<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB/A

    [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
             THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

                      For the year ended December 31, 2001

                                       OR

    [_]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
             THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

             For the transition period from _____________ to ____________

                         Commission File Number: 1-12536
                         -------------------------------

                         STRATEGIC SOLUTIONS GROUP, INC.
                         -------------------------------
             (Exact name of Registrant as specified in its charter)

     Delaware                                           11-2964894
--------------------------------              -------------------------------
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                       Identification  No.)

1598 Whitehall Road, Ste. E
Annapolis, Maryland                                          21401
--------------------------------                             -----
(Address of principal executive offices)                   (Zip Code)

Registrant's telephone number,
including area code:                                     (410) 757-2728
                                                         --------------

Securities registered pursuant to Section 12(b) of the Act:
-----------------------------------------------------------
Common Stock, $.0001 par value
------------------------------
Securities registered pursuant to Section 12(g) of the Act:  None
------------------------------------------------------------------
                        (Title of Class)

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

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulations S-K (ss.229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in part III
of this Form 10-KSB or any amendment to this Form 10-KSB. [_]

         As of February 28, 2001 the aggregate market value of the voting stock
held by non-affiliates, 6,817,254 shares of Common Stock, $.0001 par value, was
approximately $545,000 based on the closing price of $0.08. The number of shares
outstanding of our Common Stock, as of February 28, 2001 was 8,725,860.

         Documents incorporated by reference:  None

<PAGE>

                                  FORM 10-KSB/A
                                      INDEX

<TABLE>
<CAPTION>
                                      Part I                                  Page
                                                                              ----
<S>                                                                           <C>
Item 1.    Description of Business .........................................    2

Item 2.    Description of Properties .......................................    6

Item 3.    Legal Proceedings ...............................................    6

Item 4.    Submission of Matters to a Vote of Security Holders .............    6

                                     Part II

Item 5.    Market for Common Equity and Related Stockholder Matters ........    6

Item 6.    Management's Discussion and Analysis of Financial Condition
               and Results of Operations ...................................    7

Item 7.    Financial Statements ............................................  F-1

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk ......   12

Item 8.    Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure .........................   12

                                    Part III

Item 9.    Directors, Executive Officers, Promoters and Control Persons;
               Compliance with Section 16(a) of the Exchange Act ...........   13

Item 10.   Executive Compensation ..........................................   14

Item 11.   Security Ownership of Certain Beneficial Owners and Management ..   16

Item 12.   Certain Relationships and Related Transactions ..................   17

Item 13.   Exhibits and Reports on Form 8-K ................................   17
</TABLE>

                           FORWARD-LOOKING STATEMENTS
                           --------------------------

Certain statements made in this report on Form 10-KSB/A are not based on
historical facts, but are intended to be forward-looking statements. These
statements can be identified by the use of forward-looking terminology such as
"believes", "expects", "may", "will", "should", or "anticipates" or similar
terminology, or by discussions of strategy. These statements reflect the
reasonable judgment of our management with respect to future events and are
subject to risk and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. We cannot guarantee
that our forward-looking statements will turn out to be correct or that our
beliefs or goals will not change. Our actual results could be very different
from, and worse than, our expectations for various reasons, including factors
that may affect future results discussed in Management's Discussion and Analysis
of Financial Condition and Results of Operations. Under the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995, an
SEC-reporting company that identifies forward-looking statements and warns
investors that actual results could differ materially from those in the
forward-looking statements, will not be liable for any private action arising
under the Securities Act of 1933 based on such forward-looking statements.

The public may read and copy any materials we file with the Securities and
Exchange Commission at the Securities and Exchange Commission's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800- SEC-0330. The Securities and Exchange Commission also maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the Securities and
Exchange Commission at http:// www.sec.gov.
                               -----------

                                       1

<PAGE>

                                     PART I

Item 1. Description of Business.

General

Strategic Solutions Group, Inc. ("the Company") provides custom interactive
multimedia software. The Company designs, develops, and markets custom
multimedia software used to deliver computer-based and web-based training,
electronic performance support systems, multimedia manuals, sales and marketing
presentations, and corporate communications.

Custom Multimedia Software

The Company provides technical consulting services that include analysis,
design, and development of technology-based solutions and specializes in
providing training solutions. Technology-based training encompasses a wide range
of emerging technologies in the area of employee training, and can come in the
form of computer-based training, web-based training, electronic performance
support systems, and multimedia manuals. In addition, the Company also designs
and develops software for sales and marketing applications and corporate
communications.

Depending on a customer's needs, the Company can produce multimedia software
that includes interactive computer animation, full motion video, audio, high-end
color graphics, text and hypertext providing vivid and effective instruction and
information. The software developed by the Company can be distributed over
multiple platforms including MS Windows(TM) and DOS and can be delivered on
diskette, CD-ROM, or the Internet. The Company has adapted its services using
new and emerging technologies, such as internal corporate intranets or the
Internet using the World Wide Web ("Web"). In addition, the incorporation of
Web-Based training ("WBT") allows users to have access from anywhere in the
world. The Company believes that the Internet and intranets will become
increasingly important delivery methods in the future.

According to a March 2000 industry research report on e-learning conducted by WR
Hambrecht & Co., corporate e-learning is one of the fastest growing markets in
the education industry. The report indicated that the online training market is
expected to nearly double in size every year through 2003, when it will reach
approximately $11.5 billion. Within the e-learning market segments, the research
report noted that the services segment of the e-learning market was the fastest
growing segment, with a Compounded Annual Growth Rate (CAGR) of 111%.

Computer-Based Training ("CBT"). The Company designs and develops custom
computer-based training software, which provides an interactive learning
experience to instruct employees how to use complex equipment or to understand
complicated industrial processes by simulating operation and production
procedures. The Company's software typically replaces or supplements technical
manuals and operating documentation and provides interactive self-paced
training. It also often incorporates cut-away views of equipment that would be
difficult or impossible to display in a real-world setting and enables users to
learn complex processes by viewing them in real or lapsed time or in slow
motion. Based on studies conducted and published by the American Society for
Training and Development, management believes that CBT enables users to master
skills and retain information more effectively than traditional instructor-led
training.

Web-Based Training. Recent technological developments and advances in computer
network technology enable the Company to deliver computer-based training over
corporate intranets or the Internet via the Web. Web-based materials can be
text-based (such as, lecture notes, case studies, and assignments) or they may
be much like sophisticated CBT courseware. As a result of rapidly advancing Web
browsers, high-speed communications, and innovative instructional design, it is
possible that real-time animation, video, audio, and conferencing could be
features included in a WBT solution. In addition, the incorporation of WBT
allows users to have access from anywhere in the world.

                                       2

<PAGE>

Electronic Performance Support Systems ("EPSS"). The goal of an EPSS is to
provide whatever information is necessary to accelerate performance and learning
at the moment of need - commonly referred to as Help Systems. The Company
designs and develops custom EPSS software to enable users to perform better at
their jobs. This software provides computer-based support that is integrated
into a workstation or work environment, and acts as a combination
coach/trainer/job aid/reference. The Company believes that EPSS increases
employee productivity by providing needed information and training when and
where it is needed - and in an amount and format that is the most useful to the
user.

Multimedia Manuals. The Company provides turn-key multimedia manual services,
using internally developed and off-the-shelf software tools. These tools enable
the division to convert customer manuals, reference guides, or other technical
materials into interactive multimedia software, including full-motion video,
audio, animation and interaction. The Company believes that these services
enable customers to obtain a technology-based solution in less time and at a
relatively low cost as compared to traditional custom software services.

Sales and Marketing. The Company designs and develops custom sales and marketing
software which enables manufacturers and distributors to demonstrate their
products to potential customers at trade shows or in kiosks. This software can
enhance sales and marketing presentations by encouraging customer participation
through the use of interactive product demonstrations.

Corporate Communications. The Company designs and develops custom multimedia
software for internal and external corporate communications. Examples include
software used to disseminate corporate policies and procedures and information
about a company's products and services. The Company believes that its custom
multimedia development services can be used to create a technology-based
solution, including web-based, that is comprehensive and cost-effective and
delivers lively and compelling messages to large groups of employees in
disparate locations.

Development and Services. The Company's custom multimedia services for the above
technology-based solutions include needs analysis, design specification and
product development. Needs analysis typically takes from three to four weeks and
the charges for such services can range from $10,000 to $20,000. The design
phase lasts from four to ten weeks and the charges for such services can range
from $20,000 to $100,000. Depending upon a project's scope and features, the
time required to complete software development can typically range anywhere from
one month to two years and the charges for such services have ranged from
$10,000 to $650,000.

At the outset of each project, the Company provides the customer with a
statement of work that details the services that the Company will provide, sets
forth the amount that the Company will charge, and provides a work and payment
schedule. Any changes to the project that will result in additional charges are
submitted to the customer for approval prior to providing the services. The
payment schedule varies from customer to customer, but usually includes some
form of up-front payment and progress payments based upon the completion of
phases of the project. To date, the Company has not experienced any significant
difficulties in delivering its custom software products to customers in
accordance with its schedules. Post-development support services are available
and are negotiated under a separate contract and typically billed on an hourly
basis.

Customers and Backlog

The Company's multimedia customers traditionally have been comprised primarily
of large manufacturers who must train employees to use complex equipment or
understand complicated industrial processes. To date, such customers have
represented a broad range of industries, including the automotive, packaging,
electronics, pharmaceutical, beverage bottling, and fitness and food
manufacturing industries, as well as government agencies located throughout the
United States. As part of its strategy to grow revenues, the Company has
identified strategic vertical markets with business-critical needs that can be
addressed by its technology-based solutions. The Company has implemented a sales
and marketing strategy that targets its efforts on the manufacturing and
transportation industries.

                                       3

<PAGE>

The Company intends to leverage its existing relationships and expand its sales
and marketing efforts to increase market share in these industries.

During 2001, approximately $1,399,000, or 80%, of the Company's revenue was
earned from an automotive manufacturer with the other 20% from a variety of
manufacturing and service providers. During 2000, approximately $1,281,000, or
98%, of the Company's revenue was earned from two customers, an automotive
manufacturer and Varsity Heavy Duty.

As of December 31, 2001, backlog (i.e., the difference between the fees payable
to the Company set forth in existing contracts and the amount of such fees that
had been recognized as revenue on the Company's financial statements) of its
custom multimedia software services totaled approximately $270,000, all of which
is expected to be earned during 2002. There can be no assurance that contracts
reflected in backlog will not be cancelled or delayed. Accordingly, the Company
believes that backlog is not a reliable measure of future revenue.

