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                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549



                                   FORM 10-KSB



                Annual Report Pursuant to Section 13 or 15 (d) of
                       The Securities Exchange Act of 1934

                  For the Fiscal Year Ended September 30, 2002

                         Commission File Number -018515





                            SPECTRASOURCE CORPORATION
--------------------------------------------------------------------------------
             (Exact Name of Registrant as specified in its charter)



          NEVADA                                              93-0960302
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(State or other jurisdiction of                             (IRS Employer
incorporation or organization)                          Identification Number)



               14900 WESTHEIMER, STE X, HOUSTON, TEXAS 77082-1504
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                    (Address of Principal Executive Offices)



         Company's telephone number, including area code: (713) 783-0443
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    (Former name and address of Company, if changed from last annual report.)


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




          SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT:
                                      None


          SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
                         ($0.001) Par Value Common Stock

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<PAGE>

Indicate by check mark whether the Company: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the Company was required to
file such reports); Yes (X) No () and (2) has been subject to such filing
requirements for the past ninety (90) days; Yes (X) No ()

The issuer's revenues for the twelve months ended September 30, 2002, were
$6,647,730.

As of September 30, 2002, there were 7,184,872 shares of ($0.001) par value
Common Stock (the Company's only class of voting stock) outstanding. The
aggregate market value of the common shares of the Company on September 30,
2002, (based upon the mean of the closing bid and asked price) held by
non-affiliates of the Company, was approximately $262,959.


                      DOCUMENTS INCORPORATED BY REFERENCE:


Portions of the Registrant's Form 8-K filed September 6, 2002, relating to the
Registrant's acquisition of a significant amount of assets, are incorporated by
reference into Part II of this Form 10-K where indicated.

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<PAGE>

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

                                   FORM 10-KSB

                            SPECTRASOURCE CORPORATION

                                TABLE OF CONTENTS


PART I
         Item  1.    Description of Business
         Item  2.    Description of Property
         Item  3.    Legal Proceedings
         Item  4.    Submission of Matters to a Vote of Security Holders



PART II
         Item  5.    Market for Common Equity and Related
                     Stockholder Matters
         Item  6.    Management's Discussion and Analysis of
                     Financial Condition and Results of Operations
         Item  7.    Financial Statements
         Item  8.    Changes in and Disagreements with Accountants
                     On Accounting and Financial Disclosure



PART III
         Item  9.    Directors, Executive Officers, Promoters and Control
                     Persons; Compliance with Section 16(a) of the Exchange Act
         Item  10.   Executive Compensation
         Item  11.   Security Ownership of Certain Beneficial
                     Owners and Management
         Item  12.   Certain Relationships and Related Transactions
         Item  13.   Exhibits and Reports on Form 8-K



SIGNATURES

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



                                        3
<PAGE>
PART I

ITEM 1.  BUSINESS


DESCRIPTION OF THE COMPANY'S BUSINESS

SpectraSource Corporation (the Company) was organized under the laws of the
State of Nevada on September 21, 1987.

Through its subsidiaries, (the Subsidiaries) the Company provides products and
services to residential and commercial builders and developers, the
telecommunications market, commercial business applications, building owners,
and the general consumer market. These products and services, bundled and
marketed in one turnkey package to afford synergistic cost savings to its
customers, include lighting, ceiling fans, and associated hardware, fiber
optics, structured cabling, security monitoring, and electrical components for
residential and commercial uses.

Through its subsidiaries, SpectraSource has served the Texas and Gulf Coast new
construction markets for 18 years, maintaining a customer base of over 150
leading residential builders with state and national presence. It also maintains
an individual customer base to which it target markets post-construction
services and products.

The Company's subsidiaries and their respective lines of business are:

GULF COAST FAN & LIGHT, INC.

Gulf Coast Fan & Light manufactures, installs and supplies the trademarked Old
Jacksonville ceiling fan, under an exclusive licensing agreement, to residential
builders in the Texas market.

Strict manufacturing quality specifications, low manufacturing costs, and
lifetime warranties combine to position the Old Jacksonville line as the
industry standard for homebuilders in the Gulf Coast construction market, as
witnessed by a 99.3% satisfaction rate on customer surveys.

Industry leading manufacturing quality specifications that distinguish Gulf
Coast Fan from other fan manufacturers include:

     o    Multi-Electroplated Finish - to withstand 100% humidity ratings

     o    Swivel Mounting system - absorbs the torque and vibration and relieves
          the stress to the mounting system

     o    Steel Hanging Ball, rather than plastic - for strength and durability

     o    Cast Metal Hanging Bracket, instead of stamped metal - for improved
          stability and alignment

     o    Fans secured to downrods with a triple attachment system - to maintain
          position and safety

     o    Multiple capacitors, low tolerance blade alignment to blade irons and
          motor, anti-vibration and anti-loosening gaskets, micro blade
          balancing, and the use of moisture depleted high quality hardwood and
          composite blades - for quiet and smooth operation

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o        High Quality Energy Efficient Motor - contains fine silicon steel
         stators and rotors, evenly displaced and tightly bound fine copper
         windings, and perma-sealed ball bearings

Products:
Ceiling Fans Design and Import
Ceiling Fan Distribution
Ceiling Fan Installation

CONNECT SOURCE COMMUNICATIONS, INC.

Connect Source sells and installs infrastructure cabling, wiring, and network
systems for the residential and commercial building market. Connect Source
equips homes to readily receive state of the art telecommunications services
such as telephone, digital video and music, dedicated Internet connectivity,
community intranet, voicemail, home automation, security, Through its WATCHDOG
security division, Connect Source also provides 24-our home security monitoring.

Products:
Fiber Optic Risers
Fiber Optic Backbone
Home Network Systems
Interface Panels
Structured Cabling
Security Monitoring

BUILDERS LIGHTING & HARDWARE, INC.

Builders Lighting & Hardware is a major supplier of residential and commercial
lighting and hardware fixtures to the residential and commercial building
markets, with its signature 25,000 square foot retail showroom and warehousing
facility in Houston, Texas.

Products:
Electrical Components
Lighting
Hardware

DESCRIPTION OF TECHNOLOGY

Gulf Coast designs, manufactures, and is the sole distributor of the Old
Jacksonville Ceiling Fan brand under a licensing agreement with U.S. Ceiling Fan
Corp., a company controlled by the Company's Principal Shareholder.

Builders Lighting and Hardware distributes and wholesales lighting, hardware,
and electrical components to the residential and commercial building industry.
Its products are branded and commodity items, many of which are available though
competing companies.

