U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)
[x]ANNUAL REPORT UNDER 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 EXCHANGE ACT OF 1934

                         Commission file number 0-19721

                            THE CLASSICA GROUP, INC.
                 (Name of small business issuer in its charter)

            New York                              13-3413467
(State or other jurisdiction          (IRS Employer identification no.)
of incorporation or organization)

  1835 Swarthmore Avenue, Lakewood, New Jersey            08701
    (Address of principal executive offices)           (Zip Code)

                                 (732) 363-3800
                           (Issuer's telephone number)
                        ---------------------------------
 Securities registered under section 12(b) of the Exchange Act:

    Title of each class             Name of each exchange on which registered
_____________________________     _____________________________________________

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

                         Common Stock, $0.001 par value
--------------------------------------------------------------------------------
                                (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 is met contained in this form,  and no disclosure  will be
contained,  to  the  best  of  registrant's   knowledge,   definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. ( )

     State issuer's  revenues for its most recent fiscal year:
        Revenues for the fiscal year ended December 31, 2001 were $7,516,595.

     State the aggregate market value of the voting stock held by non-affiliates
computed  by  reference  to the  price at which  the  stock  was  sold,  as of a
specified  date within the past 60 days.  (See  definition  of affiliate in Rule
12b-2 of the Exchange Act).
     Note;  if  determining  whether  a  person  is an  affiliate  will  involve
unreasonable  effort and expense,  the issuer may calculate the aggregate market
value of the common  equity held by  non-affiliates  on the basis of  reasonable
assumptions, if the assumptions are stated.

     The aggregate market value of the voting stock held by non-affiliates as of
December 31, 2001 was $4,147,163.

                         (ISSUERS INVOLVED IN BANKRUPTCY
                     PROCEEDINGS DURING THE PAST FIVE YEARS)
     Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d)of the  Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes .......No ...N/A...

                   (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.


         Title of Each Class                    Number of Shares Outstanding
Common Stock, $.001 par value per share       2,513,432 as of December 31, 2001

                       DOCUMENTS INCORPORATED BY REFERENCE
     If the following documents are incorporated by reference,  briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated:  (1) any annual report to security  holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
rule 424(b) or (c) of the Securities Act of 1933 ("Securities  Act"). The listed
documents should be clearly described for identification  purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).

     Transitional  Small  Business  Disclosure  Format  (Check one):
Yes .......; No ....X...
<PAGE>
PART 1

Item 1.  Business

         General development of business

     The  Classica  Group,  Inc.  (the  "Company")  is a New  York  corporation,
headquartered in Lakewood,  New Jersey.  The Company has currently two principal
business lines: (i) designing,  building,  and selling innovative microwave heat
processing equipment for pasteurization,  sterilization,  drying, and sanitizing
in  the  food  and  pharmaceutical   industries.   (the  "microwave   processing
business"), and (ii) producing and importing specialty cheeses and Italian foods
(the "cheese business").

         Discontinued business

     From  February  1996  through  March  2001,  the  Company's   wholly  owned
subsidiary, Deli King, Inc. provided full commissary services to mobile catering
truck customers. Deli King had incurred substantial losses since its acquisition
and  despite  attempts  to  curb  such  losses  continued  to  be  unprofitable.
Therefore,  at the end of 2000 the Company  adopted a formal plan to discontinue
its mobile catering business, effective March 9, 2001.

         Description of business

     Classica  Microwave   Technologies,   Inc.  along  with  its  wholly  owned
subsidiary, CGTI Classica Group Technologies Italia, S.r.l. (collectively "CMT")
provides  safe  foods  solutions  through  its  automated  microwave  processing
systems.  Additionally,  CMT's technologically advanced design of post packaging
processing,  extends refrigerated shelf life through  pasteurization and permits
non-refrigerated  shelf  life  through  sterilization  without  the  use  of any
chemical additives. The system is designed to promote food safety while reducing
overall   operating  costs,   inventory   storage  and  delivery  costs  without
sacrificing  productivity or food quality.  Professor  Giuseppe  Ruozi,  the key
developer of the process and one of the leading European experts in the field of
microwave  technology as it applies to the food industry is under  contract with
CMT as its Chief Technology Officer.  The use of microwave technology in concert
with  proprietary  knowledge  acquired over years of research and development by
Prof.  Ruozi  gives  CMT a  strong  position  in the  growing  field  of new and
innovative  processing  technologies  for the food industry.  As important,  the
latter can be achieved  without the research and development  costs and the time
necessary to integrate the  technology  with the system  design.  CMT expects to
generate  revenues in three different areas.  First, the company sells microwave
based  processing  systems for  pasteurization,  sterilization,  sanitizing  and
drying of food  products.  Second,  the company  intends to lease small capacity
systems to assist  companies in  developing  an entry into a  marketplace  while
determining  the  capacity  requirements  for  the  purchase  of a  large  scale
industrial  system.   Third,  the  company  intends  to  utilize  its  microwave
application  expertise  to  provide  development  services  to new and  existing
clients.
     Microwave  energy  has long  been  used in the food  industry  for  various
applications such as cooking and defrosting. However, the inability of competing
companies to control  temperature  uniformity  prohibited its use as a method of
insuring  food safety.  CMT's system was designed to insure food safety  through
controlled  temperature  uniformity by using patented and proprietary  microwave
technology in concert with hot air under strict time and  temperature  guides on
post packaged products. This technological advancement of guaranteed temperature
uniformity  using  microwave  energy  as the  heat  source  allows  foods  to be
processed for consumer protection without affecting the taste and texture of the
product. The process computer controlled.  The design includes a self-monitoring
program that alerts an operator to any system  malfunction that could jeopardize
the food safety of the product.
     The Company's cheese business,  Cucina Classica Italiana,  Inc. ("CCI"), is
engaged in the production,  importation and  distribution of premium cheeses and
Italian foods,  and is located at the Company's  headquarters  in Lakewood,  New
Jersey.

                                       2
<PAGE>

         Products

     CMT  designs  and  builds  microwave  heat  processing  systems  capable of
validated pasteurization,  sterilization, sanitizing, and drying for its clients
in the food and pharmaceutical  industries.  The underlying technology developed
for these  systems and its inherent  flexibility  is  applicable  also to custom
needs in other industries.
     Pasteurization  Systems - Classica Microwave  Technologies,  Inc.'s line of
pasteurization  systems are successfully  operating  worldwide in the processing
of:

>>       Ready Meals (Single portion, Family Pack, Restaurant / Hotel Pack)
>>       Bread and Bakery
>>       Sauces and Dips
>>       Fresh and Pre-cooked Pasta
>>       Pre-Cooked Meat and Vegetables
>>       Frankfurters (Shelf Life Extension).

     Based  on  the  specific  features  and  production   requirements  of  the
customer's  product (e.g.  ingredients,  packaging  materials,  package size and
shape, initial bacterial load, sensitivity to heat and pressure,  etc), a design
platform is selected and further  customized to meet the unique  requirements of
the product.
     These systems are available with production  capacities that range from 100
Lbs/Hour for a laboratory model to 4000 Lbs/Hour for an industrial scale unit.

     Sterilization  Systems - We believe that Classica  Microwave  Technologies,
Inc.'s  line  of  continuous   sterilization  systems  are  the  only  microwave
processing systems presently available  commercially  worldwide that can provide
food manufacturers with the capability of preparing  validated,  sterilized food
products with 12 months shelf life at ambient temperature:


>>       Ready Meals
>>       Sauces
>>       Pre-Cooked Pasta
>>       Pre-Cooked Meat and Vegetables

     Based on the  characteristics of the customer's  product, a design platform
is selected and customized to meet that product's unique requirements.
     The production  capacity of these systems  ranges,  from 100 Lbs/Hour for a
laboratory model to 5000 Lbs/Hour for an industrial scale unit.

