U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   Form 10-KSB


                    [X[ ANNUAL REPORT PURSUANT TO SECTION 13
                         OF THE SECURITIES EXCHANGE ACT
                   For the Fiscal Year Ended December 31, 2001


                           Commission file No. 0-28985

                           MILLENNIA TEA MASTERS, INC.

           (Name of Small Business Issuer as specified in its Charter)

                             2591 Dallas Parkway, Suite 102
      Texas                     Frisco, TX 75034                  75-2785941
(State or Other    (Address of Principal Executive Office,   (IRS Employer
 Jurisdiction                 including Zip Code)            Identification No.)
 of incorporation)

                                 (469) 633-0100
              (Registrant's telephone number, including area code)



         Securities Registered under Section 12(b) of the Exchange Act:
                                      none
         Securities registered Under Section 12(g) of the exchange Act:
                         Common Stock, $0.001 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  management's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this form 10-K. [X]

State issuer's revenues for its most recent fiscal year: $356.00

The aggregate market value of the voting stock held by  non-affiliates  computed
by reference to the average bid and asked prices of such stock,  as of March 15,
2002 was - 0 -. There is no public market for the Company's common stock.

As of March 15, 2001 the issuer had 1,730,939  shares of common stock issued and
outstanding.

<PAGE>

Caution Regarding Forward-Looking Information
---------------------------------------------

This  quarterly   report  contains   certain   forward-looking   statements  and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to  the  Company  or  management.   When  used  in  this  document,   the  words
"anticipate",   "believe",   "estimate",   "expect"  and  "intend"  and  similar
expressions,  as they relate to the Company or its  management,  are intended to
identify forward-looking statements. Such statements reflect the current view of
the  Company   regarding  future  events  and  are  subject  to  certain  risks,
uncertainties  and  assumptions,  including the risks and  uncertainties  noted.
Should  one or more of  these  risks or  uncertainties  materialize,  or  should
underlying assumptions prove incorrect,  actual results may vary materially from
those  described  herein  as  anticipated.,  believed,  estimated,  expected  or
intended. In each instance,  forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.


                                     PART I


Item 1. Description of Business.
--------------------------------

General

The  Company was  incorporated  on August 4, 1998 under the laws of the State of
Texas and shortly  thereafter  commenced  its  operations as an importer of high
quality tea products from Sri Lanka.

Item 2. Description of Property.
--------------------------------

         The Company has no properties.


Item 3.  Legal Proceedings.
---------------------------

         The Company is not a party to any material pending litigation nor is it
aware of any threatened legal proceeding.


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

         No matters were  submitted to securities  holders during the year ended
December 31, 2001


                                     PART II

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

Market Information

         As of March 15,  2002,  there is no  public  market  for the  Company's
common stock.

         Dividend Policy

         The Company has never paid any  dividends  on its common stock and does
not have any current plan to pay any dividends in the foreseeable future.

<PAGE>

Item 6. Management's  Discussion and Analysis of Financial Condition and Plan of
--------------------------------------------------------------------------------
Operation.
----------

Discussion of Financial Condition

         The Company commenced  operations during the fourth quarter of 1998 and
has  focused  significant  resources  through  December  2001 in  procuring  and
importing inventory and developing sales and distribution channels. Accordingly,
the Company has  generated  only  minimal  revenues and  experienced  cumulative
losses of approximately $209,753.00

During this  start-up  phase,  the Company is dependent  upon the sale of common
stock and advances from  affiliates to provide  working  capital.  The Company's
continued  existence is dependent upon its ability to generate  sufficient  cash
flows  from  operations  to  support  its daily  operations  as well as  provide
sufficient  resources to retire any incurred liabilities and/or obligations on a
timely basis.

It is the intent of  management  and  significant  shareholders  to provide  the
sufficient working capital necessary to support the viability of the Company for
the foreseeable future.

