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

                                   Form 10-KSB

[X]    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934. For the fiscal year ended June 30, 2001.

[ ]    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from ___________ to _____________

                       Progressive Asset Management, Inc.
                 (Name of small business issuer in its charter)


           California                                    90-804853
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

    1010 Oak Grove Road, Concord, CA                       94518
(Address of principal executive offices)                 (Zip Code)

Issuer's telephone number (800) 786-2998


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

         Securities registered under Section 12(g) of the Exchange Act:
                        1,631,626 shares of Common Stock

                                  Common Stock
                                (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. [X] Yes  [ ] No

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of



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this Form 10-KSB or any amendment to this Form 10-KSB. [X]

Issuer's revenues for its most recent fiscal year $603,605

The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as of September
21, 2001 is $0.57.

The number of shares outstanding of each of the issuer's classes of common
equity, as of June 30, 2001, is 1,460,104.


                       DOCUMENTS INCORPORATED BY REFERENCE

None of the following documents are incorporated by reference: (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.

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

                    INFORMATION REQUIRED IN ANNUAL REPORTS OF
                       TRANSITIONAL SMALL BUSINESS ISSUERS

The Issuer has elected to furnish the information required by Items 6-11 of
Model B of Form 1-A, as well as the information required by Parts II and III of
Form 10-KSB.

ITEM 6. DESCRIPTION OF BUSINESS

(a) Narrative Description of Business.

(1) Business of Progressive Asset Management, Inc. ("PAM").

(i) PAM Provides Securities Brokerage and Advisory Services.

(A) Introduction. PAM was incorporated in California July 14, 1987. It is
registered as a broker- dealer with the NASD and as an investment adviser with
the State of California. PAM is a member of SIPC and the MSRB. PAM significantly
restructured the manner in which it provides services to the public in 1999.
This restructuring is described in section (B) below.

(B) PAM Provides Its Services Principally Through Financial West Group, Inc.,
("FWG"). Prior to 1999, PAM had its corporate office in Oakland, California, an
office in New York, New York, and offered its services through several other
independent offices operated by persons who were registered representatives of
PAM. In March 1999, PAM entered into an agreement with FWG



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and Paradox Holdings, Inc. ("Paradox"). FWG is a wholly-owned subsidiary of
Paradox. FWG is a broker-dealer, registered with the NASD, with 47 offices and
approximately 400 registered representatives. FWG is an NASD, SIPC, and MSRB
member. FWG is also registered as a investment adviser with the Securities and
Exchange Commission, the State of California and several other states. Financial
transactions are processed through Correspondent Services Corporation ("CSC"), a
wholly owned, fully guaranteed subsidiary of PaineWebber, Inc.

Under the agreement among the parties, PAM transferred all of its customer
accounts and its registered representatives to FWG. Three persons remain
registered representatives with PAM as well as becoming registered
representatives of FWG. (For purposes of convenience, persons registered through
FWG are referred to as "employees" although many are classified as "independent
contractors" under federal or state law.)

For purposes of marketing and convenience, the registered representatives of FWG
who concentrate on socially-responsible investing and use the services of PAM,
are referred to as the "PAM Network" so that it is clear to the investor that
the services of PAM are utilized to achieve the goals of the client to have a
portfolio that meets the client's social responsibility goals. Because of the
requirements of the NASD and the California Department of Corporations, all
signage, correspondence and agreements state that all transactions are conducted
through FWG. Consequently, the PAM Network serves as the socially responsible
investment arm of FWG, with PAM providing participants in the PAM Network with
state of the art socially responsible investment services - social screening,
shareholder advocacy, and information on community investing.

As part of the ongoing relationship, PAM receives a portion of the gross
commission income generated by the FWG registered representatives who are
designated as members of the PAM Network, but no portion of the gross commission
generated by FWG registered representatives who are not members of the PAM
Network.

The gross commissions generated by FWG registered representatives who are
members of the PAM Network are shared between the registered representatives who
earn the commissions, FWG, and PAM. According to the agreement among the
parties, FWG receives 4.75% of the commission. PAM receives what remains after
the portions of the commission due to the registered representative and the
portion due to FWG have been subtracted. Therefore, the exact amount PAM will
receive on any one transaction depends on the amount of compensation the
individual registered representative is entitled to receive. The amount a
registered representative is entitled to receive is negotiated between FWG and
the registered representative and is not made public. However, for purposes of
illustration, a registered representative commonly receives approximately 86% of
the gross commissions, FWG receives 4.75%, and this results in PAM receiving the
balance of the gross commission.

This fiscal year was the second full fiscal year of operation under the new
structure created by the strategic alliance with FWG. In this relationship, PAM
provides social research, stock screening,



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and other services to the brokers in the PAM Network. To date this alliance has
proved beneficial to both parties.

In the fiscal year ending June 30, 2001, PAM produced total revenues of $603,605
with expenses of $ 407,316. This means that PAM had an after-tax net profit of
$194,689 with basic earnings per share of $0.13 per share and fully diluted
earnings per share of $0.07. In comparison, during the previous fiscal year, PAM
earned gross revenues of $594,197 with expenses of $442,367, realizing a net
profit of $150,230 with fully diluted earnings per share of $ 0.05.

The significant increase in profitability is a result primarily of successfully
cutting operating expenses, continuing benefits from moving to an independent
contractor broker model, and benefitting from the alliance with FWG. These
changes in PAM's operations generated a greater increase in profits than was
realized from the modest increase in revenues of only 2%.

The nearly flat revenue growth belies the fact that total productivity of the
brokers in the PAM Network increased by 8%. This increased productivity is not
fully reflected in revenue growth. During the year PAM reduced its portion of
the commissions it receives from its override from FWG in order to give the PAM
Network brokers a higher payout to reward their success and loyalty. PAM
management is committed to making the payouts to brokers as competitive as
possible.

It was no small achievement to obtain revenue growth during the past, very
difficult year in the stock market. Many brokerage firms have laid off staff,
and the mutual fund industry in general has seen a dramatic plunge in new
investment. PAM's success in fiscal 2001 is attributable in part to the growth
of several key offices in the Boston and New York areas, and to the recruitment
of new brokers, who for the most part came on late in the year. Should investor
sentiment stay in the doldrums, there can be no assurance that PAM can continue
the present trend of revenue growth, and may indeed suffer significant declines.

The size of the PAM Network is not static because it is not limited to the
registered representatives whose registrations were transferred from PAM to FWG.
Members of the PAM Network can include persons who were registered
representatives of FWG before PAM and FWG entered into the agreement as well as
new registered representatives. PAM assists FWG in recruiting registered
representatives who are interested in promoting socially-responsible investing.
Since the transfer of the registrations of the registered representatives from
PAM to FWG in 1999, the number of registered representatives in the PAM Network,
has nearly doubled from 23 to 42.

The following is a summary of the number of registered representatives of FWG
who are members of the PAM Network and the income to PAM generated by these
representatives over the last fiscal year.



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<TABLE>
<CAPTION>
Number of           Gross Revenues Generated by            Portion of Gross Revenues Paid
Representatives     Representatives  Received by FWG       Pam by FWG
<S>                 <C>                                    <C>
42                  $4.4 million                           $577,720
</TABLE>

The increased number of registered representatives has helped generate new
clients and thus new sources of income both from the transaction-based fees they
generate as well as potential advisory fee income. On the other hand, the
increased number of registered representatives has not required an increase in
the overhead of PAM since FWG absorbs the costs of the additional registered
representatives.

As part of the agreement among the parties, Paradox has purchased a minority
equity stake in PAM equal to 40% of the voting power of all the outstanding
stock of PAM. Paradox cannot purchase any additional shares of PAM until January
2, 2002. The NASD approved the March 1999 agreement among the parties in late
June 1999, and the purchase of PAM shares by Paradox was completed in early July
1999. The March 1999 agreement among the parties is incorporated by reference as
Exhibit 12(a).

As a further incentive for entering into the relationship with FWG, PAM receives
an additional 2.5% of the gross commissions generated by FWG registered
representatives who are members of the PAM Network over and above the basic
amount. This additional payment will cease once FWG has paid PAM a total of
$875,000 from the gross commissions generated by FWG registered representatives
who are members of the PAM Network. Income of PAM from any other source is not
included in determining when the additional $875,000 is fulfilled. For purposes
of illustration, again, a registered representative commonly receives
approximately 86% of the gross commissions, FWG receives 2.25% (5% minus 2.75%),
and this results in PAM receiving 11.75% of the gross commission.

<TABLE>
<CAPTION>
                      Current Commission       Commission Structure after
                         Structure (%)          PAM receives $875,000 (%)
                      ------------------       --------------------------
<S>                   <C>                      <C>
Registered
Representative                  86                          86
FWG                           2.25                        4.75
PAM                          11.75                        9.25
</TABLE>

FWG is a registered investment adviser and persons who it employs, where
required, are registered investment adviser representatives. FWG has special
programs that utilize its own proprietary system to select stock of companies
that meet its financial criteria for inclusion in the accounts it manages or has
discretionary authority. FWG submits these selections to PAM for screening to
identify those companies that meet the social and environmental criteria set by
PAM and FWG. PAM receives 5% of the gross amount of the asset-based fee that FWG
as a registered investment advisor periodically receives from clients of FWG for
this service. However, if the FWG employee responsible for the managed account
is a member of the PAM Network, then



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PAM does not receive this management fee.

The resulting "Socially Screened Portfolio" is a product marketed directly by
FWG registered representatives in presentations to current and prospective
clients. The registered representatives use promotional material prepared by and
paid by FWG. The incremental cost to PAM for providing the social screening to
FWG is negligible since PAM is continually screening companies as part of the
services it provides directly to members of the PAM Network.

PAM does not receive a portion of all of FWG's income from its securities
brokerage and advisory business. Therefore, FWG's revenues in the past give no
guidance to the amount of revenues that will be generated under the agreement
between PAM and FWG.

Association with FWG provides PAM with a much stronger technology platform,
enhanced back office capacity, and significantly expanded registered
representative recruitment opportunities. FWG handles licensing and transactions
for the registered representatives affiliated with the PAM Network. Linking with
PAM gives FWG access to the field of socially-responsible investing. Through
FWG, the PAM Network offers a complete range of investment services for any
portfolio, large or small including:

* Access to all major markets and types of investments.

* Socially responsible mutual funds and retirement plans.

* Identification of socially responsible investment managers.

* Social screening, shareholder advocacy, and community investments.

* Offices in Arizona, California, Iowa, Indiana, Kentucky, Maryland,
Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Oregon,
Pennsylvania, and Wisconsin.

* No-load socially responsible mutual funds through Charles Schwab & Co., Inc.,
on an advisory-fee basis.

(C) PAM's Services to the Public Emphasize Socially-Responsible Investing.

(I) Socially-Responsible Investing. PAM was created to provide securities
brokerage and advisory services to persons who seek to engage in
"socially-responsible investing." This term means that a person's investments
reflect that person's social concerns. PAM starts from the premise that
corporations that combine positive financial and social performance make the
best long-term investments. Businesses that do not follow what PAM believes are
socially and environmentally responsible practices tend to have greater
liabilities and charges. Examples of such businesses are heavy industries and
utilities that pollute air and ground water and tobacco manufacturers, because
they are subject to charges against earnings from the burdens of regulatory
compliance, litigation, fines, strikes, and boycotts.