Research and Development

For the years ended December 31, 2001 and 2000, costs associated with research
and development activities have been nominal. Historically, research and
development activities included the development of a library of reusable
applications, codes, utilities, and tools that the Company can utilize in the
early stages of development of many of its software applications. There were no
software development costs capitalized for any periods presented, as the costs
incurred between technological feasibility and general availability were not
significant. The Company believes that costs for research and development will
be moderately higher in the future as the Company plans to continue improving
its existing reusable applications, codes, utilities, and tools, as well as the
development of new reusable applications, codes, utilities, and tools. In
addition, future research and development efforts may include the development of
products to be sold on a stand-alone basis. However, the Company has not yet
developed any products to be sold on a stand-alone basis, and, accordingly, has
not generated any revenue from the sale of software licenses.

Sales and Marketing

As of December 31, 2001, the Company employed two persons involved in sales who
receive a combination of salary and commission. The direct sales force focuses
on large customers and leverages its industry experience to access target
organizations within particular vertical markets. These markets are
characterized by business areas to which the Company's services and technology
are particularly well suited, and by participants who possess the financial
resources and scale of operations necessary to support the types of services
provided by the Company. The Company also employs other business development and
marketing techniques to communicate directly with current and prospective
clients.

In order to increase revenues, the Company focuses its sales and marketing
strategy and targets its efforts to providing technology-based training
solutions to the manufacturing and transportation industries.

Existing clients are also an important component of the Company's marketing
strategy. Follow-on projects leverage sales and marketing resources and
strengthen the Company's client relationships. The Company believes that it has
good relationships with its existing customer base and expects that these
contacts will enable it to successfully pursue this strategy.

Competition

The information technology consulting, software development, and business
solution markets include a large number of participants, are subject to rapid
change, and are highly competitive. The Company competes with and faces
potential competition for clients and experienced personnel from a number of
companies that have substantially greater financial, technical, sales,
marketing, and other resources, generate greater revenues, and have greater name
recognition than the Company. These markets are highly fragmented and served by
numerous firms, many of which serve only their respective local

                                       4

<PAGE>

markets. In addition, clients may elect to use their internal information
systems resources to satisfy their needs for software and application
development and consulting services, rather than using those offered by the
Company.

The Company's custom multimedia software business competes with companies that
produce interactive training software (custom and off-the-shelf) and other
third-party suppliers of training and marketing materials, as well as internal
training and information systems resources of potential customers.

The Company's clients primarily consist of large organizations, including
agencies of the federal government, and there are an increasing number of
professional services firms seeking information technology consulting and
software development engagements from that client base. The Company believes
that the principal competitive factors in the information technology consulting
and software development industry include responsiveness to client needs,
project completion time, quality of service, price, project management
capability, and technical expertise. The Company believes that it presently
competes favorably with respect to each of these factors. However, the Company's
markets are still evolving and there can be no assurance that the Company will
be able to compete successfully against current and future competitors and the
failure to do so successfully will have a material adverse effect upon the
Company's business, operating results, and financial condition. The Company
believes that its ability to compete also depends in part on a number of
competitive factors outside its control, including the ability of its
competitors to hire, retain and motivate personnel; the development by others of
software that is competitive with the Company's services; the price at which
others offer comparable services; and the extent of its competitor's
responsiveness to customer needs.

Intellectual Property

Most of the Company's contracts state that its software is proprietary and that
title to and ownership of its software generally reside with the Company. The
Company grants nonexclusive licenses to customers for software developed by the
Company for such customers. Like many software firms, the Company has no
patents. The Company attempts to protect its rights with a combination of
copyright, trade secret laws, and employee and third-party nondisclosure
agreements. Despite these precautions, it may be possible for unauthorized third
parties to copy certain portions of the Company's products or obtain and use
information that the Company regards as proprietary, such as source codes or
programming techniques.

As the number of software products increases and their functionality further
overlaps, the Company acknowledges that software programs could increasingly
become the subject of infringement claims. Although the Company's products have
never been the subject of an infringement claim, there can be no assurance that
third parties will not assert infringement claims against the Company in the
future or that any such assertion may not require the Company to enter into
royalty arrangements or result in costly litigation.

Product Liability Insurance

The Company does not currently carry product liability insurance and there can
be no assurance that such coverage, if obtainable, would be adequate in terms
and scope to protect the Company against material adverse effects in the event
of a successful product liability claim. Although the Company has not been
subject to any product liability claims, such claims could arise in the future.
There can be no assurance that the Company would have sufficient resources to
satisfy any liability resulting from these claims or would be able to have its
customers indemnify the Company against such claims.

Employees

As of December 31, 2001, the Company had nine full-time employees, two of whom
were in administration, two in sales and marketing, and five of whom held
professional technical positions. No Company employees are represented by
unions. Management believes the Company's employee relations are good.

                                       5

<PAGE>

The Company's success will depend upon its ability to attract, retain, and
motivate highly-skilled employees, particularly project managers and other
senior technical personnel. Qualified personnel are in particularly great demand
and are likely to remain a limited resource for the foreseeable future. However,
the Company believes that it has been successful in its efforts to attract and
retain the number and quality of professionals needed to support present
operations and future growth. Although the Company expects to continue to
attract sufficient numbers of highly skilled employees and to retain its
existing technical personnel for the foreseeable future, there can be no
assurance that the Company will be able to do so.

Item 2.  Description of Property.

The Company leases office space in Annapolis, Maryland and Ypsilanti, Michigan
(approximately 6,800 sq. ft. and 1,000 sq. ft., respectively). These leases
require the Company to pay monthly rent of approximately $6,300 and expire on
February 1, 2005 and March 17, 2002, respectively. Management believes that its
current office facilities are adequate and suitable for the Company's current
operations.

Item 3.  Legal Proceedings:

None.

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

None.


                                     PART II

Item 5.  Market for Registrant's Common Stock and Related Stockholder Matters

The Company's Common Stock have been quoted on the OTC Bulletin Board, a service
provided by the Nasdaq Stock Market, Inc. under the symbol "SSGI."

The following table shows the high and low sale prices for the Company's Common
Stock, for the periods indicated, based upon information supplied to the Company
by Nasdaq. The prices are inter-dealer prices, and do not include retail mark
up, mark down or commission and not necessarily represent actual transactions.

                  Year                               High              Low
                  ----                               ----              ---
         2001
         ----
         1/st/ Quarter                               $0.19             $0.08
         2/nd/ Quarter                               $0.23             $0.06
         3/rd/ Quarter                               $0.23             $0.12
         4/th/ Quarter                               $0.16             $0.08

         2000
         ----
         1/st/ Quarter                               $0.97             $0.06
         2/nd/ Quarter                               $0.61             $0.16
         3/rd/ Quarter                               $0.52             $0.22
         4/th/ Quarter                               $0.30             $0.08

The closing bid price for the Company's Common Stock on February 28, 2002, was
$0.08. The Company had approximately 2,400 holders of record of Common Stock as
of December 31, 2001. Approximately 70% of our 8,792,528 shares of common stock
outstanding were held in street name by an unknown number of beneficial owners.

No cash dividends have been paid by the Company on its Common Stock and no such
payment is anticipated in the foreseeable future.

                                       6

<PAGE>

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

Overview

The Company's revenues are comprised of service fees, product sales, and
royalties. Service fees are generated from the development of custom multimedia
software. Product sales are not considered significant by the Company and
consist principally of third-party software and hardware products sold as part
of our multimedia software solution. Royalties are paid to the Company by
customers who resell copies of software developed by the Company for such
customers.

Fiscal 2001 Compared to Fiscal 2000
-----------------------------------

Total revenues for the year ended December 31, 2001 was $1,750,194 as compared
to $1,312,613 for the same period of 2000, an increase of approximately $438,000
or 33%. The increase is primarily attributed to an increase in both the size and
volume of new contracts and the timing of completion of existing contracts with
existing customers.

During the year ended December 31, 2001, revenue from custom multimedia software
development services was $1,744,849, as compared to $1,293,008, for the prior
year, an increase of approximately $452,000 or 35%. The increase was primarily a
result of an increase in both the size and volume of new contracts and the
timing of completion of the Company's contracts. The Company's strategy is to
continue to increase revenues from custom multimedia software development
services targeting its sales and marketing efforts of technology-based training
solutions to the manufacturing and transportation industries. Management
believes revenues from multimedia software will continue to increase in 2002 and
beyond.

During the year ended December 31, 2001, no revenue from sales of products was
generated, as compared to $5,827, in the prior year. In 2000, this represented
sales of computer hardware products by the Company. The Company does not
consider the sale of computer hardware to be part of its core business, and only
engages in such sales as a courtesy to its customers when requested. The Company
does not anticipate a significant volume of computer hardware sales in the
future.

The Company has entered into agreements that allow certain customers to resell
copies of the Company's software products in exchange for royalty payments.
Royalties were $5,345 during the year ended December 31, 2001 as compared to
$13,778 for the prior year, a decrease of approximately $8,400 or 61%. The
decrease is due primarily to a decrease in the number of marketing and
development partners during 2001. The Company continually explores additional
marketing and development partners to increase revenues generated from royalty
arrangements. Royalties are not expected to be significant in the future.

During the year ended December 31, 2001, the cost of service fees for custom
multimedia software services was $851,564 as compared to $579,562 in the prior
year, resulting in gross margins of approximately 51% and 55%, respectively. We
anticipate margins to remain consistent at this level in the future.

Our loss from operations from the year ended December 31, 2001 of $98,470 was
$262,933, or 73%, less than our loss from operations of $361,403 for the year
ended December 31, 2000. The reduction in our operating loss was due primarily
to an increase in revenue and a reduction in our selling, general and
administrative expenses.

While our operating loss improved, our net income (loss) deteriorated by
$147,854, from $24,434 for the year ended December 31, 2000 to a net loss of
$123,420 for the year ended December 31, 2001. This is due primarily to activity
that we do not expect to reoccur in the future as detailed below.

                                       7

<PAGE>

<TABLE>
<CAPTION>
                                                                                 2001                2000
                                                                                 ----                ----
     <S>                                                                     <C>                 <C>
     Operating loss                                                          $     (98,470)      $   (361,403)
     Extraordinary gain on the extinguishment of debt                                  ---            418,255
     Other                                                                         (24,950)           (32,418)
                                                                             --------------      ------------
     Net income (loss)                                                       $    (123,420)      $     24,434
                                                                             =============       ============
</TABLE>

During the year ended December 31, 2001, selling, general and administrative
expenses were $997,100 as compared to $1,086,969 in the prior year, a decrease
of approximately $90,000, or 8%. This decrease is primarily the result of the
current vacancy in the Company's CEO position

During the year ended December 31, 2001, other income increased by approximately
$78,000 while other expenses increased by approximately $70,000. Other income
consists primarily of the value of the penalties waived in 2001 (see note 2) and
capital gains on the sale of shares of an investment. The increase in other
expenses is a result of interest expense and amortization of discount and costs
related to the registration of shares of our common stock which we abandoned
which were recorded during the first quarter of 2001.