Connect Source markets its trademarked WATCHDOG security surveillance systems.

The Company employs cost-saving proprietary marketing and delivery of bundled
product and service packages to customers, protected under various trade secret
laws.

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<PAGE>
FEDERAL REGULATION

All of the products marketed by the Company meet Underwriters Laboratory ("UL")
standards, as required by Federal regulations. There are no other significant
regulations that affect the business apart from those regulations affecting
commercial enterprises in general. Compliance with environmental laws is an
insignificant cost to the Company.

MARKETING

Through its Subsidiaries, the Company markets its products with direct sales,
retail stores, the Internet, telephone sales, and other marketing techniques.
The Subsidiaries have competed in the commercial and residential building
industry for 18 years, and benefit from an excellent reputation in their
respective markets. Since the consolidation of its subsidiaries product
divisions earlier this year, the Company is unifying its sales force and has
begun to cross-markets to the customer bases of its respective subsidiaries.

The Company is planning a nationwide expansion based on utilizing many of its
existing customers' national presence to move into new markets served by these
customers. This, coupled with cross-market selling and its ability to produce
substantial volume cost savings through vertical integration in the
manufacturing, purchasing, and distribution product and service mix, is expected
to provide substantial growth in both revenue and profits over the next few
years.

To help facilitate this growth, the Company is in the final stages of
restructuring its warehousing to utilize an address system that will allow
efficient locating for stocking and retrieving of products. The Company is also
completing plans for a restructuring of its showroom to a revolutionary venue
design that will provide a smooth method of moving the customer traffic flow in
a manner that makes the selection process much easier and faster than provided
in standard showrooms.

RETURNS AND WARRANTIES

The Company offers a limited lifetime warranty on its products under the
licensed name Old Jacksonville and a one-year warranty on all installation work.
It passes through whatever warranty is in existence from the manufacturer of
other products sold. The Company allows credit on items from which it receives
credit from the manufacturers. No significant returns and warranty losses have
been experienced.

EMPLOYEES

At fiscal year end, the Company and its subsidiaries had approximately 50 full
time employees.

CUSTOMERS AND SUPPLIERS

The Company's principal customers are homebuilders, multi-family and commercial
developers, commercial contractors, supply houses and the general public. The
Company sells and distributes to a customer network of over 150 of the largest
homebuilders nationwide, with a predominant presence in Texas. No single
customer accounts for a significant percentage of the Company's revenue.

The Company purchases its inventory from a number of national and international
manufacturers and distributors, none of which account for a significant
percentage of the Company's purchases.

COMPETITION

There is substantial competition in the wholesale electrical components and
hardware, many of which competitors have more resources than the Company. The
Company's success depends on its vertical

                                        6
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integration, its methods of delivery, and the cross marketing of each division's
precision built products with industry leading technical quality to a broad
repeat customer base, offering a continually expanding line of goods and
services to its target market at attractive prices, providing prompt delivery
and service, while maintaining a low-cost overhead structure. National economic
conditions impacting the construction industry may affect the Company's
performance.

BUSINESS DEVELOPMENT

Effective April 28, 2000, Charles Sheffield increased his ownership of the
Company pursuant to a reverse acquisition in which the Company exchanged its
common stock for the common stock of three corporations controlled by Mr.
Sheffield: Gulf Coast Fan & Light, Inc. (Gulf Coast); Builder Source, Inc.
(Builder Source); and Builders Lighting and Hardware, Inc (Builders Lighting).
As a result of the reverse acquisition, Charles Sheffield became the Company's
principal shareholder, periodically referred to hereinafter as the `Principal
Shareholder'.

In mid-2000, the Company's subsidiary, Connect Source Communications, Inc.
(Connect Source) formed a fiber optics and structured cabling division to sell
and install fiber optics and structured cabling products to existing and new
customers in the commercial and residential building industry.

In September, 2002, the Company purchased the operating assets, and hired the
key personnel, of Home Structure Sound, a company engaged in the residential
structured cabling and home network business similar to Connect Source. The
acquisition of Home Structure Sound propels Connect Source to a market leading
position in the residential structured cabling and home network business.

In October, 2002, the Company introduced its security monitoring service under
the proprietary trademark name `WATCHDOG Surveillance'. The Company presently
provides home security system wiring. Providing surveillance system monitoring
complements the Company's existing business and provides a source of recurring
revenue streams.


ITEM 2. PROPERTIES

As of September 30, 2002, the Company and its subsidiaries lease four locations
in Houston, Dallas and San Antonio totaling approximately 33,000 square feet of
office and warehouse space. All leases are at current market rates. The
properties are adequately insured, and are suitable and adequate for their
intended use.

To improve its business processes, the Company has completed plans to physically
consolidate the Houston operations of the Subsidiaries into one leased office
and warehouse space.

The Company has no current or planned direct or indirect investments in real
estate, real estate mortgages, or real estate activities. Any such investment is
subject to approval by the Board of Directors.

ITEM 3. LEGAL PROCEEDINGS

None.

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

None.

                                        7
<PAGE>
PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The table below sets forth the high and low bid price of common stock through
September 30, 2002, as reported by Reuters. Such over-the-counter market
quotations reflect inter-dealer prices without retail mark-up, markdown, or
commissions, and may not necessarily represent actual transactions.

Fiscal Year Ending September 30, 2001                  High           Low
   1st Quarter                                         0.93           0.70
   2ndQuarter                                          0.70           0.30
   3rd Quarter                                         0.80           0.45
   4th Quarter                                         0.80           0.795

Fiscal Year Ending September 30, 2002                  High           Low
   1st Quarter                                         0.80           0.30
   2nd Quarter                                         0.70           0.52
   3rd Quarter                                         0.51           0.30
   4th Quarter                                         0.51           0.25


As of September 30, 2002, the Company had approximately 485 shareholders of
record. The Company has never paid cash dividends and has no plans to pay any
cash dividends in the foreseeable future.

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


For the twelve months ended September 30, 2002, consolidated revenue was
$6,647,730 as compared to $6,200,506 for the twelve months ended September 30,
2001. Consolidated net income for September 30, 2002 and the twelve months ended
September 30, 2001 was $237,639 and $107,917, respectively. Earnings before
interest, taxes, depreciation and amortization (EBITDA) for the twelve months
ended September 30, 2002 was $659,549 as compared to $353,997 for the twelve
months ended September 30, 2001. Cash flow from operations for the twelve months
ended September 30, 2002 was $257,708, compared to ($26,125) for the twelve
months ended September 30, 2001. Gross Profit as a percentage of sales increased
from 38.5% for the twelve months ended September 30, 2001 to 41.8% for the
twelve months ended September 30, 2002, due to bulk purchasing initiatives
instituted by the Company and, to a lesser extent, higher sales margins on
ceiling fan products.