Socially-responsible investing can be achieved in three ways:

*Social Screening.

*Shareholder Activism.

*Community Investing.



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PAM conducts its own proprietary research which it provides to PAM Network
registered representatives and to other registered investment advisers to use in
creating model portfolios based on social and environmental concerns of most
persons concerned with socially-responsible investing. Social screens frequently
requested include structuring a portfolio that meets the goals of a client in
these areas:

* Environment.

* Employee relations.

* Quality of products and services.

* Nuclear weapons or nuclear power.

* Tobacco, alcohol, or gambling.

* Relations with repressive regimes.

Customized screens are also developed according to registered representatives'
and registered investment advisers' specifications based on clients' specific
needs.

(II) Shareholder Advocacy and Community Investments. PAM provides support to PAM
Network registered representatives to assist their clients realizing their
social objectives through the strategies of shareholder advocacy and community
investing. Through shareholder advocacy, clients use their ownership of the
stock of a company to pursue change in the company's social or environmental
performance. PAM works with the Interfaith Center for Corporate Responsibility
and other advocates of corporate responsibility to:

* Engage in dialogue with company officials.

* Introduce or co-sponsor social shareholder resolutions.

* Build shareholder advocacy networks and wage shareholder campaigns.

PAM also works to provide community investing to enable the clients of PAM
Network registered representatives to invest in companies that have a high
community impact. PAM has served as the placement agent for investments that
promote:

* Economic development in inner city and rural poverty areas in the United
States.

* Sustainable development in the developing world.

* Low income housing.

* Energy self-reliance and alternative energy production.

PAM has joined with the Calvert Social Investment Foundation to create PAM
Community Investments. PAM Community Investments are offered by Information
Guide through FWG. By using this national program, investors can direct capital
to community development loan funds that help low-income families and
neighborhoods work their way out of poverty.

PAM has a relationship to assist Trainer Wortham & Company, Inc. ("Trainer
Wortham") to offer socially-screened management of short-term funds of cities
and other institutional investors. Trainer Wortham is registered with the SEC as
an investment adviser and has over $4.4 billion in management. It is the
investment management subsidiary of First Republic Bankcorp, a regional bank
with its headquarters in San Francisco, CA. Under the arrangement with Trainer
Wortham,



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PAM will be responsible for socially-screening investments and marketing this
service while Trainer Wortham manages the investments, making the investment
decisions. For its services, PAM receives a portion of the advisory fees charged
by Trainer Wortham. The amount of the advisory fees that PAM receives is 10% of
the total management fee with respect to all funds invested by Trainer Wortham
on behalf of clients using PAM's screening services. Separately, for each
investor referred to Trainer Wortham by PAM, PAM will receive a percentage of
the total management fee Trainer Wortham receives from that client. During the
first 12 months, the amount will be 25%; for the second 12 months, 20%; for the
third 12 months,15%; for the fourth 12 months, 10%; and for the fifth 12 months
and each month thereafter, 5%. This relationship has not yet generated income
for PAM.

In the past fiscal year, PAM and PAM staff continued to play leadership roles in
a variety of special projects with significance for the field of socially
responsible investment and, during this fiscal year PAM initiated the following
new projects.

*PAM Engages Enron on Rights of Indigenous People and Protection of
Bio-Diversity. Progressive Asset Management's shareholder advocacy campaign for
2001 was highlighted by its role leading a proxy resolution considered at the
annual meeting of shareholders of Enron Corporation. Joined by a diverse
coalition of socially responsible shareholders, grass-roots organizations and
indigenous representatives, PAM requested that Enron prepare a report analyzing
the impacts of the company's global operations on biodiversity and indigenous
peoples.

This initiative was precipitated by Enron's potential development of a
controversial wind farm project in the Columbia Hills area of Washington state,
and the effect it would have on the environment and on indigenous people, such
as the members of the Yakama Nation. Prior to the Enron annual general meeting,
the coalition held a series of meetings with Enron's management to begin
addressing the relevant concerns. This issue of protecting the sensitive area of
Columbia Hills in Washington has been met with a tepid response from Enron
management.

In early May, PAM joined members of the coalition and Yakama Nation
representatives to formally present the resolution to Enron's Board of Directors
and assembled shareholders at the company's annual general meeting in Houston.
Votes in favor totaled 7.9%, far exceeding the threshold for a first year
resolution, which allows it to be re-filed the subsequent year.

The coalition led by PAM continues to be actively engaged with Enron and is
working to coordinate a face-to-face meeting between Enron and Yakama Nation
representatives on tribal land in the autumn of 2001.

*Bottomline 2001: The Future of Fiduciary Responsibility. Between April 18- 20
2001, nearly 200 institutional investors and their advisors met in San Francisco
to discuss the future of their responsibilities to address social and
environmental issues within the context of their fiduciary duties. It was an
historic conference in that trustees of public pension funds, labor funds,
faith-



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based institutions, and foundations gathered together to participate in a three
day session that would have been unimaginable only two or three years ago.

In addition to a large California contingent, attendees came from Washington,
Oregon, New Mexico, Hawaii, Colorado, Michigan, New York, Illinois and Vermont.
Trustees and board members of organizations with more than $700 billion in
assets learned how SRI has outperformed over other investment strategies during
the past decade. Presentations were supported by impressive academic studies and
empirical data. Trustees also heard expert legal opinions confirming that social
and environmental factors are valid considerations when making financial
decisions.

Conference participants universally agreed that the overall quality of the
presentations was outstanding. One of the key themes present throughout the
conference was the emerging concept of "fiduciary capitalism": the notion that
institutions should exert influence on companies through their investments, in
which in some cases reach 50% ownership of major U.S. corporations. In so doing,
trustees may profoundly change the manner in which companies are managed.

Based on the work of keynote speaker Robert Monks, a pioneer in corporate
governance issues, and the writings of professors James Hawley and Andrew
Williams, it appears that "fiduciary capitalism" may have significant
implications for social responsibility. The speakers noted that under the
guidance of active institutional owners, corporate accountability and long-term
strategic thinking will replace quarter to quarter emphasis on short-term gains
that do not take sustainability into full account. Pension funds, by far the
largest source of capital, must look out for the interests of their contributing
participants over a 40 year time horizon.

Bottomline 2001 succeeded in promoting a provocative, educational atmosphere.
Surprisingly, information does not normally flow between the different
institutional sectors. Trustees left with a better foundation to raise concerns
about social and environmental investment issues with their respective
institutions. The conference was initiated and hosted by PAM and the Global
Academy, a non-profit organization dedicated to stimulating dialogue on vital
topics.

The success of the conference showed the importance for PAM to play a leadership
role in organizing directed, educational activities. Such efforts provide
considerable potential for moving investors toward greater acceptance of SRI and
eventually in creating new business opportunities for PAM.

(III) Investment Services Provided Through the PAM Network. Registered
representatives in the PAM Network, serving as the socially-responsible division
of FWG, offers a wide variety of services and investments for any size
portfolio, including:

* Mutual funds--full range of socially responsible mutual funds.

* Stocks--access to all major markets and exchanges.



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* Bonds--municipal, government agency, corporate, and convertible bonds.

* Insurance.

* Financial and estate planning.

* Retirement planning for individuals and businesses.

Through FWG, PAM Network Registered Representatives provide additional financial
consulting services to institutions and individuals with larger investment
portfolios. These services include assistance in and investment plan design and
implementation, such as:

* Defining financial objectives and social goals.

* Asset allocation.

* Assessment of portfolio performance.

* Investment manager evaluation, search, and selection advice.

* Ongoing social screening.

* Regular performance monitoring.

* Shareholder advocacy.

* Custodial services.

These services are supported by PAM through the PAM Network. In addition to
providing these services through the PAM Network, PAM directly provides clients
ongoing social screening and shareholder advocacy services. PAM at present does
not receive compensation for shareholder advocacy. Its compensation for ongoing
social screening is negotiated between PAM and the client.

(IV) The Client Base Includes Large and Small Investors. Since any investor,
large or small, can have a portfolio structured to be socially-responsible,
persons who use the services of the PAM Network can have an account as small as
$1,000. The average size of an account is approximately $100,000, with at least
80% of the accounts under $500,000. Clients include individuals, unions,
religious organizations, and non-profit organizations. The largest client
utilizing the services of FWG registered representatives in the PAM Network is a
religious organization, but which has been responsible for 8% of PAM's gross
revenue in fiscal years 2000 and 2001.

Through its relationship with FWG, PAM receives compensation on certain
transactions on a per-trade basis as a broker-dealer, and receives compensation
for advisory services, as an investment adviser. PAM also generates fees
separately from its relationship with FWG principally from "social screening."

The income from brokerage transactions through FWG equal approximately 70% of
PAM's gross revenues, and the income from investment advisory fees through FWG
equal approximately 30% of PAM's gross revenues. PAM no longer acts as an
underwriter for any offerings.



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(ii) Status of New Products or Services.

*ProgressiveTrade Securities, Inc. In June 2000, PAM formed a strategic alliance
with Sustainable Systems, Inc., (SSI) to explore the creation of
ProgressiveTrade, as a new company to offer socially responsible investing to
on-line investors. The idea behind ProgressiveTrade is to design and build an
on-line social screening system that offers investors a way to create and apply
their own social and environmental screens to evaluate investments and then
execute trades in those investments through one or more affiliated on-line
brokerages. Under the agreement between PAM and SSI, the parties conducted
feasability studies and formed a new corporation in which PAM owns 70% of the
initial stock in ProgressiveTrade and SSI owns 30%. PAM's maximum financial
commitment is $100,000, and to date, expenditures have not exceeded $25,000.
Based on initial studies and planning, the parties in September 2000, agreed to
incorporate ProgressiveTrade (which has been done), raise initial capital and
complete a feasibility study. The agreement between the parties is identified as
Exhibit 6(c) to this filing.

Since PAM has played a pioneering role in the definition of the field of
socially responsible investing, the company has a powerful location from which
to launch ProgressiveTrade, which will incorporate PAM's proprietary social
research and social screening systems.

ProgressiveTrade is the joint venture between PAM and SSI to create an on-line
socially- responsible investment brokerage firm, and is moving steadily closer
to launching. SSI is the Managing Member of the Communication Technology
Cluster, LLC, a successful incubator for high tech communications start-ups
located in the recently restored historic Rotunda Building in downtown Oakland,
California. ProgressiveTrade has offices in the Communication Technology
Cluster, taking advantage of the many services offered by the incubator setting.

ProgressiveTrade has been incorporated, finished its business plan, and begun
the process of building its on-line socially responsible investment system.
Recently, ProgressiveTrade negotiated a favorable Memorandum of Understanding
with a provider of on-line trading and back-office brokerage services. Based on
this progress, ProgressiveTrade is in discussions with interested potential
investors. The official launch date of ProgressiveTrade has not been set because
of the uncertain status of the markets and the competitive nature of the
business.

*Transition Period. The last two years were spent making the successful
transition to our new business model with FWG. Now the essence of PAM's business
strategy may be described as follows:

1)      Actively recruit more NASD licensed financial professionals to the
        Network.

2)      Help increase the production of existing brokers with marketing and
        product initiatives.

3)      Explore new business opportunities that do not require much outlay of
        PAM's capital.