The Company's independent auditor, S.W. Hatfield, CPA, expressed, in his opinion
on the Company's audited financial statements, doubt about the Company's ability
to continue as a going  concern.  Reference is made to the Report of Independent
Certified Public Accountants included elsewhere in this report.

 Item 7. Financial Statements.
 -----------------------------

                                                                            Page

Report of Independent Certified Public Accountants                           F-2

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

Statements of Operations                                                     F-4
       For the years ended December 31, 2001 and 2000

Statements of Stockholders' Equity                                           F-5
        For the years ended December 31, 2001 and 2000

Statements of Cash Flows                                                     F-6
       For the years ended December 31, 2001 and 2000


Notes to Financial Statement                                                 F-7




ITEM 8. Changes and  Disagreements  with Accountants on Accounting and Financial
--------------------------------------------------------------------------------
Disclosures.
------------

None

                                    PART III


Item 9. Directors. Executive Officers, Promoters and Control Persons; Compliance
--------------------------------------------------------------------------------
With Section 16(a) of the Exchange Act.
---------------------------------------

The following table sets forth the officers and directors of the Company.

<PAGE>


Name                    Position                                             Age
----                    --------                                             ---
Kevin B. Halter         Chairman, President, CEO & Director                  66
Kevin B. Halter Jr.     Vice President, Secretary, Treasurer & Director      41

Set forth below is a description of the  backgrounds of each of the officers and
directors of the Company.


Kevin B. Halter has served as Chairman, President, Chief Executive Officer and a
director of the Company since August 1998.  Mr. Halter has served as Chairman of
the Board and Chief Executive Officer of Halter Capital Corporation, a privately
held  investment  and consulting  company,  since 1987. Mr. Halter has served as
Chairman of the Board and President of Millennia, Inc. and Chairman of the Board
of Digital  Communications  Technology Corporation since 1994. Mr. Halter is the
father of Kevin B. Halter, Jr.

Kevin.  Halter,  Jr. has served as Vice  President,  Secretary,  Treasurer and a
director  of the  Company  since  August  1998.  Mr.  Halter also serves as Vice
President and Secretary of Halter  Capital  Corporation.  He is the President of
Securities  Transfer  Corporation,  a stock transfer company registered with the
Securities and Exchange Commission,  a position that he has held since 1987. Mr.
Halter has served as Vice President, Secretary and a director of Millennia, Inc.
and Digital Communications  Technology Corporation since 1994. Kevin Halter, Jr.
is the son of Kevin B. Halter.

All directors hold office until the next annual meeting of the  shareholders  of
the  Company,  and until  their  successors  have been  elected  and  qualified.
Officers serve at the discretion of the Board of Directors.

Item 10. Executive Compensation.
--------------------------------

The Company  currently  pays no  compensation  to its  officers  and  directors.
Executive  management  and  oversight  services are provided to the Company by a
controlling   shareholder.   The  accompanying   financial   statements  reflect
management's estimate of the estimated fair value of the services contributed to
the Company  during  each  fiscal year based on the time and effort  required to
administer the Company's operations and affairs.

Item 11. Security Ownership of Certain Beneficial Owners and Management.
------------------------------------------------------------------------

         The  following  table set forth the names and  addresses of each of the
persons known by the Company to own  beneficially 5% or more of the common stock
of the Company,  as well as the common  stock  ownership of each of the officers
and directors of the Company as of January 19, 2001.

Name and Address                   Number of Shares      Percentage of Ownership
----------------                   ----------------      -----------------------

Kevin B. Halter                        994,500                   57.5%
2591 Dallas Parkway - #102
Frisco, TX 75034



Kevin Halter, Jr.                      100,000 (1)                5.8%
2591 Dallas Parkway - #102
Frisco, TX 75034

All officers and directors
as a group                           1,094,500                   63.2%
(2 persons)

<PAGE>

Halter Capital Corporation             139,729 (2)                8.0%
2591 Dallas Parkway - #102
Frisco, TX 75034


(1)      the shares are owned by K.P. Halter Family Partnership LTD.
(2)      Halter  Capital  Corporation is 100% owned by Kevin B. Halter and Kevin
         Halter, Jr.