Fiscal 2000 Compared to Fiscal 1999
-----------------------------------

Total revenues for the year ended December 31, 2000 was $1,312,613 as compared
to $992,331 for the same period of 1999, an increase of approximately $320,000
or 32%. The increase is primarily attributed to an increase in both the size and
volume of new contracts and the timing of completion of existing contracts with
existing customers.

During the year ended December 31, 2000, revenue from custom multimedia software
development services was $1,293,008, as compared to $952,050, for the prior
year, an increase of approximately $341,000 or 36%. This includes $283,125 in
revenue we recognized for services from Varsity Heavy Duty, a related party. The
increase was primarily a result of an increase in both the size and volume of
new contracts and the timing of completion of the Company's contracts. The
Company's strategy, put in place in 1999, is to continue to increase revenues
from custom multimedia software development services targeting its sales and
marketing efforts of technology-based training solutions to the manufacturing
and transportation industries. Management believes revenues from multimedia
software will continue to increase in 2001 and beyond.

During the year ended December 31, 2000, revenue from sales of products was
$5,827, as compared to $18,238, in the prior year, a decrease of approximately
$12,000. In 2000, this represents sales of computer hardware products by the
Company. The Company does not consider the sale of computer hardware to be part
of its core business, and only engages in such sales as a courtesy to its
customers when requested. The Company does not anticipate a significant volume
of computer hardware sales in the future.

The Company has entered into agreements that allow certain customers to resell
copies of the Company's software products in exchange for royalty payments.
Royalties were $13,778 during the year ended December 31, 2000 as compared to
$22,043 for the prior year, a decrease of approximately $8,300 or 37%. The
decrease is due primarily to a decrease in the number of marketing and
development partners during 2000. The Company continually explores additional
marketing and development partners to increase revenues generated from royalty
arrangements. Royalties are not expected to be significant in the future.

During the year ended December 31, 2000, the cost of service fees for custom
multimedia software services was $579,562 as compared to $505,532 in the prior
year, resulting in gross margins of approximately 55% and 48%, respectively. We
anticipate margins to remain consistent at this level in the future.

                                       8

<PAGE>

Our loss from operations from the year ended December 31, 2000 of $361,403 was
$53,776, or 13%, less than our loss from operations of $415,179 for the year
ended December 31, 1999. The reduction in our operating loss was due primarily
to an increase in revenue combined with an increase in gross margin. The
improvement in our gross margin was due to several factors including reuse of
previously developed utilities, higher caliber work force, and a streamlining of
the production process.

While our operating income improved, our net income deteriorated by $191,761,
from $216,195 for the year ended December 31, 1999 to a net income of $24,434
for the year ended December 31, 2000. This is due primarily to activity that we
do not expect to reoccur in the future as detailed below.

<TABLE>
<CAPTION>
                                                                                 2000                1999
                                                                                 ----                ----
     <S>                                                                     <C>                 <C>
     Operating loss                                                          $    (361,403)      $   (415,179)
     Recovery of previously written-off investment in UST                              ---            600,000
     Extraordinary gain on the extinguishment of debt                              418,255                ---
     Other                                                                         (32,418)            31,374
                                                                             -------------       ------------
     Net income (loss)                                                       $      24,434       $    216,195
                                                                             =============       ============
</TABLE>

During the year ended December 31, 2000, research and development expenses were
$3,425 as compared to $66,815 for the prior year. The variability in the amount
of research and development expenses is directly related to the timing of the
Company's product development initiatives. Research and development expenses
included improvements on existing tools and the development of software tools
and applications to be sold. As the Company expands to provide more services
directed towards the internet, and as our development tools become more
powerful, the Company anticipates a moderate increase in research and
development expenses in the future.

During the year ended December 31, 2000, selling, general and administrative
expenses were $1,086,969 as compared to $817,313 in the prior year, an increase
of approximately $270,000, or 33%. This increase is primarily due to the
inclusion of compensation expense for certain officers based on the intrinsic
value of stock options granted, professional fees associated with private
placements of our stock and debt and the conversion and cancellation of
previously issued debt.

Cash Flow, Liquidity and Capital Resources

The Company implemented a Strategy to Achieve Profitable Operation in 1999, and
made significant strides in achieving its objectives under this plan during 2000
and 2001. The Company completed 2001 with a net loss of $123,420, including
other income and expenses of $24,950, experienced a loss from operations of
$98,470 and net cash used in operations of $263,991. The Company's loss from
operations was significantly less in 2001 over prior years. The Company
continued to experience significant growth in revenue in 2001. The Company
completed 2000 with a small net income of $24,434, including an extraordinary
gain of $418,255, experienced a loss from operations of $361,403 and net cash
used in operations of $99,907. Management believes that by continuing the
implementation of it's Strategy to Achieve Profitable Operations, the Company's
operations should continue to improve into 2002 and beyond. However, there can
be no assurance that such actions will generate sufficient cash flow to allow us
to continue operations in the future without additional investment capital or
borrowings.

On March 27, 2001, the Company executed Subscription Agreements with certain
existing shareholders and members of executive management for the purchase of
fourteen units for a total of $350,000. Each unit consists of 50,000 shares of
Company common stock and a $25,000 convertible subordinated debenture, bearing
interest at 10%, due in 2004. The convertible subordinated debentures are
convertible at the holder's option, at any time, into shares of the Company's
common stock at a conversion price of $0.10 per share (the Company's market
price on March 27, 2001). The Company received $150,000 of the subscribed amount
in March 2001, an additional $150,000 was received during April 2001, and
$50,000 during May 2001 per the contractual agreements. The Company used these
funds to repay amounts drawn under its line of credit and to fund operations and
future growth.

In addition, as described in Note 2 to the Company's financial statements, the
Company is holding approximately 34,000 shares of common stock of High Speed
Access Corporation, a company listed on

                                       9

<PAGE>

the Nasdaq stock market under the symbol HSAC. The market value of these shares
of common stock as of December 31, 2001 was approximately $19,000.

Our financial statements have been prepared on a going concern basis, which
contemplates the realization of assets, and the satisfaction of liabilities in
the normal course of business. However, our auditors have included in their
Report of Independent Certified Public Accountants included a fourth
(explanatory) paragraph drawing attention to factors that raise substantial
doubt about our ability to continue as a going concern. We have experienced net
losses and negative cash flow from operations for 2001 and 2000. We have
accumulated a deficit at December 31, 2001 of $16,340,466.

Although we expect operating results to improve, there can be no assurances that
positive results will occur. We may continue to experience adverse results of
operation in the future, and may not be able to satisfy our current obligations
in the normal course of business or obtain additional investment capital on
terms acceptable to us, or at all. We believe that without new contracts or
additional investment capital we will not have sufficient cash to fund our
planned activities in the future, and we may not be able to continue operating.
As such, our continuation as a going concern is dependent upon our ability to be
awarded several large scale contracts in the near future or to raise additional
financing. Our anticipated cash flows from our 2002 operations is largely
dependent upon our ability to achieve our sales and gross profit objectives from
new contracts obtained. These factors among others may indicate that we will be
unable to continue as a going concern. We are actively pursuing new contracts
and if necessary will consider additional equity financing to provide the
necessary funds for working capital and for planned operations.

Other Factors Affecting Future Results

The Company has historically incurred operating losses.

The Company incurred a net operating loss during the year ended December 31,
2001 of approximately $98,000 and had an accumulated deficit of approximately
$16,300,000. The Company also experienced a net cash outflow from operations of
$263,991 for the year ended December 31, 2001.

While the Company believes that it is taking the necessary steps to achieve
profitable cash flow and positive operations, there can be no assurance that it
will be able to do so, or that should the Company achieve profitability, that it
will sustain such profitability in the future. Should the Company not be able to
implement its plans, and begin generating positive cash flow from its
operations, the Company will be required to obtain additional sources of
financing in the future or to reduce operating expenses.

While the Company's sales continued to increase during 2001, the Company cannot
assure you that it will continue to experience such growth. Future prospects
must be considered in light of the risks, expenses and difficulties frequently
encountered by companies in new and rapidly evolving industries. To address
these risks and achieve profitability and increased sales levels, the Company
must, among other things, continue to establish and increase market acceptance
of its products and systems, respond effectively to competitive pressures, offer
high quality customer service and support, and introduce, on a timely basis,
advanced versions and enhancements of its products and successfully market and
support such advanced versions and enhancements.

We currently rely on a small number of customers for our revenue.

The majority of our sales is generated from a limited number of customers. For
the year ended December 31, 2001, one customer, with several locations, was
responsible for 80% of recurring revenue. This customer continues to be our
largest and most important customer. While we hope to increase the number of
customers for our products, similar or greater concentration of our net sales
among a limited number of customers may occur in the future. In this event, any
material decrease in net sales to any one of our largest customers that is not
matched by corresponding increases in net sales to new or existing customers
could have a material adverse effect on our financial condition and results of

                                       10

<PAGE>

operations. We cannot assure you that we will receive orders from any existing
customers or from new customers.

We have never paid dividends, and you should not expect to receive dividends in
the future.

We have never paid dividends on our common stock and do not expect to pay any
dividends for the foreseeable future.

Our executive officers and certain key personnel are critical to our business
and these officers and key personnel may not remain with us in the future.

Our future success depends upon the continued service of our executive officers
and other key personnel. If we lose the services of one or more of our executive
officers or key employees, or if one or more of them decide to join a competitor
or otherwise compete directly or indirectly with us, our business, operating
results and financial condition could be harmed. In particular, Ernest Wagner,
our President, and Kevin Idso, our Vice-President would be particularly
difficult to replace. The loss of either of these individuals, or other future
key employees, would have a material adverse effect on us.

Our business and growth will suffer if we are unable to successfully hire and
retain key personnel.

We believe that our future success depends in large part on our ability to
attract, train, motivate and retain highly skilled employees. We may be unable
to retain our key employees or retain other highly qualified employees in the
future. The failure to attract and retain the necessary managerial, marketing,
merchandising, operational, customer service, technical, financial or
administrative personnel could harm our business. In addition, as we grow and
add additional product and service offerings, we anticipate a need to further
develop and expand our products. Competition for highly skilled and qualified
technical people is intense. We cannot be certain we will be able to attract and
retain a sufficient number of qualified technical people or outside consultants.

Technology Company related stock prices are especially volatile and this
volatility may depress our stock price.

Technology related companies like us, quoted on the Nasdaq stock market have
recently, and are continuing to experience a downward trend in their stock
prices, and significant volatility. Based on the lack of indications to the
contrary, we expect that the current market condition will continue into the
future, and that the Company's stock could experience significant price
fluctuations, when measured on a percentage basis, and volume fluctuations.
These fluctuations may be unrelated to our operating performance. Broad market
and industry volatility may reduce the value of our common stock, regardless of
our operating performance. Due to this volatility, we believe that the value of
the Company's common stock could be adversely affected.

