant's Form 10-KSB filed on March 29, 2001.




                                       11
<PAGE>


                                   SIGNATURES

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



                                           MORLEX, INC.

                                           By:   /s/ Lawrence E. Kaplan
                                                 ----------------------
                                                 Lawrence E. Kaplan
                                                 President and Treasurer
Date: March 25, 2002.

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.



                                     TITLE         DATE

  By:  /s/ Charles T. Gould          Director      March 25, 2002
       --------------------
       Charles T. Gould

  By:  /s/ Lawrence E. Kaplan        President,    March 25, 2002
       ----------------------
       Lawrence E. Kaplan            Treasurer,
                                     Director

  By:  /s/ Steven J. Goodman         Secretary,    March 25, 2002
       --------------------
       Steven J. Goodman             Director


                  Supplemental Information to be Furnished With
           Reports Filed Pursuant to Section 15(d) of the Exchange Act
                            by Non-reporting Issuers

No annual report to security holders or proxy material has been sent to security
holders of the Registrant.


                                       12



<PAGE>


                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                         Page(s)
<S>                                                                                      <C>
Independent Auditors' Report                                                             F - 2.

Financial Statements:

   Balance Sheets as of December 31, 2001 and 2000                                       F - 3.

   Statements of Operations for the Cumulative Period During the Development
     Stage (January 1, 2000 to December 31, 2001) and for the Years Ended
     December 31, 2001 and 2000                                                          F - 4.

   Statement of Changes in Shareholders' Equity (Deficit) for the two Years Ended
     December 31, 2001 (the Cumulative Period During the Development Stage)              F - 5.

   Statements of Cash Flows for the Cumulative Period During the Development
     Stage (January 1, 2000 to December 31, 2001) and for the Years Ended
     December 31, 2001 and 2000                                                          F - 6.

Notes to Financial Statements                                                            F - 7.

</TABLE>


                                      F-1
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


To the Shareholders
Morlex, Inc.
Melville, New York


We have audited the accompanying balance sheets of Morlex, Inc., a development
stage company, as of December 31, 2001 and 2000, and the related statements of
operations, changes in shareholders' deficit and cash flows for the years then
ended. 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 audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Morlex, Inc., a development
stage company, as of December 31, 2001 and 2000, and the results of its
operations, changes in shareholders' equity (deficit) and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses and has a net
capital deficiency that raise substantial doubt about its ability to continue as
a going concern. Management's plans in regard to this matter are also described
in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


                                                        ------------------------
                                                        LAZAR LEVINE & FELIX LLP

New York, New York
March 15, 2002

                                      F - 2

<PAGE>


                                  MORLEX, INC.
                          (A Development Stage Company)
                                 BALANCE SHEETS
                           DECEMBER 31, 2001 AND 2000


<TABLE>
<CAPTION>
                                                            2001              2000
                                   - ASSETS -
<S>                                                     <C>            <C>
CURRENT ASSETS:
     Cash                                                      $145           $683
                                                        -----------    -----------

TOTAL ASSETS                                                  $145            $683
                                                        ==========     ===========

               - LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) -

CURRENT LIABILITIES:
     Accrued expenses                                   $     1,500    $     1,500
                                                        -----------    -----------

TOTAL CURRENT LIABILITIES                                     1,500          1,500
                                                        -----------    -----------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY (DEFICIT):
     Common stock,  $.001 par value; 1,000,000
       shares  authorized, 971,765 shares
       issued and outstanding in 2001 and 2000                  972            972
     Additional paid-in capital                             370,798        358,398
     Accumulated deficit                                   (341,027)      (341,027)
     Deficit accumulated during the development stage       (31,876)       (18,938)
     Treasury stock, at par - 221,605 shares                   (222)          (222)
                                                        -----------    -----------
                                                             (1,355)          (817)
                                                        -----------    -----------

                                                        $       145    $       683
                                                        ===========    ===========
</TABLE>



                 See accompanying notes to financial statements.