Stuart G. Johnston, Jr.                100,831                    5.8%
12001 Shirestone Lane
Dallas, TX 75244

Ronald Robbins                         100,000                    5.8%
6334 N. Vuelta Tajo
Tucson, AZ 85717

Item 12. Certain Relationships and Related Transactions.
--------------------------------------------------------

None

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

Exhibits

None

Reports on Form 8-K

No Current  Report on Form 8-K was filed during the quarter  ended  December 31,
2001


                                   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.

Dated: March 26, 2002


MILLENNIA TEA MASTERS, INC.


By:  /s/ Kevin B. Halter
------------------------
President, CEO and Director
(Principal Executive Officer)



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.

<PAGE>


/s/ Kevin B. Halter                                               March 26, 2001
-------------------
Kevin B. Halter, President, CEO & Director
(Principal Executive Officer)



/s/Kevin B. Halter, Jr.                                           March 26, 2001
-----------------------
Kevin B. Halter
Vice President, Secretary, Treasurer and Director
(Principal Financial Officer)

<PAGE>

                          MILLENNIA TEA MASTERS, INC.

                                    CONTENTS


                                                                            Page
                                                                            ----

Report of Independent Certified Public Accountants                           F-2

Financial Statements

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

   Statement of Operations and Comprehensive Income
     for the years ended December 31, 2001 and 2000 and
     for the period from August 3, 1998 (date of inception)
       through December 31, 2001                                             F-4

   Statement of Changes in Stockholders' Equity
     for the period from August 3, 1998 (date of inception)
       through December 31, 2001                                             F-5

   Statement of Cash Flows
     for the years ended December 31, 2001 and 2000 and
     for the period from August 3, 1998 (date of inception)
       through December 31, 2001                                             F-6

   Notes to Financial Statements                                             F-7




                                                                             F-1

<PAGE>


S. W. HATFIELD, CPA
certified public accountants

Member:    Texas Society of Certified Public Accountants
           Press Club of Dallas


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors and Stockholders
Millennia Tea Masters, Inc

We have audited the accompanying  balance sheets of Millennia Tea Masters,  Inc.
(a  Texas  corporation)  as of  December  31,  2001  and  2000  and the  related
statements of operations  and  comprehensive  income,  changes in  stockholders'
equity and cash flows for the years ended December 31, 2001 and 2000 and for the
period  from  August 3, 1998 (date of  inception)  through  December  31,  2001,
respectively. 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 Millennia Tea Masters, Inc. as
of December 31, 2001 and 2000 and the results of its  operations  and cash flows
for each of the years ended  December  31, 2001 and 2000 and for the period from
August 3, 1988 (date of inception) through December 31, 2001,  respectively,  in
conformity with generally accepted 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 B to the
financial  statements,  the Company has  experienced  limited sales and incurred
cumulative operating losses since its inception.  The Company has been primarily
dependent  upon the proceeds  from the sales of common stock to provide  working
capital.  This situation raises a substantial  doubt about the Company's ability
to continue as a going  concern.  The  financial  statements  do not include any
adjustments that might result from the outcome of this uncertainty.