Strategy to Achieve Profitable Operations

During 1998, management laid out its Strategy to Achieve Profitable Operations,
which included intensified development of its technology-based training
software, greater penetration of the needs of existing, major customers, and
initial exploitation of the Internet applications for the Company's expertise.
Coupled with careful management, the Company believed in 2000 it began to
stabilize its business. While it has been successful to date, there are no
assurances that the Company will continue to achieve its strategy.

During year 2001, the Company continued to achieve higher revenues and positive
financial results by expanding its presence in the fast-growing field of
web-based training. The Company was an early entrant in this market, and our
experience and reputation provide advantages over our competitors. The Company
has also taken initial steps to participate in the joint-venture development of
a related product line, VarsityHeavyDuty.com, by working closely with one of the
Company's principal investors.

                                       11

<PAGE>

The Company's Profit Strategy for 2002 focuses on maintaining and increasing
revenue by expanding and increasing its client and contract base. The Company
believes a more diverse client base will add stability to the revenue stream.
Achievement of this goal will be accomplished by meeting production deadlines
and securing new contracts.

Item 7.   Financial Statements

The information required by Item 7 begins at page F-1 that appears after page
12.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

The Company does not believe there is any material market risk exposure with
respect to derivative or other financial instruments that would require
disclosure under this item.

Item 8.   Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.

None.

                                       12

<PAGE>

                                    PART III

Item 9.   Directors and Executive Officers of the Registrant; Compliance With
Section 16(a) of the Exchange Act.

The following table sets forth certain information concerning the directors and
executive officers of the Company:

<TABLE>
<CAPTION>
Name                                    Age       Position
----                                    ---       --------
<S>                                     <C>       <C>
John J. Cadigan                         71        Chairman of the Board

Ernest A. Wagner                        41        President, Treasurer, Chief Operating Officer, and Director

Kevin E. Idso                           38        Vice President, Director

Barbara A. Seubott                      53        Secretary

Thomas Stone                            40        Director

Timothy W. Byrne                        43        Director
</TABLE>

John J. Cadigan has been Chairman of the Board and a director of the Company
since February 1991. He was Chief Executive Officer, Secretary, and Treasurer
until his retirement in October 2000. He was President from July 1995 to January
2000. Prior to joining the Company, Mr. Cadigan served as Chairman of PAI from
its inception in 1989 until it was merged into the Company in February 1991.

Ernest A. Wagner was named President, Chief Operating Officer, and a director of
the Company in January 2000. He has been with the Company since February 1994.
In 1998, Mr. Wagner was promoted to President of the Company's Multimedia
Division. From 1985 to February 1994, Mr. Wagner served in various engineering
and management positions with SuperFlow Corporation, a manufacturer of
computerized engine and vehicle testing equipment.

Kevin E. Idso was named Vice President of the Company in January 2001 and a
director of the Company in March 2001. Mr. Idso has been with the Company since
after graduating from Western Washington University with a Bachelors degree in
Computer Sciences in 1985. Mr. Idso is the original developer of our technology
and developed the Company's first Computer-Based Training course. In 1997, Mr.
Idso was promoted to Vice President, R&D of the Company's Multimedia Division.

Barbara A. Seubott was named Secretary of the Company in January 2001. Ms.
Seubott has been with the Company since March 1999 as Accounting and Human
Resources Manager. From 1981 to March 1999, Ms. Seubott held various accounting
and management positions in both private industry and public accounting. Ms.
Seubott is a Certified Public Accountant.

Thomas Stone was named Director of the Company in May 2001. Mr. Stone has been
the President of Varsity Heavy Duty from 1999 to present. Prior to that, from
1991 to 1998, Mr. Stone was employed by Stone Heavy Duty in various positions,
including Vice President, General Manager and Secretary. Mr. Stone also served
as director of Stone Heavy Duty.

Timothy W. Byrne was named Director of the Company in May 2001. Mr. Byrne has
been President and Chief Executive Officer of U.S. Lime and Minerals, Inc. from
2000 to present. From 1998 to 2000, Mr. Byrne was employed as President of
Rainmaker Interactive. Prior to that, from 1990 to 1998, Mr. Byrne was employed
by U.S. Lime and Minerals, Inc. in various positions, including President, Chief
Executive Officer, Chief Financial Officer and Senior Vice-President.

                                       13



<PAGE>

No family relationship exists between any director or executive officer and any
other director or executive officer.

Board of Directors

The Company's Certificate of Incorporation and Bylaws, as amended, divide the
Company's directors into three classes designated as Class I, Class II and Class
III, that serve staggered three-year terms that expire at the annual meeting of
the Stockholders in the final year of the term. Each class consists, as nearly
as may be possible, of one-third of the total number of directors constituting
the entire Board of Directors. Directors serve for their term and until their
successors are duly elected, or until their earlier resignation, removal from
office, or death. The remaining directors may fill any vacancy in the Board of
Directors for an unexpired term.

There are presently five directors serving on the Board. Ernest Wagner and
Timothy Byrne are designated as a Class I directors and their terms expire in
2002. Thomas Stone is designated as a Class II director and his term expires in
2003. John J. Cadigan and Kevin Idso are designated as a Class III directors and
their terms expires in 2004.

The Company has three standing committees, the Executive Committee, Compensation
Committee and the Audit Committee. John J. Cadigan is chairman of the Executive
Committee and Thomas Stone is chairman of the Compensation Committee. Members
serve until the next annual election and until their successors are duly elected
and shall qualify until their earlier death resignation or removal. The
Executive Committee was established to assist in the administration of the
Corporation's activities. The Compensation Committee has the power and authority
to designate, recommend and/or review compensation of the Company's executive
officers and other employees, including salaries, bonuses, fringe benefits and
the grant of stock options. The Audit Committee has the power and authority to
recommend the engagement of independent accountants, review external and
internal auditing procedures and policies, review compensation paid to auditors
and make recommendations and/or implement changes with respect to the foregoing.
Both of the positions on the Audit Committee are currently vacant.

Officers are elected by the Board of Directors at the annual meeting of
directors following the annual shareholders meeting and serve until their
successors are duly elected, subject to earlier removal by the Board of
Directors.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors, executive officers and persons who beneficially own more than 10% of
the common stock to file with the Securities and Exchange Commission initial
reports of beneficial ownership and reports of changes in beneficial ownership
of common stock. Directors, executive officers and beneficial owners of more
than 10% of the common stock are required by the Securities and Exchange
Commission rules to furnish us with copies of all such reports. To our
knowledge, based solely upon a review of the copies of such reports furnished to
us, all Section 16(a) filing requirements applicable to our directors and
executive officers have been complied with during the most recent completed
fiscal year.

Item 10.  Executive Compensation

Executive Compensation

The following table shows the compensation paid or accrued by the Company for
the years ended December 31, 2001 and 2000 to or for the account of the
President and Chief Operating Officer. No other executive officer of the Company
received an annual salary and bonus in excess of $100,000 or more.

                                       14

<PAGE>

<TABLE>
<CAPTION>
                                                                                       Long-Term
                                             Annual Compensation                      Compensation
                                                                    Other
                                                                    Annual
      Name and                                                     Compens-                       All other
 Principal Position             Year     Salary         Bonus       ation      Options/ SARs     Compensation
--------------------------------------------------------------------------------------------------------------
<S>                             <C>     <C>             <C>        <C>         <C>               <C>
 Ernest A. Wagner,
 President,                     2001    $123,668         $0           $0             0                $0
 Treasurer, Chief
 Operating Officer &
 Director                       2000     129,355/(1)/    $0           $0             0                $0
</TABLE>

                /(1)/  Includes $20,000, earned in 2000, of compensation that
                       was satisfied by the issuance of 200,000 shares of our
                       common stock to Mr. Wagner.

          Option Grants in 2001

          No options or SARs were granted to the above named executive officer
          of the Company during the year ended December 31, 2001.

          Option Exercises and Fiscal Year End Values

          The following table provides information as to the unexercised options
          to purchase the Company's Common Stock granted in fiscal year 2001 and
          prior fiscal years to the named officers and the value of said options
          held by them as of the end of the year.

               AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                          AND FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
                                 Shares                       Number of Securities             Value of Unexercised In-
                                Acquired                     Underlying Unexercised           The-Money Options/SARs at
                                   on          Value         Options/SARs at FY-End                 FY-End/(1)/
                                                                                ---                    ---
               Name             Exercise     Realized     Exercisable     Unexercisable     Exercisable     Unexercisable
               ----             --------     --------     -----------     -------------     -----------     -------------
            <S>                 <C>          <C>          <C>             <C>               <C>             <C>
            John Cadigan         15,992         ---         910,677               0          $       0       $         0
            Ernest Wagner           ---         ---         151,428          80,000          $       0       $         0
</TABLE>

          /(1)/  Computed based on the difference between aggregate fair market
                 value and aggregate exercise price. The fair market value of
                 the Company's Common Stock on December 31, 2001 was $0.08,
                 based on the closing sales price on the NASD OTC Bulletin Board
                 on December 31, 2001.

          Employment Agreements

          The Company and its Chief Operating Officer and President entered into
          a three-year employment agreement on August 24, 2001, ending on August
          31, 2004. The agreement is automatically renewable for an additional
          three-year period, unless terminated by mutual consent of the parties.
          Annual compensation in the amount of $125,000 is payable in bi-weekly
          intervals plus a performance bonus, subject to change each year. No
          bonus will be paid for the year 2001.

          Directors' Compensation

          A director who is an employee of the Company receives no additional
          compensation for services as director or for attendance at or
          participation in meetings. A director who is not an employee of the
          Company is paid a retainer of $1,000 a quarter. New directors are
          given $20,000 worth of stock options, to be converted at the closing
          price the day they came on the Board, with a 100,000 option cap,
          vesting over a four year period. If a director leaves the Board for
          any reason, that director will have 90 days to elect to exercise these
          options. Two non-employee directors were granted 100,000 options each
          in May 2001.

                                       15

<PAGE>

The Company has certain nonqualified stock option plans (the "NQSOPs") that may
be used to grant options to directors. While such NQSOPs do not provide for an
automatic annual grant to the directors, our directors are typically granted
options annually pursuant to these plans. The Company anticipates future grants
to the directors. Under the NQSOPs during the year ended December 31, 2001,
300,000 options were granted to directors.

The Company has no other arrangements regarding compensation for services as a
director.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

The following table presents certain information regarding the beneficial
ownership of the Company's Common Stock as of February 28, 2002 by (i) each
person who is known by the Company to own beneficially more than five percent of
the outstanding shares of Common Stock, (ii) each director of the Company and
(iii) all directors and executive officers as a group.