The Company continues to commit its investment resources to Connect Source.
During fiscal year 2002, to increase its entry into the structured cabling and
home network market, the Company purchased the business operations of Home
Structure Sound in a transaction valued over $400,000. For the first time since
its inception, cash flow from operations of Connect Source subsequent to
year-end is positive, marking the subsidiary's emergence from a start-up
operation. Management expects Connect Source to generate revenues in excess of
$1 million in fiscal year end 2003, compared to $171,000 for the year ended
September 30, 2002, with budgeted net profit margins in the 18% range.


The Subsidiaries have had 18 years of profitability with positive cash flows,
creating the ability to sustain operations and to finance the new operations of
other subsidiaries. This is reflected in the earnings

                                        8
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generated from several product lines for which the Company has achieved
aggressive profit margins by sustaining minimal costs and high efficiency in
both purchasing and delivery and installation of the various product lines. The
Company expects that the cash requirements for operations for the next fiscal
year will be provided from its subsidiaries. There is no present assurance,
however, that these activities will sustain their respective levels of cash flow
over the long-term.

Through nationwide expansion as well as acquisitions, the Company plans to
capitalize on its market strength, which is to offer a bundled package of
lighting, hardware, ceiling fan and structured cabling products and services at
one overall lower cost to its wholesale customers. A number of these customers
are among the largest builders in the Texas market as well as nationally. The
Company plans to utilize this base, coupled with the cross marketing of its
product lines and the Home Network Division to optimize this expansion.

The Company is developing targeted marketing initiatives to solicit homeowners
to whom the Company, through a residential homebuilder, sold its products during
a home's original construction. Using its extensive sales database of homes that
contain the Company's lighting, fan, and hardware products, the Company can
effectively target these homeowners as product styles change, the age of the
home indicates it is due for remodeling, or as the products near the end of
their respective lives.

Investment in capital assets is not significant since labor is the major cost of
delivery and installation of products. The Company plans no significant
investment in capital assets.

Liquidity is expected to increase substantially as funded start-ups are
capitalized and the Company should only require short-term cash advances to
sustain normal operations. The Company is currently studying a range of logistic
plans to optimize the efficiencies gained from centralizing and consolidating
the Subsidiaries' warehouse and shipping operations, which was completed during
this fiscal year.

Safe Harbor Statement Under Private Securities Litigation Reform Act of 1995:
The above statements in regard to SpectraSource Corporation and its affiliates
and subsidiaries which are not purely historical are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
including SpectraSource Corporation's beliefs, expectations, hopes or intentions
regarding the future. All forward-looking statements are made as of the date
hereof and are based on information available to the parties as of such date. It
is important to note that actual outcome and the actual results could differ
materially from those in such forward-looking statements. Factors that could
cause actual results to differ materially include risks and uncertainties such
as technological, legislative, corporate and marketplace changes.

ITEM 7. FINANCIAL STATEMENTS

The information required by this item is included in a separate section of this
Annual Report beginning after Part IV.

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

None

                                        9
<PAGE>
PART III

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

IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS


BUSINESS EXPERIENCE

      NAME              AGE                       POSITION
      ----              ---                       --------
Charles E. Sheffield    49    Chief Executive Officer. Mr. Sheffield is a
                              graduate of the University of Houston with a BBA
                              in Finance. In 1973 he founded Sheffield
                              Construction Co., Inc., which became U. S. Design
                              & Construction Corp. when he marketed this company
                              national in the early and mid-1980's. In the 20
                              years he headed this company, Mr. Sheffield
                              expanded it from a small local firm to a leading
                              national contractor. During this period, Mr.
                              Sheffield also founded Gulf Coast Fan & Light,
                              Inc. (1984), a major supplier of ceiling fans and
                              electrical components. This base was expanded into
                              a group of companies that provide a host of
                              electrical, hardware, fiber optics, and structured
                              cabling products to the residential and commercial
                              markets.

David Bero              44    Vice President of Operations. Mr. Bero is head of
                              operations for all SpectraSource subsidiaries. He
                              was educated at the University of New Mexico in
                              Business Management. Prior to his joining the
                              Company, he spent 7 years as District Manager of
                              Swiss Colony Stores and owned and operated the
                              Light House, Inc., a lighting company that he
                              founded in 1986 and continued to operate until
                              joining BL&H in 1997.

EA Buchholtz            51    Chief Financial Officer. Mr. Buchholtz graduated
                              from the University of Texas at Austin with a BBA
                              degree in Accounting and General Business. He is
                              also a Certified Public Accountant. Prior to
                              joining the company in 2001, Mr. Buchholtz was
                              controller and treasurer for Albis Corporation.
                              The company is a manufacturer and distributor of
                              plastic resins. In addition to his financial
                              duties, he was also instrumental in the design and
                              implementation of numerous financial and
                              operational systems. He also previously held
                              various financial positions primarily in the oil
                              service industry.

                                       10
<PAGE>
Beruk Zewdie            45    Vice President and Controller. Mr. Zewdie holds a
                              degree in business and accounting from the
                              University of Houston. Prior to his joining the
                              Company in 1987, he held various positions in
                              accounting and operations.

Michael Newman          57    Director. Mr. Newman graduated from Clemson
                              University with a degree in mathematics. He served
                              as a management consultant with Deloite and Touche
                              in Washington, D.C. before buying an oil and gas
                              trucking firm in Mississippi, which he expanded
                              and sold to a public exploration company and
                              continued to serve as President until l991. He
                              returned to Texas where he purchased and operated
                              several Texas and California franchises of the New
                              Horizons Computer Learning Centers. He
                              subsequently sold the built-up business back to
                              the franchisor and continued to serve as
                              President. He recently purchased a Florida Region
                              Franchise of New Horizons Computer Learning
                              Centers.

Leon D. Hogg            82    Director. Mr. Hogg has been a Director of the
                              Company since February 27, 1995. Mr. Hogg is a
                              retired commercial banker who served as President
                              of Therapy Lasers, Inc. from 1995 to April, 2000.
                              He has since served the company in the capacity of
                              public relations, director, and secretary. He
                              holds a bachelor's degree in business from the
                              University of North Texas When operating his
                              mortgage banking firm, Lee Hogg & Co. Inc., Mr.
                              Hogg arranged financing for apartment buildings,
                              office buildings and undeveloped property for many
                              projects in the Houston area.