                                                       S. W. HATFIELD, CPA
Dallas, Texas
January 17, 2002


                                       F-2

<PAGE>
<TABLE>
<CAPTION>

                           MILLENNIA TEA MASTERS, INC.
                                 BALANCE SHEETS
                           December 31, 2001 and 2000


                                                         December 31,    December 31,
                                                              2001            2000
                                                         ------------    ------------
<S>                                                      <C>             <C>
                                     ASSETS
                                     ------
Current assets
   Cash on hand and in bank                              $      1,616    $        616
   Amounts due from affiliates                                  4,879          57,781
   Inventory                                                  526,362         526,423
                                                         ------------    ------------

   Total current assets                                       532,897         584,820
                                                         ------------    ------------

TOTAL ASSETS                                             $    532,897    $    584,820
                                                         ============    ============



                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

Current liabilities
   Accounts payable - trade                              $      9,711    $       --
                                                         ------------    ------------

   Total liabilities                                            9,711            --
                                                         ------------    ------------


Commitments and contingencies


Stockholders' equity
   Common stock - $0.001 par value
     25,000,000 shares authorized
     1,730,939 shares issued and outstanding                    1,731           1,731
   Additional paid-in capital                                 731,208         731,208
   Accumulated deficit                                       (209,753)       (148,119)
                                                         ------------    ------------

   Total stockholders' equity                                 523,186         584,820
                                                         ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY               $    532,897    $    584,820
                                                         ============    ============
</TABLE>



The accompanying notes are an integral part of these financial statements.
                                       F-3

<PAGE>
<TABLE>
<CAPTION>



                           MILLENNIA TEA MASTERS, INC.
                STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
                     Years ended December 31, 2001 and 2000
  and Period from August 3, 1988 (date of inception) through December 31, 2001


                                                                                  Period from
                                                                                   August 3,
                                                                                     1988
                                                                                    (date of
                                                                                   inception)
                                                   Year ended      Year ended       through
                                                  December 31,    December 31,    December 31,
                                                      2001             2000            2001
                                                  ------------    ------------    ------------
<S>                                               <C>             <C>             <C>
Revenues                                          $        356    $        629    $     10,298

Cost of Sales                                               61             107           2,535
                                                  ------------    ------------    ------------

Gross Profit                                               295             522           7,763
                                                  ------------    ------------    ------------

Operating expenses
   Marketing, promotion and product development          1,033           1,313          24,570
   Wages and related expenses                             --             4,269          18,279
   Warehouse rent                                       46,243          40,116         131,359
   General and administrative expenses                  14,653          12,431          43,308
                                                  ------------    ------------    ------------

   Total operating expenses                             61,929          58,129         217,516
                                                  ------------    ------------    ------------

Loss from operations                                   (61,634)        (57,607)       (209,753)

Other income (expense)                                    --              --              --
                                                  ------------    ------------    ------------

Loss before income taxes                               (61,634)        (57,607)       (209,753)

Provision for income taxes                                --              --              --
                                                  ------------    ------------    ------------

Net Loss                                               (61,634)        (57,607)       (209,753)

Other comprehensive income                                --              --              --
                                                  ------------    ------------    ------------

Comprehensive Loss                                $    (61,634)   $    (57,607)   $   (209,753)
                                                  ============    ============    ============

Loss per weighted-average share of common
   stock outstanding, computed on net loss -
   basic and fully diluted                        $      (0.04)   $      (0.03)
                                                  ============    ============

Weighted-average number of
   common shares outstanding                         1,730,939       1,730,939
                                                  ============    ============
</TABLE>



The accompanying notes are an integral part of these financial statements.
                                       F-4

<PAGE>
<TABLE>
<CAPTION>



                           MILLENNIA TEA MASTERS, INC.
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
    Period from August 3, 1998 (date of inception) through December 31, 2001



                                   Common Stock         Additional
                                   ------------           paid-in     Accumulated
                             # shares      Par Value      capital       deficit         Total
                            -----------   -----------   -----------   -----------    -----------
<S>                         <C>           <C>           <C>           <C>            <C>
Balances at
   August 3, 1998                  --     $      --     $      --     $      --      $      --

Shares issued to founders
   at inception             1  ,000,000         1,000          --            --            1,000

Sales of common stock           308,565           309       308,256          --          308,565

Net loss for the period            --            --            --         (16,030)       (16,030)
                            -----------   -----------   -----------   -----------    -----------

