Microsoft Word 10.0.2627;U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                         Amendment No. 3 to Form 10-KSB

                                  FORM 10-KSB/A

(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, 2002

[ ]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 of              (IRS Employer identification no.)
incorporation or organization)

2400 Main Street, Suite #12 Sayreville, New Jersey                  08872
     (Address of principal executive offices)                     (Zip Code)

                                 (732) 727-7800
                           (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 contained in this form, and no disclosure will be contained in,
to the best of registrant's knowledge, definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB/A or any
amendment to this Form 10-KSB/A. ( )

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

Revenues for the fiscal year ended December 31, 2002 were $37,451.

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, 2002 was $7,559,050

                         (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 5,142,211(December 31, 2002)

                       DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly describe them
and identify the part of the Form 10-KSB/A (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_______.


<PAGE>



                                   Introductory Note

We are filing this Amendment to Form 10-KSB/A to include information called for
by Item III of Form 10-KSB. There are revisions to certain disclosures within
the document and additional (unaudited) disclosures provided in the Footnotes to
Consolidated Financial Statements.

                                     PART 1

Item 1.  Business

General development of business

         We were incorporated in New York in 1987. Our headquarters are located
in Sayreville, New Jersey. From August 1994 through December 2002 our wholly
owned subsidiary Cucina Classica Italiana, Inc., or CCI, was engaged in the
production of grated, shredded and dry cheese products and the importation and
distribution of premium Italian cheese and meats under the Galbani(R) brand. On
October 18, 2002 CCI sold its grated, shredded and dry cheese processing and
distribution business. On December 31, 2002 CCI sold its Galbani(R) brand cheese
and meat importing and distribution business.

          In November, 2001, we were the subject of a Cease and Desist Order
from the SEC in connection with two of our press releases concerning the ability
of our microwave technology to kill the anthrax bacterium. The SEC issued the
order because it believed we failed to comply with Exchange Act by omitting
material information in the press releases. We believe that we have fully
complied with the Cease and Desist Order and have not committed or caused any
violation of the Exchange Act.

          In the first quarter of 2000, we formed Classica Microwave
Technologies, Inc., or CMT, a Delaware corporation. Effective October 2, 2000,
we acquired a testing laboratory and several patents for the microwave heat
processing process business from OMAC Research, Ltd., or OMAC. The equipment and
processes to which the patents relate can be used for pasteurization,
sterilization, drying, and sanitizing in the food and pharmaceutical industries.
OMAC had previously sold and installed more than200 microwave heat processing
systems worldwide. OMAC ceased operations in 1995 and its business was dormant
until 2000, when CMT purchased the equipment and patents. Our Italian
subsidiary, C.G.T.I.-Classica Group Technologies Italia, S.r.l., or CGTI was
formed in 2001. Since commencing operations, we have delivered two microwave
heat processing systems, a one of which is in Switzerland, and was rented for an
initial period of five months, which has recently been extended by the customer.
The second system was installed in Italy on a contingent basis subject to the
customer's acceptance. After the completion of the installation the customer
elected not to accept the machine, and to continue with its previous technology,
which we feel is inferior to the new system. The system has been returned to our
inventory for modification and sale to a new customer.

         Going forward, our focus will be exclusively on the microwave heat
processing equipment business, and revenue from this business will be our sole
source of revenue.

      Microwave energy has long been used in the food industry for various
applications such as cooking and defrosting. The former inability of
manufacturers to control temperature uniformity limited its use as a method of
insuring food safety. Our microwave heat processing systems are designed to
extend refrigerated shelf life through pasteurization and to permit
non-refrigerated shelf life through sterilization without the use of any
chemical additives. The system is intended to promote food safety while reducing
overall operating costs, inventory storage and delivery costs without
sacrificing productivity or food quality.


                                       2
<PAGE>

         Our system was designed to ensure 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 is controlled by a programmable linear controller, which is a computer
that controls the operation of the microwave heat processing machine. The design
includes a self-monitoring program that alerts an operator to any system
malfunction that could jeopardize the food safety of the product.

     Professor Giuseppe Ruozi, a key developer of microwave heat processing
systems, is our Chief Technology Officer.

     We anticipate generating revenues from the sale of microwave based
processing systems for pasteurization, sterilization, sanitizing and drying of
food products, and by providing development services to new and existing
clients.

Products

     We design and, through third parties, build microwave heat processing
systems capable of pasteurization, sterilization, sanitizing, and drying in the
food and pharmaceutical industries. The manufacture and assembly of the machines
is supervised by our Chief Technology Officer. Each machine is custom designed
to meet an individual customer's needs with regard to that customer's
requirements as to packaging and products.

     Pasteurization: Based on the specific features and production requirements
of a customer's product, including the ingredients, packaging materials, package
size and shape, initial bacterial load, and sensitivity to heat and pressure, a
design platform is selected and further customized to meet the unique
requirements of the product. The systems are available with production
capacities that range from 100 pounds per hour for a laboratory model to 4,000
pounds per hour for an industrial scale unit. Our line of pasteurization systems
is suitable for, among other things, processing ready meals, bread and other
bakery products, sauces and dips, fresh and precooked pasta, and precooked meat
and vegetables.

     Sterilization: Our microwave heat processing systems include a line of
continuous sterilization systems that can provide food manufacturers with the
ability to prepare sterilized food products with 12 months shelf life at ambient
temperature. The production capacity of these systems ranges, from 100 pounds
per hour for a laboratory model to 5,000 pounds per hour for an industrial scale
unit. These systems are suitable for, among other things, processing sauces,
precooked pasta, and precooked meat and vegetables.

     Drying Systems: Our line of microwave heat processing systems includes a
continuous design platform as well as a series of special rotary batch dryers.
Based on the specific features and production requirements of a 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 to 100 pounds per hour for a laboratory model to 10,000 pounds per hour
for an industrial scale unit. These systems are suitable for, among other
things, processing fruits and vegetables, cookies and biscuits, cereals, spices
and specialty meat products.

     We are also in the process of designing a technically advanced drying
system that we anticipate will offer the meat industry the ability to process
cured meats at a rate up to ten times faster than the methods being used today.
We have applied for a patent for this process, which is pending. When fully
developed, we expect that this system will also be applicable to and useful for
sanitation and drying in the produce and vegetable markets.

     Sanitizing Systems: Our line of sanitizing systems uses a continuous design
platform as well as a series of special rotary drum batch designs. 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
pounds per hour for a laboratory model, and up to 10,000 pounds per hour for an
industrial scale unit. These systems are suitable for, among other things,
processing spices, herbs, grains, flour and rice.


    Although to date we have focused our marketing efforts on the food industry,
we believe that our microwave heat processing systems are also suitable, after
customization, for drying ceramics, paper and wood products, vulcanizing rubber,
and sterilizing pharmaceutical products and medical waste.

                                       3
<PAGE>

Competition

     Currently, the market for industrial microwave heat processing systems is a
small niche in the larger area of industrial heat processing systems. We are
focusing our efforts on higher value-added applications that require uniform
heat distribution. Although there are approximately a dozen manufacturers of
microwave heat processing systems worldwide, we believe that they do not
currently represent significant competition to our patented and proprietary
controlled hear distribution process. This is primarily because many
manufacturers of microwave systems for the food industry use systems that employ
significantly fewer high-power microwave generators than our systems. Their
designs are limited in capability to generate uniform heat distribution within
the product, and, accordingly, are useful only in applications where heat
uniformity is less important.

     Many of our competitors, that manufacture conventional hear processing
systems, have financial resources, marketing and technical personnel superior to
ours. As our share of the market grows, we anticipate that many of the market
leaders of conventional heat processing systems will develop and/or acquire the
ability to build and market new systems that will compete with our systems.

     In addition, there are a few small companies in Italy, each of which
employs individuals who were employed and trained by OMAC, that therefore have
the knowledge to design and build systems that would compete with our systems.
Our advantage is that we employ the inventor of the technology, Engineer
Giuseppe Ruozi who developed the uniform heat distribution process and the
author of the patents on this process which the Company now owns. Therefore,
while these smaller competitors have the ability to emulate OMAC's old
technology that existed at the time they ceased operations, Engineer Ruozi
provides us with a significant advantage in the development of new technology in
this field. Furthermore, we own and operate 2 state of the art laboratories for
development of new applications, which these Italian competitors lack
altogether.

Sources of Availability of Raw Materials and the Names of Principal Suppliers

         We are developing sources for raw material to be used in the
manufacture of our products and do not currently have principal suppliers.

Dependence on a Few Customers

         We are developing our marketing and sales effort and accordingly are
not dependent on a few customers.

Product Line Exclusivity License & Trademark Agreements

         We hold four United States patents and numerous foreign patents for the
microwave heat processing systems technology, which we purchased in October
2000. We have also applied for additional patents, and are developing technology
for which we anticipate applying for patents in the future. The patents we hold
have effective lives of from 10 to 19 years.

Government Regulations

         Purchasers of our microwave heat processing systems that will use the
systems to process food products will be subject to regulations of the United
States Department of Agriculture and/or the United States Food and Drug
Administration. Although we intend to work with our customers in satisfying such
regulations, the responsibility for compliance lies with the ultimate user of
our products.


                                       4
<PAGE>

Research & Development

         Prior to our purchase of the equipment and patents for the microwave
heat processing systems technology, several million dollars were spent on their
development and design. We anticipate that in the future and as the need arises,
we will update and develop the systems. In addition, as potential customers test
our equipment prior to purchase, they may require that certain research be done
to determine whether the equipment is suitable for their products. A significant
portion of any monies we will spend on research for those purposes will be borne
by the potential customers. We do expect, however, that we will provide certain
research free of charge as a marketing tool. In addition, we have performed some
research and testing for potential customers for a fee, which has been only a
minor portion of our revenues, and which we do not anticipate will become a
significant portion of our revenues. For the foreseeable future, however, we do
not intend to allocate significant resources to research or development.

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

         We and our subsidiaries currently employ 14 people, of whom 13 are full
time.

Item 2.  Description of Property

         Effective February 15, 2003, we began leasing a 10,400 square foot
facility at 2400 Main Street, Sayreville, New Jersey. Approximately 7,900 square
feet serves as our office and laboratory space and 2,500 square feet serves as
our warehouse.