To achieve these objectives, PAM has taken several important steps in
restructuring its staff. In March 2001 the PAM Board chose Eric Leenson to lead
the company for the next year as



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President and CEO, while Peter Camejo will remain as Board Chair. This change
was approved unanimously, as was a resolution thanking Peter for his devoted
service as CEO over the past 14 years. In his role as CEO, Eric Leenson will be
able to dedicate more management time for implementation of the business plan,
especially in the area of broker recruitment.

To that end, PAM has hired a Director of Business Development and will dedicate
more resources to promote activities oriented to fulfill points 1 and 2 of the
strategy described above. In fact, PAM has been understaffed in the business
development area for some time. In the short run these shifts are likely to cut
significantly into the level of profitability attained in fiscal 2001. However,
increasing the number and productivity of brokers is crucial for the long-term
health of the Company. In addition, the current, substantial rise in investor
sentiment favoring socially responsible investing (SRI) makes the upcoming
period an unique time frame for attracting experienced professionals.

In one other major shift, James Nixon, long-time Vice President of Sustainable
Development left PAM to focus on his work at Sustainable Systems, Inc. (SSI), a
company that PAM helped found in 1993. SSI is the founder and manager of a
successful incubator for high tech start-ups located in Oakland, California.

SSI is also Managing Director of a project initiated by the Bay Area Council
that is establishing an innovative $250 million family of community investment
funds.

The fiscal year that began on July 1, 2001 will be a difficult, but exciting
one. In the financial realm, PAM's profitability will be challenged by investor
fears resulting from a weakened stock market, as well as by the allocation of
funds for the implementation of the business plan. The creation of a real
business development capacity is one of the most important initiatives
undertaken in PAM's history. PAM will need to monitor carefully the cost benefit
balance of this program. The ability of Progressive Trade to obtain adequate
financing and begin operations will be a factor influencing the degree of
success in the coming year.

On the social advocacy side PAM will continue to leverage resources for
shareholder advocacy and community investing efforts. Interest in SRI issues by
institutional shareholders is likely to grow. PAM is well positioned to develop
educational services for that constituency, and for the investing public in
general, should it be determined that such activity will generate a meaningful
contribution to profitability.

Any statements contained in this filing that relate to future plans, events, or
performance are forward-looking statements that involve risks and uncertainties,
including, but not limited to, changes in general economic conditions, intense
competition for customers and pressure on brokerage and other fees charged, the
mood of the investing public, changes in political attitude towards
socially-responsible investments. The terrible attack on September 11, 2001, on
targets in the United States create even greater uncertainty and insecurity. No
one yet knows the ramifications of these incidents. PAM cautions that the
foregoing list of important factors is not



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exclusive. Developments in any of these areas could cause PAM's results to
differ materially from results that have been or may be projected by or on
behalf of PAM. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as the date of this statement. PAM
does not undertake to update any forward-looking statement that may be made from
time-to-time by or on behalf of PAM.

(iii) Estimated Amount Spent on Research. Less than $20,000 has been spent on
company- sponsored research to develop new products or services during the last
two years and no money has been spent on customer-sponsored research to develop
new products or services.

(iv) Number of Employees. PAM has two full-time employees and five part-time
employees for a total of seven employees, including three of whom are registered
representatives with FWG. Peter Camejo, Eric Leenson, Cathy Cartier, remain as
registered principals of PAM. Staff in the offices of the 19 affiliates of the
PAM Network are employees of the independent contractor offices that make up the
PAM Network.

(v) Environmental Expenditures. PAM discharges no material into the environment
and requires no environmental control facilities. Therefore there have been no
expenditures and no effects or expected effects from compliance with federal,
state, and local provisions regulating discharge of materials into the
environment or from environmental control facilities.

(2) Future Financial Performance.

(i) Distinctive or special characteristics of the financial services industry,
which may have a material impact upon Progressive Asset Management's financial
performance, include:

* Changes in technology. The advent of internet trading, direct consumer access
to ever- increasing quantities of research information and lower commission
rates are having a significant impact on the securities industry. Such changes
have pushed down the profit-margins on transaction-based fees, especially those
charged on the internet. Furthermore, the increased usage of the internet for
trading requires all securities brokerage firms to consider offering such a
service. The availability of free or low-cost advice through print, television
and the internet have increased the pressure on profit-margins for offering
advice.

* Shifts in financial services compensation from transaction-based commissions,
to asset-based fee structures. This may result in short-term decline in revenue
from certain accounts through fiscal year 2002 as the basis of compensation is
gradually converted. All registered representatives may not be able to make the
transition to earning sufficient income under this basis of compensation and
thus may leave the industry.

* Rapid growth of socially responsible investment up 82% to $2.16 trillion with
screened portfolios up 183% to $1.49 trillion, according to the 1999 SRI Trends
Report of the Social Investment Forum, the professional association of socially
responsible investment professionals. One of the reasons for the rapid growth of
socially responsible investing is the positive financial performance of socially
responsible investment. Also, according to the Forum in a July 26, 2001 press
release. Ten of the 15 screened funds (66%) with $100 million or more in assets
earned top



                                       13
<PAGE>   14

marks for performance from either or both Morningstar and Lipper Analytical
Services for the one and three year periods ending June 30, 2001. The rapid
growth of socially responsible investment is both positive, in that the market
for the services of PAM and the PAM Network is expanding, and also negative in
that competition within that market is also increasing. The number of individual
socially responsible investment practitioners is growing and some of the major
brokerage houses are adding socially responsible investment divisions. Larger
firms may have an advantage in recruiting registered representatives, including
the possibility of recruiting from FWG and the PAM Network because they offer
significant bonuses.

*The trading of PAM's common stock will remain on the NASD Bulletin Board.
Because trading on the Bulletin Board is extremely light in comparison with
trading on the NASDAQ or trading on an exchange, trading of PAM's stock will
remain illiquid, thus limiting the ability to trade its stock.

(ii) Impact of the Earth Trade settlement. Earth Trade, Inc. (Earth Trade) was
organized in 1992 to promote sustainable development by marketing both organic
and conventional food products from farm cooperatives in the developing world.
In prior years, the Company acted as a sales agent in connection with the
placement of certain Earth Trade debt and equity securities.

Principally due to continuing losses, the shareholders of Earth Trade voted in
May 1997 to voluntarily dissolve and liquidate its net assets. In April 1997,
the Company Board of Directors, with consideration of its mission and standards
of social responsibility, its 30% ownership of Earth Trade and its role as
placement agent for debt and equity securities issued by Earth Trade, offered a
settlement agreement to the Earth Trade note holders. Under the agreement, in
exchange for their residual Earth Trade debt and a general release of liability,
the note holders could receive either Company Series A preferred stock with a
stated value of $7.00 (fair market value on settlement date of $0.70) or Company
common stock with a stated value of $5.00 (fair market value on settlement date
of $0.50). Substantially all the Earth Trade note holders accepted the
settlement agreement in January 1998.

In February 1999, the shareholders approved an additional settlement with
certain remaining Earth Trade note holders. Under the agreement, in exchange for
their residual Earth Trade debt, a general release of liability and a
subordination agreement acceptable to the NASD, the note holders will receive a
total of $380,000. A reconciliation of the additional settlement subordinated
liability and current and future payments follow. Future payments depend upon
the gross revenue of the Company limited by the ability of the Company to meet
the NASD net capital requirements (Note 16). The remaining note holders may
elect to exchange their debt for PAM common shares held by its chair.
Outstanding amounts, if any, owed to the chair of PAM due to any exchange of
debt for common shares are further subordinated to debt owed the remaining note
holders.

The settlement of the claims with the Earth Trade noteholders has removed a
cloud on the future operations of PAM, and terminated what could have resulted
in a series of arbitrations and court cases that PAM's legal counsel estimated
would have cost PAM in excess of $100,000 in



                                       14
<PAGE>   15

attorneys' fees. Furthermore, under the terms of the settlement, PAM is able to
extend the payments over approximately 10 years without the payment of any
interest.

On the other hand, the Earth Trade settlement did require the initial payments
of $119,000 over 2-1/2 years, and will require annual payments equal to 1% of
PAM's gross revenues. These funds would have been available to meet the
obligations of PAM or expand PAM's operations. However, because of the amount of
legal fees facing PAM in relation to Earth Trade, the settlement overall has
improved the liquidity of PAM.

(b) Segment Data. Progressive Asset Management, Inc. does not segment data in
its financial statement.

ITEM 7. DESCRIPTION OF PROPERTY

*National Office. PAM's national office is at 1010 Oak Grove Road, Concord, CA
94518. The phone number is 800-786-2998, and the email address is
pam@progressive-asset.com. PAM entered into a lease with Mr. Camejo for the
space now occupied as the principal offices of PAM. The term of the lease ends
October 1, 2002. The office space is approximately 960 square feet. The rent,
payable monthly, is $1,660.00, and includes utilities. PAM's management believes
the terms of the lease are below market rate at the time the lease was entered
into and was approved by a majority of the disinterested members of the Board of
Directors.

Progressive Asset Management Housing, Inc., a California corporation, is a
wholly-owned subsidiary of PAM. It is a general partner along with Rental
Housing, Inc., the managing general partner, of Magnolia Apartment Associates
Limited Partnership, an Idaho limited partnership. The limited partnership owns
two apartment complexes in the Boise, Idaho area. The units in these two
apartment complexes are leased to low-income families. The limited partnership
will dissolve December 31, 2021, unless earlier terminated under limited
circumstances as provided in the limited partnership agreement. While
Progressive Asset Management Housing, Inc., was instrumental in the organization
of the limited partnership and acquisition of the apartment complexes in 1991
and retains a .50% partnership interest, it has never been involved in the
operation of the limited partnership or the apartment complexes. Other than its
position as a general partner of Magnolia Apartment Associates Limited
Partnership, Progressive Asset Management Housing, Inc., is not a general
partner nor a manager of any other real estate investments. These real estate
investments generate less than $7000 per year income to PAM.

ITEM 8. DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES

The members of the board of directors of PAM are elected at the annual meeting
of shareholders and serve until the next annual meeting of shareholders or until
their successors are elected. The most recent annual meeting was held February
22, 2001.

(a) Names, Ages, and Experience of Directors and Executive Officers.



                                       15
<PAGE>   16

Peter Camejo, Chair of the Board of PAM. Peter Camejo has served as CEO and
Board member since PAM's inception in 1987. From the inception of PAM until
April 1, 2001, Mr. Camejo was also the Chief Executive Officer of PAM. Before
co-founding PAM, he was an investment broker at Merrill Lynch and Prudential
Bache. Mr. Camejo has, in addition to his Series 7 General Securities license, a
Series 24 General Principal license, a Series 4 Options license, and a Series 3
Commodities license.

Active in the environmental movement, Mr. Camejo has served as a member of the
Board of Directors of EarthShare and the Chair of the Council for Responsible
Public Investment. He is also a member of the Board of the Contra Costa County
Employee Retirement Association. Mr. Camejo, originally from Venezuela, is a
naturalized U.S. citizen. He is 61 years old, married and has two children.

Catherine Cartier, Secretary, Chief Administrative Officer and Director. Ms.
Cartier joined PAM at its inception in 1987 and has served as a Board member and
Corporate Secretary since 1994.