                                      F - 3

<PAGE>



                                  MORLEX, INC.
                          (A Development Stage Company)
                            STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                                             Cumulative During the
                                                               Development Stage
                                                               (January 1, 2000
                                                                      to
                                                               December 31, 2001)       2001                2000
                                                               ------------------       ----                ----
<S>                                                               <C>                 <C>                 <C>
REVENUES                                                          $    --             $    --             $    --
                                                                  ---------           ---------           ---------

COSTS AND EXPENSES:
     Professional fees                                               26,846              11,108              15,738
     Filing fees                                                      4,388               1,616               2,772
     Other expenses                                                     642                 214                 428
                                                                  ---------           ---------           ---------

                                                                     31,876              12,938              18,938
                                                                  ---------           ---------           ---------

NET LOSS                                                          $ (31,876)          $ (12,938)          $ (18,938)
                                                                  =========           =========           =========

LOSS PER SHARE - BASIC AND DILUTED                                $    (.04)          $    (.02)          $    (.03)
                                                                  =========           =========           =========

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                750,160             750,160             750,160
                                                                  =========           =========           =========


</TABLE>

                 See accompanying notes to financial statements.

                                      F - 4


<PAGE>



                                  MORLEX, INC.
                          (A Development Stage Company)
             STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)


<TABLE>
<CAPTION>
                                                                                       Deficit
                                                                                      Accumulated                    Total
                                                            Additional                 During the                 Shareholders
                                                 Common      Paid-In     Accumulated  Development     Treasury        Equity
                                      Shares      stock      Capital       Deficit      Stage          stock        (Deficit)
                                      ------      -----      -------       -------      -----          -----        ---------
<S>                                  <C>        <C>          <C>          <C>           <C>           <C>           <C>
Balance at January 1, 2000           971,765    $     972    $ 341,898    $(341,027)    $    --       $    (222)    $   1,621

Capital contributed                     --           --         16,500         --            --            --          16,500

Net loss for the year ended
  December 31, 2000                     --           --           --           --         (18,938)         --         (18,938)
                                   ---------    ---------    ---------    ---------     ---------     ---------     ---------

Balance at December 31, 2000         971,765          972      358,398     (341,027)      (18,938)         (222)         (817)

Capital contributed                     --           --         12,400         --            --            --          12,400

Net loss for the year ended
  December 31, 2001                     --           --           --           --         (12,938)         --         (12,938)
                                   ---------    ---------    ---------    ---------     ---------     ---------     ---------

Balance at December 31, 2001         971,765    $     972    $ 370,798    $(341,027)    $ (31,876)    $    (222)    $  (1,355)
                                   =========    =========    =========    =========     =========     =========     =========


                                           See accompanying notes to financial statements.

                                                                F - 5
</TABLE>


<PAGE>



                                  MORLEX, INC.
                          (A Development Stage Company)
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     Cumulative During the
                                                                       Development Stage
                                                                       (January 1, 2000
                                                                             to
                                                                       December 31, 2001)       2001                2000
                                                                       ------------------       ----                ----

<S>                                                                        <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                              $(31,876)           $(12,938)           $(18,938)
     Increase in accrued expenses                                                20                --                    20
                                                                           --------            --------            --------

        Net cash used by operating activities                               (31,856)            (12,938)            (18,918)
                                                                           --------            --------            --------


CASH FLOWS FROM FINANCING ACTIVITIES:
     Capital contributed                                                     28,900              12,400              16,500
                                                                           --------            --------            --------

        Net cash provided by financing activities                            28,900              12,400              16,500
                                                                           --------            --------            --------


NET DECREASE IN CASH                                                         (2,956)               (538)             (2,418)

     Cash at beginning of year                                                3,101                 683               3,101
                                                                           --------            --------            --------

CASH BALANCE AT END OF YEAR                                                $    145            $    145            $    683
                                                                           ========            ========            ========



                                           See accompanying notes to financial statements.