         Our basic rent is $9,533.33 per month or $114,400 annually. The lease
runs until March 31, 2008 with a provision for renewal for an additional
five-year term.

         CGTI leases a 3,768 square foot facility at Via Nagy 7, 42019
Pratissolo di Scandiano, Italy. Approximately 2,700 square feet serves as office
space, with the balance serving as its laboratory. The basic rent is 1,807.6
Euro (approximately $1,600) per month or 21,691.2 Euro (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 basic rent is adjusted to
reflect changes in the Italian price indexes.

Item 3.  Legal Proceedings

         Currently, there are no material legal proceedings by or against our
company or any of our subsidiaries.


                                       5
<PAGE>

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

      Our annual meeting of shareholders was held on October 30, 2002.

Election of Directors.

      Our shareholders elected each of the five nominees for directors as listed
in our Proxy Statement dated October 9, 2002. The votes were as follows:

Director                         For            Against           Abstain
----------------------     ---------------      -------           --------
Scott G. Halperin             2,678,838          22,179              0
Bernard F. Lillis, Jr.        2,678,838          22,179              0
Joseph M. Greene              2,678,838          22,179              0
Alan Rubin                    2,678,838          22,179              0
Harry J. Friedberg            2,678,838          22,179              0


Adoption of our 2002 Incentive and Non-Qualified Stock Option Plan.

         Our shareholders approved the adoption of our 2002 Incentive and
Non-Qualified Stock Option Plan. The votes were as follows:

                 For                Against            Abstain
              ---------            --------            --------
               974,164              85,166              11,267


Appointment of Auditors

      Our shareholders ratified the appointment of Ehrenkrantz Sterling & Co.
LLC independent auditors as our auditors. The votes were as follows:


--------------------------------------------------------------------------------
Ratification of the appointment of
Ehrenkrantz Sterling & Co.                                               Broker
LLC as auditors                    Votes For Votes Against Abstention  Non-Votes
---------------------------------- --------- ------------- ----------  ---------
                                   2,665,714    15,284       20,079         0
--------------------------------------------------------------------------------

                                       6
<PAGE>


                                     Part II

Item 5.  Market for Common Equity and Related Stockholder Matters

         Shares of our common stock are traded on the Nasdaq SmallCap Market
under the symbol "TCGI". The following table sets forth the range of high and
low bid quotations for our common stock for the period indicated, as reported by
the Nasdaq SmallCap Market. The quotations represent inter-quotations, without
adjustment for retail mark-ups, markdowns or commissions, and may not represent
actual transactions.

                                          2002                      2001
                                      Common Shares             Common Shares
Period                             High          Low         High         Low
------                             --------------------------------------------

January 1 - March 31             $2.3400        $1.1300     $2.6670     $1.1670

April 1 - June 30                 2.2600         1.2000      4.6670      1.8750

July 1 - September 30             1.7400         0.6000      4.6000      2.5600

October 1 - December 31           1.4900         0.8000      5.2500      1.3400




Holders
         As of March 26, 2003 there were approximately 240 holders of record of
our common stock.



Dividends

         We have not paid a cash dividend on our common stock since our
inception. We expect that, for the foreseeable future, any earnings will be
retained for use in the business or other corporate purposes, and we do expect
that cash dividends will be paid. There are, however, no restrictions on the
payment of dividends, either by contract or regulation.



Recent Sales of Unregistered Securities

            On December 13, 2002, we completed a private placement of 1,030,000
shares of our common stock and 206,000 shares issuable upon the exercise of
warrants to a group of accredited investors, from which we received gross
proceeds of $1,030,000 pursuant to an exemption from registration under Section
4(2) of the Securities Act of 1933. The warrants are dated December 13, 2003 and
expire on December 12, 2005. The exercise price is $1.00 per share. The shares
of common stock issued in the transaction and those issuable upon exercise of
the warrants are subject to a registration rights agreement. In accordance
therewith, we filed a registration statement on Form SB-2 (Registration No.
333-102642) with the Securities and Exchange Commission on January 22, 2003. We
are using the proceeds from this private placement to fund the growth of our
microwave technology business.


         On May 31, 2002, we sold 100,000 shares of our common stock to each of
two accredited investors in a private placement pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933. Each purchaser
purchased 100,000 shares at a purchase price of $1.00 per share. Each purchaser
was granted "piggyback" registration rights, and their shares were included in a
registration statement on Form SB-2 (Registration No. 333-102642) that we filed
with the SEC on January 22, 2003. We used the proceeds from this private
placement of our shares for general working capital.


         In January 2000, we completed a private placement of 200,000 shares at
a purchase price of $1.50 per share of our common stock to a group of investors
pursuant to an exemption from registration under Section 4(2) of the Securities
Act of 1933. We received gross proceeds of $300,000. We used the proceeds from
this private placement for general working capital.

                                       7
<PAGE>


Securities Authorized For Issuance Under Equity Compensation Plans

       The following table provides information as of December 31, 2002
regarding compensation plans (including individual compensation arrangements)
under which our equity securities are authorized for issuance.

<table>
<caption>
                                                                                                 Number of Securities
                                     Number of Securities To                                    Remaining Available for
                                         Be Issued Upon                                          Future Issuance Under
                                            Exercise            Weighted-Average Exercise              Equity
                                         Of Outstanding            Price of Outstanding            Compensation Plans
                                            Options,                     Options,                (Excluding Securities
                                       Warrants and Rights         Warrants and Rights          Reflected in Column (a))

                                     ------------------------  -----------------------------  -----------------------------

                                       <c>                            <c>                            <c>
          Plan Category                        (a)                         (b)                            (c)

Equity Compensation Plans
   Approved by Security Holders             1,610,679                     $1.15                          10,794
Equity Compensation Plans Not                 479,333                                                         0
   Approved by Security Holders                                           $1.66
Total                                       2,090,012                     $1.27                          10,794
</table>



<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 our company or our management are intended to identify such
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Our 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, 2002 and 2001

         Net Revenues. Net revenues for the year ended December 31, 2002 were
$37,451 compared with $38,382 in 2001, a decrease of $931, or 2.5%. This
decrease is insignificant as the revenues in both years represent only
incidental amounts related to the start-up of our microwave technology
subsidiary. These incidental amounts consisted of:

                                                           Years Ended
                                                           December 31,
                                                      2002              2001
                                                 -------------------------------

Laboratory systems rental                          $ 13,158          $       -
Consulting fees                                      10,836              4,285
Laboratory testing fees                               6,209                  -
Maintenance fees-systems in operation                 4,156                  -
Interest and other miscellaneous income               3,092                443
Gain on cash collateral account (See below)               -             33,654
                                                 -------------     -------------

TOTAL                                              $ 37,451           $ 38,382
                                                 =============     =============


         A cash collateral account was maintained by the parent company, The
Classica Group, Inc. as security for a trade account payable to one of the major
suppliers of the now discontinued subsidiary, Cucina Classica Italiana, Inc.
("CCI"). The cash Collateral account and the income from the account were the
property of the parent Company. The account was liquidated at the time of the
sale of CCI's Galbani Products business.

         Gross Profit. We generated gross profit of $28,246 or 75.4% of net
revenues for 2002 versus $38,382 for 2001. This decrease is insignificant as the
revenues in both years represent only incidental amounts related to the start-up
of our microwave technology subsidiary.



<PAGE>



         Selling, General and Administrative Expenses. Selling, general and
administrative expenses ("SG&A") were $1,311,412 in 2002 versus $552,285 for
2001. This represents an increase of $759,127, substantially all of which
represents start-up costs of our microwave technology subsidiary. The
significant costs that make up SG& A were:

<table>
<caption>
                                                                                           Year Ended
                                                                                           December 31,
                                                                                     2002                  2001

                                                                              ------------------- --- ----------------

                                                                                  <c>                  <c>
Employee compensation and related expenses                                      $      662,049          $   274,093
Depreciation and amortization                                                          150,396               35,381
Advertising,trade shows, travel and other selling expenses                             129,287               24,350
Professional fees and other expenses of being a public company                         179,341               78,668
Administrative, office and general expenses                                            129,344              123,295
Research and Development                                                                60,995               16,498
                                                                              -------------------     ----------------

TOTAL                                                                           $    1,311,412          $   552,285
                                                                              ===================     ================
</table>
         Loss from Continuing Operations. Loss from continuing operations for
2002 was $1,283,166 versus $513,903 for 2001. These amounts represent start-up
costs of our microwave technologies subsidiary.

         Income Taxes. We reported no provision for Federal income taxes for the
years ended December 31, 2002 and 2001, as we had net losses for both years.

                                       8
<PAGE>


Liquidity and Capital Resources

                  Our potential sources of capital include capital leases and
the issuance of debt and/or equity securities. At December 31, 2002, we had a
net worth of $3,436,329 compared to $2,225,443 at December 31, 2001. We use
capital leases for the acquisition of operating assets of our subsidiaries when
appropriate. We expect that we will issue additional shares of our common stock
in a private placement within the next 12 months. In addition, we anticipate an
increase in sales of our products by the end of fiscal year 2003. If we believe
we need to, we will seek a line of credit from an institutional lender. We
believe that we have, or have access to, sufficient working capital to meet the
requirements of our microwave technologies subsidiary.

         On June 10, 2003 the Company executed a promissory note and security
agreement and received a loan in the principal amount of $325,000 for a term of
four (4) months maturing on October 10, 2003. The loan bears interest at the
rate of 16% per annum, which will accrue and be payable at the maturity date
together with the principal. The note is secured by a pledge of 770,000 shares
of the Company's common stock which are being held in escrow by the lenders'
attorney. The Company has the right to extend the maturity date of the note for
a period of sixty (60) days upon payment of an extension fee of 70,000 fully
registered shares, provided, that as a condition to any such extension the SEC
shall have declared the registration statement relating to such shares and the
shares collateralizing the note effective.