Geary Broadnax          50    Director. Mr. Broadnax, after studying electrical
                              engineering and photography at Virginia Tech,
                              became a photographer and later, Director of
                              Photography for the Houston Post. In 1992 Mr.
                              Broadnax founded AllSource, Inc., a systems
                              integration company, which became ranked 2nd
                              (second) on the list of Houston's 100 Fastest
                              Growing Companies. In 1995, Mr. Broadnax expanded
                              to become an Internet provider. This company,
                              Insync Internet Services, Inc, became the number
                              one fastest growing technology company in the 1998
                              Houston 100 Fastest Growing Companies list. In
                              2000, he sold Insync to Reliant Energy and Mr.
                              Broadnax became the Senior Vice President of
                              Reliant Energy Communications. After fulfilling
                              the terms of his employment contract with Reliant,
                              he purchased his latest company, Empowerment,
                              Inc., a 7-year old CRM (customer relationship and
                              management) software company. He now serves as its
                              Chairman and CEO.

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<PAGE>
William Sherrill        74    Director. Mr. Sherrill graduated from the
                              University of Houston with a Bachelors of Business
                              Administration and obtained his MBA from the
                              Harvard Graduate School of Business
                              Administration. He has served as a Governor of the
                              Federal Reserve System in Washington D. C.,
                              Director of the Federal Deposit Insurance
                              Corporation, Treasurer of the City of Houston,
                              Chief Administrative Officer of the City of
                              Houston, Executive Assistant to the Mayor and Port
                              Commissioner of the Port of Houston, and
                              Commissioner to the United Nations Commission for
                              UNESCO. In private industry, he has served as
                              President of Associates Corporation of North
                              America, a multi-billion dollar international
                              financial services corporation, as a member of
                              Gulf and Western's Board of Directors, Chairman,
                              President and CEO of Dasa Corporation, a
                              multi-million dollar telephonics and electronics
                              company with international offices and
                              distribution. He has also served as President of a
                              Commercial Bank and a Federal Credit Union, as
                              well as Executive Vice President of a Savings and
                              Loan Association. As a financial consultant, he
                              has assisted corporations structuring
                              acquisitions, mergers and spin-offs. Mr. Sherrill
                              now teaches Entrepreneurship as an Executive
                              Professor at the University of Houston's College
                              of Business Administration.

COMPLIANCE WITH SECTION 16 (A) OF THE SECURITIES EXCHANGE ACT

Section 16 (a) of the Securities Exchange Act of 1934 as amended, (the "Exchange
Act") requires the Company's officers and directors, and persons who own more
than ten percent of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Officers, directors and greater than ten-percent
shareholders are required by the Securities and Exchange Commission regulations
to furnish the Company with copies of all Section 16 (a) forms they file.

Management believes that during the period from September 30, 2001 to September
30, 2002, all Section 16 (a) filing requirements applicable to its current
officers, directors and greater than ten-percent beneficial owners were complied
with.

ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

In his capacity as President, CEO, and Loan Guarantor, the CEO was granted the
following stock options during the fiscal year ended September 30, 2002 for

                                       12
<PAGE>
services rendered during the three fiscal years ended in 2000, 2001, and 2002:
<TABLE><CAPTION>
                                                                           Percent of total
                    Years services were      Number of securities         options granted to
      Name                rendered        underlying options granted   employees in fiscal year   Exercise price ($/Sh)
<S>                         <C>                     <C>                         <C>                       <C>
Charles Sheffield           2000                    25,000                      17.8                      0.34
Charles Sheffield           2001                    25,000                      17.8                      0.34
Charles Sheffield           2002                    25,000                      17.8                      0.34
</TABLE>
No other named executive officer or other employee of the Company was
compensated more than $100,000 during the fiscal year ended September 30, 2002.

OPTION AND LONG-TERM COMPENSATION TABLES

On July 31, 2000, the Company adopted an incentive stock option plan. As of
September 30, 2002, under this incentive stock option plan, total cumulative
options on 312,570 shares have been awarded to 50 employees according to the
following schedule, none of which are in-the-money:

                 TOTAL CUMULATIVE OUTSTANDING OPTIONS UNDER ISO

      Name                       Position                      Underlying Shares

Charles Sheffield        President, CEO, Director                   105,000
All Other Employees                                                 207,570
                                                                    -------
     Total                                                          312,570
                                                                    -------

Includes 3 years of total stock option
compensation for those listed above

PENSION PLANS AND OTHER BENEFIT OR ACTUARIAL PLANS

The Company has a 401k plan in which employees contribute a portion of their
salaries. The Company then has the option to match a portion of the employee
contribution. In the past, the Company has typically matched, within certain
restrictions, 25% of the employee contribution.

The Company has a medical insurance plan in which it pays 75% of covered
employees' cost of insurance coverage for the covered individual.

EMPLOYMENT CONTRACTS AND TERMINATION AGREEMENTS

The Company has no standard employment arrangements or termination agreements
with any named executive officer or director.

DIRECTOR COMPENSATION

The Company has no standard arrangement by which its directors are compensated.
During fiscal year 2002, the Company awarded 10,000 stock options to Directors
for each year of service as a Director of the Company,

                                    Number of         Exercise
                              underlying securities     price
  Director                       options granted        ($/Sh)   Expiration date

Charles Sheffield                    30,000             0.34         5 yrs.
Leon Hogg                            30,000             0.30         5 yrs
Mike Newman                          30,000             0.30         5 yrs

                                       13
<PAGE>
Geary Broadnax                       10,000             0.30         5 yrs
William Sherrill                     10,000             0.30         5 yrs
Catherine Cullen, Former Director    10,000             0.30         5 yrs
Mark Chapman, Former Director        50,000             0.30         5 yrs


COMPENSATION COMMITTEE REPORT

The Company's Compensation Committee consists of all Directors. There were no
items to report.

STOCK PERFORMANCE CHART

A graph comparing the Company's commutative total return to stockholders in
terms of stock price appreciation plus dividends during the previous five years
to a broad market index, such as the S&P 500, has not been presented due to the
Company's inactivity in recent years and the resulting lack of any significant
stock price appreciation or dividends.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the stock ownership of each person known by the
Company to be the beneficial owner of five percent or more of the Company's
common stock as of September 30, 2002. Unless otherwise indicated, each person
has beneficial voting and investment power with respect to the shares owned.