Prior to joining PAM, Ms. Cartier worked for Lehman Brothers and Prudential
Bache. She earned a BA from St. Mary's College and holds her Series 7 General
Securities license, Series 24 General Principal license, Series 53 Municipal
Principal license. Ms. Cartier is 51 years old.

Eric Leenson, President, Chief Executive Officer, Chief Financial Officer and
Director. Eric Leenson has been a member of the Board since 1989. He has been
CFO since 1990, President since 1992, and became Chief Executive Officer on
April 1, 2001. In his positions, he is responsible for the day-to-day oversight
of the firm's operations. He is also responsible for its financial accounting
and reporting. He holds a Series 7 General Securities license, a Series 24
General Principal license, and a Series 4 Options license.

Mr. Leenson left his position as a financial consultant at Merrill Lynch to join
PAM in October 1987. Prior to joining Merrill Lynch, he was co-founder and long
time Managing Director of La Pena Cultural center in Berkeley, CA. Mr. Leenson
is 52 years old. Mr. Leenson received a B.A. from the Woodrow Wilson School of
Princeton University in 1970, and an M.B.A. from the University of California,
Berkeley in 1986.

Kalman Stein, Director. Mr. Stein has been a director since 1997. Mr. Stein has
been the President of EarthShare since its inception in 1989. EarthShare now
represents more than 40 leading national environmental and conservation
organizations, and has raised more than $60 million for its member agencies
during its first eight years of operation. In addition Mr. Stein is a founder of
the Council of Foundations and has served as Chair of that organization.

Mr. Stein's business experience includes management consulting with the United
Research Company, founding Kalman Stein Associates, a management consulting firm
in Berkeley, CA and establishing and managing the Strong Foundation for
Environmental Values. He was also the Executive Director of the Environmental
Federation of California. Mr. Stein is 48 years old.



                                       16
<PAGE>   17

Michael S. Wyman, Director. Mr. Wyman is a Board member of PAM, serving in his
second term. Mr. Wyman is a graduate of Pomona College, class of 1972 and
Hastings College of Law, class of 1981. He is member in good standing of the
California State Bar.

Mr. Wyman has worked as a lettuce picker, dishwasher, writer, editor, corporate
director. More recently, he was CEO of It's Electric!, an electric car
dealership from 1998 through January 1999. Before his involvement with It's
Electric!, and since he left, It's Electric!, he has been a private investor in
the field of socially responsible investing. Earlier he held the positions of
editor, associate director, and director for the Center for Democracy in the
Americas in Washington, D.C. Prior to his tenure at the Center, Mr. Wyman was an
attorney in private practice. Mr. Wyman is 50 years old.

Nina Lau-Branson, Director. Nina Lau-Branson is serving her second term on the
Board. After receiving her MBA in Finance from the University of Wisconsin, Ms.
Lau-Branson was employed by Price Waterhouse Coopers. As the first Corporate
Controller for Wind River Systems in Alameda, CA, Ms. Lau-Branson was an
integral part of the team that brought Wind River Systems public. During her
tenure with Wind River Systems they grew to a company with over $50 million in
revenues and operations in over ten countries. Ms. Lau-Branson lives in Oakland,
California and is 45 years old.

Gene Valentine, Director. Gene Valentine is serving his second full one-year
term on the Board. He joined the Board in June 1999. Mr. Valentine is Chairman
of the Board and Chief Executive Officer of FWG. Mr. Valentine has a BS degree
from Bethany College and also attended the University of Vienna. Mr. Valentine
is also the President and Founder of Second Byte Foundation which provides
computers to at-risk children. Mr. Valentine is 51 years old.

Edward L. Price, Director. Mr. Price is serving his second term. Mr. Price is
Director and Chief Administrative Officer of FWG. Mr. Price has a BA from the
U.S. Naval Academy and a MBA from the University of California, Berkeley.
Previously a CPA with Touche Ross, Mr. Price joined FWG in 1998. Mr. Price is 50
years old.

(b) Family Relationships. No director, person nominated to be a director,
executive officer, or significant employee have family relationships with any
other director, executive officer, or significant employee.

(c) Business Experience. The business experience of each director, executive
officer, and significant employee is described under (a) above.

(d) Involvement in Certain Legal Proceedings. No director, person nominated to
be a director or executive officer of PAM has been in the last five years
involved in any action under the Bankruptcy Act, any state insolvency law, or
convicted in a criminal proceeding (excluding traffic violations and other minor
offenses).



                                       17
<PAGE>   18

ITEM 9. REMUNERATION OF DIRECTORS AND OFFICERS

(a) Aggregate Annual Remuneration.

Name                         Capacities in which                 Aggregate
                             Remuneration Was Received           Remuneration

Peter Camejo                 Chair, Broker                       $12,875

Eric Leenson                 President, CEO, CFO, Broker         $84,606

Catherine  Cartier           Corporate Secretary,
                             Operations Manager                  $16,615

This information was prepared on a cash basis.

(b) Future Remuneration. Peter Camejo will receive $15,000 per year in salary.
Eric Leenson will receive $65,000 per year in base salary. Catherine Cartier
will receive $15,000 per year in salary. Subsequent to the strategic alliance
with FWG, each of these corporate officers is a registered representative with
FWG and receives commission income through Financial West Group, but that income
is not generated through Progressive Asset Management, Inc.

ITEM 10. SECURITY OWNERSHIP

(a) Principal Holders of Voting Securities. (Each of the three highest paid
persons who are officers and directors; all officers and directors as a group;
shareholders holding more than 10% of any voting class.)

<TABLE>
<CAPTION>
Title                 Name                           Amount of   Percent of
of Class              and Address                     Shares       Class
--------              -----------                    ---------   ----------
<S>                   <C>                            <C>         <C>
Common Shares         Peter Camejo
                      1010 Oak Grove Road
                      Concord, CA 94518               360,718       24.7

Common Shares         Eric Leenson
                      1010 Oak Grove Road
                      Concord, CA 94518                78,350        5.4

Common Shares         Catherine Cartier
                      1010 Oak Grove Road
                      Concord, CA 94518                20,000        1.4

Common Shares         All Officers
                      and Directors                   567,834       38.9
</TABLE>



                                       18
<PAGE>   19

<TABLE>
<S>                   <C>                                  <C>          <C>
Series B              Paradox Holdings, Inc.
Preferred             2663 Townsgate Rd.
Shares                Westlake Village, CA 91361           25,000       100
</TABLE>

The Series B Preferred Shares, held by Paradox Holdings, Inc., when combined
with the common stock, has voting power equal to 40% of the total shares that
can be cast. Consequently, the following is the voting power of the following
persons when factoring in the voting power of the Series B Preferred Shares:
Peter Camejo 14.8% ; Eric Leenson 3.2%, Catherine Cartier .08%; and all Officers
and Directors, 23.3%. Under the Standstill Agreement between PAM and Paradox,
until January 1, 2002, neither party can take steps to change the relative
voting power of Paradox. This agreement is identified as Exhibit 6(b) to this
filing.

(b) Other Holders of 10% Voting Securities. None.

(c) Certain holders of Non-Voting Securities.

<TABLE>
<CAPTION>
                                                 Amount of           Percent of
Title of Class        Name and Address             Shares               Class
--------------        ----------------           ---------           ----------
<S>                   <C>                        <C>                 <C>
Class Preferred A     Lakshima Inc.                14,863               18.9
                      36 Rosebery Ave.
                      Ottawa, ON  K1S  1W2
</TABLE>

(d) Options, warrants, and rights. None of the persons listed in item (a) above,
hold any options, warrants, or rights reportable under this section.

ITEM 11. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

Peter Camejo, Chair of the Board of Directors has entered into an agreement
whereby certain holders of notes of Earth Trade, Inc., in which PAM held an
interest, may exchange such notes for shares of PAM held by Mr. Camejo. The
notes are payable by PAM. This transaction is explained in more detail under
"PART II, ITEM 5. RECENT SALES OF UNREGISTERED SECURITIES (b) Securities Being
Offered, Shares issued in settlement with creditors of Earth Trade, Inc."

Mr. Camejo has also entered into an agreement with PAM for the office space
occupied by PAM. This transaction is explained in more detail under "PART I,
ITEM 7. DESCRIPTION OF PROPERTY."



                                       19
<PAGE>   20

                                     PART II

Item 1. Market Price of Dividends on the Registrant's Common Equity and Other
Shareholder Matters.

(a) Market Information.

PAM's common stock has been reported on the OTCBB under the symbol PAMI since
1997 and the following are the highs and lows reported on the OTCBB for the
periods listed.

<TABLE>
<CAPTION>
      Quarter                           High              Low
      -------                           ----              ---
<S>                                    <C>               <C>
July-September 1999                    .68750            .375
October-December 1999                  .50               .40925
January-March 2000                     .4375             .40625
April-June 2000                        .4375             .01
July-September 2000                    .43               .03
October-December 2000                  .50               .01
January-March 2001                     .30               .30
April-June 2001                        .51               .25
</TABLE>

The quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions. Market makers who posted
bids or offers during the period listed above are Herzog, Heine, Geduld, Inc.,
Wien Securities Corp., Hill, Thompson, Magid & Co., Citadel Securities Corp.,
Knight Securities, LLP, and Paragon Capital Corporation. You can find price
quotes on the OTC Bulletin Board website www.otcbb.com using the symbol PAMI.

The PAM Board believes that one of the best ways to increase value for
shareholders is to continue buying back PAM common shares on the NASDAQ's OTC
Bulletin Board. During fiscal 2001 PAM acquired 124,953 common shares at an
average price of 41 cents per share for a total expenditure of $51,085. Because
of securities industry regulations , PAM Management and PAM Network registered
representatives can not discuss the advisability of the purchase or sale of PAM
stock.

(b) Holders of Common Stock. The number of holders of common stock are 137.

(c) Dividends. Declaration of dividends on common stock is subject to the
discretion of the Board and will depend upon a number of factors, including the
future earnings, capital requirements and financial condition of PAM. In
December 1995, PAM declared a common stock dividend of one share for each 20
shares of common stock held as of March 1, 1995. PAM has not declared any cash
dividends on its Common Stock in the past and does not anticipate declaring
dividends in any form in the near future.



                                       20
<PAGE>   21

Item 2. Legal Proceedings.

There are no legal proceedings pending or threatened against PAM.

Item 3. Changes in and Disagreements with Accountants.

There have been no changes in or disagreements with accountants.

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

No matter was submitted during the fourth quarter of the fiscal year covered by
this report to a vote of security holders.

Item 5. Compliance with Section 16(a) of the Exchange Act.

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers, and persons who own more than 10% of
a registered class of PAM's equity securities to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes of
ownership of equity securities of PAM. Officers, directors and greater than 10%
shareholders are required to furnish PAM with copies of all Section 16(a) forms
they file. To PAM's knowledge, persons as defined above have complied with all
applicable section 16(a) requirements during the preceding fiscal year.

Item 6. Reports on Form 8-K.

No reports on Form 8-K were filed during the last quarter of the period covered
by this report.

                                    PART F/S

The following pages, starting with page F-i, are the financial statements and
supplemental information of PAM for the fiscal year end June 30, 2001, with the
reports of independent auditors. Please note that because PAM is a registered
broker-dealer, the financial statements and supplemental information contain
information required by the Securities and Exchange Commission that a registered
broker-dealer must provide that other businesses need not provide in comparable
financial statements.