Plan of Operation

         More than 200 installations of microwave heat processing systems and
technology have been undertaken in Europe and Japan. All but two of those
installations were undertaken by OMAC and other entities. We have only delivered
two systems, one of which is in Switzerland, and was rented for an initial
period of five months, which has been extended by the customer. The second
system was installed in Italy on a contingent basis subject to the customer's
acceptance. After the completion of the installation the customer elected not to
accept the machine, and to continue with its previous technology, which we feel
is inferior to the new system. The system has been returned to our inventory for
modification and sale to a new customer. Our systems and the technology are not
well known outside Europe and Japan. Our plan is to continue to promote and
market our systems in Europe and Japan, and to penetrate other markets. Our goal
is to generate revenues from the sale of microwave heat processing systems and
the sale of technical services.


         In order to facilitate sales of our microwave systems, we have
undertaken a major campaign of communications and education among future users,
governmental regulatory agencies and food industry professionals. We are seeking
to introduce our company, our systems, and the benefits of our systems to
potential users, so that we can obtain a high level of recognition and
acceptance of our systems.

              Up until the recent introduction of CMT's patented technology the
common perception among food manufacturers in the US was that the food
applications of microwave heat processing technology are very limited due to the
uneven heating offered by existing microwave equipment manufactures (e.g. Amana
or Cryodry).

              In the US commercial installations of microwave heat processing
systems were successful only for defrosting of frozen meat blocks and for the
cooking of bacon - two applications where non-uniformity of temperature is
acceptable.

              In order to introduce its technology in the United States CMT had
to overcome this common perception by providing food technologists, process
engineers, Quality Assurance specialists and other food industry professionals
with the evidence of the technology's features, advantages and benefits as
demonstrated by its earlier successful European track record of almost 200
industrial installations.

              Through the education campaign, which has so far included the
mailing of more than 7,500 brochures, presentations at the meetings of various
trade organizations, and attendance at several trade shows and international
conferences, CMT achieved the attention of the Research & Development and
Operations departments of leading US food manufacturers. The professionals in
those organizations followed up with visits and tests at CMT's laboratory in New
Jersey, and based upon their positive feedback within their companies, CMT is
currently involved in applications development projects for top Fortune 100
companies.

Anticipated future activities in our education campaign:

         Communication and education campaign - On going.
                  Using CMT's general brochure and a series of specific
                  technical brochures we provide professionals (food
                  technologists, process engineers, etc.) at targeted potential
                  customer companies with information about the benefits that
                  CMT's equipment will provide to their business.

         Participation in trade shows - 2 to 3 times per year.
                  At these venues we present and demonstrate the capabilities of
                  our technology in the most prestigious and relevant technical
                  shows globally. In 2003 we have participated in Anuga FoodTec
                  in Cologne, Germany (April, 2003), and will participate in IBA
                  in Dusseldorf, Germany (October 2003) and the Worldwide Food
                  Expo in Chicago, Illinois (November, 2003).


         Technical services to clients - On going.
                  We have begun providing microwave application development
                  services for our clients at our new laboratory in Sayreville,
                  New Jersey (and continue to do so at our Italian laboratory in
                  Scandiano, Italy.) Our clients use our full commercial kitchen
                  for the preparation of food products for testing in one of the
                  Company's microwave heat processing systems in order to
                  generate product samples needed by their Marketing, R&D,
                  Quality Assurance and Operations departments in order to
                  conduct a comprehensive due diligence of the business
                  proposition prior to their investment in our system. Following
                  such successful tests we also provide clients with access to
                  our systems in their own facilities through a short-term
                  rental of our microwave systems.


         Partnership with engineering and manufacturing companies - On going.
                  We are conducting an on-going search to identify potential
                  partners that can enhance our competitive position and improve
                  our total delivered cost. With the significant weakness of the
                  dollar versus the Euro in the last year, it is much more
                  expensive for US companies to purchase equipment manufactured
                  in Europe. Accordingly, we are seeing qualified US equipment
                  manufacturers to become our partners in the construction of
                  our microwave systems in the United States for the North
                  American market.



              Simultaneously with the communications and education campaign, we
have begun to use both a direct sales force and an independent agent with
regional offices and representation throughout the United States. In addition,
we have begun to develop relationships with a network of agents worldwide who
will identify market and sell our equipment to customers.

              In developing our network of agents to sell our equipment in the
United States we have entered into an Agreement of Representation with a
national agency for the sale of food processing machinery, with headquarters in
California for the sale of our microwave heat processing equipment to the food
industry, using their network of regional sales agents throughout the United
States.

              In addition, we have entered into exclusive agency agreements with
two European companies, one located in Zurich, Switzerland covering Switzerland,
Germany, Austria, and Lichtenstein, and for France with a well known agency for
the sale of food processing machinery headquartered in Argenteuil, France.

              We are currently negotiating with a national agency for the sale
of food processing machinery located in Mississauga, Canada an exclusive agency
agreement covering Canada and British Columbia. Additional international
agencies are being identified and contacted

              Following our participation at the Anuga FoodTec trade show in
Germany in April of 2003 we were contacted two companies from Japan and Thailand
requesting to become our agent in their respective countries. We have begun
working together with these companies exploring leads in their territories and
expect to decide by early 2004 if either one of these two companies should
become our exclusive agent in their designated territories

         In addition to selling our microwave systems, we intend to provide
technical services to customers. We have two laboratories, one at our
Sayreville, New Jersey location, and one in our Italy location. Our Sayreville
location is also equipped with a full commercial kitchen. We have provided
potential clients with access to our laboratories in the USA and Italy so that
we can work with them to develop and customize new microwave heat processing
applications. Some of the technical services are, and will continue to be,
provided free of charge as part of our marketing efforts. Other more
comprehensive research and development services are marketed and will be offered
to customers for fees.

         We hope to market our company and our capabilities to food and
pharmaceutical manufacturers through many means, including through partnerships
with engineering and design companies, and with manufacturers of complementary
equipment. We believe that such partnerships would be beneficial to both our
company and to our potential partner by enabling us to avoid duplication of
marketing, and research and development costs, and by expanding the field of
potential customers to whom our products would become known.

              We are a member of ten relevant trade associations through which
we promote recognition of microwave technology in general and of our unique
systems in particular. Members of our staff have made presentations at various
trade association meetings and seminars to acquaint the members with our unique
systems.

         At the present time the design and construction of systems is carried
out in Italy by our subsidiary CGTI and third parties. We are evaluating
additional manufacturing capabilities in the USA, so as to be prepared for
domestic construction of our systems as our sales volumes increase.

                                       9
<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
------   ------------------------------------------------------------

         The following table sets forth information with respect to each person
who serves as one of our executive officers or directors and their ages as of
the date of this prospectus:

Name                             Age            Position
___________________________________________________________________________

Scott G. Halperin                41       Director, Chairman of the Board, and
                                          Chief Executive Officer
---------------------------------------------------------------------------
Bernard F. Lillis, Jr. CPA       60       Director, Chief Administrative
                                          Officer, Chief Financial Officer,
                                          Treasurer and Secretary
---------------------------------------------------------------------------
Joseph M. Greene                 60       Director
---------------------------------------------------------------------------
Alan Rubin                       34       Director
---------------------------------------------------------------------------
Harry J. Friedberg, Esq.         65       Director
---------------------------------------------------------------------------
Joseph Riemer, PhD.              54       President of Classica Microwave
                                          Technologies, Inc.
---------------------------------------------------------------------------

         Each director holds office until the next annual meeting of
shareholders or until his successor has been elected and qualified. our officers
are elected by our board of directors and serve at the board's discretion.

         Scott G. Halperin has served as Chairman of our board of directors
since July 1, 1997 and as Chief Executive Officer since August 1, 1994. He has
served as one of our directors since May, 1994. He also served as Treasurer from
May 1994 through June 30, 1997. Prior to joining us, he was President and a
principal of Agama, Inc., a company involved in mergers and acquisitions from
1993 to 1997. Earlier in his career, Mr. Halperin worked for ABIC International
Consultants, Inc., a food technology consulting company, from May, 1982 to
September 1982 where he was involved in product development and analytical
testing of food products.

         Bernard F. Lillis, Jr., CPA has been one of our directors, and
Treasurer since July 1, 1997. He served as our Chief Operating officer from July
1, 1997 through November, 2001 and as our Chief Administrative Officer since
November, 2001. He has been our Chief Financial Officer and our Secretary since
April 15, 1996. Prior to joining us, he served as Chief Financial Officer of
several companies from 1969 to 1972 and from 1974 to 1996, as Deputy City
Manager for Finance of Rochester, New York from 1973 to 1974 and on the audit
staff of Deloitte & Touche, certified public accountants from 1964 to 1969. Mr.
Lillis is a certified public accountant.

         Joseph M. Greene has been one of our directors since February 23, 1998.
He served as acting chief operating officer of Marx Toys, Inc., from January
2001 through May, 2002. He is the founder and has been the chief executive
officer of Advanced Trading concepts since January, 1990, a sales agency for
various fully tariffed switch and network based domestic and international
carriers of telephone services. Mr. Greene is a member of the Audit committee
and the compensation committee of the Board of Directors.

                                       10
<PAGE>

         Alan Rubin has been one of our directors since January 28, 2000. Since
2000 he has been a partner of Targeted Financial Services, a registered
investment advisor. Prior to 2000, he was partner of Nalven, Paredes, Payne &
Rubin, a registered investment advisor from March, 1998 to July, 2000. Mr. Rubin
is a member of the Audit Committee and the Compensation Committee of the Board
of Directors.

         Harry J. Friedberg, Esq. has been one of our directors since March 2,
1998. He has been engaged in the private practice of law since 1963.

         Joseph Riemer, Ph.D. was appointed Vice President - Corporate
Development of Classica Microwave Technologies, Inc. in November, 2001 and
President in June, 2002. Prior to 2001, he a Director of Global Operations
Development for Pfizer in the Adams Confectionary Division from 1998 to 2001 and
he was the Director, Adams R&D Process Development and Operations for Pfizer
from 1998 to 1993. From 1991 to 1993, he was the Manager of R&D in the Food and
Consumer Products Group for CRS Sirrine Engineers, Inc. He was the General
Manager and Founder F.R.J. Foods, Ltd., a consulting firm in the field of food
technology, engineering and management from 1988 to 1990. He holds a BS in Food
Engineering and Biotechnology from Technion, Israel and a Ph.D. in Food science
and Technology from Massachusetts Institute of Technology.