Name and Address of Beneficial Owner     Number of Shares    Percentage of Total

Charles Sheffield
14900 Westheimer
Houston, Texas 77082                       5,425,232(A)             75.5%

(A) Includes shares owned directly and shares owned indirectly by related
entities, as follows:

Name and Address of Beneficial Owner     Number of Shares    Percentage of Total

Charles Sheffield
U.S. Design & Construction, Inc.             5,410,855                75.3%
                                                14,377                  .2%
                                            ----------           ----------
   Total                                     5,425,232                75.5%
                                            ==========           ==========

The following table sets forth as of September 30, 2002, the common stock
ownership of all officers and directors of the Company:

                                       14
<PAGE>
Name and Address of Beneficial Owner     Number of Shares    Percentage of Total

Leon D. Hogg
6701 Sands Point, Suite 15                      100,400               1.4%
Houston, Texas 77074

Charles Sheffield
14900 Westheimer                              5,425,232              75.5%
Houston, Texas 77082

All Officers Not Listed Above                    14,500               0.2%
                                              ---------          ---------
All Officers and Directors as a Group         5,540,132              77.1%
                                              =========          =========

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Effective April 28, 2000, the Principal Shareholder acquired control of the
Company pursuant to the acquisition as described in Item 1 above.

An affiliated company, controlled by the Principal Shareholder, wholesales
ceiling fans of lower quality and lower price points than the Company's
products.

Under a licensing agreement with a company controlled by the Principal
Shareholder, Gulf Coast Fan & Light is the exclusive licensee of the Old
Jacksonville brand of ceiling fan. Payments made under the license agreement for
fiscal years ended 2002, 2001, and 2000 were $0, $0, and $170,000 (made prior to
the reverse acquisition), respectively.


PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(A)      EXHIBITS:

         LISTING OF SUBSIDIARIES OF REGISTRANT:

                                 Name                     Percentage Owned

           Connect Source Communications, Inc.
           (Formerly LaserCare, Inc.)
           (Acquired March 12, 1996)                          100.00%

           Gulf Coast Fan & Light, Inc.
            (Acquired April 28, 2000)                         100.00%

           Builder Source, Inc.
            (Acquired April 28, 2000)                         100.00%

                                       15
<PAGE>

           Builders' Lighting and Hardware, Inc.
           (Acquired April 28, 2000)                          100.00%


(B)      REPORTS FILED ON FORM 8-K:

On November 27, 2001, the Company filed a Form 8-K announcing the change in the
Company's certifying accountant. On September 6, 2002, the Company filed a Form
8-K reporting the acquisition of a significant amount of assets. Both Form 8-K's
are incorporated by reference.

















                                       16
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report on Form 10-KSB to be signed on its behalf
by the undersigned, thereunto duly authorized, on this 29th day of December,
2002.

SPECTRASOURCE CORPORATION

By:  /s/ CHARLES SHEFFIELD
     ------------------------------------------
     Charles Sheffield, Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, the
following persons, in the capacities and on the dates indicated, have signed
this Report on Form 10-KSB below.

          NAME                            TITLE                     DATE
          ----                            -----                     ----

/s/ CHARLES E. SHEFFIELD                President,             December 29, 2002
---------------------------       Chief Executive Officer,
Charles E. Sheffield                     Director


/s/ EA BUCHHOLTZ                  Chief Financial Officer      December 29, 2002
---------------------------
EA Buchholtz




SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANT WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT:

NOT APPLICABLE.








                                       17


<PAGE>
                   SPECTRASOURCE CORPORATION AND SUBSIDIARIES
                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
                         REQUIRED BY ITEMS 8 AND ITEM 13

                                      INDEX


A.       FINANCIAL STATEMENTS
         ------------------------------------
         Report of independent certified public accountants

         Consolidated Balance sheet - September 30, 2002, and 2001

         Consolidated Statements of Income for the years ended September 30,
         2002 and September 30, 2001

         Consolidated Statements of Shareholders' Equity for the years ended
         September 30, 2002 and September 30, 2001

         Consolidated Statements of Cash Flows for the years ended September 30,
         2002 and September 30, 2001

         Notes to Consolidated Financial Statements




B.       FINANCIAL STATEMENT SCHEDULES
         -----------------------------------------------------

         Schedules are omitted because of the absence of the conditions under
         which they are required, or because the information required by such
         omitted schedule is contained in the financial statements or the notes
         thereto.


                                       18
<PAGE>

Yartz & Rabalais
800 Bering, Suite 310
Houston, Texas 77057
713-839-8200





                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors and Stockholders
of SpectraSource Corporation and its Subsidiaries

We have audited the accompanying consolidated balance sheets of SpectraSource
Corporation and its subsidiaries as of September 30, 2002 and September 30,
2001, and the related consolidated statements of income, of cash flows and of
changes in stockholders' equity for the years then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of SpectraSource
Corporation and its subsidiaries at September 30, 2002 and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States.


/s/ Yartz & Rabalais
    Yartz & Rabalais

Houston, Texas

December 29, 2002





                                       19
<PAGE>
                            SPECTRASOURCE CORPORATION
                           CONSOLIDATED BALANCE SHEET


<TABLE><CAPTION>
                                                        September 30,     September 30,
                                                            2002              2001
                                                        ------------      ------------
<S>                                                     <C>               <C>
ASSETS
   Current Assets
     Cash                                               $    156,350      $    165,414
     Accounts Receivable, less bad debt reserve of
       $125,235 and $24,080, respectively                  1,057,222           905,601
     Prepaid Expenses                                        115,954            35,863
     Inventory                                             1,134,242           897,323
                                                        ------------      ------------
   Total Current Assets                                 $  2,463,767      $  2,004,201

   Fixed Assets, net of accumulated depreciation of
     $399,878 and $321,692                                   451,068           431,953
   Goodwill, net of amortization of $1,670                   400,768
   Deferred Tax Asset (Note 8)                               342,243           470,244
   Other Assets and Investments                               30,816            13,000

                                                        ------------      ------------
Total Assets                                            $  3,688,663      $  2,919,398
                                                        ============      ============

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current Liabilities
     Accounts payable and accrued expenses              $    592,204      $    341,785
     Short Term Debt (Note 4)                                806,600           847,143
     Current Maturities of Long Term Debt                    141,017            87,430
     Due To Affiliates                                       156,429           127,792
                                                        ------------      ------------
   Total Current Liabilities                               1,696,250         1,404,150

   Long Term Debt (Note 5)
     Notes Payable, Banks                                     12,207           114,743
     Notes Payable, Shareholders                           1,522,548         1,374,313
                                                        ------------      ------------
   Total Long Term debt                                    1,534,755         1,489,056

   Stockholders' Equity (Deficit)
     Common stock, $.001 par value, 10,000,000
       shares authorized, with 7,184,872 and
       6,015,850 shares issued and outstanding at
       September 30, 2002 and September 30, 2001,
       respectively                                           17,356            16,188
     Capital in excess of par value                        3,530,704         3,338,045
     Accumulated Deficit                                  (3,090,403)       (3,328,041)
                                                        ------------      ------------
   Total Stockholders' Equity                                457,657            26,192
                                                        ------------      ------------
Total Liabilities and Stockholders' Equity              $  3,688,662      $  2,919,398
                                                        ============      ============
</TABLE>


        The Accompanying Notes are an integral part of these statements.