</TABLE>
                                                                F - 6


<PAGE>


                                  MORLEX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000

NOTE 1 - DESCRIPTION OF COMPANY:

     Morlex, Inc., the Company, was incorporated under the laws of the State of
     Colorado on April 23, 1986. The primary activity of the Company was to seek
     merger or acquisition candidates. In January 1987, the Company, in a
     stock-for-stock exchange acquired America OnLine, Inc., a then wholly-owned
     subsidiary of Info Source Information Service, Inc. The Company
     simultaneously changed its name to America OnLine, Inc. ("AOL #1"). AOL #1
     was never affiliated with the well-known company of the same name. On
     December 28, 1992, the Company terminated the business of AOL #1 and has
     had no active business operations since. On May 15, 1998, the name of the
     Company was changed back to Morlex, Inc. The Company is currently seeking
     potential business opportunities.

     As shown in the financial statements, the Company incurred net losses, has
     negative working capital and has an accumulated a deficit of $372,903 as of
     December 31, 2001. It is management's assertion that these circumstances
     may hinder the Company's ability to continue as a going concern. As of the
     date of this report, management has not developed a formal plan to raise
     funds for either the Company's short or long term needs.

     In accordance with Statement of Financial Accounting Standards No. 7, the
     Company is being treated as a development stage company since January 1,
     2000, the date the Company began devoting substantially all of their
     efforts to establish a new business.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     The Company's accounting policies are in accordance with accounting
     principles generally accepted in the United States of America. Outlined
     below are those policies considered particularly significant.

     (a)  Use of Estimates:

          In preparing financial statements in accordance with accounting
          principles generally accepted in the United States of America,
          management makes certain estimates and assumptions, where applicable,
          that affect the reported amounts of assets and liabilities and
          disclosures of contingent assets and liabilities at the date of the
          financial statements, as well as the reported amounts of revenues and
          expenses during the reporting period. While actual results could
          differ from those estimates, management does not expect such
          variances, if any, to have a material effect on the financial
          statements.

     (b)  Statements of Cash Flows:

          For purposes of the statement of cash flows the Company considers all
          highly liquid investments purchased with a remaining maturity of three
          months or less to be cash equivalents.


                                      F - 7


<PAGE>


                                  MORLEX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000

NOTE 2 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     (c)  Net Loss Per Common Share:

          Basic loss per share is calculated by dividing net income available to
          common stockholders by the weighted average number of common shares
          outstanding during the year. Diluted loss per share is calculated by
          using the weighted average of common shares outstanding adjusted to
          include the potentially dilutive effect of outstanding stock options.

NOTE 3 - SHAREHOLDERS' EQUITY:

          On December 5, 2000, the shareholders of the Company, approved a
          reverse stock split whereby each issued and outstanding share of
          common stock, was converted into 0.001927029 of a share of common
          stock. Stockholders' equity was retroactively restated to give
          recognition to the reverse stock split by reclassifying from common
          stock to additional paid-in capital the par value of the number of
          shares that were eliminated as a result of the reverse stock split. In
          addition, all references in the financial statements and notes to the
          number of shares and per share amounts, reflect this reverse stock
          split.

          On June 14, 1999, the Company filed a Registration Statement under the
          Securities Exchange Act of 1934, as amended (the "Exchange Act") on
          Form 10-SB, pursuant to which the Company sought to register its
          common stock under the Exchange Act. The Registration Statement became
          effective on August 14, 1999.

          During 2001 and 2000, the Company received capital contributions of
          $12,400 and $16,500, respectively from its officers.

NOTE 4 - INCOME TAXES

          The Company has a net operating loss carryforward of approximately
          $360,000 expiring principally in 2002 and 2003. However, the Company's
          ability to utilize such losses to offset future taxable income is
          subject to various limitations imposed by the rules and regulations of
          the Internal Revenue Service. A portion of the Company's net operating
          losses are limited each year to offset future taxable income, if any,
          due to the change of ownership in the Company's outstanding shares of
          common stock.


                                      F - 8