         None of our directors holds directorships in any other public company.
There are no family or other personal or business relationships between or among
our directors, key employees, any control persons or the investors purchasing
the shares covered by this filing.

Compliance with Section 16(a) of the Exchange Act

       Section 16(a) of the Exchange Act requires our directors and executive
officers and persons who own more than ten percent of a registered class of our
equity securities to file reports of beneficial ownership and changes in
beneficial ownership with the Securities and Exchange Commission (the
"Commission"). The rules promulgated by the Commission under Section 16(a) of
the Exchange Act require those persons to furnish us with copies of all reports
filed with the Commission pursuant to Section 16(a).

       To our knowledge, during the fiscal year ended December 31, 2002, all
filing requirements were complied with for the year ended December 31, 2002.

                                       11
<PAGE>

Item 10. Executive Compensation

         The following table sets forth, for each of the last three fiscal
years, cash and certain other compensation paid or accrued by our company for
our Chief Executive Officer and Chief Administrative and Financial Officer, the
President of our subsidiary, Cucina Classica Italiana, Inc., and the President
of our subsidiary, Classica Microwave Technologies, Inc. There are no other
executive officers who earned at least $100,000 for any of the last three fiscal
years.
<table>
<caption>
                           Summary Compensation Table

               Annual Compensation ($) Long-Term Compensation ($)
------------------------------------------------------------------------------------------------------------------------------------

Long-Term                                                                                              Incentive
Name and Principal                                                      Restricted    Securities      Plan Payouts  All other
Position                                       Bonus  *                 Stock Awards  underlying                    Compensation ($)
                           Year     Salary            Other Annual                     Options
                                                      Compensation
------------------------------------------------------------------------------------------------------------------------------------

                      <c>      <c>           <c>     <c>                  <c>       <c>                <c>             <c>
Scott G.  Halperin         2002     190,008       0       12,990               0         377,526            0               0
Chairman of the Board;     2001     190,008       0       12,322               0               0            0               0
Chief Executive Officer;   2000     190,008       0       10,778               0               0            0               0

------------------------------------------------------------------------------------------------------------------------------------
Bernard F.  Lillis, Jr.    2002     160,006       0        9,009               0         302,021            0               0
Chief Administrative       2001     160,006       0        8,226               0               0            0               0
Officer;                   2000     160,006       0        7,482               0               0            0               0
Chief Financial Officer
------------------------------------------------------------------------------------------------------------------------------------
Robert Castellano,         2002     114,880       0       12,990               0               0            0               0
President Cucina           2001     106,345       0       12,322               0          25,000            0               0
Classica Italiana          2000     106,033       0       10,778               0               0            0               0
(Resigned December 27,
2002)
------------------------------------------------------------------------------------------------------------------------------------
Joseph Riemer              2002      69,231       0        8,660               0         189,783            0               0
President,                 2001           0       0            0               0               0            0               0
Classica Microwave         2000           0       0            0               0               0            0               0
Technologies, Inc.
------------------------------------------------------------------------------------------------------------------------------------
</table>

Represents payment of health insurance premiums.


                            Long-Term Incentive Plans

         We have no long-term incentive plans other than our various stock
option plans.

           Option Grants in Last Fiscal Year, Ending December 31, 2002

                                Individual Grants
<table>
<caption>
Name                      Number of Securities    % of Total Options     Exercise      Expiration Date
                           Underlying Options    Granted to Employees    or Base
                                Granted             In Fiscal Year       Price ($/sh)
------------------------------------------------------------------------------------------------------

                           <c>                      <c>                <c>           <c>
Scott G. Halperin               377,526                  15.7%              0.99          12/12/2012
Bernard F. Lillis, Jr.          302,021                  12.6%              0.99          12/12/2012
Robert Castellano                68,570                   2.9%              1.75          05/31/2011
Joseph Riemer                   121,213                   5.0%              0.99          10/31/2012
</table>

                       Aggregated Option Exercises in 2002
                       and December 31, 2002 Option Values

<table>
<caption>
                                        Shares
                                       Acquired                          Number of
                                          On           ($)         Securities Underlying          Value of Unexercised
                                       Exercise       Value         Unexercised Options           In-the-Money Options
                                         (#)        Realized      at Fiscal Year-End ($)        at Fiscal Year-End (#)(A)
                                     -------------  ----------  ----------------------------  -----------------------------
                Name                                            Exercisable   Unexercisable   Exercisable    Unexercisable
               --------              -------------  ----------  ------------  --------------  -------------  --------------

                                    <c>             <c>       <c>            <c>            <c>             <c>
Scott G.  Halperin                       0               0         324,111        252,526        103,804         121,212
Bernard F.  Lillis, Jr.                  0               0         158,778        202,021         82,931          96,970
Robert Castellano                        0               0          45,000              0              0               0
Joseph Riemer                            0               0          22,857        166,926              0          58,182
</table>

* Options are "in-the-money" if, on December 31, 2002, the market price of our
common stock ($1.47) exceeds the exercise price of such options. The value of
such options is calculated by determining the difference between the aggregate
market price of our common stock covered by such options on December 31, 2002,
and the aggregate price of such options.

                                       12
<PAGE>


Employment Agreements

Scott G. Halperin

         On August 1, 1997, (amended December 13, 2002) we entered into an
employment agreement with Scott G. Halperin, which provides for an annual salary
of $250,000 effective January 1, 2003. The agreement provides that Mr. Halperin
shall serve as Chairman of the Board and our Chief Executive Officer through
July 31, 2005. Mr. Halperin's employment agreement may be renewed for successive
three-year periods commencing on the termination date by mutual agreement. We
may, however, terminate the agreement at the end of a term by giving written
notice of non-renewal at least 180 days prior to the end of such term. Mr.
Halperin's base compensation will be increased annually by 5% plus the increase
in the cost of living annually. Additionally, on December 13, 2002 and annually
thereafter on December 13th. Mr. Halperin will be given a stock option for no
less than an amount of shares equal to his updated annual salary divided by the
closing price of The Classica Group, Inc. common stock on the previous business
day. These options will vest 1/3 one year from the date of granting of the
option, and 1/3 each year thereafter on the 1st of January. As an inducement to
accept the amendment of December 13, 2002 to his employment agreement Mr.
Halperin was granted an option to purchase 125,000 shares of our common stock at
the closing price on December 12, 2002 ($0.99 per share). In addition to his
base salary, Mr. Halperin is entitled to receive additional incentive
compensation during each fiscal year in an amount not less than two percent of
the increase in our gross revenues during each year as compared to the prior
year, commencing with the fiscal year ended December 31, 1996, and any other
bonus our board of directors may award to Mr. Halperin. We will pay Mr. Halperin
an automobile expense allowance in the amount of $12,000 per annum and will
maintain at our expense a medical and dental plan that covers Mr. Halperin, his
spouse and his minor children. Mr. Halperin waived the automobile allowance
through December 31, 2002.

         We may terminate this agreement for cause, and Mr. Halperin may
terminate it for good reason. Should the agreement be terminated without cause,
however, Mr. Halperin will be paid his full base salary through the time notice
of termination is given and a lump sum severance payment equal to the greater of
(i) the remaining compensation (including incentive compensation) payable to Mr.
Halperin as though the employment agreement had been performed through July 31,
2005 or such later date to which the term of the employment has been extended or
(ii) the total compensation earned by Mr. Halperin during the one year period
prior to the date of termination. Under such circumstances, Mr. Halperin is also
entitled to receive all employee benefits until the later of (A) July 31, 2005
or such later date to which the term of the Employment Agreement has been
extended or (B) one year from the date of termination. In addition, all stock
awards and options theretofore awarded or granted to Mr. Halperin shall, to the
fullest extent permitted by applicable law, immediately vest.

         The Employment Agreement prohibits Mr. Halperin from disclosing our
confidential information or trade secrets during the term of his employment
under the Employment Agreement and for 12 months thereafter. The Employment
Agreement also prohibits Mr. Halperin from competing, during the period of his
employment under the Employment Agreement and for 12 months thereafter, within
any county (or adjacent county) in any state within the United States in which
we are engaged in business during Mr. Halperin's employment by us. However, the
restrictions on disclosure and competition do not apply if we terminate Mr.
Halperin without cause or if Mr. Halperin terminates the Employment Agreement
for good reason.

         The Employment Agreement also grants Mr. Halperin certain demand and
"piggyback" registration rights with respect to the shares of common stock owned
by him.

         Mr. Halperin waived cash compensation in excess of $190,000 for 1998,
1999, 2000, 2001 and 2002.

                                       13
<PAGE>


Bernard F. Lillis, Jr.

         On August 1, 1997, (amended December 13, 2002) we entered into an
employment agreement with Bernard F. Lillis, Jr., which provides for an annual
salary of $200,000 effective January 1, 2003. The agreement provides that Mr.
Lillis shall serve as our Chief Financial Officer and Chief Administrative
Officer through July 31, 2005. Mr. Lillis' employment agreement may be renewed
successive three-year periods commencing on the termination date, by mutual
agreement. We may, however, terminate the agreement at the end of a term by
giving written notice of non-renewal not less than 180 days prior to end of such
term. Mr. Lillis's base compensation will be increased annually by 5% plus the
increase in the cost of living annually. Additionally, on December 13, 2002 and
annually thereafter on December 13th, Mr. Lillis will be given a stock option
for no less than an amount of shares equal to his updated annual salary divided
by the closing price of The Classica Group, Inc. common stock on the previous
business day. These options will vest 1/3 one year from the date of granting of
the option, and 1/3 each year thereafter on the 1st of January. As an inducement
to accept the amendment of December 13, 2002 to his employment agreement Mr.
Lillis was granted an option to purchase 100,000 shares of our common stock at
the closing price on December 12, 2002 ($0.99 per share). In addition to his
base-salary, Mr. Lillis is entitled to receive additional incentive compensation
during each fiscal year in an amount not less than two percent of the increase
in our gross revenues during each such year as compared to the prior year,
commencing with the fiscal year ended December 31, 1996, and any other bonus our
board of directors may award to Mr. Lillis. We will pay Mr. Lillis an automobile
expense allowance in the amount of $12,000 per annum and will maintain at our
expense a medical and dental plan that covers Mr. Lillis, his spouse and his
minor children. Mr. Lillis waived the automobile allowance through December 31,
2002.