Balances at
   December 31, 1998        1  ,308,565         1,309       308,256       (16,030)       293,535

Sales of common stock           422,374           422       422,952          --          422,374

Net loss for the year              --            --            --         (74,482)       (74,482)
                            -----------   -----------   -----------   -----------    -----------

Balances at
   December 31, 1999        1  ,730,939         1,731       731,208       (90,512)       642,427

Net loss for the year              --            --            --         (57,607)       (57,607)
                            -----------   -----------   -----------   -----------    -----------

Balances at
   December 31, 2000        1  ,730,939         1,731       731,208      (148,119)       584,820

Net loss for the year              --            --            --         (61,634)       (61,634)
                            -----------   -----------   -----------   -----------    -----------

Balances at
   December 31, 2001        1  ,730,939   $     1,731   $   731,208   $  (209,753)   $   523,897
                            ===========   ===========   ===========   ===========    ===========
</TABLE>



The accompanying notes are an integral part of these financial statements.
                                       F-5

<PAGE>
<TABLE>
<CAPTION>



                           MILLENNIA TEA MASTERS, INC.
                             STATEMENT OF CASH FLOWS
                   Years ended December 31, 2001 and 2000 and
    Period from August 3, 1988 (date of inception) through December 31, 2001


                                                                                            Period from
                                                                                             August 3,
                                                                                                1988
                                                                                             (date of
                                                                                             inception)
                                                             Year ended      Year ended       through
                                                            December 31,    December 31,    December 31,
                                                                 2001            2000            2001
                                                            ------------    ------------    ------------
<S>                                                         <C>             <C>             <C>
Cash flows from operating activities
   Net loss for the year                                    $    (61,634)   $    (57,607)   $   (209,753)
   Adjustments to reconcile net loss to net
     cash provided by operating activities
       (Increase) Decrease in
         Inventory                                                    61            (491)       (526,362)
       Increase (Decrease) in
         Accounts payable - trade                                  9,711          (1,800)          9,711
                                                            ------------    ------------    ------------

Net cash used in operating activities                            (51,862)        (59,898)       (726,404)
                                                            ------------    ------------    ------------


Cash flows from investing activities
   Net cash advanced (to)/from affiliates                         52,902          60,000          (4,879)
                                                            ------------    ------------    ------------

Net cash provided by (used in) investing activities               52,902          60,000          (4,879)
                                                            ------------    ------------    ------------


Cash flows from financing activities
   Proceeds from sale of common stock                               --              --           732,939
                                                            ------------    ------------    ------------

Net cash provided by financing activities                           --              --           732,939
                                                            ------------    ------------    ------------

Increase (Decrease) in Cash                                        1,040             102           1,656

Cash at beginning of year                                            616             514            --
                                                            ------------    ------------    ------------

Cash at end of year                                         $      1,656    $        616    $      1,656
                                                            ============    ============    ============

Supplemental disclosure of interest and income taxes paid
   Interest paid for the period                             $       --      $       --      $       --
                                                            ============    ============    ============
   Income taxes paid for the period                         $       --      $       --      $       --
                                                            ============    ============    ============

</TABLE>



The accompanying notes are an integral part of these financial statements.
                                       F-6

<PAGE>

                           MILLENNIA TEA MASTERS, INC.

                          NOTES TO FINANCIAL STATEMENTS


Note A - Organization and Description of Business

Millennia Tea Masters,  Inc.  (Company) was incorporated on August 3, 1998 under
the laws of the State of Texas. The Company was formed to engage  principally in
the marketing and sale of imported teas.

The  Company has had no  substantial  operations  or  substantial  assets  since
inception.  Due to the lack of sustaining operations from inception, the Company
is  considered  in  the  development  stage  and,  as  such,  has  generated  no
significant  operating revenues and has incurred cumulative  operating losses of
approximately $209,753.