                                       20
<PAGE>
                            SPECTRASOURCE CORPORATION
              CONSOLIDATED STATEMENT OF INCOME FOR THE YEARS ENDED
                           SEPTEMBER 30, 2002 AND 2001



<TABLE><CAPTION>
                                                  September 30,    September 30,
                                                      2002             2001
                                                  ------------     ------------
<S>                                               <C>              <C>
Sales                                             $  6,647,730     $  6,200,506
Cost of Sales                                        3,869,455        3,808,857
                                                  ------------     ------------
Gross Profit                                         2,778,275        2,391,649

Other Operating Costs
   Selling and administrative expenses                  80,884           45,581
   Depreciation                                        107,280          102,930
   Other costs and operating expenses                2,228,327        2,097,939
                                                  ------------     ------------
Total Other Operating Costs                          2,416,491        2,246,450

                                                  ------------     ------------
Income from operations                                 361,784          145,199

Other Income:
   Interest Income                                          45            2,927
   Miscellaneous Other Income (Expense)                  3,812            1,444
                                                  ------------     ------------
Total Other Income                                       3,857            4,371

                                                  ------------     ------------
Income before income taxes                             365,641          149,570

Provision for income taxes (Note 8)                    128,002           41,653

                                                  ------------     ------------
Net Income                                        $    237,639     $    107,917
                                                  ============     ============

Basic earnings per common share                   $       0.03     $       0.02
Diluted earnings per common share                 $       0.03     $       0.02
Weighted average number of common shares             7,184,872        6,015,850
</TABLE>





        The Accompanying Notes are an integral part of these statements.


                                       21
<PAGE>
                            SPECTRASOURCE CORPORATION
                       CONSOLIDATED STATEMENT OF CASH FLOW
                 FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001



<TABLE><CAPTION>
                                                       September 30,     September 30,
                                                           2002              2001
                                                       ------------      ------------
<S>                                                    <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income from operations                             $    237,639      $    107,917
Adjustments to reconcile net income:
   Depreciation                                             107,280           102,930
   Bad debt expense                                          63,924            12,800
   Deferred taxes                                           128,001            41,653
   Increase in Accounts Receivable                         (215,545)          128,646
   Increases in Inventory                                  (236,919)           20,730
   Increase (Decrease) in Prepaid Expenses                  (80,091)           29,134
   Increase (Decrease) in Accounts Payable                  250,418          (469,935)
   Increase (Decrease) in Due to Related Parties             28,639           (23,029)
                                                       ------------      ------------
Net cash provided/(used) in operating activities            254,708           (49,154)
                                                       ------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Long term asset purchases                               (527,163)         (305,417)
   Increase (Decrease) in Long Term Deposits                 35,335
                                                       ------------      ------------
Net cash used in investing activities                      (527,163)         (270,082)
                                                       ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Issuance of common stock                                 193,827              (998)
   Proceeds (Repayment) from short term debt                (40,543)          146,988
   Proceeds from long term debt                              99,284           119,403
   (Increase) in long term Investments                      (17,817)


                                                       ------------      ------------
Net cash provided by financing Activities                   263,391           265,393
                                                       ------------      ------------

Net (Decrease) in cash and cash equivalents                  (9,065)          (53,843)
Cash and equivalents, beginning of period                   165,414           219,257
                                                       ------------      ------------
Cash and equivalents, end of period                    $    156,350      $    165,414
                                                       ============      ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid for Interest                              $     58,626      $    101,497
</TABLE>



        The Accompanying Notes are an integral part of these statements.

                                       22
<PAGE>
                            SPECTRASOURCE CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY




<TABLE><CAPTION>
                                        Common Stock            Additional                         Total
                                ---------------------------       Paid in       Accumulated    Stockholders'
                                   Shares          Amount         Capital         Deficit          Equity
                                -----------     -----------     -----------     -----------     -----------
<S>                             <C>             <C>             <C>             <C>             <C>

BALANCE, SEPTEMBER 30, 2000       6,015,850     $    16,190     $ 3,338,043     $(3,435,958)    $   (81,725)

   Net Income                                                                       107,917         107,917

                                -----------     -----------     -----------     -----------     -----------
BALANCE, SEPTEMBER 30, 2001       6,015,850     $    16,190     $ 3,338,043     $(3,328,041)    $    26,192

   LT Asset Purchase                339,400             339         192,661                         193,000
   Stock Compensation               829,622             827                                             827
   Net Income                                                                       237,639         237,639
                                -----------     -----------     -----------     -----------     -----------
BALANCE, SEPTEMBER 30, 2002       7,184,872     $    17,356     $ 3,530,704     $(3,090,403)    $   457,657
                                ===========     ===========     ===========     ===========     ===========
</TABLE>





        The Accompanying Notes are an integral part of these statements.


                                       23
<PAGE>
                            SPECTRASOURCE CORPORATION
                   NOTES TO THE COMBINED FINANCIAL STATEMENTS


NOTE 1.   ORGANIZATION AND NATURE OF OPERATIONS

SpectraSource Corporation (the Company), through its four subsidiaries, markets
products and services to the telecommunications market, commercial business
applications, building owners, residential and commercial builders and
developers, and the general consumer market. These products and services include
fiber optics, structured cabling, home network systems, electrical components,
lighting, ceiling fans, and associated hardware.

On April 28, 2000, the Company acquired all of the stock of three corporations
that are engaged in supplying fixtures to the residential and commercial
construction industry: Gulf Coast Fan & Light, Inc. (Gulf Coast); Builder
Source, Inc. (Builder Source); and Builders Lighting and Hardware, Inc.
(Builders Lighting) (collectively referred to as the "Acquired Companies").

As a result of these acquisitions, the Company's Principal Shareholder received
as consideration for his interests in the Acquired Companies a total amount of
4,301,000 shares of the Company's common stock. Upon consummation of these
acquisitions, the Principal Shareholder, directly and indirectly through his
control of a corporation that owns stock in the Company, owned 4,734,876 shares
which represents approximately 81% of the Company's outstanding common stock as
of April 28, 2000.