                                       21
<PAGE>   22

                                    CONTENTS

<TABLE>
<CAPTION>
                                                                              Page
                                                                              ----
<S>                                                                           <C>
Financial Statements

        Report of Independent Auditors                                          1

        Statement of Financial Condition                                        2

        Statement of Operations                                                 4

        Statement of Stockholders' Equity                                       5

        Statement of Cash Flows                                                 6

        Notes to Financial Statements                                           7


Supplemental Information

        Report of Independent Auditors on Supplemental Information              22

        Statement of Changes in Liabilities Subordinated to Claims of General
               Creditors                                                        23

        Computation of Net Capital under Rule 15c3-1 of the Securities and
               Exchange Commission                                              24

        Reconciliation Pursuant to Rule 17a-5(d)(4)                             25

        Computation for Determination of Reserve Requirements                   26

        Information Relating to Possession or Control Requirements              26

        Report of Independent Auditors on Internal Accounting Control
               Required by SEC Rule 17a-5                                       27
</TABLE>



                                       F-i
<PAGE>   23

                         Report of Independent Auditors


Board of Directors
Progressive Asset Management, Inc.

We have audited the accompanying statement of financial condition of Progressive
Asset Management, Inc. as of June 30, 2001 and 2000, and the related statements
of operations, stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the management of
Progressive Asset Management, Inc. 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. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Progressive Asset Management,
Inc. as of June 30, 2001 and 2000, and the results of its operations and cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States.


Markle Stuckey Hardesty & Bott
Larkspur, California
August 8, 2001



                                      F-1
<PAGE>   24

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                        Statement of Financial Condition
                             June 30, 2001 and 2000

<TABLE>
<CAPTION>
                                                                 2001                  2000
                                                               ---------             ---------
<S>                                                            <C>                   <C>
Assets
    Current assets
        Cash and cash equivalents                              $ 479,383             $ 506,125
        Investment securities, at fair market value              108,979                13,124
        Commissions and other receivables                         54,638                87,991
        Employee advances                                          2,930                 6,896
        Prepaid expenses                                          16,308                20,328
                                                               ---------             ---------

        Total current assets                                     662,238               634,464

    Property and equipment, at cost                               30,114                30,114
        Accumulated depreciation                                 (19,189)              (14,455)
                                                               ---------             ---------

        Property and equipment, net                               10,925                15,659

   Other assets
        Deposits                                                   1,467                 9,532
        Other investments, at cost                                19,300                16,000
        Advances to unconsolidated subsidiary                     24,179                     0
                                                               ---------             ---------

        Total other assets                                        44,946                25,532
                                                               ---------             ---------

        Total assets                                           $ 718,109             $ 675,655
                                                               =========             =========
</TABLE>


                             See accompanying notes.



                                      F-2
<PAGE>   25

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                        Statement of Financial Condition
                             June 30, 2001 and 2000

<TABLE>
<CAPTION>
                                                                       2001                    2000
                                                                    -----------             -----------
<S>                                                                 <C>                     <C>
Liabilities
    Current liabilities
     Accounts payable                                               $    10,548             $    14,560
     Salaries and commissions payable                                     5,927                  10,073
     Accrued liabilities                                                 13,500                  26,883
     Income taxes payable                                                 1,600                       0
                                                                    -----------             -----------

     Total current liabilities                                           31,575                  51,516

    Other liabilities
     Earth Trade settlement - Subordinated                               78,074                 119,000
                                                                    -----------             -----------

    Total liabilities                                                   109,649                 170,516


Other commitments and contingencies
     Preferred stock, Series A, $7 stated value;
             200,000 shares authorized, 78,670 shares
             issued and outstanding (2000 - 84,513)                      55,069                  59,160


Stockholders' equity
     Preferred stock, Series B, $1 stated value; 25,000
             shares authorized, 25,000 shares issued and
             outstanding (2000 - 25,000)                                 25,000                  25,000


     Common stock, no par value; 5,000,000 shares
             authorized, 1,460,104 shares issued and
             outstanding (2000 - 1,583,557)                           1,418,187               1,468,657
     Retained earnings (accumulated deficit)                           (889,796)             (1,047,678)
                                                                    -----------             -----------

     Total stockholders' equity                                         553,391                 445,979
                                                                    -----------             -----------

     Total liabilities and stockholders' equity                     $   718,109             $   675,655
                                                                    ===========             ===========
</TABLE>


                             See accompanying notes.



                                      F-3
<PAGE>   26

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                             Statement of Operations
                       Years ended June 30, 2001 and 2000

<TABLE>
<CAPTION>
                                                        2001                  2000
                                                     ----------            ----------
<S>                                                  <C>                   <C>
Revenues
       Commissions - FWG                             $  576,541            $  553,167
       Commissions - Other                                1,219                16,808
       Interest and dividend income                      25,845                19,212
       Other revenue                                          0                 5,010
                                                     ----------            ----------

       Total revenues                                   603,605               594,197

Costs and expenses
       Employee compensation and benefits               194,175               195,127
       Commissions                                            0                 9,852
       Administrative and other                               0                36,760
       Broker recruitment                                     0                 3,841
       Communications                                     1,901                 4,087
       Dues and subscriptions                            39,797                42,013
       Insurance                                         28,075                19,875
       Occupancy                                         21,564                25,693
       Office expenses                                   22,195                 4,604
       Professional fees                                 53,471                40,012
       Promotion and advertising                         20,514                32,322
       Regulatory                                        11,267                 6,881
       Taxes and licenses                                 5,766                 7,483
       Travel and entertainment                           3,857                 5,354
       Depreciation and amortization                      4,734                 8,463
                                                     ----------            ----------

       Total costs and expenses                         407,316               442,367
                                                     ----------            ----------

Income before income taxes                              196,289               151,830

Taxes on income                                           1,600                 1,600
                                                     ----------            ----------

Net income (loss)                                    $  194,689            $  150,230
                                                     ==========            ==========

Net income (loss) per share
       Basic                                         $     0.13            $     0.09
                                                     ==========            ==========
       Fully diluted                                 $     0.07            $     0.05
                                                     ==========            ==========

Shares used to compute per share amounts
       Basic                                          1,534,094             1,600,620
                                                     ==========            ==========
       Fully diluted                                  2,695,035             2,774,939
                                                     ==========            ==========
</TABLE>


                             See accompanying notes.



                                      F-4
<PAGE>   27

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                        Statement of Stockholders' Equity
                       Years ended June 30, 2001 and 2000

<TABLE>
<CAPTION>
                                  Preferred stock, Series B          Common stock
                                  -------------------------   ----------------------------        Retained        Stockholders'
                                    Shares         Amount       Shares           Amount       earnings (deficit)  equity totals
                                  ---------      ----------   ----------       -----------    -----------------   -------------
<S>                               <C>            <C>          <C>              <C>            <C>                 <C>
Balances, June 30, 1999                   0      $     0       1,631,626       $ 1,490,180       ($1,172,114)      $ 318,066
Issuance of preferred stock,
   Series B                          25,000       25,000               0                 0                 0          25,000

Redemption of preferred stock,
   Series A, at stated value,
   net of issuance value                  0            0               0                 0           (28,030)        (28,030)

Cancelation of preferred stock,
   Series A, by shareholder               0            0               0                 0             2,236           2,236

Repurchases of common stock               0            0         (48,069)          (21,523)                0         (21,523)

Net income (loss)                         0            0               0                 0           150,230         150,230
                                     ------      -------       ---------       -----------       -----------       ---------

Balances, June 30, 2000              25,000       25,000       1,583,557         1,468,657        (1,047,678)        445,979
Redemption of preferred stock,
   Series A, at stated value,
   net of issuance value                  0            0               0                 0           (36,807)        (36,807)

Issuance of common stock                  0            0           1,500               615                 0             615

Repurchases of common stock               0            0        (124,953)          (51,085)                0         (51,085)

Net income (loss)                         0            0               0                 0           194,689         194,689
                                     ------      -------       ---------       -----------       -----------       ---------

Balances, June 30, 2001              25,000      $25,000       1,460,104       $ 1,418,187       ($  889,796)      $ 553,391
                                     ======      =======      ==========       ===========       ===========       =========
</TABLE>


                             See accompanying notes.



                                      F-5
<PAGE>   28

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                             Statement of Cash Flows
                       Years ended June 30, 2001 and 2000

<TABLE>
<CAPTION>
                                                                           2001                  2000
                                                                        ---------             ---------
<S>                                                                     <C>                   <C>
Cash flows from operating activities
    Net income (loss)                                                   $ 194,689             $ 150,230
    Adjustments to reconcile net income (loss) to
            net cash provided (used) by operating activities
            Unrealized loss (gain) on investments                            (855)                  (43)
            Depreciation and amortization                                   4,734                 8,463
            Issuance of common stock for director fees                        615
            Changes in current assets and liabilities
                    Investment securities                                 (95,000)                    0
                    Commissions and other receivables                      30,053                 1,833
                    Employee advances                                       3,966                18,333
                    Prepaid expenses                                        4,020                (4,866)
                    Accounts payable                                       (4,012)               (7,840)
                    Salaries and commissions payable                       (4,146)               (1,030)
                    Accrued liabilities                                   (13,383)               26,883
                    Earth Trade settlement payment                        (40,926)              (75,000)
                    Income taxes receivable and payable                     1,600                     0
                                                                        ---------             ---------

    Net cash provided (used) by operating activities                       81,355               116,963

Cash flows from investing activities
    Purchase of furniture and equipment                                         0                (9,041)
    Change in deposits                                                      8,065                 3,516
                                                                        ---------             ---------

    Net cash provided (used) by investing activities                        8,065                (5,525)

Cash flows from financing activities
    Advances to unconsolidated subsidiary                                 (24,179)                    0
    Issuance of preferred stock, Series B                                       0                25,000
    Redemption of preferred stock, Series A                               (40,898)              (31,144)
    Repurchase of common stock                                            (51,085)              (21,523)
                                                                        ---------             ---------

    Net cash provided (used) by financing activities                     (116,162)              (27,667)
                                                                        ---------             ---------

Net change in cash and cash equivalents                                   (26,742)               83,771

Cash and cash equivalents,
    Beginning of year                                                     506,125               422,354
                                                                        ---------             ---------

    End of year                                                         $ 479,383             $ 506,125
                                                                        =========             =========

Supplemental disclosures of cash flow information
    Cash paid during the year for income taxes                          $       0             $   3,200
                                                                        =========             =========
</TABLE>


                             See accompanying notes.



                                      F-6
<PAGE>   29

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                          Notes to Financial Statements
                                  June 30, 2001


Note 1 - Summary of significant accounting policies

        Basis of presentation

        Progressive Asset Management, Inc., (Company) incorporated in California
        in 1987 and registered as a broker-dealer under the Securities and
        Exchange Act of 1934. Through May 1999, the Company was a full-service
        investment firm specializing in socially responsible investing. As more
        fully discussed in Note 11, the Company transferred all customer
        accounts and relationships with client representatives to another
        broker-dealer. The Company remains registered as a broker-dealer and
        continues to provide research and referrals in consideration for
        commission-based fees.

        In its policies, practices and programs, the Company commits to provide
        its clients with the highest quality financial products and investment
        services and to operate as a strong, positive force for social justice
        and environmental protection. The headquarters of the Company is in
        Concord, California.