                                       3
<PAGE>

     Drying  Systems - Classica  Microwave  Technologies,  Inc.'s line of drying
systems  includes a  continuous  design  platform as well as a series of special
rotary batch dryers. These dryers are currently being used for:

>>       Fruits and Vegetables
>>       Cookies and Biscuits
>>       Cereals
>>       Spices
>>       Specialty Meat Products (e.g. Prosciutto)

     Based  on  the  specific  features  and  production   requirements  of  the
customer's  product a design  platform is selected and is further  customized to
meet the unique  requirements of the product.  Variable design elements  include
"Hose Down"  construction  for easy  cleaning  including a Self  Cleaning  belt,
Vacuum and additional Infrared heating.
     The production capacity of these systems ranges from 5 to100 Lbs/Hour for a
laboratory model to 10,000 Lbs/Hour for an industrial scale unit.

     Sanitizing  Systems  -  Classica  Microwave  Technologies,  Inc.'s  line of
sanitizing  systems  use a  continuous  design  platform  as well as a series of
special Rotary Drum batch designs. These systems are currently being used for:

>>       Spices
>>       Herbs
>>       Grains
>>       Flours
>>       Rice

     Based on the  characteristics of the customer's product (mainly sensitivity
to heat, initial bacterial load and desired bacterial kill) a design platform is
selected and further customized.
     The  production  capacity of these  systems  ranges from 100 Lbs/Hour for a
laboratory model, and up to 10,000 Lbs/Hour for an industrial scale unit.

                                       4
<PAGE>

     Miscellaneous  Systems  - While  the  majority  of the  systems  have  been
designed for the Food industry,  the technology developed for those applications
has also been made available to custom processes in other industries:

>>       Drying of Ceramics, paper and wood products
>>       Vulcanization of Rubber
>>       Sterilization of Pharmaceutical products and medical waste

     CCI is a producer of specialty  Italian-style  cheeses and Greek-style Feta
and a major  importer  of Italian  specialty  cheeses,  and  Procuitto  di Parma
(Italian ham). CCI distributes  its products  nationally with its heaviest areas
of  distribution  located on the East and West Coasts of the United States.  Its
customers  are  other  importers  and  large  distributors  who sell to  smaller
distributors and retail accounts.  Sixty five percent of sales are food service;
i.e., sales to restaurants,  catering houses and other businesses in the leisure
industry.
     CCI markets Italian specialty and Greek-style Feta cheeses. Bel Paese(R) is
a semi-soft  natural  cheese,  manufactured  in 5 lb. bulk wheels and 6 oz. mini
wheels. In reply to customer demand, several flavors such as Basil and Sun-dried
Tomatoes,  Roasted Garlic, and Hot Red Pepper flavored Bel Paese have been added
to the line.  Greek-style  Feta  cheese and Feta  flavored  with dill,  oregano,
sun-dried  tomatoes and basil, and with peppercorn are produced in random and in
exact weight  portions.  Freshly grated and shredded Romano and Parmesan cheeses
are also produced by CCI and are sold both in bulk for  institutional use and in
consumer-sized  cups. Dry grated  Parmesan and Romano are available in canisters
under the Cucina Classica Italiana(R) brand. CCI annually produces approximately
200,000  pounds of Bel Paese(R)  and 50,000  pounds of Feta.  CCI also  provides
private label drying, grating and shredding services for some well known branded
cheese sellers in the U.S.
     Galbani(R)  Mascarpone,  Gorgonzola  Dolcelatte and Bel Paese(R) Medallions
are CCI's imported products.  700,000 pounds of Galbani Mascarpone,  a specialty
dessert  cheese was imported in 2001.  CCI imports more than 50% of the nation's
imported   Mascarpone.   In  2001,  the  Company   imported  175,000  pounds  or
approximately  three and one quarter million individual  medallions of Bel Paese
Process Medallions, a soft, spreadable cheese.
     Procuitto  di Parma and  Gorgonzola  Dolcelatte(R),  the Italian  blue-mold
cheese, round out the line with 2001 imports of 35,000 pounds and 55,000 pounds,
respectively.
     CCI also imports  Parmigiano  Reggiano,  Grana Padana, and Pecorino Romano,
which are sold in whole wheels, pre-cut portions or freshly grated in deli cups.

                                       5
<PAGE>

         New Products and Expansion

     CMT's post  packaging  microwave  systems  offer food safety  advantages to
frozen,  fresh  refrigerated  and shelf stable food processors.  However,  fresh
refrigerated  and  shelf  stable  food  processors  will  benefit  from  all the
advantages of our technology.  Presently,  our pasteurization  applications have
been used for prepared foods,  fresh pastas,  breads,  juices and other liquids.
The  sterilization  applications  are presently  used for prepared meals and the
drying applications are being used for cereal and confectionary items.
     CMT is in the  latter  stages  of  designing  technically  advanced  drying
systems that will offer the meat  industry the ability to process cured meats at
a rate up to 10 times faster than the methods being used today (Patent Pending).
These  systems  will also have  applications  to both the produce and  vegetable
markets for sanification and drying.
     Additionally, other applications are being studied.
     CCI is continually  seeking to expand its product line by either  producing
or importing new  products.  In 2002 CCI will  undertake a marketing  project to
determine if there is a market for Galbani's short shelf life products,  such as
fresh  mozzarella,  in the  United  States.  In  addition,  with  a view  toward
decreasing  its dependence on the food service  industry,  CCI has been studying
the  packaging  of its  products to make them  consumer  friendly for the retail
market.  A new retail  shipper / display for the 3-pack Bel Paese process cheese
spread was introduced at the end of 2001.

         Competitive Position

     Currently, the market for industrial Microwave heat processing systems is a
small  niche in the larger  area of  industrial  heat  processing  systems.  The
competition can be divided into 3 groups:

>>       The existing manufacturers of Microwave systems for the food industry
         have developed expertise and a good reputation in the following
         applications: Frozen Food Tempering, Bacon Cooking and Pasta Drying -
         The competition's system designs are similar to each other and employ a
         continuous tunnel with a few high power microwave generators. Their
         design is limited in its capability to generate uniform heat
         distribution within the product, and, accordingly, is useful only in
         such applications where heat uniformity is less important. Classica
         Microwave Technologies has no plan to compete in these applications,
         and is focusing its efforts on higher value added applications that
         necessitate the uniform heat distribution that only our systems are
         capable of providing at the present time. These companies include:
         Microdry, Amana Industrial Systems, Ferrite, Cober Electronics and
         Strayfield.

>>       The market leaders of conventional heat processing systems currently
         lack the proprietary know-how to readily manufacture competing
         equipment. However, it is reasonable to assume that they will develop /
         acquire capabilities to build and market new systems that will compete
         with Classica. These companies include: APV, Alpha-Laval, FMC, and
         Stork.

>>       The last group is comprised of a few small companies, each with
         individual/s that had been employed and trained in the past at
         Classica's predecessor, and whose technical knowledge enabled them to
         design and build competing systems. These companies are lacking in R&D
         capabilities and have limited financial and marketing resources. These
         companies include: Modo Grupo, CIE, Nuova Era and REM.

     CCI maintains a strong presence in the Italian  specialty food market.  CCI
offers trade promotions to its major customers, provides point-of-sale materials
to help product  sell-through  at the retail  level,  offers  consumers  various
incentives  to buy its  products  and uses  consumer and trade media to increase
product awareness nationwide.

                                       6
<PAGE>


         Product Line Exclusivity License & Trademark Agreements

     CMT is utilizing four US patents and numerous foreign patents  purchased by
the  Company in October of 2000,  in  conjunction  with  patents the Company has
applied for or presently has under  development.  These  patents have  effective
lives of from 10 to 19 years,  and provide CMT with exclusivity in marketing our
technology.

     CCI is the exclusive U.S. importer of the Galbani line of Italian specialty
cheeses and meat products.  Egidio Galbani,  S.p.A. of Milan,  Italy, is a major
force in the  European  Dairy Market with an annual sales volume of about US$1.4
billion dollars.
     CCI has the exclusive  right to import Galbani  products into the U.S., and
is the only company  worldwide with the license to manufacture  cheeses  bearing
the Galbani  trademarks.  The  Product  Exclusivity  and License to  Manufacture
Agreements  are granted in a contract,  which runs through the year 2003 when it
will be subject to renewal.
     CCI's   trademarks  are  Cucina  Classica   Italiana(R),   Classika(R)  and
Tal-Fino(R).  CCI is currently  applying for the trademark Classica and uses the
(TM) symbol to denote its application.