The transaction between the Company and the Acquired Companies has been
reflected in the accompanying financial statements as a reorganization of
entities under common control whereby the historical basis of assets and
liabilities of the Acquired Companies are carried forward as the recorded basis
for the Company.


NOTE 2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries after elimination of all significant inter-company
transactions.

      USE OF ESTIMATES
The preparation of these financial statements requires the use of certain
estimates by management in determining the Company's' combined assets,
liabilities, revenues and expenses. Actual results could differ from those
estimates.

      CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of highly liquid investments that are readily
convertible into cash and have a maturity of three months or less. Cash
equivalents are stated at cost, which approximates fair market value.

      REVENUE RECOGNITION
Revenue from product sales is recognized as risk and title to the product
transfer to the customer, which usually occurs when shipment, delivery, or
installation, whichever is applicable, is made. The Company accrues for
allowances for doubtful accounts based on its experience.

                                       24
<PAGE>
      INVENTORIES
Inventories are carried at the lower of cost or market, using average cost.
Materials and supplies are valued using the average cost method.

      PROPERTY AND EQUIPMENT
Property and equipment is stated at cost less accumulated depreciation. Property
and equipment is depreciated on the straight-line method over their estimated
useful lives, which in the opinion of management is adequate to allocate the
cost of the property and equipment over their estimated useful lives.
Expenditures for renewals, replacements, and betterments are capitalized.
Maintenance and repairs are charged to operating expenses as incurred. Upon sale
or other disposition, the applicable amounts of asset cost and accumulated
depreciation are removed from the accounts and the net amount, less proceeds
from disposal, is charged against or credited to income.

      GOODWILL
Goodwill represents the excess of purchase price paid over the value assigned to
the net tangible and identifiable intangible assets of a business acquired. As
described below under Recent Accounting Standards, no amortization of goodwill
has been recorded; instead, goodwill will be reviewed for impairment based on
fair values.

      DEFERRED SOFTWARE COSTS
Costs to purchase and to develop software for internal use are deferred and
amortized on a straight-line basis over 5 years.

      INCOME TAXES
The Company follows the asset and liability approach to account for deferred
income taxes. Under this method, deferred taxes are recognized for temporary
differences between the book and tax basis of assets and liabilities. These
temporary differences are measured using the applicable enacted tax rates and
provisions of the enacted tax laws. Valuation allowances are provided against
deferred tax assets when it is more likely than not that some portion or all of
the deferred tax asset will not be realized.

      COMPREHENSIVE INCOME
Financial Accounting Standards Board ("FASB") Statement No. 130, "Reporting
Comprehensive Income", became effective for fiscal years beginning after
December 15, 1997, and establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. This Statement requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. The Company
had no comprehensive income other than net income during the periods included in
the accompanying financial statements.

      EARNINGS PER COMMON SHARE
Earnings per common share is computed by dividing net income by the weighted
average number of common shares outstanding during the year.

      RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets, effective January 1, 2002. SFAS No. 141 is effective for business
combinations initiated after June 30, 2001 and has no effect on the Company.
SFAS No. 142 prescribes discontinuance of the amortization of goodwill as well
as annual review of goodwill for impairment. The Company does not expect the
implementation of SFAS No. 142 to result in any impairment of goodwill.


                                       25
<PAGE>
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. Adoption of SFAS No. 143 and SFAS
No. 144 is not expected to have a material effect on the consolidated financial
statements of the Company.

In April 2002, the FASB issued SFAS No. 145, RESCISSION OF FASB STATEMENTS NO.
4, 44, AND 64, AMENDMENT OF FASB STATEMENT NO. 13, AND TECHNICAL CORRECTIONS.
Application of the statement will be required in 2003. The Company does not
expect the implementation of SFAS No. 145 to have a material effect on the
financial statements of the Company.

In July 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR EXIT OR DISPOSAL
ACTIVITIES. SFAS No. 146 addresses the recognition, measurement, and reporting
of costs associated with exit and disposal activities, including restructuring
activities and facility closings. SFAS No. 146 will be effective for activities
initiated after December 31, 2002. The Company does not expect adoption of SFAS
No. 146 to have a material impact on its consolidated financial statements.


NOTE 3.   ACQUISITIONS

On April 28, 2000, the Company acquired all the stock of the Subsidiaries as
described below:

The acquisition of Gulf Coast was accomplished by the issuance of an aggregate
of 3,500,000 shares of the Company's Common Stock and a $1,000,000 10-year
promissory note, a $390,000 5-year promissory note and a $50,000 3-year
promissory note. Gulf Coast was incorporated in 1984 and designs and distributes
the Old Jacksonville Ceiling Fans under a licensing agreement with U.S. Ceiling
Fan Corp., a company controlled by the Company's Principal Shareholder.

The acquisition of Builders' Lighting was accomplished by the issuance of an
aggregate of 1,000,000 shares of the Company's Common Stock. Builders' Lighting
was incorporated in 1997 and distributes and wholesales lighting, hardware, and
electrical components to the residential and commercial building industry.

The acquisition of Builder Source was accomplished by the issuance of an
aggregate of 200,000 shares of the Company's Common Stock. Builder Source was
incorporated in 1996 and distributes and wholesales hardware and electrical
components to the residential and commercial building industry. The operations
of Builders Source have since been absorbed into Gulf Coast and Builder's
Lighting.

On August 30, 2002, the Company purchased the inventory, work-in-process,
trademarks, and other assets of Home Structure Sound, a company in the same line
of business as the Connect Source subsidiary. The purchase was valued at
$423,000, paid with a combination of cash, debt, and the Company's common stock.
Fiscal year 2002 4th quarter pro forma data for the Home Structure Sound
division, as if the purchase had occurred at the beginning of the Company's 4th
quarter, is as follows:

                  Revenue            $  320,982

                  Net Income         $   57,000

                  EPS                $    0.008


                                       26
<PAGE>
No pro forma data is presented for the prior year interim period as Home
Structure Sound was not then in existence.


NOTE 4.   SHORT TERM DEBT

At September 30, 2002, and September 30, 2001, the Company had short-term debt
of $806,600 and $847,143, respectively. Short-term debt consists of lines of
credit with commercial banks on a revolving basis bearing interest at the
current prime rate. These lines of credit expire within twelve to fifteen months
from the date of issuance with options to renew with similar terms. These lines
of credit are secured by a blanket U.C.C. security filing on inventory, accounts
receivable, furniture and fixed assets, and are personally guaranteed by the
Principal Shareholder.