        The accompanying financial statements include the accounts of the
        Company and exclude the accounts of its 70%-owned subsidiary,
        ProgressiveTrade Securities, Inc., a start-up enterprise incorporated on
        November 1, 2000 and that had no significant activity during the year
        ended June 30, 2001.

        The Company clears all of its limited trading activities with a clearing
        broker on a fully disclosed basis. Accordingly, the Company claims
        exemption from Securities Exchange Commission Rule 15c3-3 because it
        does not carry customer funds or handle customer securities.

        Cash and cash equivalents

        Cash and cash equivalents consist of cash on hand, demand deposits and a
        certificate of deposit with an original maturity of three months held by
        commercial banks and money market funds held by registered investment
        companies. All cash and cash equivalents are available to the Company
        within 90 days of demand. The carrying amount of cash and cash
        equivalents approximates fair value due to their short-term nature.

                            See accompanying notes.


                                      F-7
<PAGE>   30

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                          Notes to Financial Statements
                                  June 30, 2001


Note 1 - Summary of significant accounting policies (continued)

        Investment securities and investments

        The Company classifies investments in marketable securities as
        investment securities and records them at their fair market value. The
        Company classifies investments without a ready market as other
        investments and records them at the lower of cost or estimated net
        realizable value.

        Property and equipment

        Property and equipment consists of office and computer equipment and
        furniture. The Company computes depreciation of property and equipment
        using the straight-line method over the estimated useful lives of the
        respective property and equipment, ranging from three to seven years.

        Advances to unconsolidated subsidiary

        Advances to unconsolidated subsidiary consist of a note receivable
        totaling $16,000 and other reimbursable expenses totaling $8,179 all due
        from ProgressiveTrade Securities, Inc.

        Security transactions and commissions

        The Company records net commission revenue from FWG (Note 11) and on its
        limited security transactions on a settlement-date basis. Net commission
        revenue on unsettled transactions at year-end is not material.

        Advertising costs

        The Company expenses costs for producing and communicating advertising
        when incurred.

                            See accompanying notes.


                                      F-8
<PAGE>   31

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                          Notes to Financial Statements
                                  June 30, 2001


Note 1 - Summary of significant accounting policies (continued)

        Income taxes

        The Company adopted Statement of Financial Accounting Standards No. 109,
        "Accounting for Income Taxes" which requires recognition of deferred tax
        assets and liabilities for the expected future tax consequences of
        events that are included in financial statements and tax returns in
        different periods. Under this method, the Company determines deferred
        tax assets and liabilities based on the difference between financial
        statement and tax bases of assets and liabilities using enacted tax
        rates in effect for the years when the Company estimates the differences
        to reverse. As of June 30, 2001 and 2000, there were no significant
        deferred tax assets or liabilities except for a deferred tax asset (net
        of a 100% valuation allowance) resulting from available income tax loss
        carryforwards (Note 7).

        Earnings per share

        The Company calculates basic earnings per share based on the weighted
        average number of common shares outstanding during the year. The Company
        calculates fully diluted earnings per share based on the weighted
        average number of common shares and common stock equivalents, including
        options and convertible preferred stock, outstanding during the year.

        Estimated fair value of financial instruments

        Statement of Financial Accounting Standards No. 107, "Disclosure about
        Fair Value of Financial Instruments," requires the disclosure of the
        fair value of financial instruments, including assets and liabilities
        recognized on the statement of financial condition. Management estimates
        that the aggregate net fair value of financial instruments recognized on
        the statement of financial condition (including receivables, payables
        and accrued expenses) approximates their carrying value, as such
        financial instruments are short-term in nature, bear interest at current
        market rates or are stated at their fair value.

        Use of estimates

        The preparation of financial statements in conformity with accounting
        principle generally accepted in the United States requires management to
        make estimates and assumptions that affect the amounts reported in these
        financial statements and notes. Although management of the Company bases
        the estimates on its knowledge of current events and actions it may
        undertake in the future, actual results may differ.

                            See accompanying notes.


                                      F-9
<PAGE>   32

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                          Notes to Financial Statements
                                  June 30, 2001


Note 2 - Earth Trade settlement

        Earth Trade, Inc. (Earth Trade) organized in 1992 to promote sustainable
        development by marketing both organic and conventional food products
        from farm cooperatives in the developing world. In prior years, the
        Company acted as a sales agent in connection with the placement of
        certain Earth Trade debt and equity securities.

        Principally due to continuing losses, the shareholders of Earth Trade
        voted in May 1997 to voluntarily dissolve and liquidate its net assets.
        In April 1997, the Company Board of Directors, with consideration of its
        mission and standards of social responsibility, its 30% ownership of
        Earth Trade and its role as placement agent for debt and equity
        securities issued by Earth Trade, offered a settlement agreement to the
        Earth Trade note holders. Under the agreement, in exchange for their
        residual Earth Trade debt and a general release of liability, the note
        holders could receive either Company Series A preferred stock with a
        stated value of $7.00 (fair market value on settlement date of $0.70) or
        Company common stock with a stated value of $5.00 (fair market value on
        settlement date of $0.50). Substantially all the Earth Trade note
        holders accepted the settlement agreement in January 1998.

        During the years ended June 30, 1999 and 1998, the Company issued stock
        and cash to close the settlement agreement, as follows:

<TABLE>
<CAPTION>
                                 Shares            Amount
                                 ------           --------
<S>                              <C>              <C>
Preferred, Series A              94,879           $ 66,416
Common                           91,852             45,925
Cash                                 --             27,022
                                                  --------

Total                                             $139,363
                                                  ========
</TABLE>

                            See accompanying notes.


                                      F-10
<PAGE>   33

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                          Notes to Financial Statements
                                  June 30, 2001


Note 2 - Earth Trade settlement (continued)

        In February 1999, the shareholders approved an additional settlement
        with certain remaining Earth Trade note holders. Under the agreement, in
        exchange for their residual Earth Trade debt, a general release of
        liability and a subordination agreement acceptable to the NASD, the note
        holders will receive a total of $380,000. A reconciliation of the
        additional settlement subordinated liability and current and future
        payments follow. Future payments depend upon the gross revenue of the
        Company limited by the ability of the Company to meet the NASD net
        capital requirements (Note 16). The remaining note holders may elect to
        exchange their debt for Company common shares held by its chair.
        Outstanding amounts, if any, owed to the chair of the Company due to any
        exchange of debt for common shares are further subordinated to debt owed
        the remaining note holders.

        Earth Trade settlement subordinated liability and current and future
        payments as of June 30, 2001 and 2000 reconcile as follows:

<TABLE>
<S>                                                                           <C>
Additional settlement                                                         $380,000
    Paid from the final liquidation proceeds of Earth Trade during
           June 1999                                                            83,684
    Paid by the Company during June 1999                                       102,316
    Paid by the Company on September 30, 1999                                   75,000
                                                                              --------

    Total payments through June 30, 2000                                       261,000
                                                                              --------

Earth Trade settlement subordinated liability at June 30, 2000                 119,000

    Paid by the Company on September 27, 2000                                   40,926
                                                                              --------

Earth Trade settlement subordinated liability at June 30, 2001                $ 78,074
                                                                              ========
</TABLE>

        Remaining minimum and maximum amounts payable by the Company during the
        years ended June 30, subject to the ability of the Company to meet the
        NASD net capital requirements (Note 16), total as follows:

                            See accompanying notes.


                                      F-11
<PAGE>   34

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                          Notes to Financial Statements
                                  June 30, 2001


Note 2 - Earth Trade settlement (continued)

<TABLE>
<CAPTION>
                Minimum            Maximum
                -------            -------
<S>             <C>                <C>
2002            $30,000            $50,000
2003             28,074             48,074
2004                 --             18,074
</TABLE>

        Before the settlement agreements, the Company had no debt or other
        obligations to Earth Trade or its share or note holders and,
        accordingly, the settlement agreement is not an extinguishment of debt.
        However, due to the mandatory redemption feature of the Series A
        preferred stock (Note 8) issued as part of the first Earth Trade
        settlement agreement, management has not classified the Series A
        preferred stock as part of stockholders' equity.


Note 3 - Investment securities

        Investment securities as of June 30, 2001 consist of a bank certificate
        deposit bearing interest at 3.50%, maturing August 30, 2001 and totaling
        $95,000 and zero coupon bonds maturing July 15, 2001 and totaling
        $13,979.

        Investment securities as of June 30, 2000 consist of zero coupon bonds
        maturing July 15, 2001 and totaling $13,124.


Note 4 - Property and equipment

        Property and equipment as of June 30, 2001 and 2000 consists of the
        following:

<TABLE>
<CAPTION>
                                                     2001                 2000
                                                   --------             --------
<S>                                                <C>                  <C>
        Furniture                                  $ 18,673             $ 18,673
        Equipment                                     4,457                4,457
        Computer equipment                            6,984                6,984
                                                   --------             --------

        Property and equipment, at cost              30,114               30,114
        Accumulated depreciation                    (19,189)             (14,455)
                                                   --------             --------

        Property and equipment, net                $ 10,925             $ 15,569
                                                   ========             ========
</TABLE>

                            See accompanying notes.


                                      F-12
<PAGE>   35

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                          Notes to Financial Statements
                                  June 30, 2001

Note 5 - Other investments

        Other investments as of June 30, 2001 consist of notes receivable from
        Oikocredit USA (formerly Ecumenical Development Cooperative Society)
        maturing during the year ending June 30, 2002 and totaling $16,000 and
        300 warrants to purchase the common stock of the NASDAQ Stock Market,
        Inc. beginning June 28, 2002 and totaling $3,300.

        Other investments as of June 30, 2000 consist of notes receivable from
        Oikocredit USA (formerly Ecumenical Development Cooperative Society)
        maturing during the year ending June 30, 2002 and totaling $16,000.


Note 6 - Advances to unconsolidated subsidiary.

        Advances to unconsolidated subsidiary as of June 30, 2001 consist of a
        note receivable bearing interest at 10%, maturing December 1, 2001 and
        totaling $16,000 and other reimbursable expenses totaling $8,179 all due
        from ProgressiveTrade Securities, Inc. (Note 1).


Note 7 - Income taxes receivable, payable and provision

        As of June 30, 2001 and 2000, the Company had net operating loss
        carryforwards available to reduce future federal and California income
        taxes estimated as follows:

<TABLE>
<CAPTION>
Expiring June 30                                Federal           California
                                                --------          ----------
<S>                                             <C>                 <C>
      2002                                      $  2,000            $     --
      2003                                         3,000              10,000
      2004                                         4,000             233,000
      2013                                       268,000                  --
      2019                                       560,000                  --
                                                 --------            --------

Totals available as of June 30, 2000             837,000             243,000
</TABLE>

                            See accompanying notes.