         Government Regulations

     All of the Company's  subsidiaries  are subject to  regulations of the U.S.
Department  of  Agriculture  (USDA)  and The U.S.  Food and Drug  Administration
(FDA).

     CMT's  Pasteurization  systems  technology is presently  being used in USDA
plants in the United  States.  CMT will proceed to work with  potential  clients
interested in sterilization, and with the relevant regulatory agencies to obtain
government approval and certification for the equipment.

     The USDA establishes  regulations for cheese identity and also oversees the
importation of meat products into the U.S. The FDA regulates cheese labeling and
has  established  strict  guidelines   regarding   ingredients  and  nutritional
information.


         Research & Development

     CMT plans on  allocating  substantial  resources  to  product  testing  and
development of the  applications.  It is estimated that several  million dollars
has been spent toward the development and design of present systems.

     Research  costs for CCI are  minimal.  In recent  years,  CCI has  expended
research and development  costs related to developing new cheeses  (reduced fat,
spreadable  versions of current  semi-soft  cheeses,  new flavor  extensions  to
existing lines).

                                       7
<PAGE>

         Cost and Effects of Compliance with Environmental Laws

     The  costs  and  effects  of  compliance  with  environmental  laws are not
material to our operations.

         Current Employees

     The Company and its subsidiaries currently employ 21 people of which 18 are
full time.


Item 2.  Description of Property

     CCI  leases  a 28,000  square  foot  facility  at 1835  Swarthmore  Avenue,
Lakewood,  New Jersey 08701, of which  approximately 3,000 square feet serves as
office space. This facility serves as the Classica Group's  headquarters as well
as a cheese drying, shredding and grating operation and warehouse.
     CMT occupies  approximately  2,000 square feet at this location  serving as
its  product-testing  center within.  This center houses CMT's  laboratory scale
microwave  pasteurization  and sterilization  system and a test kitchen equipped
for food  preparation.  This  product-testing  center  is used for food  product
development  under  pasteurization  or sterilization  for clients  interested in
purchasing  a  system,   joint  venture   interests  or  potential   acquisition
candidates.
     The facility is a fireproof  high bay  warehouse  located on 3.5 acres with
ample expansion  potential.  The warehouse  contains 13,000 cubic feet of cooler
space.  This  facility  is leased at a basic rent of $7,665 per month or $91,980
annually. The lease was renewed in August 1999 for a five-year term with no rent
escalation.
     Additionally,  CMT leases a 3768 square foot  facility at Via Nagy 7, 42019
Pratissolo di Scandiano,  Italy, of which  approximately 2700 square feet serves
as office space,  with the balance  serving as its  laboratory.  The facility is
leased at a basic rent of 1,807.6 Euro dollars  (approximately $1,600) per month
or 21,691.2 Euro dollars (approximately $19,200) annually. The lease was entered
into on December 15, 2001, and continues for a period of four years.  At the end
of each year,  the rent shall be adjusted to changes  based upon  Italian  price
indexes.


Item 3.  Legal Proceedings

     There  currently  are no  material  legal  proceedings  by or  against  the
Company, or any of its subsidiaries.

                                       8
<PAGE>

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

                  None

Part II

Item 5.  Market for Common Equity and Related Stockholder Matters

     The  Company's  common  shares  are traded on the  over-the-counter  market
through the NASDAQ Small Cap Market  Trading  System under the symbol TCGI.  The
following  table  sets  forth the range of high and low bid  quotations  for the
common stock for the period indicated, as reported by NASDAQ. The quotations are
inter-dealer  prices in the  over-the-counter  market without  retail  mark-ups,
markdowns or commissions, and may not represent actual transactions.

                                      2001                         2000
                                  Common Shares                Common Shares
       Period                 High             Low           High          Low
                           -----------------------------------------------------

January 1 - March 31        $2.6670          $1.1670       $9.2800       $1.5900

April 1 - June 30            4.6670           1.8750        8.2500        2.8800

July 1 - September 30        4.6000           2.5600        8.5000        4.2500

October 1 - December 31      5.2500           1.3400        7.9400        2.0000

     As of March 12, 2002 there were  approximately 240 holders of record of the
Company's common stock.
     The  Company  has not paid a cash  dividend  on its common  stock since its
inception.  The Company  expects that for the foreseeable  future,  any earnings
will be retained for use in the business or other corporate purposes,  and it is
not expected that cash or share  dividends will be paid.  However,  there are no
restrictions on the payment of dividends, either by contract or regulation.

                                       9
<PAGE>

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

     The following discussion and analysis contains forward-looking  statements,
which involve risk and uncertainties. When used herein, the words "anticipated,"
"believe,"  "estimate,"  and "expect" and similar  expressions as they relate to
the Company or its  management  are  intended to identify  such  forward-looking
statements which the meaning of the Private Securities  Litigation Reform Act of
1995. The Company's  actual results,  performance or  achievements  could differ
materially  from the  results  expressed  or  implied  by these  forward-looking
statements.
     Management's  Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Audited Consolidated Financial
Statements and related notes, which are contained in Item 7 herein.

     Results of Operations for the Years Ended December 31, 2001 and 2000

     Net sales for the year ended  December  31, 2001 were  $7,516,595  compared
with $8,305,879 in 2000, a decrease of $789,284, or 9.5%. This decrease in sales
at CCI is the  result  of a  general  downturn  in the  U.S.  economy  that  was
exacerbated by the events of September  11th.  Most of the  Galbani(R)  imported
cheese, and meat products sold by the Company are sold to food service, high end
white tablecloth  restaurants,  and the travel and entertainment  industry.  The
reduction in the sales of those products  represents 81% ($645,700) of the total
reduction in revenue in 2001 vs. 2000.  An  additional  factor that has affected
the sale of the imported products is a reduction in "best if used by" shelf life
ascribed to the products by the  manufacturer  in Italy.  CCI's  customers  have
reduced  their  inventory  levels in order to reduce the amount of "out of date"
product  they  experience.  In January  of 2002 CCI  instituted  an air  freight
program for the Galbani  products that provides  CCI's  customers  with 21 to 25
additional day shelf life (versus shipping the product from Italy to the U.S. by
boat.)  As a  result  of the  air  freight  program,  coupled  with  an  overall
improvement  in the  economy  CCI sales for the first two  months of 2002 are up
9.2% over the same  period in 2001 and 17.4% over the same  period in 2000.  CCI
Management  notes that the  upward  trend is  continuing  in March and the first
quarter of 2002 should show an increase in revenues over the same period in 2001
and 2000. The Company generated gross profit of $1,723,078 or 22.9% of net sales
in 2001 verses  $1,951,147 or 23.5% of net sales in 2000.  The decrease in gross
profit  margin was the  result of CCI's  reduction  in sales of the high  margin
Galbani products, both imported and domestic,  resulting in an overall shift its
product  sales mix to the lower margin  grated and shredded  products.  Selling,
general and  administrative  expenses were $1,780,444 and $1,697,440 in 2001 and
2000, respectively. This represents an increase of $83,004 or 1.1% of net sales.
This  increase   included  $118,693  in  start-up  expenses  for  the  microwave
processing  business  in 2001  verses  $68,400  for 2000,  an  increase in those
expenses  of $50,293.  The  remaining  increase  is the result of an  aggressive
marketing effort undertaken at CCI to generate sales for 2002.

     Loss from  continuing  operations  for the year ended December 31, 2001 was
($219,797)  versus  income of $52,925 in 2000.  This  represents  a reduction of
$272,722 due to the factors discussed above.

     Interest expense was $162,431 and $200,782 for the years ended December 31,
2001 and 2000  respectively.  The decrease is the result of orderly  pay-down of
the Company's term obligations.

     The Company  reported no provision  for Federal  income taxes for the years
ended December 31, 2001 and 2000, as the Company had net losses for both years.