NOTE 5.   LONG TERM DEBT

Long-term debt and the amount due within one year at September 30, 2002, and
2001 consist of the following:
                                                      Balance at     Balance at
                                                    September 30,  September 30,
                                                      ----------     ----------
                                 Interest Rate           2002           2001
                                 -------------        ----------     ----------
Notes payable - Banks          Ranges between 0-7%    $   80,572     $  190,458
Notes payable - Shareholders          0-8%             1,595,200      1,386,030
                                                      ----------     ----------
Total long-term debt                                   1,675,772      1,576,488
Less: Current maturities of
  long term debt                                         141,017         87,430
                                                      ----------     -----------
Net long-term debt                                    $1,534,755     $1,489,056
                                                      ==========     ===========

Notes Payable to banks are borrowings from commercial institutions to finance
vehicle and equipment purchases and are secured by the assets purchased. On
April 28, 2000, the Company issued $1,440,000 in principal amount of Notes
Payable to Shareholders to effect the acquisition of Gulf Coast as described in
Note 2 above. This portion of the Notes Payable to Shareholders is
collateralized by the common stock of the subsidiaries. On August 30, 2002, the
Company issued $184,000 of principal amount of Notes Payable in connection with
the purchase of Home Structure Sound, the sellers of which became shareholders
of the Company. This portion of the Note Payable to Shareholders is unsecured.
The Company, with the consent of the Principal Shareholder, is not currently
accruing interest expense on the notes payable to the Principal Shareholder, and
is deferring the payment of $447,509 of principal due the Principal Shareholder
under the original terms of the notes.

The principal payments required to be made on long-term debt during the next
five years are shown below:

            Fiscal Year                       Amount
            -----------                     ---------
               2003                         $ 141,017
               2004                           738,684
               2005                           213,123
               2006                           121,618
        2007 and thereafter                   461,328


                                       27
<PAGE>
NOTE 6.   INCENTIVE STOCK OPTION PLAN

On July 31, 2000, the Company adopted a Stock Incentive Plan (the Plan). The
Company may grant incentive stock options (ISOs), non-qualified stock options
(NSOs), restricted stock options, performance units and bonus stock to officers,
directors, consultants, or key-employees. The number of shares of Common Stock
authorized for issuance under the Plan is 1,500,000. Options have a maximum life
of 10 years and a minimum exercise value of no less than 100% of the fair market
value of the stock at the grant date, except that an employee with more than 10%
of the combined voting power of all classes of stock, whether directly or
indirectly, the option price shall be not be less than 110% of such fair market
value on the date of grant. The Option price for each non-qualified stock option
shall not be less than 50% of the fair market value on the date the option is
granted. ISO's may have a vesting period from immediate to 5 years at the
discretion of the Committee charged with issuing the options. Options may
terminate if employment is terminated and only the employee, officer, and or
director may then exercise the vested portion.

At September 30, 2002, the Company's Board of Directors had granted options on a
total of 452,570 shares of stock to employees and Directors under the Plan. The
options are exercisable at an average strike price of $0.30 - $0.34 cents per
share.


NOTE 7.   EMPLOYEE 401(K) PLAN

The Company has an Employee 401(k) Plan for all full-time employees. The plan
provides a tax deferred contribution by the Company, at the Company's option, of
up to 100% of the current year contributions for each employee with one year of
vesting service, to the extent that such contribution does not exceed 10% of the
total annual compensation. The Company typically matches 25% of the employee
contribution. Total pre-tax contributions per employee are limited each year by
the Internal Revenue Service.


NOTE 8.   FEDERAL INCOME TAX

The provision for federal income taxes consisted of:

                                        September 30, 2002   September 30, 2001
                                        ------------------   ------------------
Deferred tax provision                       $ 128,002            $  41,653

The Company's deferred income tax asset at the federal statutory rate of 34% are
composed of the following differences between financial and tax reporting:

                                        September 30, 2002   September 30, 2001
                                        ------------------   ------------------
Allowance for doubtful accounts              $  36,416            $   8,668
Net operating loss carryforwards (NOLs)        305,827              412,247
Capital loss carryforwards                           0               49,329
Other
                                        =======================================
Total deferred tax asset                     $ 342,243            $ 470,244
                                        =======================================



                                       28
<PAGE>
Based on historical performance, the Company believes that sufficient future
taxable income will be generated to realize the entire deferred tax asset prior
to expiration of any NOLs and that the realization of the deferred tax asset is
more likely than not and therefore no valuation allowance has been established
for deferred tax assets.

As of September 30, 2002, the Company's federal consolidated NOLs for income tax
purposes were $1,123,237. If not utilized, the Company's federal consolidated
NOLs will expire as follows:

              Year                        Amount
              ----                       -------
              2007                        61,237
              2008                       542,000
              2010                       389,000
              2012                        78,000
              2019                        35,000
              2020                        18,000


NOTE 9.   RELATED PARTY TRANSACTIONS

At September 30, 2002 and September 30, 2001, the balance due to related parties
controlled by the Principal Shareholder were $120,000 and $127,790,
respectively. Transactions with these related parties include advancement of
funds for inventory and operating expenses.


NOTE 10.  LEASES

The Company leases various facilities and equipment under non-cancelable lease
arrangements for varying periods. As of December 31, 2002, future minimum lease
payments for the next five years and thereafter, relating to all non-cancelable
operating leases with terms in excess of one year were as follows:


NOTE 11.  FAIR VALUE OF FINANCIAL INSTRUMENTS AND DERIVATIVE
          FINANCIAL INSTRUMENTS

The carrying amounts of cash, accounts receivable, accounts payable, short term
notes payable, and accrued expenses approximate fair value because of the short
maturity of these items. These fair value estimates are subjective in nature and
involve uncertainties and matters of significant judgment, and, therefore,
cannot be determined with precision. Changes in assumptions could significantly
affect these estimates. During September 30, 2002 and September 30, 2001, the
Company had no derivative financial instruments.


NOTE 12.  EARNINGS PER SHARE

Basic and Diluted Earnings per Share--Basic earnings per share for income (loss)
before extraordinary items for the periods presented are computed based upon the
weighted average number of shares outstanding for the periods. Diluted earnings
per share for income (loss) before extraordinary items include the effect of
outstanding stock options issued under the incentive stock option plan. These
stock options were antidilutive in 2002 and 2001. Earnings (loss) per share
("EPS") data is as follows for the years ended September 30:

                                         2002            2001
                                        ------          ------
Thousands of shares                      7,185           6,016
Basic EPS                                 0.03            0.02


                                       29