The Company has elected a year-end of December 31 and uses the accrual method of
accounting.

The Company's principal product, imported teas from Sri Lanka, is processed by a
single  unrelated  Sri  Lankan  entity.  In the event of any  disruption  in the
availability of imported teas from Sri Lanka, if any, the Company may experience
a negative  economic  impact.  The Company  believes  that other  processors  of
imported teas of comparable quality and price are available from the same region
and that no interruption of product availability will occur.

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.


Note B - Going Concern Uncertainty

The  Company  commenced  operations  during the  fourth  quarter of 1998 and has
focused  significant  resources through December 2000 in procuring and importing
inventory and developing  sales and distribution  channels.  Due to management's
efforts during 2000 and prior years, marketplace conditions caused management to
virtually  cease  all  activities  during  2001.   Management  is  investigating
alternative methods to generate product demand and market acceptance.

The Company has generated only minimal revenues since inception and has incurred
cumulative  operating losses of  approximately  $210,000.  Since inception,  the
Company  has been  dependent  upon the sale of common  stock and  advances  from
affiliates to provide  working  capital.  The Company's  continued  existence is
dependent upon its ability to generate  sufficient cash flows from operations to
support its daily operations as well as provide  sufficient  resources to retire
existing  liabilities and obligations on a timely basis. This situation raises a
substantial doubt about the Company's ability to continue as a going concern.

Management  is  reviewing  the actions to be take in future  periods to generate
operational  results  sufficient to provide resources to sustain its operations.
Further,  management  believes  that its  efforts  to raise  additional  capital
through the sale of equity  securities  and/or new debt  financing  will provide
additional cash flows. However,  there can be no assurance that the Company will
be able to obtain additional funding or, that such funding,  if available,  will
be obtained on terms favorable to or affordable by the Company.



                                       F-7

<PAGE>

                           MILLENNIA TEA MASTERS, INC.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED


Note C - Summary of Significant Accounting Policies

1.   Cash and cash equivalents
     -------------------------

     For  Statement of Cash Flows  purposes,  the Company  considers all cash on
     hand  and  in  banks,  including  accounts  in  book  overdraft  positions,
     certificates of deposit and other highly-liquid investments with maturities
     of three months or less, when purchased, to be cash and cash equivalents.

     Cash  overdraft  positions may occur from time to time due to the timing of
     making bank deposits and releasing checks, in accordance with the Company's
     cash management policies.

2.   Inventory
     ---------

     Inventory  consists of imported tea products  from Sri Lanka and are valued
     at the lower of cost or market using the first-in, first-out method.

3.   Revenue Recognition
     -------------------

     The Company  principally  sells its products to the general  public through
     direct  sales on a  prepaid  basis.  Accordingly,  the  Company  recognizes
     revenue at the point of shipment to its  customers.  Sales  allowances  are
     recorded  concurrent  with the related sale of product.  Sales  returns are
     recorded  at the time and point  that  products  are  received  back from a
     dissatisfied consumer.

4    Organization costs
     ------------------

     The Company has adopted the provisions of AICPA Statement of Position 98-5,
     "Reporting on the Costs of Start-Up  Activities"  whereby all  organization
     and   initial   costs   incurred   with  the   incorporation   and  initial
     capitalization of the Company were charged to operations as incurred.

5.   Income Taxes
     ------------

     The Company uses the asset and liability  method of  accounting  for income
     taxes.  At December 31, 2001 and 2000,  the deferred tax asset and deferred
     tax  liability  accounts,  as  recorded  when  material  to  the  financial
     statements,  are entirely the result of  temporary  differences.  Temporary
     differences   represent  differences  in  the  recognition  of  assets  and
     liabilities for tax and financial reporting purposes, primarily accumulated
     depreciation and amortization, allowance for doubtful accounts and vacation
     accruals.