                                       10
<PAGE>

     Liquidity and Capital Resources

     The  Company's  sources of capital  include,  but are not  limited  to, the
issuance of public or private  debt,  bank  borrowings,  capital  leases and the
issuance of equity securities. At December 31, 2001, the Company had a net worth
of $2,225,443 compared to $2,790,126 at December 31, 2000.
     The Company  has  limited  requirements  for  capital  expenditures  in the
immediate  future,  except for the start-up of the new CMT  subsidiary for which
the Company is planning a private placement.
     CCI's factoring  arrangement with GMAC Commercial  Credit, LLC has adequate
availability  to  provide  working  capital  to  support  sales  growth  in that
division.
     The Company utilizes capital leases for the acquisition of operating assets
at its  subsidiaries  when  appropriate.  At December 31, 2001,  the Company had
capital leases with an unamortized balance of $194,161.
     Management believes that the Company has sufficient working capital to meet
the  needs  of its  current  level of  operations,  with  the  exception  of the
requirements of CMT.

     Anticipated Future Growth

     CMT has a unique patented and proprietary expertise in microwave processing
applications.  While the technology has been in use in Europe and in Japan, with
more than 200  successful  installations,  it is virtually  unknown beyond those
markets.
     CMT plans to  penetrate  these new markets  and  generate  revenues  from 3
distinct sources:

>>       Sales of Microwave heat processing systems.
>>       Leasing of Microwave heat processing systems
>>       Sales of Technical Services.

     In order to facilitate sales of the company's  Microwave  systems,  a major
campaign of communications  and education will be undertaken among future users,
government regulatory agencies and food industry professionals - globally.

The objectives of this campaign are:

>>       To introduce the company and the benefits of its systems to the
         universe of future potential users
>>       To gain for these technologies a high level of
         recognition and acceptance.

     Concurrent with the communications and education campaign, the company will
establish  its direct sales force in the USA, and a network of exclusive  agents
worldwide to identify,  negotiate  and sell its equipment to clients on a global
basis.
     Leasing  of  Microwave  heat  processing  systems is the  company's  second
channel of revenues.  It has importance far beyond the actual  cash-flow it will
generate,  since it will be the  premier  marketing  vehicle  through  which the
Company will  introduce  its  technology to small and mid size first time users.
The program  will provide  these new users a low risk  business  opportunity  to
increase their sales and profits.
     It will provide CMT with a steady  stream of cash in terms of leasing fees,
and a continuously  replenishing  source of new sales from those  customers with
leased equipment who are driven by need to enlarge their manufacturing capacity.
     The third  revenue  channel is from  Technical  Services.  The company will
provide  potential clients with access to its laboratories in the USA and Italy,
for the purpose of developing and customizing new processing applications. While
some of these  services  are  provided  free of charge as part of the  marketing
efforts,  other more  comprehensive  research and  development  services will be
marketed and offered to clients for fees.
     The company  uses its  laboratories  and  technical  staff to  continuously
improve current systems, and develop next generation systems.
     Beyond the efforts to sell systems to food manufacturers,  the company will
market itself and its capabilities  through partnerships with engineering design
companies,  and with manufacturers of complimentary equipment, to provide future
clients with "Total Delivered Solutions".
     The company is a member of 10 relevant Trade Associations, through which it
promotes  recognition of the Microwave  Technology in general, and the company's
unique systems in particular.

                                       11
<PAGE>

Item 7.  Financial Statements

     Response  submitted as a separate section of this report commencing on page
F-1.


Item 8.  Changes in and Disagreement With Accountants on Accounting and
            Financial Disclosure

                  None

 Part III.

Item 9.  Directors, Executive Officers, Promoters and Control Persons

     Incorporated  by reference  from the proxy  statement,  which will be filed
within 30 days of the filing of this report.

Item 10. Executive Compensation

     Incorporated  by reference  from the proxy  statement,  which will be filed
within 30 days of the filing of this report.

Item 11. Security Ownership of Certain Beneficial Owners and Management

     Incorporated  by reference  from the proxy  statement,  which will be filed
within 30 days of the filing of this report.

Item 12. Certain Relationships and Related Transactions

     Incorporated  by reference  from the proxy  statement,  which will be filed
within 30 days of the filing of this report.

Item 13. Exhibits and Reports on Form 8-K

Exhibit No.         Description of Exhibit                                  Note

10.  (ai) - -     Agreement between the Company and OMAC                     1
                     Research, Ltd.
     (aj) - -     Lease Agreement between CGTI Classica Group                2
                     Technologies, Italia  S.r.l. and PRAGMATA, S.r.l.,
                     dated December 15, 2001.

NOTES

1.       Filed with the Company's 2000 Form 10-KSB, and incorporated herein.

         2.       Filed herein.

         (b)      Reports on Form 8-K.

                  None

                                       12
<PAGE>

                                   SIGNATURES

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

THE CLASSICA GROUP, INC.



By:      /s/ Scott G. Halperin                            Date:   March 29, 2002
         --------------------------------------------
         Scott G. Halperin
         Chairman of the Board
         Chief 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.



By:      /s/ Scott G. Halperin                            Date:   March 29, 2002
         --------------------------------------------
         Scott G. Halperin
         Chairman of the Board
         Chief Executive Officer
         Audit Committee Member

By:      /s/ Bernard F. Lillis, Jr.                      Date:    March 29, 2002
         -----------------------------------
         Bernard F. Lillis, Jr.
         Chief Financial Officer
         Principal Accounting Officer
         Director

By:      /s/ Joseph M. Greene                             Date:   March 29, 2002
         --------------------------------------------
         Joseph M. Greene
         Director
         Audit Committee Member

By-      /s/ Alan Rubin                                   Date:   March 29, 2002
         --------------------------------------------
         Alan Rubin
         Director
         Audit Committee Member

                                       13
<PAGE>

                    THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                                      INDEX



                              FINANCIAL STATEMENTS


Included in Part II


Report of Independent Certified Public Accountants


Consolidated Balance Sheet at December 31, 2001


Consolidated Statements of Operations for the Years Ended
        December 31, 2001 and 2000


Consolidated Statements of Cash Flows for the Years Ended
        December 31, 2001 and 2000


Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
        December 31, 2001 and 2000


Notes to Consolidated Financial Statements


                                      F-1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT




Board of Directors and Stockholders of
The Classica Group, Inc.
Lakewood, New Jersey


We have  audited the  accompanying  consolidated  balance  sheet of The Classica
Group,  Inc. and Subsidiary  Companies (the  "Company") as of December 31, 2001,
and the related consolidated statements of operations,  changes in stockholders'
equity,  and cash flows for the years ended December 31, 2001,  and 2000.  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 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.  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  audit  provides  a
reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the financial position of the Company at December 31, 2001,
and the  results  of its  operations  and its cash  flows  for the  years  ended
December 31, 2001, and 2000 in conformity with accounting  principles  generally
accepted in the United States of America.


EHRENKRANTZ, STERLING & CO., LLC

Livingston, New Jersey
March 27, 2002


                                      F-2
<PAGE>

                    THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheet
                                December 31, 2001

                                     ASSETS
                                   ----------

CURRENT ASSETS:
Cash and cash equivalents                                               $100,997

          Accounts receivable                                            155,392


          Inventories                                                    446,653


          Prepaid expenses and other current assets                       57,064
                                                                        --------

          TOTAL CURRENT ASSETS                                           760,106


Property and equipment, at cost, net                                     890,185

Intangible assets, net                                                 1,552,640

Other assets                                                             405,556


Goodwill, net                                                            157,500
                                                                       ---------

          TOTAL   ASSETS                                              $3,765,987
                                                                      ==========


                 See notes to consolidated financial statements.