         We may terminate Mr. Lillis for cause and Mr. Lillis may terminate the
Employment Agreement for good reason or if his health should become impaired to
an extent that makes the continued performance of his duties under the
Employment Agreement hazardous to his physical or mental health.

         If we terminate the Employment Agreement we are required to pay to Mr.
Lillis his full base salary through the time notice of termination is given and
a lump sum payment equal to the greater of (i) the remaining compensation
(including incentive compensation) payable to Mr. Lillis as though the
Employment Agreement had been performed through July 31, 2005 or such later date
to which the term of the employment has been extended and (ii) the total
compensation earned by Mr. Lillis during the one ear period prior to the date of
termination. Under such circumstances, Mr. Lillis is also entitled to receive
all employee benefits until the later of (A) July 31, 2005 or such later date to
which the term of the Employment Agreement has been extended or (B) one year
from the date of termination. In addition, all stock awards and options
theretofore awarded or granted to Mr. Lillis shall, to the fullest extent
permitted by applicable law, immediately vest.

         The Employment Agreement prohibits Mr. Lillis from disclosing our
confidential information or trade secrets during the term of his employment
under the Employment Agreement and for 12 months thereafter. The Employment
Agreement also prohibits Mr. Lillis from competing, during the period of his
employment under the Employment Agreement and for 12 months thereafter, within
any county (or adjacent county) in any state within the United States in which
we are engaged in business during Mr. Lillis's employment by us. However, the
restrictions on disclosure and competition do not apply if we terminate Mr.
Lillis without cause or if Mr. Lillis terminates the Employment Agreement for
good reason.

         The Employment Agreement also grants Mr. Lillis certain demand and
"piggyback" registration rights with respect to the shares of common stock owned
by him.

         Mr. Lillis waived cash compensation in excess of $160,000 for 1998,
1999, 2000, 2001, and 2002.

                                       14
<PAGE>


Joseph Riemer

         On June 1, 2002, we entered into a letter agreement with Dr. Joseph
Riemer, which provides for an annual salary of $120,000.00, plus an initial
grant of options to purchase 68,750 shares of our common stock at $1.75 per
share, vesting one-third on each of November 1, 2002, 2003 and 2004. in
addition, on November 1, 2002 and each year thereafter, Dr. Riemer's
compensation will be reviewed and updated, and he is entitled to an annual stock
option grant to purchase the number of shares equal to his updated annual salary
divided by the closing price of our common stock the previous day. Those options
will vest one third one year from the date of granting and one third each year
thereafter on November 1.

         Under the terms of the letter agreement, Dr. Riemer is an at-will
employee, and the letter agreement is not to be construed as a contract.

Giuseppe Ruozi

         On September 21, 1999, we entered into a consulting agreement with Ing.
Giuseppe Ruozi, which, at this time, provides for a monthly fee of $6,000.00,
plus an initial grant of options to purchase 75,000 shares of our stock, which
have been vested. In addition, The agreement was initially for 3 years, but
automatically renews for additional 1 year periods unless one of the parties
notifies the other of his or its desire to not renew the agreement, at least 30
days prior to the expiration date of the term. Other than by expiration or
termination by non-renewal, the agreement may only be terminated in the event of
default by a party.

Item 11. Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth certain information as of May 6, 2003,
regarding the ownership of our common stock by each director and each of our
current executive officers, each person known to us to beneficially own 5% or
more of common stock, and all our directors and executive officers as a group.
Except as indicated, all persons named as beneficial owners of common stock have
sole voting and investment power with respect to the shares indicated as
beneficially owned by them. All persons named have an address at c/o The
Classica Group, Inc., 2400 Main Street, Suite 12, Sayreville, New Jersey 08872.

--------------------------------------------------------------------------------

Name of Beneficial Owner (A)   Number of Shares            Percentage
                               of Outstanding (I)
--------------------------------------------------------------------------------
Scott G. Halperin                729,150 (B)                     14.18
--------------------------------------------------------------------------------
Bernard F. Lillis, Jr.           548,950 (C)                     10.68
--------------------------------------------------------------------------------
Joseph M. Greene                  45,500 (D)                      0.90
--------------------------------------------------------------------------------
Harry J. Friedberg                60,667 (E)                      1.18
--------------------------------------------------------------------------------
Alan Rubin                        55,100 (F)                      1.07
--------------------------------------------------------------------------------
Joseph Riemer                     27,257 (G)                      0.53
--------------------------------------------------------------------------------
Michael Iaverone                 303,000                          5.89
--------------------------------------------------------------------------------
Howard Green                     400,000                          7.78
--------------------------------------------------------------------------------
All directors and executive
officers                       1,466,624                         28.54
--------------------------------------------------------------------------------
All beneficial owners          2,169,624                         42.21
--------------------------------------------------------------------------------

(A) All information with respect to beneficial ownership of the shares is based
upon filings made by the respective beneficial owners with the Securities and
Exchange Commission or information provided by such beneficial owners to us.
Shares include stock options and warrants exercisable within 60 days.

(B) Includes options to purchase 199,111 shares at $1.25 per share and 125,000
shares at $ 0.99 held by Mr. Halperin.

(C) Includes options to purchase 158,778 shares at $1.25 per share and 100,000
shares at $ 0.99 held by Mr. Lillis.

(D) Includes options to purchase 20,500 shares at $1.25 per share and 25,000
shares at $0.99 held by Mr. Greene.

(E) Includes options to purchase 23,000 shares at $1.25 per share and 15,000
shares at $ 0.99 held by Mr. Friedberg.

(F) Includes options to purchase 10,000 shares at $1.25 per share and 25,000
shares at $ 0.99 held by Mr. Rubin.

(G) Includes options to purchase 22,857 shares at $ 1.75 per share held by Dr.
Riemer.

(H) Includes options to purchase 103,000 shares at $1.00 per share held by Mr.
Iaverone

(I) For each beneficial owner, the "Percentage of outstanding" equals each
owner's actual holdings of shares plus shares represented by unexercised options
and warrants held, divided by total shares outstanding of our company on May 6,
2003, of 5,142,211 plus the above-referenced unexercised options and warrants of
the referenced holder only. In other words, individual percentages of the listed
holders will not add to the group total because the calculations are made
separately for each holder.

Securities authorized for issuance under equity compensation plans.

Included in Item 5, above.

Item 12. Certain Relationships and Related Transactions

         There are no family or other personal or business relationships between
or among our directors, key employees, or any control persons.

                                       15
<PAGE>


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

(a) Exhibits.

Exhibit
Number   Description

3.1      Articles of Incorporation of Registrant (A)
3.2      Bylaws of Registrant (A)
4.1      1998 Incentive and Non-Qualified Stock Option Plan (D)
4.2      Amendment to 1998 Incentive and Non-Qualified Stock Option Plan (D)
4.3      1998 Incentive and Non-Qualified Stock Option Plan (E)
4.4      Form of Warrant dated December 13, 2002 (A)
10.1     Acquisition Agreement between Registrant and OMAC Research, Ltd. (B)
10.2     Lease Agreement between CGTI Classica Group Technologies, Italia S.r.l.
                and PRAGMATA, S.r.l., dated December 15, 2001 (C)
10.3     Lease Agreement between First Industrial Development Services, Inc.
                and Classica Microwave Technologies, Inc. dated
                November 13, 2002. filed herewith
10.4     Placement Agent Agreement (A).
10.5     Securities Purchase Agreement (A)
10.6     Registration Rights Agreement (A)
10.7     Employment Agreement with Scott G. Halperin. (F)
10.8     Employment Agreement with Bernard F. Lillis (F)
10.9     Employment Agreement with Joseph Riemer, Ph.D.,  filed herewith.
10.10    Amendment to Employment Agreement with Scott G. Halperin,
                dated 12/13/2002, filed herewith.
10.11    Amendment to Employment Agreement with Bernard F. Lillis dated
                12/13/2002, filed herewith.
10.12    Agreement with Giuseppe Ruozi, filed herewith.
21.1     Subsidiaries of Registrant, filed herewith.
23.1     Engineer Giuseppe Ruozi's consent, filed herewith.
99.1     Certification  Pursuant  to 18 U.S.C.  Section  1350,  as adopted
                Pursuant  to Section 906 of the
                Sarbanes-Oxley Act of 2002, filed herewith
99.2     Certification  Pursuant  to 18 U.S.C.  Section  1350,  as adopted
                Pursuant  to Section 906 of the
                Sarbanes-Oxley Act of 2002, filed herewith.
99.3     List of Patents held by the Company.
-----------
The foregoing is incorporated by reference from the Registrant's filings
indicated:

         (A) Registration Statement on Form SB-2, filed with the Securities and
         Exchange Commission on January 22, 2003. (B) Form 8-K, filed with the
         Securities and Exchange Commission on April 17, 2001. (C) Form 10-KSB,
         filed with the Securities and Exchange Commission on April 1, 2002. (D)
         Registration Statement on Form S-8 filed with the Securities and
         Exchange Commission on September
                  18, 2002.
         (E)      Registration Statement on Form S-8 filed with the Securities
                  and Exchange Commission on May 15, 2002.
         (F)      Form 10-KSB filed with the Securities and Exchange Commission
                  on March 12, 1998.

(b) Reports on Form 8-K.

         None

                                       16
<PAGE>

Item 14. Controls and Procedures

         Within the 90-day period prior to the filing of this report, an
evaluation was carried out under the supervision and with the participation of
our management, including our Chief Executive Officer ("CEO") and Chief
Financial Officer ("CFO"), of the effectiveness of our disclosure controls and
procedures. Based on that evaluation, the CEO and CFO have concluded that our
disclosure controls and procedures are effective to ensure that information
required to be disclosed by us in reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms. Subsequent to the date of our management's evaluation, there were no
significant changes in our internal controls or in other factors that could
significantly affect these controls, including any corrective actions with
regard to significant deficiencies and material weaknesses.