<TABLE>
<CAPTION>
                                                         Amount and Nature of
             Name of Beneficial Owner                  Beneficial Ownership/(1)/        Percent of Class/(2)/
             ------------------------                  -------------------------        ---------------------
         <S>                                           <C>                              <C>
         Michael Damas                                        799,996                          9.17%
           1A Chester Plaza
           Chester, Maryland 21619
         Thomas Stone                                       4,487,069/(3)/                    36.00%
           181-2 Ascot Lane
           Yonahlossee Resort
           Boone, North Carolina 28607
         John J. Cadigan                                    1,526,954/(4)/                    15.06%
           1598 Whitehall Road, Ste. E
           Annapolis, MD 21401
         Ernest A. Wagner                                     951,428/(5)/                    10.15%
           1598 Whitehall Road, Ste. E
           Annapolis, MD 21401
         Kevin E. Idso                                         80,000/(6)/                        *
           1598 Whitehall Road, Ste. E
           Annapolis, MD 21401
         Timothy W. Byrne                                      25,000/(7)/                        *
           13800 Montford Drive, Ste. 330
           Dallas, TX 75240
         All directors and executive officers as
         a group (6 persons)                                                                  62.55%
</TABLE>

/(1)/   Unless otherwise noted, the Company believes that all persons named in
        the table have sole voting and investment power with respect to all
        shares of Common Stock beneficially owned by such persons.
/(2)/   In accordance with the rules of the SEC, each beneficial owner's
        percentage ownership assumes the exercise or conversion of all options,
        warrants, other convertible securities and other rights that are (i)
        held by such person and (ii) exercisable or convertible within 60 days
        after February 28, 2001.
/(3)/   Includes (i) 3,362,069 shares issuable upon conversion of debentures
        owned by Mr. Stone and (ii) 250,000 shares issuable upon exercise of a
        warrant, and (iii) 125,000 shares issuable upon exercise of stock
        options.
/(4)/   Includes (i) 285 shares owned by Mr. Cadigan's wife, (ii) 500,000 shares
        issuable upon conversion of debentures, and (iii) 910,677 shares of
        Common Stock issuable upon exercise of options.
/(5)/   Includes (i)500,000 shares issuable upon conversion of debentures and
        (ii)151,428 shares of Common Stock issuable upon exercise of options.
/(6)/   Includes 71,000 shares issuable upon exercise of options.
/(7)/   Includes 25,000 shares issuable upon exercise of options.

                                       16


<PAGE>

Item 12.  Certain Relationships and Related Transactions

        Not applicable.


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

Exhibits
--------
        3         Certificate of Incorporation and Amendment thereto (1)
        3.1       By-Laws (1)
        3.2       Form of Amendments to Certificate of Incorporation and Bylaws
                  dated October 20, 1995 (5)
       10         Form of Indemnification Agreement executed in favor of each
                  officer and director of the Company (1)
       10.1       Form of Indemnification Agreement Amendment executed in favor
                  of certain officers and directors of the Company (6)
       10.2       Form of Indemnification Agreement executed in favor of each
                  officer and director of the Company (6)
       10.3       Securities Purchase Agreement, for 6% Convertible Subordinated
                  Debentures (10)
       10.4       Form of Debenture (10)
       10.5       Registration Rights Agreement (10)
       10.6       Form of Common Stock Purchase Warrant (10)
       10.7       Employment Agreement with John J. Cadigan dated September 1,
                  1995 (5)
       10.8       Amendment to Employment Agreement with John J. Cadigan (11)
       10.9       Employment Agreement (7/15/96) - Peter S. Steele (9)
       10.10      Loan Renewal and Modification Agreement (9)
       10.11      Form of Debenture (18)
       10.12      Securities Purchase Agreement, for 10% Convertible Debenture
                  (19)
       10.13      Registration Rights Agreement (19)
       10.14      Stock Purchase Warrant (19)
       10.15      Securities Purchase Agreement, Sale of common stock (19)
       10.16      Registration Rights Agreement (19)
       10.17      Settlement Agreement (19)
       10.18      Promissory Note (19)
       10.19      Subscription Agreement to Purchase Common Stock (21)
       10.20      Registration Rights Agreement (21)
       10.21      Convertible Subordinated Debenture (21)
       10.22      Subscription Agreement to Purchase Common Stock (21)
       10.23      Registration Rights Agreement (21)
       10.24      Convertible Subordinated Debenture (21)
       10.25      Subscription Agreement to Purchase Common Stock (21)
       10.26      Registration Rights Agreement (21)
       10.27      Convertible Subordinated Debenture (21)
       10.28      Employment Agreement with Ernest A. Wagner (23)
       10.29      Stock Repurchase Agreement (23)
       10.30      Promissory Note (23)
       10.31      Agreement with Varsity Heavy Duty (23)
       10.32      Form of Agreement with Automotive Manufacturer (23)
       16.1       Change in its Independent Accountants (20)
       21         Subsidiaries of Registrant (2)
       99         Incentive Stock Option Plan No. 1 (4)
       99.1       Nonqualified Stock Option Plan No. 1(4)
       99.2       Incentive Stock Option Plan No. 2 (5)
       99.3       Phantom Stock Performance Stock Plan (3)


                                       17

<PAGE>

       99.4       Nonqualified Stock Option Plan No. 2 (5)
       99.5       Nonqualified Stock Option Plan No. 3 (5)
       99.6       Split Dollar Plan Agreement (11/21/94) - John J. Cadigan (3)
       99.7       Nonqualified Stock Option Plan No. 4 (6)
       99.8       Nonqualified Stock Option Plan No. 5 (9)
       99.9       Nonqualified Stock Option Plan No. 6 (9)
       99.10      Nonqualified Stock Option Plan No. 7 (8)
       99.11      Incentive Stock Option Plan No. 3 (11)
       99.12      Incentive Stock Option Plan No. 4 (12)
       99.13      Nonqualified Stock Option Plan No. 8 (13)
       99.14      Nonqualified Stock Option Plan No. 9 (14)
       99.15      Incentive Stock Option Plan No. 5 (15)
       99.16      Nonqualified Stock Option Plan No. 10 (16)
       99.17      Nonqualified Stock Option Plan No. 11 (17)
       99.18      2001 Stock Incentive Plan (22)

       ____________________
       (1)    Incorporated by reference to Form S-1 Registration Statement, File
              No. 33-68826
       (2)    JMC Company, Inc. and Forsight, Inc., are wholly owned
              subsidiaries of the Company incorporated under the laws of the
              State of Maryland.
       (3)    Incorporated by reference to December 31, 1994 Form 10-K.
       (4)    Incorporated by reference to Form S-8 Registration Statement, File
              No. 33-53536.
       (5)    Incorporated by reference to Original Form SB-2, File No.
              33-97776.
       (6)    Incorporated by reference to December 31, 1995 Form 10-K.
       (7)    Incorporated by reference to Form 8-K, dated July 19, 1996.
       (8)    Incorporated by reference to Form S-8 Registration Statement, File
              No. 333-23777.
       (9)    Incorporated by reference to December 31, 1996 Form 10-KSB.
       (10)   Incorporated by reference to Form 8-K, dated October 31, 1997
       (11)   Incorporated by reference to December 31, 1997 Form 10-KSB.
       (12)   Incorporated by reference to December 31, 1998 Form 10-KSB.
       (13)   Incorporated by reference to December 31, 1998 Form 10-KSB.
       (14)   Incorporated by reference to December 31, 1998 Form 10-KSB.
       (15)   Incorporated by reference to December 31, 1999 Form 10-KSB.
       (16)   Incorporated by reference to December 31, 1999 Form 10-KSB.
       (17)   Incorporated by reference to December 31, 1999 Form 10-KSB.
       (18)   Incorporated by reference to March 31, 2000 Form 10-QSB.
       (19)   Incorporated by reference to June 30, 2000 Form 10-QSB
       (20)   Incorporated by reference to Form 8-K, dated May 15, 2000.
       (21)   Incorporated by reference to December 31, 2000 Form 10-KSB.
       (22)   Incorporated by reference to Proxy Statement for 2001 Annual
              Meeting of Stockholders.
       (23)   Filed herein.


       (b)    Reports on Form 8-K
              -------------------

       No reports on Form 8-K was filed by the Company during the three months
       ended December 31, 2001.

                                       18

<PAGE>

                                   SIGNATURES

Pursuant to the requirements Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

STRATEGIC SOLUTIONS GROUP, INC.



By:      /s/ Ernest A. Wagner                           Dated:    March 12, 2003
   ---------------------------------
         Ernest A. Wagner
         President, Chief Operating Officer, Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and dates indicated:

<TABLE>
<CAPTION>
Signature                                       Title                           Date
---------                                       -----                           ----
<S>                                         <C>                                 <C>
/s/ John J. Cadigan                         Chairman of the Board               March 12, 2003
---------------------------
John J. Cadigan


/s/ Kevin E. Idso                           Vice-President, Director            March 12, 2003
---------------------------
Kevin E. Idso


/s/ Ernest A. Wagner                        President, Chief Operating          March 12, 2003
---------------------------
Ernest A. Wagner                            Officer, Director, Treasurer

</TABLE>

                                       19

<PAGE>

                 STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARY




                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                Page No.
<S>                                                                             <C>
Reports of Independent Certified Public Accountants                             F-2

Consolidated Balance Sheets, December 31, 2001 and 2000                         F-3

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

Consolidated Statements of Stockholders' Deficit for the years
         ended December 31, 2001 and 2000                                       F-5

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

Notes to Consolidated Financial Statements                                      F-7 - F-18
</TABLE>

                                      F-1
























<PAGE>

               Report of Independent Certified Public Accountants

To the Stockholders and Board of Directors of
     Strategic Solutions Group, Inc.