                                      F-3
<PAGE>

                    THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheet
                                December 31, 2001

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


CURRENT LIABILITIES:
         Current portion of long-term debt                           $   90,949

         Accounts payable                                             1,278,883

         Accrued expenses                                                67,500
                                                                      ----------

         TOTAL CURRENT LIABILITIES                                    1,437,332

Long-term debt, less current portion                                    103,212
                                                                     ----------

         Total liabilities                                            1,540,544
                                                                     ----------

         COMMITMENTS AND CONTINGENCIES                                        -

                              STOCKHOLDERS' EQUITY
                             -----------------------

         Preferred stock
         Class A participating convertible preferred shares,
         $1 par value, stated at liquidation value, authorized 200
         shares of which 16.5 shares are issued and outstanding         397,898

         Common stock
         $.001 par value, 25,000,000 shares authorized, 2,513,432
         issued and outstanding                                           2,513

         Additional paid-in-capital                                   3,676,085

         Accumulated deficit                                         (1,851,053)
                                                                     ----------

         Total stockholders'equity                                    2,225,443
                                                                     ----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                           $3,765,987
                                                                    ============


                 See notes to consolidated financial statements.


                                      F-4
<PAGE>

                    THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations

                                                           Years Ended
                                                           December 31,
                                                     2001                2000
                                               ---------------------------------

Net sales                                       $ 7,516,595         $ 8,305,879

Cost of sales                                     5,793,517           6,354,732
                                               ---------------------------------

Gross profit                                      1,723,078           1,951,147

Selling, general and administrative expenses      1,780,444           1,697,440
                                               ---------------------------------

Income (Loss) from operations                       (57,366)            253,707

Interest expense - net                              162,431             200,782
                                               ---------------------------------

Income (Loss) from continuing operations           (219,797)             52,925

Discontinued operations
    Loss from operation of business segment        (179,074)         (1,439,147)

    Loss from disposal of business segment         (728,494)         (1,017,188)
                                               ---------------------------------

NET LOSS                                       $ (1,127,365)       $ (2,403,410)
                                               =================================


INCOME (LOSS) PER COMMON SHARE

BASIC & DILUTED

Income (Loss) from continuing operations            $ (0.10)             $ 0.04

Loss from discontinued operations                     (0.42)              (1.76)
                                               ---------------------------------


NET LOSS                                            $ (0.52)            $ (1.72)
                                               =================================

Weighted average shares outstanding,
     basic and diluted                            2,168,052           1,396,284

                 See notes to consolidated financial statements.


                                      F-5
<PAGE>

                    THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows


                                                              Years Ended
                                                              December 31,
                                                           2001          2000
                                                     ---------------------------
Cash Flows from operating activities:
      Net loss                                        $(1,127,365)  $(2,403,410)
Adjustments to reconcile net less to net cash
   used in operating activities:
      Decrease in investment in discontinued
         operations                                       637,610     1,568,388
      Depreciation                                        184,749       173,498
      Amortization                                         68,974        87,267
Changes in operating assets and liabilities
      Accounts receivable                                 337,824        10,484
      Inventories                                         (11,255)      (16,181)
      Prepaid expenses and other current assets            95,351       (27,929)
      Other assets                                        (13,067)      258,797
      Accounts payable and accrued expenses              (442,251)      (46,738)
                                                     ---------------------------
      Net cash used in operating activities of
         continuing operations                           (269,430)     (395,824)
                                                     ---------------------------
Cash flows from investing activities:
      Purchase of property and equipment                 (127,532)     (107,424)
      Costs of of obtaining import license                (39,285)           -
                                                     ---------------------------
      Net cash used in investing activities
                 of continuing operations                (166,817)     (107,424)
                                                     ---------------------------
Cash flows from financing activities:
      Proceeds of long-term debt                           28,659            -
      Repayment of long-term debt                          85,201)     (110,076)
      Proceeds from issuance of capital stock             562,682       617,878
                                                     ---------------------------
      Net cash provided by financing activities           506,140       507,802
                                                     ---------------------------

Increase in cash and cash equivalents                      69,893         4,554
Cash and cash equivalents at beginning of year             31,104        26,550
                                                     ---------------------------

Cash and cash equivalents at end of year                $ 100,997      $ 31,104
                                                     ===========================
Supplemental disclosure of cash flow information:
      Interest paid                                     $ 162,431     $ 199,910
      Income taxes paid                                       240           750
Non-cash financing activities
         The Company issued 301,094 shares of its common stock for the
         acquisition of certain patents and testing equipment during 2000.


                 See notes to consolidated financial statements.

                                      F-6
<PAGE>

                    THE CLASSICA GROUP, INC. AND SUBSIDIARIES
            Consolidated Statement of Changes in Stockholders' Equity
                     Years Ended December 31, 2001 and 2000

<TABLE>
<CAPTION>
                               CLASS "A" PARTICIPATING
                                CONVERTIBLE PREFERRED
                             --------------------------
                                             AMOUNT
                                           STATED AT                               ADDITIONAL       RETAINED
                                          LIQUIDATION        COMMON SHARES           PAID-IN        EARNINGS
                                SHARES       VALUE         SHARES      AMOUNT        CAPITAL        (DEFICIT)         TOTAL
                             ----------------------------------------------------------------------------------------------------
<S>                            <C>         <C>         <C>            <C>           <C>           <C>             <C>
Balance at December 31, 1999     16.5      $ 397,898     1,009,333    $ 1,009       $ 525,114     $ 1,679,722      $2,603,743

Private Placement                 -               -        200,000        200         299,800              -          300,000

Options exercised                 -               -        301,786        302         496,473              -          496,775

Acquisition of Assets             -               -        301,094        301       1,792,717              -        1,793,018

Net loss                          -               -             -          -               -       (2,403,410)     (2,403,410)
                             ----------------------------------------------------------------------------------------------------

Balance at December 31, 2000     16.5        397,898     1,812,213      1,812       3,114,104        (723,688)      2,790,126

Options exercised                 -               -        701,219        701         561,981              -          562,682

Net Loss                          -               -             -          -               -       (1,127,365)     (1,127,365)
                             ----------------------------------------------------------------------------------------------------

Balance at December 31, 2001     16.5      $ 397,898     2,513,432    $ 2,513     $ 3,676,085    $ (1,851,053)     $2,225,443
                             ====================================================================================================
</TABLE>

                 See notes to consolidated financial statements.

                                      F-7
<PAGE>

                    THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     NATURE OF BUSINESS
     Classica  Microwave   Technologies,   Inc.  along  with  its  wholly  owned
subsidiary, CGTI Classica Group Technologies Italia, S.r.l. (collectively "CMT")
provides  safe  foods  solutions  through  its  automated  microwave  processing
systems.  Additionally,  CMT's technologically advanced design of post packaging
processing,  extends refrigerated shelf life through  pasteurization and permits
non-refrigerated  shelf  life  through  sterilization  without  the  use  of any
chemical additives. The system is designed to promote food safety while reducing
overall   operating  costs,   inventory   storage  and  delivery  costs  without
sacrificing  productivity or food quality.  Professor  Giuseppe  Ruozi,  the key
developer of the process and one of the leading European experts in the field of
microwave  technology as it applies to the food industry is under  contract with
CMT as its Chief Technology Officer.  The use of microwave technology in concert
with  proprietary  knowledge  acquired over years of research and development by
Prof.  Ruozi  gives  CMT a  strong  position  in the  growing  field  of new and
innovative  processing  technologies  for the food industry.  As important,  the
latter can be achieved  without the research and development  costs and the time
necessary to integrate the  technology  with the system  design.  CMT expects to
generate  revenues in three different areas.  First, the company sells microwave
based  processing  systems for  pasteurization,  sterilization,  sanitizing  and
drying of food  products.  Second,  the company  intends to lease small capacity
systems to assist  companies in  developing  an entry into a  marketplace  while
determining  the  capacity  requirements  for  the  purchase  of a  large  scale
industrial  system.   Third,  the  company  intends  to  utilize  its  microwave
application  expertise  to  provide  development  services  to new and  existing
clients.
     Microwave  energy  has long  been  used in the food  industry  for  various
applications such as cooking and defrosting. However, the inability of competing
companies to control  temperature  uniformity  prohibited its use as a method of
insuring  food safety.  CMT's system was designed to insure food safety  through
controlled  temperature  uniformity by using patented and proprietary  microwave
technology in concert with hot air under strict time and  temperature  guides on
post packaged products. This technological advancement of guaranteed temperature
uniformity  using  microwave  energy  as the  heat  source  allows  foods  to be
processed for consumer protection without affecting the taste and texture of the
product. The process computer controlled.  The design includes a self-monitoring
program that alerts an operator to any system  malfunction that could jeopardize
the food safety of the product.
     The Company's cheese business,  Cucina Classica Italiana,  Inc. ("CCI"), is
engaged in the production,  importation and  distribution of premium cheeses and
Italian foods.  CCI distributes its products  nationally with its heaviest areas
of  distribution  located on the East and West Coasts of the United States.  Its
customers  are  other  importers  and  large  distributors  who sell to  smaller
distributors and retail accounts.