                                       17
<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.


/s/ Scott G. Halperin                                  Date:  September 4, 2003
---------------------------------
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:  September 4, 2003
         ---------------------
         Scott G. Halperin
         Chairman of the Board
         Chief Executive Officer
         Audit Committee Member

By:      /s/ Bernard F. Lillis, Jr.                    Date:  September 4, 2003
         --------------------------
         Bernard F. Lillis, Jr.
         Chief Financial Officer
         Chief Administrative Officer
         Principal Accounting Officer
         Director

By:      /s/ Joseph M. Greene                          Date:  September 4, 2003
         --------------------
         Joseph M. Greene
         Director
         Audit Committee Member


By:      /s/ Alan Rubin                                Date:  September 4, 2003
         --------------
         Alan Rubin
         Director
         Audit Committee Member

                                       18
<PAGE>

      CERTIFICATION PURSUANT TO RULE 13-A-14 OF THE SECURITIES ACT OF 1934
      AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Scott G. Halperin, certify that:

1.       I have reviewed this annual report on Form 10-KSB/B of The Classica
         Group, Inc.;

2.       Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         have:

         (a) designed such disclosure controls and procedures to ensure that the
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

         (b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

         (c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent functions):

         (a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

         (b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control; and

6.       The registrant's other certifying officers and I have indicated in this
         annual report whether there are significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.

Date:    September 4, 2003

/s/ Scott G. Halperin
Scott G. Halperin
Chief Executive Officer

                                       19
<PAGE>


      CERTIFICATION PURSUANT TO RULE 13-A-14 OF THE SECURITIES ACT OF 1934
      AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bernard F. Lillis, Jr., certify that:

1.       I have reviewed this annual report on Form 10-KSB/B of The Classica
         Group, Inc.;

2.       Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         have:

         (a) designed such disclosure controls and procedures to ensure that the
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

         (b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

         (c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent functions):

         (a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

         (b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control; and

6.       The registrant's other certifying officers and I have indicated in this
         annual report whether there are significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.

Date:    September 4, 2003

         /s/ Bernard F. Lillis, Jr.
         Bernard F. Lillis, Jr.
         Chief Financial Officer

                                       20
<PAGE>

                    THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                                      INDEX



                              FINANCIAL STATEMENTS


Included in Part II


Independent Auditors' Report


Consolidated Balance Sheet at December 31, 2002


Consolidated Statements of Operations and Comprehensive Income for the Years
   Ended December 31, 2002 and 2001


Consolidated Statements of Cash Flows for the Years Ended December 31, 2002
   and 2001


Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
December 31, 2002 and 2001


Notes to Consolidated Financial Statements


                                       F-1


<PAGE>



                          INDEPENDENT AUDITORS' REPORT




Board of Directors
The Classica Group, Inc. and Subsidiaries
Sayreville, New Jersey 08872


We have audited the accompanying consolidated balance sheet of The Classica
Group, Inc. and Subsidiaries (the "Company") as of December 31, 2002, and the
related consolidated statements of operations and comprehensive income, cash
flows and changes in stockholders' equity for the years ended December 31, 2002,
and 2001. 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 consolidated financial position of the Company at
December 31, 2002, and the results of its consolidated operations and its cash
flows for the years ended December 31, 2002, and 2001 in conformity with
accounting principles generally accepted in the United States of America.


EHRENKRANTZ, STERLING & CO., LLC

Livingston, New Jersey
March 27, 2003


                                       F-2


<PAGE>



                    THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheet
                                December 31, 2002




                                     ASSETS
                                     ------

CURRENT ASSETS:
         Cash                                                          $742,067

         Accounts receivable                                             14,433

         Receivable from sale of discontinued operation                 426,819

         Inventories                                                    297,562

         Prepaid expenses                                               101,486

         Assets relating to discontinued operations                     397,441

                                                                   ------------
         TOTAL CURRENT ASSETS                                         1,979,808


Property and equipment, at cost, net                                    472,138

Intangible assets, net                                                1,422,967


Other assets                                                            123,423
                                                                  -------------

         TOTAL   ASSETS                                              $3,998,336
                                                                  -------------


                 See notes to consolidated financial statements.



                                       F-3



<PAGE>



                    THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheet
                                December 31, 2002


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


CURRENT LIABILITIES:

         Accounts payable                                             $ 106,122

         Accrued expenses                                                58,444

         Liabilities relating to discontinued operations                397,441
                                                                 ---------------

         TOTAL CURRENT LIABILITIES                                      562,007
                                                                 ---------------

TOTAL LIABILITIES                                                       562,007
                                                                 ---------------

         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, 5,142,211
         issued and outstanding                                           5,142

         Additional paid-in-capital                                   5,756,166

         Accumulated deficit                                         (2,736,729)

         Accumulated other comprehensive income                          13,852
                                                                 ---------------

         TOTAL STOCKHOLDERS' EQUITY                                   3,436,329
                                                                 ---------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                           $3,998,336
                                                                 ---------------


                 See notes to consolidated financial statements.



                                       F-4


<PAGE>



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

                                                               Years Ended
                                                               December 31,
                                                             2002        2001
                                                       -------------------------

Revenue                                                   $ 37,451     $ 38,382

Cost of sales                                                9,205           -
                                                       -------------------------

Gross profit                                                28,246       38,382

Selling, general and administrative expenses             1,311,412      552,285
                                                       -------------------------

Loss from continuing operations                         (1,283,166)    (513,903)
                                                       -------------------------

Discontinued operations
     Loss from operation of business segment - Deli King         -     (179,074)
     Income(loss) from operation of business segment - CCI(168,861)     294,106
     Loss from disposal of business segment - Deli King          -     (728,494)
     Income from disposal of business segment - CCI        566,351            -
                                                       -------------------------

Income (loss) from discontinued operations                 397,490     (613,462)
                                                       -------------------------

Net loss before income taxes                              (885,676)  (1,127,365)

Other comprehensive income:

   Foreign currency translation,
     net of tax effect of $-0-                              13,852           -
                                                       -------------------------

Comprehensive income                                    $ (871,824)$ (1,127,365)
                                                       -------------------------

INCOME (LOSS) PER COMMON SHARE

BASIC & DILUTED

Loss  from continuing operations                          $ (0.38)      $ (0.24)

Income (loss) from discontinued operations                   0.12         (0.28)
                                                       -------------------------


NET LOSS                                                  $ (0.26)      $ (0.52)
                                                       -------------------------

Weighted average shares outstanding, basic and diluted  3,374,437     2,168,052


                 See notes to consolidated financial statements.


                                       F-5
<page>
                    THE CLASSICA GROUP, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows

                                   Years Ended
                                                               December 31,
                                                            2002         2001
                                                      --------------------------
Cash Flows from operating activities:
              Net loss                                 $ (885,676)  (1,127,365)
Adjustments to reconcile net loss to net cash
         used in operating activities:
              Net assets of discontinued operations             -      637,610
              Foreign currency adjustment                  13,852            -
              Depreciation                                 46,907        9,509
              Amortization                                103,489       25,872
Changes in operating assets and liabilities
              Accounts receivable                         (98,403)     (14,443)
              Inventories                                (297,562)           -
              Prepaid expenses and other current assets   (82,699)      (3,011)
              Other assets                               (122,924)         500
              Accounts payable and accrued expenses        91,034       27,495
                                                      --------------------------
              Net cash used in operating activities    (1,231,982)    (443,833)
                                                      --------------------------
Cash flows from investing activities:
              Purchase of property and equipment         (197,046)     (48,956)
                                                      --------------------------
              Net cash used in investing activities      (197,046)     (48,956)
                                                      --------------------------
Cash flows from financing activities:
              Proceeds from issuance of common stock    2,082,710      562,682
                                                      --------------------------
              Net cash provided by financing activities 2,082,710      562,682
                                                      --------------------------
Increase in cash                                          653,682       69,893
Cash at beginning of year                                  88,385       18,492
                                                      --------------------------

Cash at end of year                                     $ 742,067     $ 88,385
                                                      --------------------------
Supplemental disclosure of cash flow information:
              Income taxes paid                                 -          240

                 See notes to consolidated financial statements.


                                       F-6



<PAGE>

                    THE CLASSICA GROUP, INC. AND SUBSIDIARIES
           Consolidated Statements of Changes in Stockholders' Equity
                     Years Ended December 31, 2002 and 2001
<TABLE>
<CAPTION>
                                       CLASS "A" PARTICIPATING
                                        CONVERTIBLE PREFERRED
                                    ---------------------------
                                                     AMOUNT                                                    ACCUMULATED
                                                   STATED AT                          ADDITIONAL                  OTHER
                                                  LIQUIDATION     COMMON SHARES        PAID-IN    ACCUMULATED COMPREHENSIVE
                                       SHARES        VALUE      SHARES     AMOUNT      CAPITAL      DEFICIT      INCOME      TOTAL
                                    ------------------------------------------------------------------------------------------------
<S>                                   <C>         <C>        <C>           <C>      <C>            <C>         <C>      <C>
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

Options exercised                         -              -     1,398,779     1,399    1,204,111            -              1,205,510

Issuance of Common Stock                  -              -     1,230,000     1,230      875,970            -                877,200

Foreign currency translation              -              -             -         -            -                   13,852     13,852

Net loss                                  -              -             -         -            -     (885,676)              (885,676)
                                    ------------------------------------------------------------------------------------------------

Balance at December 31, 2002            16.5      $ 397,898    5,142,211     $ 5,142 $5,756,166   $ (2,736,729) $ 13,852 $3,436,329
                                    ================================================================================================
</TABLE>


                                       F-7


<PAGE>



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


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         NATURE OF BUSINESS

         The Classica Group, Inc. ("the Company") and its wholly owned
subsidiaries Classica Microwave Technologies, Inc. (United States) and CGTI
Classica Group Technologies Italia, S.r.l. ("Classica Italy") (collectively
"CMT") provide safe food solutions through its automated microwave processing
systems. In addition, 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, a key
developer of the process is under a consulting agreement 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 Professor Ruozi
gives CMT a strong position in the growing field of new and innovative
processing technologies for the food industry.