We have audited the accompanying consolidated balance sheets of Strategic
Solutions Group, Inc. and its subsidiary (the Company) as of December 31, 2001
and 2000, and the related consolidated statements of operations, stockholders'
deficit, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our 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 Strategic Solutions Group, Inc.
and subsidiary as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has experienced recurring losses
and negative cash flow from operations. The Company has an accumulated deficit
of $16,340,466 at December 31, 2001. These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans with
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

/s/Grant Thornton LLP
---------------------
Grant Thornton LLP

Vienna, Virginia
January 25, 2002

                                      F-2

<PAGE>

                 STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                     December 31,      December 31,
                                                                                         2001              2000
                                                                               ---------------------------------------
<S>                                                                            <C>                    <C>

                                     ASSETS
                                     ------

Current assets:
      Cash and cash equivalents                                                $        105,430       $       219,537
      Accounts receivable, net of $25,000 allowance for doubtful accounts               274,793                61,244
      Prepaid expenses and other current assets                                          25,923                23,930
                                                                               ---------------------------------------
          Total current assets                                                          406,146               304,711

Property and equipment, net                                                              22,432                41,293
Investments                                                                              19,139                69,269
Other assets                                                                              8,233                13,506
                                                                               ---------------------------------------
                                                                               $        455,950       $       428,779
                                                                               =======================================



                              LIABILITIES AND STOCKHOLDERS' DEFICIT
                              -------------------------------------
Current liabilities
      Accounts payable and accrued liabilities                                 $        197,054       $       239,861
      Deferred revenue                                                                    5,893                78,725
      Notes payable                                                                      88,000                    --
                                                                               ---------------------------------------
          Total current liabilities                                                     290,947               318,586
Convertible subordinated debentures                                                     431,565               204,592
                                                                               ---------------------------------------
          Total liabilities                                                             722,512               523,178
                                                                               ---------------------------------------
Commitments and contingencies                                                                --                    --
Stockholders'  deficit
      Common stock, $.0001 par value.  Authorized 25,000,000
          and 10,000,000 shares; issued and outstanding 8,792,528
          and 8,256,690 shares as of December 31, 2001 and 2000                             879                   826
      Additional paid-in capital                                                     16,053,886            16,052,552
      Accumulated deficit                                                           (16,340,466)          (16,217,046)
      Accumulated other comprehensive income                                             19,139                69,269
                                                                               ---------------------------------------
          Total stockholders' deficit                                                  (266,562)              (94,399)
                                                                               ---------------------------------------
                                                                               $        455,950       $       428,779
                                                                               =======================================
</TABLE>

        The accompanying notes are an integral part of these consolidated
                              financial statements.

                                      F-3

<PAGE>


                STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARY
             CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                           Year ended December 31,
                                                                                       ------------------------------
                                                                                            2001              2000
                                                                                       ------------------------------
<S>                                                                                    <C>              <C>
Revenues

   Service                                                                             $  1,744,849     $  1,293,008
   Product                                                                                      ---            5,827
   Royalty                                                                                    5,345           13,778
                                                                                       ------------------------------
               Total revenue                                                              1,750,194        1,312,613
                                                                                       ------------------------------
Cost of revenues
   Cost of service                                                                          851,564          579,562
   Cost of product                                                                              ---            4,060
                                                                                        -----------------------------
               Total cost of revenue                                                        851,564          583,622
                                                                                        -----------------------------
   Gross profit                                                                             898,630          728,991
                                                                                        -----------------------------
Operating expenses
   Research and development                                                                     ---            3,425
   Selling, general and administrative                                                      997,100        1,086,969
                                                                                       ------------------------------
               Total operating expenses                                                     997,100        1,090,394
                                                                                       ------------------------------
Loss from operations                                                                        (98,470)        (361,403)
                                                                                       ------------------------------

Other income                                                                                 77,897              ---
Interest expense and other, net                                                            (102,847)         (32,418)
                                                                                       ------------------------------
                                                                                            (24,950)         (32,418)
                                                                                       ------------------------------
Income (loss) before extraordinary item                                                    (123,420)        (393,821)
   Extraordinary gain on the extinquishment of debt                                             ---          418,255
                                                                                       ------------------------------
Net (loss) income                                                                      $   (123,420)    $     24,434
                                                                                       ==============================
(Loss) Earnings per common share - Basic and Diluted
   (Loss) Income before extraordinary item                                             $      (0.01)    $      (0.05)
   Extraordinary item                                                                  $        ---     $       0.06
                                                                                       ------------------------------
   Net (loss) income per common share                                                  $      (0.01)    $       0.01
                                                                                       ==============================
Weighted average number of common shares outstanding - basic and diluted                  8,713,429        7,383,732
                                                                                       ==============================
</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                      F-4

<PAGE>

                 STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
                                                                                           Additional
                                                                 Common Stock               Paid-in        Accumulated
                                                                 ------------
                                                              Shares       Amount           Capital          Deficit
                                                        ------------------------------------------------------------------

                                                        ------------------------------------------------------------------
<S>                                                     <C>             <C>             <C>              <C>
Balance, January 1, 2000                                     5,356,690  $       536     $   15,370,848   $ (16,241,480)

    Shares of common stock issued upon
     conversion of subordinated debenture                    1,000,000          100            249,900              --
    Issuance of common stock, net of
     issuance costs                                          1,250,000          125            245,790              --
    Amortization of deferred compensation                           --           --                 --              --
    Common stock issued to an officer for
     compensation in lieu of cash                              200,000           20             19,980              --
    Stock options granted to nonemployee
     directors for services                                         --           --             53,101              --
    Stock issued to debenture holder                           250,000           25             35,131              --
    Exercise of stock options                                  200,000           20             18,740              --
    Detachable warrants issued in
     connection with debt.                                          --           --             22,500              --
    Unrealized appreciation in the value of
     restricted investment                                          --           --                 --              --
    Stock options granted to employees                              --           --             36,562              --
    Net income                                                      --           --                 --          24,434
                                                        ------------------------------------------------------------------
Balance, December 31, 2000                                   8,256,690          826         16,052,552     (16,217,046)

    Stock issued in connection with the
     purchase of convertible subordinated
     debentures                                                700,000           70             76,510              --
    Exercise of stock options                                  142,986           14             16,762              --
    Common stock issued to an employee
     in lieu of compensation                                    76,188            7             11,024              --
    Shares reserved under Repurchase
     Agreement (Note7)                                              --           --            (88,000)             --
    Repurchase of common stock under
      Repurchase Agreement (Note 7)                           (383,336)         (38)           (91,962)             --
    Redemption of investments
    Value of beneficial conversion feature
     related to convertible subordinated debt                       --           --             77,000              --
    Net (loss)                                                      --           --                 --        (123,420)
     Other comprehesive income
     Unrealized loss on marketable
     investments
     Comprehesive Loss
                                                        ------------------------------------------------------------------
Balance, December 31, 2001                                   8,792,528  $       879     $   16,053,886   $ (16,340,466)
                                                        ==================================================================

<CAPTION>
                                                            Accumulated
                                                               Other
                                                           Comprehensive       Deferred
                                                              Income         Compensation    Total
                                                        ---------------------------------------------

                                                        ------------------------------------
<S>                                                     <C>                <C>            <C>
Balance, January 1, 2000                                $           --     $  (38,781)    $ (908,877)
    Shares of common stock issued upon
     conversion of subordinated debenture                           --             --        250,000
    Issuance of common stock, net of
     issuance costs                                                 --             --        245,915
    Amortization of deferred compensation                           --         38,781         38,781
    Common stock issued to an officer for
     compensation in lieu of cash                                   --             --         20,000
    Stock options granted to nonemployee
     directors for services                                         --             --         53,101
    Stock issued to debenture holder                                --             --         35,156
    Exercise of stock options                                       --             --         18,760
    Detachable warrants issued in
     connection with debt.                                          --             --         22,500
    Unrealized appreciation in the value of
     restricted investment                                      69,269             --         69,269
    Stock options granted to employees                              --             --         36,562
    Net income                                                      --             --         24,434
                                                        ---------------------------------------------
Balance, December 31, 2000                                      69,269             --        (94,399)

    Stock issued in connection with the
     purchase of convertible subordinated
     debentures                                                     --             --         76,580
    Exercise of stock options                                       --             --         16,776
    Common stock issued to an employee
     in lieu of compensation                                        --             --         11,031
    Shares reserved under Repurchase
     Agreement (Note7)                                              --             --        (88,000)
    Repurchase of common stock under
      Repurchase Agreement (Note 7)                                 --             --        (92,000)
    Redemption of investments                                  (32,956)                      (32,956)
    Value of beneficial conversion feature
     related to convertible subordinated debt                       --             --         77,000
    Net (loss)                                                      --             --       (123,420)
     Other comprehesive income
     Unrealized loss on marketable
     investments                                               (17,174)                      (17,174)
                                                                                            ---------
     Comprehesive Loss                                                                      (140,594)
                                                        ---------------------------------------------
Balance, December 31, 2001                              $       19,139     $        0     $ (266,562)
                                                        =============================================
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                      F-5

<PAGE>

            STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                    Year ended December 31,
                                                                                      2001             2000
                                                                                 ----------------------------
<S>                                                                              <C>               <C>
 Cash flows from operating activities
     Net (loss) income                                                           $   (123,420)    $    24,434
     Adjustments to reconcile net (loss) income to net cash used in
            operating activities
        Depreciation and amortization                                                  30,349          46,023
        Amortization of deferred financing costs                                       31,284          12,250
        Amortization of beneficial conversion
            feature on convertible subordinated debentures                             14,155              --
        Stock options issued as a payment for services                                     --           3,000
        Stock options granted to employees                                                 --          36,562
        Common stock issued for compensation in lieu of cash                           11,031          20,000
        Non cash expense for services                                                 (15,224)             --
        Increase (reduction) of allowance for doubtful accounts                            --         (10,000)
        Gain on debt extingishment                                                         --        (418,255)
        Amortization of deferred compensation                                              --          38,781
        Other                                                                         (61,119)             --
        Increase (decrease) in cash from changes in assets and liabilities:
            Accounts receivable                                                      (213,548)        139,409
            Prepaid expenses and other current assets                                  94,007          (1,845)
            Other assets                                                                5,273              85
            Accounts payable and accrued liabilities                                   36,053          32,911
            Other liabilities                                                              --        (101,987)
            Deferred revenue                                                          (72,832)         78,725
                                                                                 ----------------------------
     Net cash used in operating activities                                           (263,991)        (99,907)
                                                                                 ----------------------------
 Cash flows from investing activities
     Proceeds from the sale of investments                                             14,258              --
     Capital expenditures                                                             (11,488)        (36,337)
                                                                                 ----------------------------
     Net cash provided by (used in) investing activities                                2,770         (36,337)
                                                                                 ----------------------------

 Cash flows from financing activities
     Proceeds from issuance of convertible subordinated debenture                     350,000         250,000
     Proceeds from the sale of common stock, net                                           --         245,915
     Proceeds from exercise of stock options and warrants                                  --          18,760
     Payments to repurchase common stock                                              (92,000)             --
     Payments on financing debt and promissory note                                        --         (90,001)
     Payments on financing costs                                                      (14,886)             --
     Payments on short-term debt                                                      (96,000)             --
     Redemption of convertible debt                                                        --        (215,000)
                                                                                 ----------------------------
     Net cash provided by financing activities                                        147,114         209,674
                                                                                 ----------------------------

 Net (decrease) increase in cash and cash equivalents                                (114,107)         73,430

 Cash and cash equivalents, beginning of year                                         219,537         146,107
                                                                                 ----------------------------
 Cash and cash equivalents, end of year                                          $    105,430     $   219,537
                                                                                 ============================

 Supplemental disclosures of cash paid:
     Interest                                                                    $      7,670     $     3,572
     Income taxes                                                                          --              --

 Supplemental schedule of noncash investing and financing activities:
     Options issued as payment for accrued penalties                             $     12,000     $        --
     Options issued as payment for professional fees                                       --          53,101
     Options exercised for the payment of directors' fees                              16,776              --
     Stock issued as payment for professional services                                     --          50,000
     Detachable warrants issued in connection with debt                                    --          22,500
     Stock issued upon conversion of convertible debentures                                --          35,156
     Stock issued in connection with the sale of convertible
        subordinated debenture                                                         76,580         250,000
     Beneficial conversion feature related to convertible debentures                   77,000              --
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                      F-6

<PAGE>

                 STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   __________


1.   THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business. Strategic Solutions Group, Inc. and its subsidiary (the
"Company") are full-service providers of technology based software solutions.
The Company specializes in the development of custom interactive multimedia
software for use in the areas of process enhancement, technical documentation,
training, and performance support for a variety of commercial and industrial
end-users.