                                      F-13
<PAGE>   36

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                          Notes to Financial Statements
                                  June 30, 2001

Note 7 - Income taxes receivable, payable and provision (continued)

<TABLE>
<CAPTION>
Used during the year ended June 30, 2001
<S>                                                        <C>                <C>
       2002                                                     --                 --
       2003                                                     --             10,000
       2004                                                     --            186,000
       2013                                                196,000                 --
       2019                                                     --                 --
                                                           -------            -------

Totals used during the year ended June 30, 2001            196,000            196,000
</TABLE>

<TABLE>
<CAPTION>
Expiring June 30
<S>                                             <C>                  <C>
       2002                                        2,000                 --
       2003                                        3,000                 --
       2004                                        4,000             47,000
       2013                                       72,000                 --
       2019                                      560,000                 --
                                                --------            -------

Totals available as of June 30, 2001            $641,000            $47,000
                                                ========            =======
</TABLE>


As of June 30, 2001 and 2000, the Company had carryforwards of unused tax
credits related to low- income housing of approximately $58,000 and $58,000,
respectively, from several partnerships in which the Company has invested or
received participating interests.

Under certain 1986 Tax Reform Act provisions, the availability of the net
operating loss carryforwards is subject to limitation upon a change in ownership
of more than 50% of the stock of the Company.

The income tax provision for the years ended June 30, 2001 and 2000 consists of
minimum state franchise taxes.

                            See accompanying notes.


                                      F-14
<PAGE>   37

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                          Notes to Financial Statements
                                  June 30, 2001

Note 8 - Series A preferred stock

        The Series A preferred stock issued during the years ended June 30, 1999
        and 1998, in connection with the Earth Trade settlement (Note 2), does
        not pay dividends, is non-voting, has a $7.00 per share liquidation
        preference over the common and Series B preferred stock and is
        convertible 1:1 into shares of common stock at the option of the holder
        or automatically upon the occurrence of certain events. The Series A
        preferred stock is subject to mandatory redemption annually each
        November 1 at $7.00 per share. The Company will redeem a portion of the
        Series A preferred stock based on 1% of its gross revenues, as adjusted
        and limited by the ability of the Company to meet the NASD net capital
        requirements (Note 16). The liquidation preference and remaining
        redemption requirement of the Series A preferred stock as of June 30,
        2001 and 2000 totaled $550,691 and $591,591, respectively. The Company
        includes the Series A preferred stock on the consolidated statement of
        financial condition at its value when issued (Note 2) and excludes it
        from stockholders' equity.


Note 9 - Series B preferred stock

        The Company, as part of a May 1999 agreement with Paradox Holdings,
        Inc., parent of FWG (Note 11), agreed to sell a 40% ownership interest
        in the Company; represented by Series B preferred stock, for $25,000.
        Following approval by the NASD in June 1999, the Company received
        payment and issued 25,000 shares of Series B preferred stock in July
        1999.

        The Series B preferred stock is entitled to 40% of the total dividends
        declared on common stock, is entitled to vote as if converted to a 40%
        share of the common stock, has a $1.00 per share liquidation preference
        (plus declared but unpaid dividends) over the common stock and is
        convertible into shares of common stock equal to 40% of the common stock
        after conversion at the option of the holder or automatically after the
        sooner of the Company receiving $875,000 under the agreement (Note 11)
        or June 30, 2002.



                            See accompanying notes.


                                      F-15
<PAGE>   38

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                          Notes to Financial Statements
                                  June 30, 2001

Note 10 - Common stock options

        In December 1995, the Company adopted a stock option and incentive plan
        that allows for the issuance of up to 200,000 shares of common stock.
        The plan provides for the award of stock options, employee stock
        purchases and restricted stock grants. Of the options awarded, all vest
        immediately and must be held for up to two years before exercise.
        Options awarded before December 1995 had holding requirements of up to
        seven years.

        The Company Board of Directors determines awards of additional stock
        options, vesting, exercise prices and other option terms. The exercise
        prices for all options awarded have not been less than the fair market
        value of the stock as determined by the Board of Directors at the date
        of grant. Certain options require a 10% premium on the option price
        under certain circumstances. Outstanding options as of June 30, 2001 and
        2000 expire from December 31, 2001 through 2006 and reconcile as
        follows:

<TABLE>
<CAPTION>
                                                  Price          Shares      Expiration
                                                  -----          ------      ----------
<S>                                               <C>            <C>         <C>
   Remaining from grants during the calendar
        years ended December 31
        1991-4                                    $1.00           13,657        2000
        1991-4                                     1.00            6,000        2001
        1995                                       2.00            3,227        2001
        1995                                       2.00            2,000        2002
        1996                                       1.00           32,000        2002
        1996                                       2.00            2,500        2002
        1997                                       1.00           31,628        2002
        1997                                       1.00           14,500        2003
        1998                                       0.24            1,500        2003
        1998                                       0.24            1,000        2004
        1999                                       0.49            1,500        2005
                                                                 -------

        Outstanding as of June 30, 2000                          109,512
        Granted as of December 31, 2000            0.41            1,500        2006
        Expired December 31, 2000                  1.00          (13,657)       2000
                                                                --------

        Outstanding as of June 30, 2001                           97,355
                                                                ========
</TABLE>



                            See accompanying notes.


                                      F-16
<PAGE>   39

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                          Notes to Financial Statements
                                  June 30, 2001

Note 10 - Common stock options (continued)

        The Company records its stock-based awards using the intrinsic value
        method of accounting in accordance with Accounting Principles Board No.
        25, "Accounting for Stock Issued to Employees" and its related
        interpretations. Accordingly, the Company recognized no compensation
        expense in the accompanying financial statements. Statement of Financial
        Accounting Standards No. 123, "Accounting for Stock-Based Compensation
        (SFAS 123)," requires the disclosure of pro forma net income had the
        Company adopted the fair value method of accounting. Under SFAS 123, the
        fair value of stock-based awards to employees is calculated through the
        use of option pricing models, even though such models were developed to
        estimate the fair value of freely tradable, fully transferable options
        without vesting restrictions, which significantly differs from the stock
        option awards of the Company. These models also require subjective
        assumptions, including future stock price volatility and expected time
        to exercise, which significantly affect the calculated values. The
        Company has not completed the pro forma calculations to determine the
        fair value of its option awards.


Note 11 - Paradox Holding, Inc. and FWG agreement

        In May 1999 the Company entered into agreement with Paradox Holdings,
        Inc., parent of Financial West Investment Group, Inc. (FWG), in which
        the Company transferred all of its customer accounts and relationships
        with client representatives to FWG. FWG retains 4.75% of all gross
        commissions generated by the transferred representatives (and any other
        representatives recruited by the Company in the future), pays
        commissions and reimburses certain expenses to the transferred
        representatives and remits the net commissions to the Company. FWG
        retains only 2.25% of all gross commissions until the difference (2.50%
        of all gross commissions) paid to the Company totals $875,000.

        The Company records payments from FWG in connection with the transfer as
        commission revenue. Of the total FWG commissions the Company recorded as
        revenue during the years ended June 30, 2001 and 2000, $109,916 and
        $101,709, respectively, represent payments against the $875,000 with
        $656,047 and $765,963, respectively, still due as of June 30, 2001 and
        2000. Paradox Holdings, Inc. has guaranteed payments to the Company by
        FWG, Inc.



                            See accompanying notes.


                                      F-17
<PAGE>   40

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                          Notes to Financial Statements
                                  June 30, 2001

Note 12 - Employee benefit plans

        Through December 31, 1999, the Company maintained a 401(k) profit
        sharing plan for the benefit of its employees. The plan allowed for both
        Company and employee elective contributions. The Board of Directors of
        the Company determined contributions to the plan annually subject to
        certain maximum amounts allowable under the Internal Revenue Code. The
        Company made no elective contributions to the plan during the year ended
        June 30, 2000. Effective December 31, 1999, the Company terminated the
        401(k) profit sharing plan.

        Beginning July 1, 2000, the Company offers a SIMPLE profit sharing plan
        for the benefit of its employees. Like the predecessor 401(k) profit
        sharing plan, the SIMPLE profit sharing plan allows for both Company and
        employee elective contributions. Additionally, the Company is required
        to match employee elective contributions up to the lesser of an
        individual employee's actual elective contributions or 3% of an
        employee's salary. Company matching contributions paid or accrued on
        employee salary earned and deferred during the year ended June 30, 2001
        totaled $5,819.

Note 13 - Bottomline 2001 conference

        The Company cosponsored the Bottomline 2001: The Future of Fiduciary
        Responsibility conference held in San Francisco, California on April
        18-20, 2001. The Company incurred certain expenses to organize and stage
        the conference and received reimbursement from other conference
        cosponsors and participant fees. Commissions and other receivables
        include conference expense reimbursements received by the Company after
        June 30, 2001 totaling $9,744. Conference expenses incurred by and
        reimbursed to the Company and excluded from the statement of operation
        total as follows:

<TABLE>
<S>                                                                         <C>
               Employee compensation and benefits                           $  70,621
               Office expenses                                                 10,295
               Professional fees                                                8,607
               Promotion and advertising                                        9,598
               Travel and entertainment                                         8,444
                                                                             --------

               Total expenses incurred, reimbursed and excluded              $107,565
                                                                             ========
</TABLE>



                            See accompanying notes.


                                      F-18
<PAGE>   41

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                          Notes to Financial Statements
                                  June 30, 2001

Note 14 - Credit risk and concentrations

        As of and during the years ended June 30, 2001 and 2000, the Company
        maintained deposit balances at a commercial bank in excess of federal
        deposit insurance amounts. Federal deposit insurance does not cover
        money market amounts held by registered investment companies.

        Amounts held by, due from and earned from FWG (Note 11) represent
        concentrations in the following percentages as of or during the years
        ended June 30, 2001 and 2000, as follows:

<TABLE>
<CAPTION>
                                                           2001%           2000%
                                                           ----            ----
<S>                                                        <C>             <C>
               Cash and cash equivalents                      2%             28%
               Investment securities                        100%            100%
               Commissions and other receivables             82%             80%
               Commission revenues                          100%             97%
</TABLE>

        Additionally, the balance of commission revenues clears through FWG.


Note 15 - Commitments and contingencies

        The company leases its new office facility in Concord, California under
        an operating lease from September 12, 2000 through October 1, 2002 from
        an entity owned or otherwise controlled by its chair. As of June 30,
        2001, remaining future minimum lease payments for the year ended June
        30, 2002 and 2003 totaled $19,920 and $4,980, respectively. During the
        years ended June 30, 2001 and 2000, rent expense, net of sublease
        payments, totaled $21,564 and $25,693, respectively.

        During the years ended June 30, 2001 and 2000, sublease payments paid to
        the Company totaled $10,765 and $17,412, respectively, of which an
        entity owned or otherwise controlled by its president and CEO paid
        $2,576 and $7,728, respectively.



                            See accompanying notes.


                                      F-19
<PAGE>   42

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                          Notes to Financial Statements
                                  June 30, 2001

Note 15 - Commitments and contingencies (continued)

        The Company and Sustainable Systems, Inc., which owns the other 30% of
        ProgressiveTrade Securities, Inc., agreed to raise initial capital for
        ProgressiveTrade Securities, Inc. (Note 1) totaling $250,000. The
        Company will not be obligated to raise its full commitment of $100,000,
        beyond its advances totaling $24,179 (Note 6), until ProgressiveTrade
        Securities, Inc. raises $150,000.

        The Company, in the ordinary course of its business, is named in matters
        arising from its activities as a broker-dealer. In the opinion of
        management, based upon discussions with legal counsel, the resolution of
        these matters will not have a material adverse effect on the financial
        condition of the Company.