          CMT expects to generate revenues in two different areas. First, the
company sells microwave based processing systems for pasteurization,
sterilization, sanitizing and drying of food products. Second, 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 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 is controlled by a Programmable Logic Controller ("PLC"), a
device used to control the operations of complex industrial equipment.
Basically, it is an earlier generation computer. The PLC allows the operator to
customize a vast number of instructions ("the program"), in proper sequence, for
the tasks that the equipment is required to perform under any number of
alternative conditions to achieve the desired results. Different programs for
different output results and conditions can be stored in the PLC. The design
includes a self-monitoring program that alerts an operator to any system
malfunction that could jeopardize the food safety of the product.


             In October 2002, the Company sold certain assets of its grated,
shredded and dry cheese processing and distributing business. In December 2002,
the Company sold certain assets of its Galbani(R) brand cheese and meat
importing and distribution business. See note 5.


         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 accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures 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.

         REVENUE RECOGNITION

                  Revenue for microwave heat processing systems is recognized
upon acceptance of the system by the customer after its installation in the
customer's facility. In the case of the construction of a large multi-unit
system for a customer the system may be broken down into sections that can be
individually unconditionally accepted by the customer. In that case, revenue
will be recognized upon the unconditional acceptance of a section of the system
by the customer.

Revenue for technical services rendered by the Company is recognized, if on an
hourly basis as the services are provided to the customer, or upon completion of
the project if on a project basis.

Rental fees for the use of the Company's laboratory systems are recognized on a
per diem basis as the systems are used by the customer. The customer uses these
laboratory systems to test their products in order to determine the production
scale system they will require to process their products. The rental charges for
the use of the Company's laboratory system, whether in our facilities or the
client's is to defer our costs and expenses and is not intended to be a profit
center for the Company. At the present time the Company does not rent production
sized systems to customers.

In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements", which provides guidance related to revenue recognition. The Company
has adopted SAB 101 and it has not had a material impact on the Company's
consolidated financial position or results of operations, nor did it result in
the Company reporting a change in accounting principles from its application.

                                       F-8
<PAGE>


         CASH AND CASH EQUIVALENTS

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

         FOREIGN CURRENCY

         For Classica Italy, the local currency is the functional currency. In
accordance with the Statement of Financial Standards (SFAS) No. 52, "Foreign
Currency Translations," the financial statements of the subsidiary are
translated into U.S. dollars as follows: assets and liabilities at year-end
exchange rates; income, expenses and cash flows at average exchange rates; and
shareholders' equity at historical exchange rates. The resulting translation
adjustment is recorded as a component of accumulated other comprehensive income
in the accompanying Consolidated Statement of Financial Position.


         RESEARCH AND DEVELOPMENT COSTS

         Research and development costs, which include costs in connection with
new product development, fundamental and exploratory research, process
improvement, and product use technology and product accreditation, are charged
to operations in the period in which they are incurred. Research and development
costs for the years ended December 31, 2002 and 2001 were $60,995 and $16,498,
respectively.


         ADVERTISING COSTS

         The Company expenses all advertising costs as incurred. Advertising
costs for the years ended December 31, 2002 and 2001 were $8,547 and $0,
respectively.


         ACCOUNTS RECEIVABLE

         On a periodic basis, the Company evaluates its accounts receivable and
establishes an allowance for doubtful accounts, when deemed necessary, based on
its history of past write-offs and collections, contractual terms and current
credit conditions.

         INVENTORIES

         Inventories consist of raw materials used in production, construction
in progress and used machines held for resale and are carried at the lower of
cost or market. Cost is determined on a first-in, first-out method.


         DEPRECIATION

         Property 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.



                                       F-9


<PAGE>


         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. The Company assesses the recoverability of its assets, in accordance
with SFAS No. 142 "Goodwill and Other Intangible Assets," 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. The Company determined that there is
no impairment of the assets at December 31, 2002 and 2001.

Intangible assets consist of the following at December 31, 2002:

              Patents                                $ 1,552,328

              Accumulated amortization                  (129,361)
                                                   --------------

              Intangible assets, net                 $ 1,422,967
                                                   --------------

For the years ending December 31, 2003 through 2007 the patents will be
amortized at the rate of $103,489 per annum for a total amortization for the
five year period of $517,245.

         CONCENTRATION OF RISK

         The Company's products are constructed by its wholly owned subsidiary,
C.G.T.I. - Classica Group Technologies Italia, S.r.l. ("CGTI") in Italy. The
products are manufactured by sub-contractors under the supervision of CGTI's
personnel. 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

         Long-lived assets to be held and used by the Company are reviewed to
determine whether an event or 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
years ended December 31, 2002 and 2001.

         INCOME TAXES
         The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." The asset and liability approach underlying SFAS
No. 109 requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the carrying
amount and tax basis of the Company's assets and liabilities, and net operating
loss carryforwards. Management provides valuation allowances against the net
deferred tax asset for amounts that may not be realized.

                                      F-10


<PAGE>


         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. There were outstanding at December 31,
2002 1,610,689 employee stock options and 479,333 warrants with average purchase
prices of $1.1497 and $1.6554 per share, respectively. These options and
warrants could potentially dilute basic earnings per share in the future should
be Company achieve profitability. 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, trade receivables and other receivables reported in the consolidated
balance sheet approximate fair value.

Note 2 - INVENTORIES

         Inventories at December 31, 2002 consist of:

              Raw materials                                       $ 20,553
              Construction in progress                             245,934
              Used machines held for resale                         31,075
                                                               ------------

              Total inventory                                    $ 297,562
                                                               ------------
NOTE 3 - PROPERTY AND EQUIPMENT

            Property and equipment, at cost, consists of the following at
December 31, 2002:


     Furniture, fixtures and equipment                           $ 525,670

     Less accumulated depreciation and amortization                (53,532)

                                                               -------------

     Fixed assets, net                                           $ 472,138
                                                               -------------
NOTE 4 - ACCRUED EXPENSES

             Accrued expenses at December 31, 2002 consist of:

     Accrued payroll                                               $ 36,558
     Other accrued expenses                                          21,886
                                                              ---------------

     Total accrued expenses                                        $ 58,444
                                                              ---------------
                                      F-11


<PAGE>



NOTE 5 - DISCONTINUED OPERATIONS

              On October 18, 2002, the Company sold assets comprised of
manufacturing equipment, certain inventory and related packaging materials and
supplies, customer lists, goodwill, trademark and rights to its lease of the
distribution facility and other rights relating to its grated, shredded and dry
cheese processing and distributing business.

              On December 30, 2002, the Company sold assets comprised of a
customer list, goodwill, right to use a license and distribution agreement with
a supplier, certain inventory and related packaging materials and supplies a
portfolio of import licenses for dairy products, and an assumption of a
liability to its distributor relating to its Galbani(R) brand cheese and meat
importing and distribution business.

              The cheese business has no further operations. However, certain
assets remain, such as trade accounts receivable and some cash, and certain
liabilities remain, such as trade accounts payable and certain broker
commissions due on the receivables to be collected. No contingencies remain
relating to the sale of the assets. Accordingly, we have recognized the sale of
the assets as of December 31, 2002.


              As a result of the aforementioned sales, the Company has recorded
an after-tax gain on these sales of assets of $566,351 including the write-off
of prior recognized goodwill of $157,500 and a loss from operations totaling
$168,861 as discontinued operations. The total selling price included cash of
approximately $600,000 and liabilities assumed totaling approximately $739,000.
The consolidated financial statements and related notes for the year ended
December 31, 2001 have been restated, where applicable. The tax effect of the
gain on the sale of assets was to reduce the amount of the deferred tax asset by
approximately $192,000 as of December 31, 2002 for the amount of the taxes that
would have been due on the transaction were it not for the Company's large net
loss carryforwards.

         Revenues related to the 2002 discontinued operations totaled $6,647,798
and $7,478,213 in 2002 and 2001, respectively. Pretax profit (loss) reported was
$(168,861) and $294,104 in 2002 and 2001, respectively.

         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 year ended December
31, 2001 are shown separately in the accompanying income statement. Deli King
had no operations for the year ended December 31, 2002. Revenues of Deli King
for 2001 were $343,463. This amount is not included in net sales in the
accompanying financial statements. Pretax loss reported in discontinued
operations was zero and $(179,074) in 2002 and 2001, respectively.

         As of December 31, 2001, all of the assets of Deli King, Inc. had been
disposed of or were deemed to be worthless. During 2002 Deli King, Inc. was
liquidated 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.
The tax effect of the loss on the sale of the Deli King business segment was to
increase the amount of the deferred tax asset by approximately $247,000 as of
December 31, 2001 for the amount of the tax benefit that would have been
received from the transaction were it not for the Company's large net loss
carryforwards.


                                      F-12


<PAGE>



NOTE 6 - INCOME TAXES

         The income taxes are comprised of the following for the years ended
December 31, 2002:

                                                            December 31,
                                                       2002              2001
                                                  ------------------------------
Deferred
     Federal                                       $ 301,100        $ (373,104)
     State                                            79,700           (98,700)
                                                  ------------------------------
Sub-total                                            380,800          (471,804)
Valuation allowance                                  380,800           471,804
                                                  ------------------------------
Income tax provision                               $       -        $        -
                                                  ==============================

The difference between the U.S. federal statutory rate and the Company's
effective tax rate is as follows:

                                                       Years Ended December 31,
                                                       2002               2001
                                                   -----------------------------
Federal statutory tax rate                             34.0%             34.0%
Valuation allowance                                   -34.0%            -34.0%
                                                   -----------------------------

Effective tax rate                                      0.0%              0.0%

                                                   =============================

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

                                                           December 31, 2002

Net operating loss carryforwards                              $ 3,985,300
Less:  valuation allowance                                     (3,985,300)
                                                           -----------------
                                                              $         -
                                                           =================

         The Company has available net operating loss carryforwards of
approximately $ 9,300,000 for federal and state income taxes expiring between
2009 and 2022 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, 2002 and 2001, the valuation
allowance was increased by $380,800 and $471,804, 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>



NOTE 7--COMMITMENTS AND CONTINGENCIES

         Operating Leases

         Until December 2002, the Company leased its distribution and office
facility in Lakewood, New Jersey under a lease which required a base annual
rental of approximately $92,000.