     FINANCIAL STATEMENT PRESENTATION
     The accompanying  consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary companies. All material intercompany
transactions have been eliminated.

     USE OF ESTIMATES
     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting   principles  require  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying notes. Actual results could differ from those estimates.

     REVENUE RECOGNITION
     Net sales are recognized at the time products are shipped to customers.

     In December 1999, the Securities and Exchange  Commission  (SEC) issued SEC
Staff  Accounting  Bulletin  (SAB) No.  101  Revenue  Recognition  in  Financial
Statements SAB 101 summarizing  certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financials. The Company
has  adopted of SAB 101 and  currently  believes  that its  revenue  recognition
polity is consistent with the guidance of SAB 101.

     CASH EQUIVALENTS AND MARKETABLE SECURITIES
     The  Company  considers  all highly  liquid  investments  with an  original
maturity of three months or less when purchased to be cash equivalents.

     ADVERTISING COSTS
     The  Company  expenses  all  advertising  costs as  incurred.  The  Company
incurred  approximately  $16,860and  $11,840 in advertising  costs for the years
ended December 31, 2001 and 2000, respectively.

                                      F-8
<PAGE>
                   THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

     INVENTORIES
     Inventories  consist of raw materials used in production and finished goods
and are  carried  at the  lower  of  cost or  market.  Cost is  determined  on a
first-in, first-out method.

     PROPERTY, PLANT AND EQUIPMENT
     Property,  plant  and  equipment  are  carried  at cost,  less  accumulated
depreciation  and  amortization  computed  on a  straight-line  basis  over  the
estimated useful lives of the assets which range from three to ten years.

     GOODWILL AND INTANGIBLE ASSETS
     Patents, recorded at cost, are amortized over their estimated useful lives,
approximating 15 years.  Intangible assets are reviewed for impairment  whenever
events or  circumstances  indicate  impairment might exist or at least annually.
Goodwill  represents the excess of the fair value of the net assets  acquired in
acquisitions by the Company,  and is being amortized on the straight-line method
over 10  years.  The  Company  assesses  the  recoverability  of its  assets  by
comparing projected undiscounted cash flows associated with those assets against
their respective carrying amounts. Impairment, if any, is based on the excess of
the carrying amount over the fair value of those assets.

Intangible assets consist of the following at December 31, 2001:

              Patents                                $ 1,552,328

              Import licenses                             39,285
                                                   --------------
                                                       1,591,613
              Accumulated amortization                   (38,973)
                                                   --------------

              Intangible assets, net                 $ 1,552,640
                                                   ==============

Goodwill consists of the following at December 31, 2001:

              Goodwill                                 $ 300,000
              Accumulated amortization                  (142,500)
                                                   --------------

              Goodwill, net                            $ 157,500
                                                   ==============


     CONCENTRATION OF RISK
     Approximately 50% of the Company's  purchases  originate from one supplier,
outside the United States,  under an exclusive contract,  which expires in 2003.
Management  believes that, in the event of a disruption in the supply of product
as the result of  circumstances  beyond its control,  wherein the supplier could
not supply  product in a timely manner,  a replacement  source could be obtained
without major disruption to the business.

     The Company  maintains cash balances in financial  institutions,  which are
insured by the Federal Deposit Corporation up to $100,000.

     LONG-LIVED ASSETS
     In accordance with SFAS No. 121 Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be disposed of, long-lived assets to be held
and used by the Company are reviewed to determine  whether an event of change in
circumstances  indicated  that  the  carrying  amount  of the  asset  may not be
recoverable.  For  long-lived  assets to be held and used, the Company bases its
evaluation on such impairment  indicators as the nature of the asset, the future
economic  benefit  of  the  assets,  any  historical  or  future   profitability
measurements, as well as other external market conditions or factors that may be
present.  If such impairment  indicators are present or other factors exist that
indicate  that the  carrying  amount of the assets may not be  recoverable,  the
Company   determines   whether  impairment  has  occurred  through  the  use  of
undiscounted  cash  flows  analysis  of  assets  at the  lowest  level for which
identifiable  cash  flows  exist.  If  impairment  has  occurred,   the  Company
recognizes  a loss  for the  difference  between  the  carrying  amount  and the
estimated  value of the  asset.  The fair value of the asset is  measured  using
discounted  cash flow analysis or other  valuation  techniques.  Management  has
determined  that there is no impairment of assets in the continuing  segments of
the business.  No impairment  expense was  recognized in the year ended December
31, 2001.

                                      F-9
<PAGE>
                   THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

     INCOME TAXES
     The Company accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities  are recognized for future tax  consequences
attributable to differences between the financial statements carrying amounts of
existing  assets and  liabilities  and their  respective tax bases and operating
loss and tax credit  carry-forwards.  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  and
settled.  The  effect  of a change  in tax  rates on  deferred  tax  assets  and
liabilities  is  recognized  in income in the period that includes the enactment
date.

     EARNINGS PER COMMON SHARE
     Earnings  per common  share is  computed  by  dividing  net  income  (loss)
available to common shareholders by the weighted-average number of common shares
outstanding  during the period.  Diluted  earnings  per share do not reflect the
potential  dilution that could occur if  securities or other  contracts to issue
common shares were  exercised or converted into common shares or resulted in the
issuance of common shares as the impact of such would be antidilutive  given the
net losses incurred.

     FAIR VALUE OF FINANCIAL INSTRUMENTS
     The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current  transaction between willing parties,
other  than a forced  sale or  liquidation.  Significant  differences  can arise
between the fair value and  carrying  amount of financial  instruments  that are
recognized at  historical  cost  amounts.  The Company in estimating  fair value
disclosures   for  financial   instruments   used  the  following   methods  and
assumptions:

o    Cash and cash equivalents, trade receivables, short-term borrowings and
     current maturities of long-term debt: the amounts reported in the
     consolidated balance sheet approximate fair value.

o    Long-term debt: The amount reported in the consolidated balance sheet
     approximates fair market value, since such debt was primarily variable rate
     debt.


Note 2 - Inventories

     Inventories at December 31, 2001 consist of:

          Raw materials                             $118,709

          Finished goods                             327,944
                                                 ------------

          Total inventory                           $446,653
                                                 ============

                                      F-10
<PAGE>
                   THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

NOTE 3 - Property and equipment

     Property and equipment,  at cost, consists of the following at December 31,
2001:


   Furniture, fixtures and equipment                               $ 1,555,568

   Leasehold Improvements                                               86,876
                                                                 --------------

        Total Cost                                                   1,642,444
   Less accumulated depreciation and amortization                     (752,259)
                                                                 --------------
   Fixed assets, net                                                 $ 890,185
                                                                 ==============


NOTE 4 - DISCONTINUED OPERATIONS

     On December 28, 2000 the Company  adopted a formal plan to discontinue  the
operations of its Deli King, Inc.  ("Deli King") mobile catering  subsidiary and
to dispose of the assets of the business  segment.  The  operations of Deli King
ceased on March 9, 2001.

     Operating  results of Deli King Subsidiary for the years ended December 31,
2001 and 2000 are shown separately in the accompanying income statement.

     Net  sales of Deli King for 2001 and 2000  were $  343,463  and  $2,426,028
respectively.  These  amounts are not included in net sales in the  accompanying
financial statements.