Principles of Consolidation. The consolidated financial statements include the
accounts of Strategic Solutions Group, Inc. and its wholly owned subsidiary, an
inactive corporation. All significant intercompany accounts and transactions
have been eliminated.

Revenue Recognition. Revenue on fixed-priced contracts are generally recorded
using the percentage of completion method based on a relationship of costs
incurred to the estimated total costs of the project. Revenues on cost
reimbursable and time and material contracts are recorded as labor and other
expenses are incurred. Revenues from software development, consulting and
training services are recognized as services are performed. Revenues from custom
multimedia software products are recognized using the percentage of completion
method due to the significant customization involved in their development.
Revenues from the sale of third party hardware and software products recognized
when products are shipped. Revenues from royalties are recognized in the period
for which the royalties are earned. Software products generally are delivered
without post sale vendor obligations and without a significant obligation to the
customer. Deferred revenue represents amounts advanced by customers and is
recognized as revenue upon delivery of the products or services and is adjusted
on a quarterly basis to reflect the status of projects.

When adjustments in contract value of estimated costs are determined, any
changes from prior estimates are reflected in earnings in the current period.
Any anticipated contract losses are recognized in the period that they become
evident.

Use of Estimates. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and contingent
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

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

Property and Equipment. Property and equipment are stated at cost. Depreciation
is computed using the straight-line method over the estimated useful lives of
the related assets. The Company has estimated the useful lives of computer
hardware and software to be three years and furniture and fixtures to be seven
years. Amortization of leasehold improvements is computed using the
straight-line method over the shorter of the estimated useful life of the
improvements or the remaining lease term.

Net Loss Per Common Share. The Company reports basic and diluted earnings per
share. Basic earnings per common share are computed based upon the weighted
average number of common shares outstanding during the year. Diluted earnings
per common share is computed based on common shares outstanding plus the effect
of dilutive stock options and other potentially dilutive common stock
equivalents. The dilutive effect of stock options and other potentially dilutive
common stock equivalents is determined using the treasury stock method based on
the Company's average stock price. The effect on weighted average shares
outstanding of securities that could potentially dilute basic earnings per share
that were not included in the computation of diluted earnings per share, because
to do so would have been antidilutive for the periods presented, were 903,917
and 1,069,244 of common stock equilivants for 2001 and 2000, respectively.

                                      F-7

<PAGE>

                 STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   __________

Concentration of Credit Risk. Financial instruments that potentially subject the
Company to concentrations of credit risk consist principally of cash and cash
equivalents. The Company provides hardware and software products, develops
software, and performs services for its customers located throughout the United
States. The Company provides credit in the normal course of business and, to
date, has not experienced significant losses related to receivables from
individual customers or groups of customers in a particular industry or
geographic area. Due to these factors, management believes no additional credit
risk beyond amounts provided for in the doubtful account allowance is inherent
in the Company's accounts receivable.

For the year ended December 31, 2001 and 2000, one customer, an automotive
manufacturer, accounted for 80% and 78%, respectively, of the Company's revenue.
At December 31, 2001, two customers accounted for 99% of accounts receivable,
and at December 31, 2000, two customers accounted for 78% of accounts
receivable.

Recoverability of Long-Lived Assets. The Company evaluates the recoverability of
the carrying value of property and equipment and intangible assets in accordance
with the provisions of Statement of Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets to be Disposed Of". The Company
considers historical performance and anticipated future results in its
evaluation of potential impairment. Accordingly, when indicators of impairment
are present, the Company evaluates the carrying value of these assets in
relation to the operating performance of the business and future and
undiscounted cash flows expected to result from the use of these assets.
Impairment losses are recognized when the sum of expected future cash flows are
less than the assets' carrying value.

Income Taxes. Deferred income taxes are recognized for the tax consequences in
future years of differences between the tax basis of assets and liabilities and
their financial reporting amounts at each year end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
Income tax expense is the tax payable for the period and the change during the
period in deferred tax assets and liabilities.

Going Concern. The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplates the
realization of assets, and the satisfaction of liabilities in the normal course
of business and the continuation of the company as a going concern. The Company
has experienced net losses and negative cash flows from operations during 2001
and 2000. As shown in the financial statements, the Company has accumulated
deficit of $16,340,466 at December 31, 2001. While the Company expects to be
awarded several large scale contracts in the near future, and that operating
results will improve, there can be no assurances that the Company will not
experience adverse results of operations in the future, that it will be able to
satisfy its current obligations in the normal course of business, or obtain
additional investment capital. The Company believes that without new contracts
or additional investment capital it will not have sufficient cash to fund its
current level of activities in the future, and may not be able to continue
operating. As such, the Company's continuation as a going concern is dependent
upon its ability to obtain new contracts or to raise additional financing. These
factors among others may indicate that the Company will be unable to continue as
a going concern. The Company is actively pursuing additional equity financing to
provide the necessary funds for working capital and other planned activities.

Management believes that actions presently being taken to revise the Company's
operating and financial requirements provide the opportunity for the Company to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classifaction of liabilities that
might be necessary should the Company be unable to continue as a going concern.

                                      F-8

<PAGE>

                 STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   __________

2.   INVESTMENT

As a result of the Company's divestiture of U.S. Technologies, Inc. ("UST") and
the subsequent merger of UST with and into a subsidiary of Digital Chainsaw,
Inc. ("Digital Chainsaw") in 1999, the Company held 641,045 shares of Digital
Chainsaw common stock. At December 31, 1999, the Company had established a
reserve for the full value of the Digital Chainsaw common stock it held.

In August 2000, Digital Chainsaw was acquired by High Speed Access Corporation
("High Speed Access"), (Nasdaq: HSAC), in a share exchange where each share of
Digital Chainsaw was exchanged for 0.1017 shares of High Speed Access. The
Company received 65,194 shares of restricted common stock of High Speed Access
in exchange for the shares of Digital Chainsaw it held.

The Company has recorded the shares of High Speed Access it holds at their fair
value, which is based on the quoted market price at December 31, 2001 as an
investment and accumulated other comprehensive income. Any future adjustments to
fair value of the investment, which has been classified as available-for-sale,
will be recorded as an increase or decrease in accumulated other comprehensive
income, a stockholders' equity account.

The Company's investment in High Speed Access was contractually restricted until
August 2001. During 2001, the Company disposed of 31,017 shares of High Speed
Access common stock.

3.   ACCOUNTS RECEIVABLE

Accounts receivable as of December 31, 2001 and 2000 consists of the following:

<TABLE>
<CAPTION>
                                                              2001             2000
                                                              ----             ----
           <S>                                            <C>              <C>
           Accounts receivable, billed                    $   146,435      $   32,062
           Accounts receivable, unbilled                      153,358          54,182
                                                          -----------      ----------
                                                              299,793          86,244

           Less allowance for doubtful accounts               (25,000)        (25,000)
                                                          -----------      ----------

           Accounts receivable, net                       $   274,793      $   61,244
                                                          ===========      ==========
</TABLE>


4.   PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2001 and 2000 consists of the
following:

<TABLE>
<CAPTION>
                                                              2001            2000
                                                              ----            ----
           <S>                                             <C>             <C>
           Computer equipment and software                $    96,704      $  252,875
           Office equipment                                    63,822          62,470
           Furniture and fixtures                             137,594         137,594
                                                          -----------      ----------
                                                              298,120         452,939
                                                          -----------
           Less accumulated depreciation                     (274,688)       (411,646)
                                                          -----------      ----------
           Property and equipment, net                    $    22,432      $   41,293
                                                          ===========      ==========
</TABLE>

During the year ended December 31, 2001, the Company discarded fully depreciated
computer equipment with an original cost of $166,307.

For the years ended December 31, 2001 and 2000, depreciation expense of $30,349
and $46,024 was charged to operations.

                                      F-9

<PAGE>

                 STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   __________


5.   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES

Accounts payable and accrued liabilities as of December 31, 2001 and 2000
consist of the following:

<TABLE>
<CAPTION>
                                                            2001              2000
                                                            ----              ----
           <S>                                           <C>               <C>
           Accounts payable                              $   4,469         $  82,078
           Accrued interest expense                         71,910            21,243
           Payroll and related expenses                     14,805            54,064
           Other                                           105,870            82,476
                                                         ---------         ---------
                                                         $ 197,054         $ 239,861
                                                         =========         =========
</TABLE>


6.   LINE OF CREDIT AND SUBORDINATED CONVERTIBLE DEBENTURES

Line of Credit
--------------

At December 31, 2001 the Company had a line of credit with a bank for up to
$100,000, expiring in November 2002. The Company had no borrowings due on its
line of credit at either December 31, 2001 or 2000. The line of credit is
secured by the assets of the Company, and bears interest at the prime rate (5%
at December 31, 2001) plus 2%.

Convertible Subordinated Debentures
-----------------------------------

Convertible subordinated debentures consisted of the following at December 31,
2001 and 2000:

<TABLE>
<CAPTION>
                                                                 2001            2000
                                                             ------------    ------------
           <S>                                              <C>             <C>
           Convertible subordinated debt (1)                 $  350,000      $        -
           Convertible subordinated debt (2)                    250,000         250,000
                                                             ------------    ------------

           Subtotal                                             600,000         250,000
           Less: unamortized debt discount                     (180,435)        (45,408)
                                                             ------------    ------------

                                                                519,565         204,592
           Less: current portion                                (88,000)              -
                                                             ------------    ------------

           Long-term portion of notes payable                $  431,565      $  204,592
                                                             ============    ============
</TABLE>

(1)      On March 27, 2001, the Company executed Subscription Agreements with
         certain existing shareholders, directors and members of executive
         management for the sale of fourteen units for a total of $350,000. Each
         unit consists of 50,000 shares of Company common stock and a $25,000
         convertible subordinated debenture, bearing interest at 10%, due in
         2005. The convertible subordinated debentures are convertible at the
         holder's option, at any time, into shares of the Company's common stock
         at a conversion price of $0.10 per share (the closing market price on
         March 27, 2001).