         On November 13, 2002 the Company entered into a lease of a 10,400
square foot facility in Sayreville New Jersey of which approximately 7,900
square feet serve as office space and a laboratory and 2,500 square feet serves
as a warehouse. The lease was effective February 15, 2003 (the move in date).
The lease is for a period of five years and three months, with the first three
months of base rental forgiven. The base rental under the lease is $114, 400 per
annum ($9,533.33 per month). The lease contains a renewal option for five
additional years, the lease provides for the Company to pay its proportionate
share of the landlord's common costs.

          The Company leases a 3,768 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 $19,200 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 based upon changes in the Italian price
indexes.

         Rent expenses totaled $ 19,522 and $ 977 for 2002 and 2001
respectively.


Minimum future commitments under all operating leases are as follows:


                  Year Ending
                  December 31,                        Amount
                ------------------            ------------------

                   2003                              $ 91,022
                   2004                               133,922
                   2005                               133,108
                   2006                               114,400
                   2007                               114,400
                   Thereafter                          42,900
                                              ------------------
                                                    $ 629,752
                                              ==================


         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 Company'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 Administrative Officer that
expire on July 31, 2005.
         The Company has a consulting agreement with the Company's Chief
Technical Officer which is automatically renewed annually on September 21, that
provides for A monthly fee of $6,000 per month.

                                      F-14


<PAGE>



NOTE 8- STOCK PLANS AND STOCK BASED COMPENSATION

         The Company's 1998 Incentive and Nonqualified Stock Option Plan was
amended in 2002 to increase the number of shares reserved for issuance under the
1998 Incentive and Nonqualified Stock Option Plan to 1,450,000. 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 December 31, 2002, 3 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 1998 plan and 40,000 shares of common stock were reserved
for issuance under the 1998 Director Stock Option Plan.

         The Company's 2002 Incentive and Nonqualified Stock Option Plan
provides for the granting of options to purchase 1,000,000 shares of common
stock to certain employees of the Company. Exercise and vesting terms for
options granted are determined at each grant date. All options will be granted
at no less than fair market value at the date of grant. At the end of 2002,
10,794 options were available for grant and reserved for issuance under the 2002
Incentive and Nonqualified Stock Option Plan.

<TABLE>
<CAPTION>

                                                2002 Options        2002 Warrants            2001 Options      2001 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 year606,349     1.3271      32,632     9.1349     572,849  $1.3127    91,300     $8.9058

              Granted                     2,403,109     0.9567     456,000     1.3015     734,719  $1.7543         -           -

              Forfeited                                             (9,299)   10.5487                        (58,668)    $8.7784

               Exercised                 (1,398,779)    0.8966                           (701,219)$1.7629          -           -
              -------------------------------------------------------------------------------------------------------------------


              Outstanding, end of year    1,610,679     1.1497     479,333     1.6554     606,349  $1.3271    32,632     $9.1349
                                        =========================================================================================

              Options and warrants
                 exercisable at year-end    989,206     1.2149     479,333     1.7076     606,349  $1.3271    32,632     $9.1349
                                        =========================================================================================

              Weighted-average fair value of $ 0.9576                                    $ 1.6700
                 options granted during the year
</TABLE>

The following table summarizes stock options and warrants outstanding and
exercisable at December 31, 2002:
<TABLE>
<CAPTION>
                                     Weighted            Outstanding              Exercisable
                                      Average                     Average                   Average
     Exercise         Options &      Remaining      Options &     Exercise    Options &    Exercise
   Price Range        Warrants          Life        Warrants       Price      Warrants       Price
----------------------------------------------------------------------------------------------------
<S>          <C>    <C>               <C>       <C>               <C>      <C>               <C>
$ 0.99      $ 1.25    1,820,609         7.36      1,820,609       $ 1.09     1,194,849       $ 1.13
  1.50        1.75      112,070         6.62        112,070         1.65        66,357         1.59
  1.78        2.00      130,000         2.14        130,000         1.95       130,000         1.95
  6.25       10.00       27,333         2.09         27,333         8.23        27,333         8.23
----------------------------------------------------------------------------------------------------
                      2,090,012         6.93      2,090,012       $ 1.27     1,418,539       $ 1.36
                   =================================================================================
</TABLE>


                                      F-15

<PAGE>



          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 2002 and 2001, respectively: risk free
interest rate 4.85% and 2.5%; expected life from 1 to 5 years; expected
volatility of 93.8% and 127%; 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.

         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 $(2,353,661) and $(1,642,335) for 2002
and 2001, respectively. Diluted loss per share, would have been $(0.70) and
$(0.76) for 2002 and 2001, 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.


NOTE 9 - RECENT ACCOUNTING PRONOUNCEMENTS

         In July, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 141, "Business Combinations"
(SFAS 141) and Statement of Financial Accounting Standards No. 142 "Goodwill and
Other Intangible Assets" (SFAS 142). SFAS 141 requires that all business
combinations initiated after June 30, 2001 be accounted for using the purchase
method of accounting, thereby eliminating use of the pooling of interests
method. SFAS 141 also requires that an intangible asset acquired in a business
combination be recognized apart from goodwill if: (i) the intangible asset
arises from contractual or other legal rights or (ii) the acquired intangible
asset is capable of being separated from the acquired enterprise, as defined in
SFAS 141.

         SFAS 142 requires, among other things, that goodwill not be amortized
but should be subject to impairment testing at the "reporting unit level" at
least annually and more frequently upon the occurrence of certain events, as
defined by SFAS 142. A reporting unit is the same level as or one level below an
operating segment, as defined by Statement of Financial Accounting Standards No.
131 "Disclosures About Segments of an Enterprise and Related Information." As a
result of the adoption of SFAS 142 in 2002, the non-amortization of goodwill had
the effect of decreasing the Company's loss from discontinued operations by
approximately $30,000.

         In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 "Accounting for the Impairment or Disposal of Ling-Lived
Assets" (SFAS 144). SFAS 144 supersedes Statement of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," and certain provisions of APB Opinion No.
30 "Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." SFAS 144 establishes standards for long-lived assets
to be disposed of, and redefines the valuation and presentation of discontinued
operations. SFAS 144 is effective for fiscal years beginning after December 15,
2001, and interim periods within those fiscal years. The adoption of SFAS 144
did not have a material effect on the Company's financial position, results of
operations, and cash flows.

                                      F-16


<PAGE>



     In July, 2002, the Financial Accounting Standards Board, or FASB, issued
SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities". SFAS No. 146 requires companies to recognize costs associated with
exit or disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. Examples of costs covered by the
standard include lease termination costs and certain employee severance costs
that are associated with a restructuring, discontinued operation, plant closing
or other exit or disposal activity. SFAS No. 146 is to be applied prospectively
to exit of disposal activities initiated after September 30, 2002. We do not
expect SFAS No. 146 to have a material effect on our consolidated financial
position, results of operations or liquidity.


NOTE 10 - 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, 2002 there were 16.5 preferred shares outstanding all
of which are convertible into common shares at the holder's option.

NOTE 11 - COMMON STOCK

         On January 23, 2003, the Company filed with the Securities and Exchange
Commission a Registration Statement under the Securities Act of 1933 seeking to
register 1,686,000 shares of its common stock, which 1,230,000 common shares
have been issued along with warrants exercisable to purchase 456,000 shares of
common stock.

NOTE 12 - SEGMENT REPORTING

         Industry segment information at December 31, 2002 and 2001 is
summarized as follows:
                                   Total Revenues        Operating Profits(Loss)
                                      2002      2001         2002        2001
                                --------------------- --------------------------
United States Operations            $ 4,268  $  4,728  $  (614,180) $  (118,251)
Italian Operations                   24,327         -      (18,405)           -
                                ------------------------------------------------
Total Segments                       28,595     4,728     (632,585)    (118,251)
Eliminations                              -         -            -            -
Corporate Income(expenses)            8,856    33,654     (650,581)    (395,652)
                                ------------------------------------------------

Consolidated                        $37,451  $ 38,382   (1,283,166)    (513,903)
                                 =======================

Interest expense                                                 -            -
                                                        ------------------------

Loss from continuing operations                        $(1,283,166) $  (513,903)
                                                       =========================


<TABLE>
<CAPTION>
                                                 Depreciation and
                      Capital Expenditures     Amortization Expense        Identifiable Assets
                        2002        2001        2002         2001          2002           2001
                     --------------------------------------------------------------------------------

                    <c>          <c>         <c>           <c>        <c>               <c>
U.S. Operations        $ 184,889    $ 48,956     $41,515      $ 3,722    $ 1,247,560       $ 406,588
Italian Operations        12,157           -       3,729            -        442,263               -
Corporate                      -           -     105,152       31,659      1,911,072       2,059,171
Discontinued Op.               -           -           -            -        397,441       1,300,228
                     --------------------------------------------------------------------------------
Consolidated           $ 197,046    $ 48,956   $ 150,396      $35,381    $ 3,998,336     $ 3,765,987
                     ================================================================================
</table>

                                      F-17
<PAGE>



NOTE 13 (Unaudited)  -  SUBSEQUENT EVENTS

         On June 10, 2003 the Company executed a promissory note and security
agreement and received a loan in the principal amount of $325,000 for a term of
four (4) months maturing on October 10, 2003. The loan bears interest at the
rate of 16% per annum, which will accrue and be payable at the maturity date
together with the principal. The note is secured by a pledge of 770,000 shares
of the Company's common stock which are being held in escrow by the lenders'
attorney. The Company has the right to extend the maturity date of the note for
a period of sixty (60) days upon payment of an extension fee of 70,000 fully
registered shares, provided, that as a condition to any such extension the SEC
shall have declared the registration statement relating to such shares and the
shares collateralizing the note effective. The 770,000 shares contingently
issued and placed in escrow will not be included in the calculation of earnings
per share while the contingency exists in accordance with paragraph 30 of SFAS
128.


                                      F-18