     As of December 31,  2001,  all of the assets of Deli King,  Inc.  have been
disposed of or have been deemed to be worthless.  In February  2002,  Deli King,
Inc. filed for liquidation  under Chapter VII in the U.S.  Bankruptcy  Court for
the  District  of New  Jersey.  Management  believes  that there are no material
present or future liabilities on the part of the Company for matters relating to
Deli King, Inc.


NOTE 5 - OTHER ASSETS

     Other assets consist of the following at December 31, 2001:

Restricted cash relating to amounts                        $352,131
    owed to a major supplier
Accounts and notes receivable                                 5,490
Deposits                                                     47,435
Other                                                           500
                                                 -------------------

Total                                                      $405,556
                                                 ===================

                                      F-11
<PAGE>

                   THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

NOTE 6 - LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES

     The Company has nine capital leases  requiring  monthly  payments  totaling
$9,474  including  interest between 9.0% and 16.4% and maturing through February
2006.

     The machinery and equipment under capital leases have a capitalized cost of
$419,527, less accumulated depreciation of $233,969.

     The following is the schedule of future minimum payments required under the
leases together with their present value as of December 31, 2001:


                        Years Ending
                        December 31,                                  Amount
                            2002                                    $ 107,758
                            2003                                       86,453
                            2004                                       17,908
                            2005                                        5,028
                            2006                                        3,771
                                                              ----------------
Total minimum lease payments                                          220,918
Less: amount representing interest                                    (26,757)
                                                              ----------------
Present value of net minimum lease
     payments including current
     maturities of  $90,949                                         $ 194,161
                                                              ================

                                      F-12
<PAGE>
                   THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

NOTE 7 - INCOME TAXES

     The income tax provision is comprised of the following for the years ended:

                                                           December 31,
                                                      2001              2000
                                                --------------------------------
Current
     Federal                                      $      -          $      -
     State                                               -                 -
Deferred
     Federal                                       (373,104)         (806,959)
     State                                               -                 -
                                                --------------------------------
Sub-total                                          (373,104)         (806,959)

Valuation allowance                                 373,104           806,959
                                                --------------------------------
Income tax provision                             $       -          $      -
                                                ================================

     The difference  between the U.S.  federal  statutory rate and the Company's
effective tax rate are as follows:
                                                         Year Ended December 31,
                                                             2001       2000
                                                        ------------------------
Federal statutory tax rate                                      34.0%      34.0%
Other                                                           (1.0)      (1.0)
Valuation allowance                                            (33.0)     (33.0)
                                                        ------------------------
Effective tax rate                                               0.0%       0.0%
                                                        ========================

     Deferred tax assets (liabilities) are comprised of the following:

                                                           December 31, 2001
                                                        -----------------------
Net operating loss carryforwards                             $ 8,382,559
Impairment of long-lived asset                                  (534,867)
                                                        -----------------------

                                                               7,847,692
Less:  valuation allowance                                    (7,847,692)
                                                        -----------------------
                                                             $        -
                                                        =======================

     The Company has available net operating loss carryforwards of approximately
$7,800,000 for federal and state income taxes expiring  between 2009 and 2021 to
offset future taxable income.
     A deferred tax asset  results from the benefit of utilizing  net  operating
loss carryforwards in future years. A valuation  allowance has been provided for
the entire benefit.
     During the years  ended  December  31, 2001 and 2000,  the  increase in the
valuation  allowance  was $373,104 and  $806,959,  respectively.  These  charges
reflect increases in the valuation allowance related to the deferred tax asset.
     The Company  will  continue to assess the  recoverability  of its  deferred
income  tax  asset  and  adjustments  may be  necessary  based  on the  evidence
available at that time.

                                      F-13
<PAGE>
                   THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

NOTE 8-- COMMITMENTS

     Factoring Agreement

     The  Company  is a party to a  factoring  agreement  with  GMAC  Commercial
Credit, LLC (GMAC).  The Company is required to factor  substantially all of its
trade  receivables on a  non-recourse  basis in return for immediate cash credit
for a major portion of these  factored  receivables  as well as a portion of the
finished goods  inventory.  The factoring fee is 1% of the invoice amount and 1%
over prime on the amount advanced under the factoring agreement. At December 31,
2001 the amount advanced under the factoring  agreement was $738,033.  The prime
rate was 4.75% at December  31,  2001.  The  factoring  agreement  provides  The
Company with an ability to receive advances of up to $3,000,000. The Company has
pledged all of its accounts receivable, inventories, and equipment as collateral
for this credit agreement.

     Operating Leases

     The Company  leases a  distribution  and office  facility in Lakewood,  New
Jersey under a lease expiring in August 2004 and requiring an annual  commitment
of  approximately  $92,000.  The lease  requires  that the  Company  pay certain
operating expenditures of the facility. A renewal option exists.
     The  Company  leases a 3768  square  foot  facility  at Via  Nagy 7,  42019
Pratissolo di Scandiano,  Italy, of which  approximately 2700 square feet serves
as office space,  with the balance  serving as its  laboratory.  The facility is
leased at a base  rent of  $19,522  annually.  The  lease  was  entered  into on
December 15, 2001, and continues for a period of four years.  At the end of each
year,  the rent shall be  adjusted  based  upon  changes  in the  Italian  price
indexes.
     Rent expenses totaled $120,236 and $118,679 in 2001 and 2000 respectively.

     Minimum future commitments under all operating leases are as follows:


                       Year Ended
                       December 31,                          Amount
                    ------------------                ------------------

                          2002                              111,497
                          2003                              111,497
                          2004                               80,839
                          2005                               18,709
                                                      ------------------
                                                          $ 322,542
                                                      ==================

     Royalties

     The Company  has a license  agreement  expiring in 2003 with S.p.A.  Egidio
Galbani  ("Galbani")  under which it is licensed to manufacture  certain Galbani
brand  products  in the United  States.  Royalties  of $.20 per pound of product
produced and sold are required under the agreement. The Company incurred $36,263
and $41,212 in royalty  expense for the years ended  December  31, 2001 and 2000
respectively.

     Litigation

     The  parent  and  its  subsidiaries  are  not  currently  involved  in  any
litigation  that they  expect,  individually  or in the  aggregate,  will have a
material  adverse  effect on the  Parent's  financial  condition  or  results of
operations.

     Employment Agreements

     The Company has employment agreements with the Company's Chairman and Chief
Executive  Officer and its Chief Financial and Operating  Officer that expire on
July 31, 2005.

                                      F-14
<PAGE>
                   THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

NOTE 9 - STOCK PLANS

     The Company's 1998 Incentive and Nonqualified Stock Option Plan was amended
in 1999 to provide for the  granting of options to  purchase  600,000  shares of
common stock to certain employees of the Company. Exercise and vesting terms for
options  granted under this plan are  determined at each grant date. All options
were granted at not less than fair market value at dates of grant. At the end of
2001,  222,821  options were available for grant under the plan and reserved for
issuance under the 1998 Incentive and Nonqualified Stock Option Plan.

     The Company's  1998 Director Stock Option Plan provides for the granting of
options to purchase  40,000  shares of common stock to certain  directors of the
Company.  Exercise  and vesting  terms for options  granted  under this plan are
determined  at each grant date.  All options  were granted at not less than fair
market value at dates of grant.  At the end of 2001,  no options were  available
for grant under the plan and 40,000  shares of common  stock were  reserved  for
issuance under the 1998 Director Stock Option Plan.

     SFAS No. 123 Accounting for Stock-Based  Compensation  encourages (but does
not  require)  compensation  expense to be  measured  based on fair value of the
equity instrument  awarded.  In accordance with APB No. 25 "Accounting for Stock
Issued  to  Employees"  no   compensation   cost  has  been  recognized  in  the
Consolidated  Statements of Operations for the Company's  stock option plans, as
all options have been  granted to  employees  and  non-employee  directors  with
exercise prices equal to or greater than the fair market value of the underlying
stock on the date of grant. If compensation  cost for the Company's stock option
plans had been determined in accordance with the fair value method prescribed by
SFAS  No.  123,  the  Company's  net  loss  would  have  been  $(1,642,335)  and
$(2,904,466) for 2001 and 2000, respectively. Diluted loss per share, would have
been  $(0.76)  and  $(2.08)  for 2001 and  2000,  respectively.  This pro  forma
information  may not be  representative  of the amounts to be expected in future
years as the fair value method of accounting  prescribed by SFAS No. 123 has not
been applied to options granted prior to 1996.