     As of December 31, 2001 and 2000,  the  deferred  tax asset  related to the
     Company's net  operating  loss  carryforward  is fully  reserved.  If these
     carryforwards are not utilized, they will begin to expire in 2018.



                                       F-8

<PAGE>

                           MILLENNIA TEA MASTERS, INC.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED


Note C - Summary of Significant Accounting Policies - Continued

6.   Earnings (loss) per share
     -------------------------

     Basic  earnings  (loss) per share is computed  by  dividing  the net income
     (loss) by the weighted-average  number of shares of common stock and common
     stock  equivalents  (primarily  outstanding  options and warrants).  Common
     stock equivalents  represent the dilutive effect of the assumed exercise of
     the  outstanding  stock  options and  warrants,  using the  treasury  stock
     method.  The calculation of fully diluted earnings (loss) per share assumes
     the dilutive effect of the exercise of outstanding  options and warrants at
     either the  beginning  of the  respective  period  presented or the date of
     issuance, whichever is later. As of December 31, 2001 and 2000, the Company
     had no warrants and/or options outstanding.


Note D - Related Party Transactions

As of  December  31,  2001 and 2000,  respectively,  the Company has net amounts
receivable from an affiliated entity and/or officers of approximately $4,879 and
$57,781.  These  advances are  unsecured,  due upon demand and are  non-interest
bearing.

Note E - Equity Transactions

In August 1998, the Company issued an aggregate  1,000,000 shares of restricted,
common stock to its founders at par value for the initial  capitalization of the
Company.

In the fourth quarter of 1998,  the Company sold an aggregate  308,565 shares of
restricted,  unregistered common stock to various unrelated investors at a price
of $1.00 per share for aggregate proceeds of approximately $308,565.

In the first quarter of 1999,  the Company sold an aggregate  422,374  shares of
restricted,  unregistered common stock to affiliates and other unrelated parties
at a price of $1.00 per share for aggregate proceeds of approximately $422,374.


Note F - Commitments

The Company stores its inventory in a public warehouse located in Dallas, Dallas
County,  Texas under a revolving 15 day storage  arrangement.  This  arrangement
automatically  renews  every 15 days unless the  inventory  is removed  from the
warehouse.



                                       F-9

<PAGE>
<TABLE>
<CAPTION>


                           MILLENNIA TEA MASTERS, INC.

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED


Note G - Selected Financial Data (Unaudited)

The following is a summary of the quarterly  results of operations for the years
ended December 31, 2001 and 2000, respectively.

                                  Quarter ended    Quarter ended    Quarter ended   Quarter ended       Year ended
                                    March 31           June 30       September 30    December 31       December 31
                                  -------------    -------------    --------------  --------------    --------------
<S>                               <C>              <C>              <C>             <C>               <C>
Calendar 2001
   Net revenues                   $          82    $          80    $         148    $          46    $         356
   Gross profit                              68               66              122               39              295
   Net loss from operations             (21,198)          (6,183)         (15,849)         (18,404)         (61,634)
   Basic and fully diluted
     earnings per share                   (0.01)           (0.01)           (0.01)           (0.01)           (0.04)
   Weighted-average
     number of shares
     outstanding                      1,730,939        1,730,939        1,730,979        1,730,939        1,730,979

Calendar 2000
   Net revenues                   $         262    $          92    $          77    $         198    $         629
   Gross profit                             210               73               62              177              522
   Net loss from operations             (20,292)          (8,673)          (6,997)         (21,645)         (57,607)
   Basic and fully diluted
     earnings per share                   (0.01)           (0.01)             nil            (0.01)           (0.03)
   Weighted-average
     number of shares
     outstanding                      1,730,939        1,730,939        1,730,979        1,730,939        1,730,979
</TABLE>

The  Company   experiences   fluctuations  in  quarterly   operating   expenses,
principally professional services and insurance, which are charged to expense as
billed by the corresponding vendor.



                                      F-10