Note 16 - Net capital requirement

        Pursuant to the net capital provisions of Rule 15c3-1 of the Securities
        and Exchange Act of 1934, the Company is required to maintain both
        minimum net capital, as defined under such provisions, and a ratio of
        aggregate indebtedness to net capital not to exceed 15 to 1. As of June
        30, 2001 and 2000, the Company had net capital of $520,322 and $418,155,
        respectively, which is $515,322 and $413,155, respectively, in excess of
        its required net capital of $5,000 and $5,000, respectively. As of June
        30, 2001 and 2000, the ratio of aggregate indebtedness to net capital
        was 0.0607 and 0.1232 to 1, respectively.



                            See accompanying notes.


                                      F-20
<PAGE>   43

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                          Notes to Financial Statements
                                  June 30, 2001

Note 17 - Quarterly financial results (unaudited)

        The unaudited revenues and income (loss) of the Company for the four
        quarters ending June 30, 2001 and 2000 total as follows:

<TABLE>
<CAPTION>
                                                         Revenues           Income (loss)
                                                         --------           -------------
<S>                                                      <C>                <C>
        September 30, 2000                               $140,558              $39,174
        December 31, 2000                                 189,125               74,074
        March 31, 2001                                    128,938               40,981
        June 30, 2001                                     144,984               40,460

        September 30, 1999                                121,508               11,996
        December 31, 1999                                 129,488               33,589
        March 31, 2000                                    162,139               46,357
        June 30, 2000                                     181,062               58,288
</TABLE>


                            See accompanying notes.


                                      F-21
<PAGE>   44

           Report of Independent Auditors on Supplemental Information



Board of Directors
Progressive Asset Management, Inc.

We have audited the financial statements of Progressive Asset Management, Inc.
as of and for the year ended June 30, 2001, and have issued our report thereon
dated August 8, 2001. Our audit was made primarily for the purpose of forming an
opinion on the basic financial statements taken as a whole. The accompanying
supplemental information presented hereinafter is presented for purposes of
additional analysis and is not a required part of the basic financial
statements, but is supplementary information required by Rule 17a-5 of the
Securities and Exchange Commission. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.


Markle Stuckey Hardesty & Bott
Larkspur, California
August 8, 2001


                            See accompanying notes.


                                      F-22
<PAGE>   45

                       PROGRESSIVE ASSET MANAGEMENT, INC.
 Statement of Changes in Liabilities Subordinated to Claims of General Creditors
                            Year ended June 30, 2001

<TABLE>
<S>                                                 <C>
   Balance, beginning of year                       $ 119,000

   Increase (decrease)                                (40,926)
                                                    ---------

   Balance, end of year                             $  78,074
                                                    =========
</TABLE>


                            See accompanying notes.


                                      F-23
<PAGE>   46

                       PROGRESSIVE ASSET MANAGEMENT, INC.
               Computation of Net Capital under Rule 15c3-1 of the
                       Securities and Exchange Commission
                                  June 30, 2001

<TABLE>
<S>                                                                    <C>
 Aggregate indebtedness
      Total liabilities                                                $109,649
      Less subordinated liabilities                                      78,074
                                                                       --------

 Total aggregate indebtedness                                          $ 31,575
                                                                       ========

 Net capital
      Stockholders' equity                                             $553,391
      Addition
             Subordinated liabilities                                    78,074
      Deductions
             Petty cash                                                     200
             Other receivables                                            9,944
             Employee advances                                            2,930
             Prepaid expenses                                            16,308
             Property and equipment, net                                 10,925
             Deposits                                                     1,467
             Other investments, at cost                                  19,300
             Advances to unconsolidated subsidiary                       24,179
             Securities haircuts                                          5,700
             Undue concentration                                         20,190

             Total deductions                                           111,143
                                                                       --------

             Net capital                                               $520,322
                                                                       ========

 Net capital requirements and ratio
      Minimum net capital requirements
        Higher of 6-2/3% x aggregate indebtedness or $5,000            $  5,000

      Excess net capital                                               $515,322

Excess net capital at 1,000% of aggregate indebtedness                 $517,164

      Aggregate indebtedness to net capital ratio                      0.0607 to 1
</TABLE>


                            See accompanying notes.


                                      F-24
<PAGE>   47

                       PROGRESSIVE ASSET MANAGEMENT, INC.
                   Reconciliation Pursuant to Rule 17a-5(d)(4)
                                  June 30, 2001


Reconciliation with Computation of the Company
  (Included in Part IIA of Form X-17A-5 as of June 30, 2001)

<TABLE>
<S>                                                                <C>
Net capital,
       as reported in Part IIA (Unaudited) FOCUS Report            $ 527,722

Audit adjustments                                                     (7,400)
                                                                   ---------

Net capital, as adjusted                                           $ 520,322
                                                                   =========


Aggregate indebtedness,
       as reported in Part IIA (Unaudited) FOCUS Report            $  97,095

Audit adjustments                                                    (65,520)
                                                                   ---------

Aggregate indebtedness, as adjusted                                $  31,575
                                                                   =========
</TABLE>

                            See accompanying notes.


                                      F-25
<PAGE>   48

                       PROGRESSIVE ASSET MANAGEMENT, INC.
           Computation for Determination of Reserve Requirements under
              Rule 15c3-3 of the Securities and Exchange Commission
                                  June 30, 2001


The computation for determination of the reserve requirements under Exhibit A of
Rule 15c3-3 of the Securities and Exchange Commission has not been prepared
because the exemption under Reg. Section 240, 15c3-3 (k)(i)(C) is met.


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


                       PROGRESSIVE ASSET MANAGEMENT, INC.
        Information Relating to Possession or Control Requirements under
              Rule 15c3-3 of the Securities and Exchange Commission
                                  June 30, 2001


A supplementary report pursuant to Rule 17a-5(d)(4) and the information relating
to possession or control requirements under Rule 15c3-3 are not required under
Rule 17a-5(e)(1)(i)(A) and Rule 15c3-3(k), respectively.


                            See accompanying notes.


                                      F-26
<PAGE>   49

          Report of Independent Auditors on Internal Accounting Control
                           Required by SEC Rule 17a-5


Board of Directors
Progressive Asset Management, Inc.

We have audited the financial statements of Progressive Asset Management, Inc.
as of and for the year ended June 30, 2001, and have issued our report thereon
dated August 8, 2001. As part of our audit, we made a study and evaluation of
the system of internal accounting control (internal control structure) of the
Company to the extent we considered necessary to evaluate the system as required
by auditing standards generally accepted in the United States. The purpose of
our study and evaluation, which included obtaining an understanding of the
accounting system, was to determine the nature, timing and extent of the
auditing procedures necessary for expressing an opinion on the financial
statements.

We also made a study of the practices and procedures followed by the Company in
making the periodic computations of aggregate indebtedness and net capital under
rule 17a-3(a)(11) and the procedures for determining compliance with the
exemptive provisions of rule 15c3-3. We did not review the practices and
procedures followed by the Company in making the quarterly securities
examinations, counts, verifications and comparisons and the recordation of
differences required by rule 17a-13 or in complying with the requirements for
prompt payment for securities under section 8 of Regulation T of the Board of
Governors of the Federal Reserve System, because the Company does not carry
security accounts for customers or perform custodial functions relating to
customer securities.

The management of the Company is responsible for establishing and maintaining a
system of internal accounting control and the practices and procedures referred
to in the preceding paragraph. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected benefits and related
costs of control procedures and of the practices and procedures referred to in
the preceding paragraph and to assess whether those practices and procedures can
be expected to achieve the Commission's above-mentioned objectives.

The objectives of a system and the practices and procedures are to provide
management with reasonable, but not absolute assurance that assets for which the
Company has responsibility are safeguarded against loss from unauthorized use or
disposition and that transactions are executed in accordance with management's
authorization and recorded properly to permit the preparation of financial
statements in


                            See accompanying notes.


                                      F-27
<PAGE>   50

accordance with generally accepted accounting principles. Rule 17a-5(g) lists
additional objectives of the practices and procedures listed in the preceding
paragraph.

Because of inherent limitations in any internal accounting control procedure or
the practices and procedures referred to above, errors or irregularities may
nevertheless occur and not be detected. In addition, projection of any
evaluation of them to future periods is subject to the risk that they may become
inadequate because of changes in conditions or that the degree of compliance
with them may deteriorate. Our study and evaluation made for the limited purpose
described in the first paragraph would not necessarily disclose all material
weaknesses in the system. Accordingly, we do not express an opinion on the
system of internal accounting control of Progressive Asset Management, Inc.
taken as a whole. However, our study and evaluation disclosed no condition that
we believe to be a material weakness.

We understand that practices and procedures that accomplish the objectives
referred to in the second paragraph of this report are considered by the
Commission to be adequate for its purposes in accordance with the Securities
Exchange Act of 1934 and related regulations and that practices and procedures
that do not accomplish such objectives in all material respects indicate a
material inadequacy for such purposes. Based on this understanding and on our
study, we believe that the practices and procedures of the Company were adequate
as of June 30, 2001 to meet the Commission's objectives.

This report is intended solely for the use of management, the Securities and
Exchange Commission and the National Association of Securities Dealers and
should not be used for any other purpose.


Markle Stuckey Hardesty & Bott
Larkspur, California
August 8, 2001


                            See accompanying notes.

                                      F-28
<PAGE>   51

                                    PART III

Exhibit 2      (a) Restated Articles of Incorporation(1)
               (b) Bylaws(1)
Exhibit 6      (a) Stock Option Plan(1)
               (b) Standstill Agreement between PAM and Paradox Holdings(1)
               (c) Agreement between PAM and Sustainable Systems, Inc.(2)
Exhibit 12     (a) Purchase Agreement Among Paradox Holdings, PAM and FWG(1)

Footnotes:

(1) Incorporated by reference to PAM's Registration Statement on Form 10SB,
Amendment 2, filed August 9, 2000.

(2) Incorporated by reference to PAM's Annual Report on Form 10-KSB, filed
September 28, 2000.


                                   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.

Progressive Asset Management, Inc.

/s/ ERIC LEENSON
---------------------------------------            Date: September 28, 2001
by Eric Leenson, President
and 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.

/s/ PETER CAMEJO
---------------------------------------            Date: September 28, 2001
Peter Camejo, Chairman of the Board

/s/ ERIC LEENSON
---------------------------------------            Date: September 28, 2001
Eric Leenson, President Chief Executive
Officer, Chief Financial Officer
and Member of the Board of Directors

/s/ CATHERINE CARTIER
---------------------------------------            Date: September 28, 2001
Catherine Cartier, Secretary
and Member of the Board of Directors

/s/ MICHAEL S. WYMAN
---------------------------------------            Date: September 28, 2001
Michael S. Wyman,
Member of the Board of Directors



                                       22
<PAGE>   52
/s/ NINA LAU-BRANSON
---------------------------------------            Date: September 28, 2001
Nina Lau-Branson,
Member of the Board of Directors

/s/ GENE VALENTINE
---------------------------------------            Date: September 28, 2001
Gene Valentine,
Member of the Board of Directors

/s/ EDWARD L. PRICE
---------------------------------------            Date: September 28, 2001
Edward L. Price,
Member of the Board of Directors

/s/ KALMAN STEIN
---------------------------------------            Date: September 28, 2001
Kalman Stein,
Member of the Board of Directors


                                      23