     Stock options transactions are summarized as follows:
<TABLE>
<CAPTION>

                                       2001 Options         2001 Warrants                  2000 Options       2000 Warrants
                                                Weighted                  Weighted                Weighted                Weighted
                                                 Average                   Average                 Average                 Average
                                                Exercise                  Exercise                Exercise                Exercise
                                     Shares        Price        Shares       Price        Shares     Price     Shares        Price
-----------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>           <C>           <C>         <C>          <C>        <C>        <C>          <C>
Outstanding, beginning of year      572,849       1.3127        91,300      8.9058       606,349   $4.4395     91,300      $8.9058

Granted                             734,719       1.7543                                 222,017   $1.2500     -           -

Forfeited                                                      (58,668)     8.7784      (247,500)  $3.7500

 Exercised                         (701,219)      1.7629                                  (8,017)    -          -          -
-----------------------------------------------------------------------------------------------------------------------------------


Outstanding, end of year            606,349       1.3271        32,632      9.1349       572,849   $1.3127     91,300      $8.9058
                               ====================================================================================================

Options and warrants
   exercisable at year-end          606,349       1.3271        32,632      9.1349       572,849   $1.3127     91,300      $8.9058
                               ====================================================================================================

Weighted-average fair value of     $ 1.6700                                             $ 1.8100
   options granted during the year
</TABLE>

                                      F-15
<PAGE>
                   THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

     The following table summarizes  stock options and warrants  outstanding and
exercisable at December 31, 2001:

                             Weighted      Outstanding          Exercisable
                              Average              Average              Average
  Exercise        Options &  Remaining  Options &  Exercise  Options &  Exercise
 Price Range      Warrants     Life     Warrants    Price    Warrants     Price
--------------------------------------------------------------------------------
$ 1.25   $ 5.00   602,349      6.40      602,349   $ 1.29    602,349     $ 1.29
  6.25     8.75    20,732      3.58       20,732     7.26     20,732       7.26
  9.00    12.50    13,400      1.22       13,400     9.75     13,400       9.75
 16.80    20.00     2,500      0.02        2,500    16.80      2,500      16.80
--------------------------------------------------------------------------------

                  638,981      6.18      638,981   $ 1.73    638,981     $ 1.73
                ================================================================


     The fair  value of each  option  granted is  estimated  on the date of each
grant using the Black-Scholes  option-pricing  model with the following weighted
average  assumptions used for grants in 2001 and 2000,  respectively:  risk free
interest  rate  2.5%  and  5.5%;  expected  life  from  1 to 5  years;  expected
volatility of 127% and 62%;  dividend yield 0% and 0%. The fair values generated
by the Black-Scholes  model may not be indicative of the future benefit, if any,
which may be received by the option holder.


Note 10 -- SEGMENT REPORTING

     The  accounting  policies of the  operating  segments are the same as those
described  in the  summary  of  significant  accounting  policies.  There are no
material inter-segment sales or transfers. All revenues are generated within the
United States and all revenue-producing assets are located therein.

     Management evaluates a segment's performance based upon profit or loss from
operations before income taxes.

     Industry segment information is summarized as follows:


                                  Total Revenues        Operating Profits (Loss)
                                 2001          2000          2001        2000
                            ----------------------------------------------------
CCI                         $ 7,478,213    $ 8,295,163   $ 456,536    $ 741,037
CMT                                 443             -     (118,250)     (68,408)
                            ----------------------------------------------------
  Total Segment               7,478,656      8,295,163     338,286      672,629
Eliminations and other
corporate income(expenses)       37,939         10,716    (395,652)    (418,922)
                            ----------------------------------------------------
Consolidated                $ 7,516,595    $ 8,305,879     (57,366)     253,707
                            ===========================
Interest expense                                           162,431      200,782
                                                       -------------------------
Consolidated (loss) income from continuing
   operations before income taxes                       $ (219,797)    $ 52,925
                                                       =========================


                                       Depreciation and        Identifiable
                Capital Expenditures Amortization Expense         Assets
                ----------------------------------------------------------------
                   2001       2000     2001       2000       2001        2000
                ----------------------------------------------------------------
CCI              $ 78,576  $ 73,424 $ 218,342  $ 229,521  $1,300,228  $1,756,890
CMT                48,956    34,000     3,722         -      406,588      34,000
Corporate              -         -     31,659     31,244   2,059,171   2,400,963
Discontinued Op.       -         -         -          -           -      637,610
                ----------------------------------------------------------------

Consolidated     $127,532  $107,424 $ 253,723  $ 260,765  $3,765,987  $4,829,463
                ================================================================

                                      F-16
<PAGE>
                   THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

NOTE 11 - RECENT ACCOUNTING PRONOUNCEMENTS

     In June,  2001,  the  Financial  Accounting  Standards  Board (FASB) issued
Statement  of  Financial   Accounting   Standards   (SFAS)  No.  141,   Business
Combinations,  and SFAS No.  142,  Goodwill  and Other  Intangible  Assets.  The
Company  is  required  to  adopt  SFAS  No.  141 for all  business  combinations
completed after June 30, 2001. This standard requires that business combinations
initiated  after June 30,  2001,  be accounted  for under the  purchase  method.
Goodwill  and other  intangible  assets that result from  business  combinations
before July 1, 2001, must be reclassified to conform to the requirements of SFAS
No. 142, as of the statement adoption date.

     The  Company  will  adopt  SFAS No.  142 at the  beginning  of 2002 for all
goodwill and intangible  assets  recognized in the Company's Balance Sheet as of
January 1, 2002.  This  standard  changes the  accounting  for goodwill  from an
amortization method to an impairment-only  approach,  and introduces a new model
for determining impairment changes.

     The new  impairment  model  requires  performance  of a  two-step  test for
operations that have goodwill  assigned to them. First, it requires a comparison
of the book value of net assets to the fair value of the related operation. Fair
values are estimated using  discounted cash flows,  subject to adjustment  based
upon the Company's  market  capitalization  at the date of  evaluation.  If fair
value is  determined  to be less than book value,  a second step is performed to
compute the amount of impairment. In this process, the fair value of goodwill is
estimated,  and is compared to its book value.  Any  shortfall of the fair value
below book value represents the amount of the impairment.

     The Company expects,  on a prospective basis, that the  non-amortization of
goodwill  will  have the  effect of  increasing  income  by  $30,000  in year of
adoption.

     In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations,  and in August,  2001, the FASB issued SFAS No. 144, Accounting for
the  Impairment  or Disposal of  Long-Lived  Assets,  effective for fiscal years
beginning  after  December  15,  2001.  The Company  does not  believe  that the
implementation  of  these  standards  will  have  a  significant  impact  on the
financial statements.


NOTE 12 - STOCKHOLDERS' EQUITY

     The  Preferred  Stockholders  have no voting  rights but are  entitled to a
priority of payment in the amount of the  original  subscription  price paid for
each  Preferred  Share ($16,667 to $25,000),  plus a  proportionate  amount,  as
defined,  on any remaining  excess proceeds if there is, among other matters,  a
sale of all or  substantially  all of the shares or assets of the  Company.  The
Preferred Stockholders are not entitled to specific dividends;  however,  should
the  Company  declare  any  dividends  on  the  common  shares,   the  Preferred
Stockholders  will be entitled to receive  dividends as if they had converted to
common shares immediately prior to the dividend declaration.  The holders of the
Preferred Shares may convert, at their option, at any time, all or part of their
shares into common shares. Each outstanding  Preferred Share is convertible into
one  common  share,  subject to certain  adjustments  as defined in the  Amended
Certificate of Incorporation.

     The Company has  reserved,  in  aggregate,  17 common  shares for  possible
future issuance to Preferred Shareholders in the event of conversion.

     At December 31, 2001 their were 16.5 preferred  shares  outstanding  all of
which are convertible into common shares at the holder's option.