         These debentures bear interest at 10%, with principal and accrued
         interest due in March and April 2005, are convertible, by the holder at
         any time, into shares of the Company's common stock, with the number of
         shares determined by dividing the unpaid principal balance and all
         accrued interest by $0.10. The Company calculated the value of the
         700,000 shares of common stock issued as part of these units as $77,000
         based on the closing market price on March 27, 2001 (the "Commitment
         Date"). The Company recorded the market value of the 700,000 shares of
         common stock issued as part of these units as a discount to the
         convertible debentures and as common stock and additional paid in
         capital. The Company also calculated the value of the

                                      F-10

<PAGE>

                 STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   __________


     beneficial conversion feature associated with these debentures in
     accordance with EITF 98-5: Accounting for Convertible Securities and
     Beneficial Conversion Features or Contingently Adjustable Conversion
     Ratios, of approximately $77,000 at the Commitment Date. The total discount
     of $154,000 is being amortized over the holding period of the debentures.

     The Company has the right to redeem the debentures at redemption prices
     increasing from 125% of the principal amount of the debenture, if redeemed
     before the first anniversary of the Issuance Date, to 175% of the principal
     amount of the debenture between the second and third anniversary dates of
     the Issuance Date. Within ten (10) days of receipt of notice of redemption,
     the holder of the debenture has the right to convert the redemption
     proceeds into common stock at $0.10 per share.

(2)  On February 24, 2000 ("Issuance Date"), the Company issued a convertible
     subordinated debenture for $250,000. This debenture bears interest at 10%,
     matures February 24, 2004 and is convertible into common stock, beginning
     the earlier of 180 days after the Issuance Date or the effective date of
     the Registration Statement filed pursuant to a Registration Rights
     Agreement, at a conversion price of $0.28 (the "Conversion Price").

     The Company has the right to redeem this debenture at redemption prices
     increasing from 125% of the principal amount of the debenture, if redeemed
     before the first anniversary of the Issuance Date, to 200% of the principal
     amount of the debenture after the third anniversary date of the Issuance
     Date. Upon notice of redemption, the holder of the debenture has the right
     to convert the redemption proceeds into common stock at the above
     Conversion Price.

     The Company granted the holder of this debenture a security interest in the
     shares of High Speed Access it holds.

     In connection with the issuance of this debenture, the Company issued a
     stock purchase warrant for the purchase of up to 250,000 shares of the
     Company's common stock at $0.75 per share. This stock purchase warrant
     expires on February 24, 2004. Based on the relative fair value of the
     debenture and stock purchase warrant, the stock purchase warrant has been
     assigned a value of $22,500, which represents a debenture discount and will
     be amortized to interest expense over the life of the debenture. This fair
     value of the warrants was calculated using the Black-Scholes option pricing
     model with the following assumptions: risk free rate of return of 5.7%;
     expected warrant lives of four years; volatility of 125%; and a dividend
     yield of 0%.

     As part of the debenture, the Company also issued 250,000 shares of its
     common stock to the investor. The Company recorded the market value of
     these shares as an additional debenture discount and as common stock and
     additional paid in capital.

     In connection with these investments, the Company entered into a
     registration rights agreement with this investor that required the Company
     to file a registration statement with the SEC registering the shares of
     common stock related to these investments or incur penalties.

     The Company adopted Emerging Issues Task Force ("EITF") Issue 00-27,
     "Application of EITF 98-5, `Convertible Securities with Beneficial
     Conversion Features or Contingently Adjustable Conversion Ratios' to
     Certain Convertible Instruments" during the fourth quarter of 2000. EITF
     00-27 requires that a convertible instrument's beneficial conversion
     feature be measured using an effective conversion price. As a result, the
     value assigned to the original issue discount on the convertible debt
     securities issued by the Company in the private placement of the
     convertible subordinated debentures completed in February 2000 was
     increased by $57,789. In accordance with the consensus, this additional
     original discount was expensed in the current period and recognized as the
     cumulative effect of a change in accounting principle.

                                      F-11

<PAGE>

                 STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   __________


Extinguishment of Debt
----------------------

On March 1, 2000, the Company entered into a Settlement Agreement with Releases
under which the Company paid the holder of subordinated convertible debentures
it entered into in January 1998 - $200,000 cash, issued a $100,000 non-interest
bearing promissory note secured by certain assets of the Company, payable in
installments of $10,000 per month beginning in March 2000, issued 1,000,000
shares of the Company's common stock, and transferred to the holder certain
other assets owned by the Company which had a negligible book value. The Company
also incurred legal fees totaling $15,000 related to this transaction. The
Company recognized a gain on the cancellation and extinguishments of this debt
and the related accrued interest and penalties as an extraordinary item in the
operating statement of $408,255 in 2000.

7.       STOCKHOLDERS' EQUITY

2001 Transactions
-----------------

On March 27, 2001, as described in Note 6, the Company issued 700,000 shares if
its common stock in connection with Subscription Agreements it executed with
certain existing shareholders, directors and members of executive management for
the sale of fourteen units for a total of $350,000. The Company determined the
value of the 700,000 shares of common stock issued based on the closing market
price on March 27, 2001.

On August 15, 2001, the Company entered into a stock repurchase agreement with a
shareholder whereby the Company agreed to repurchase 750,000 shares
("Repurchased Shares") of common stock held by the shareholder for an aggregate
purchase price of $180,000. Of such Repurchased Shares, 250,000 shares were paid
for in cash for $60,000 and the remaining 500,000 shares were paid for in the
form of a promissory note in the principal amount of $120,000. The promissory
note calls for fifteen monthly payments of $8,000 plus interest, with each
payment repurchasing 33,334 shares of common stock. The shareholder also agreed
to waive, prorata as the note is repaid, $94,250 of previously accrued penalties
the Company has incurred in connection with not registering these shares for
resale. The Company has recorded the unpaid portion, $88,000, of the promissory
note as a reduction of paid in capital. The Company has recorded as other income
of $48,172 the accrued penalties waived at December 31, 2001.

During 2001, the Company issued to an employee 76,188 shares of its common stock
in lieu of compensation. The Company determined the value of these shares of
common stock issued based on the closing market price on each date of issuance.

2000 Transactions
-----------------

As described in Note 6, the Company issued 1,000,000 shares of its common stock
in connection with the extinguishment of subordinated convertible debentures
issued in 1998.

During the year ended December 31, 2000, the Company sold 1,250,000 shares of
common stock in a private placement of $250,000. In connection with this
investment, the Company entered into a registration rights agreement with this
investor that required the Company to file a registration statement with the SEC
to register the shares of common stock by May 5, 2000 The Company did not meet
this filing deadline and as such incurred approximately $38,000 in penalties as
of December 31, 2000 as described above. The Company has entered into a stock
repurchase agreement with this individual for the repurchase of 750,000
previously issued shares and the waiver of accrued penalties.

As described in Note 6 above, the Company issued 250,000 shares of common stock
to an individual in connection with a convertible subordinated debenture.

                                      F-12

<PAGE>

                 STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   __________

During 2000, the Company issued 200,000 shares of its common stock to its
President in lieu of compensation. The Company determined the value of these
shares of common stock issued based on the closing market price on the date of
issuance.

8.   STOCK OPTION PLANS

Option Repricing
----------------

On January 26, 2001, the Board of Directors unanimously approved a change in the
number of options granted to employees after 90 days of service. Previous
options to purchase 2,000 shares were replaced with new options for the purchase
of 20,000 shares. A total of 180,000 new options were granted. These new options
are exercisable at $0.10 per share, which represented the average price from
January 1, 2001 to January 26, 2001, and continue to vest and expire over the
four year vesting period of the previously granted options. The new options will
be accounted for as variable stock options from January 26, 2001 until the
options are exercised, forfeited or expire unexercised.

2001 Stock Incentive Plan
-------------------------

On June 14, 2001 the Company's Board of Directors, subject to shareholder
approval, adopted the 2001 Stock Incentive Plan, reserving 761,081 shares of
common stock for issuance under this plan. On August 21, 2001 the Company
received a majority vote from the shareholders for approval of this plan.

In connection with the adoption of this plan, the Board of Directors, in June
2001 also approved the re-allocation of 761,081 shares of common stock that had
been previously reserved for grants under the Company's existing stock option
plans (as shown below), be reserved for grants under the Company's 2001 Stock
Incentive Plan. As such future grants of stock options will only be made under
the Company's 2001 Stock Incentive Plan.

The 2001 Stock Incentive Plan is administered by a Committee appointed by the
Board of Directors. The Committee may grant options under the above Stock
Incentive Plan, depending on the type of option, at exercise prices, equal to,
less than or more than the fair market value of the stock on the date of the
grant. The Plan permits the grant of both incentive and non-qualified stock
options. In addition, the Plan allows for the granting of stock appreciation
rights, awards subject to restrictions, dividend equivalent rights, performance
units and phantom shares. The terms and vesting schedules of the options are to
be determined by the Committee at the time of grant.

For incentive stock options granted under Plan, the option price per share may
not be less than the fair market value of the stock on the date of the grant,
the terms of the options are ten years from the date of grant, and options vest
over various periods as established by the Committee. If immediately before the
grant of incentive stock options, an employee owns more than 10% of the total
combined voting stock of the Company, the exercise price shall be at least 110%
of the fair market value of the stock on the date of the grant and the incentive
option shall expire five years from the date of grant.

Each director of the Company who is not an employee of the Company will receive
a grant of a nonqualified option upon his initial election or appointment as a
director. The option will be for a number of shares of common stock equal to the
lesser of (a) 100,000 or (b) $20,000 divided by the exercise price per share.
The exercise price per share of these options will either be the closing price
per share on the grant date or the average closing price per share during the
30-day period immediately preceeding the trading date, as determined by the
Committee or the Board of Directors at their discretion.

A summary of option activity for the year ended December 31, 2001 under the
above Stock Incentive Plan is as follows:

                                      F-13

<PAGE>

                 STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   __________

<TABLE>
<CAPTION>
                                                              Number        Weighted Average
                                                            of Options       Option Prices
                                                         ------------------------------------
    <S>                                                  <C>                <C>
    Balance, August 21, 2001 (Plan inception)                       -                -
        Incentive options granted                              60,000            $0.11
         Non-qualified options granted                         50,000            $0.11
         Exercised                                                  -                -
         Expired                                              (32,000)           $0.11
                                                         ------------------

    Balance, December 31, 2001                                 78,000            $0.11
                                                         ==================
</TABLE>

Incentive Stock Option Plans
----------------------------

Since 1992, the shareholders have approved several incentive stock option plans
authorizing the issuance of options for employees. The Company has granted
options under these incentive stock option plans which are detailed below.

<TABLE>
<CAPTION>
                                                                  Date Plan      Shares
                                                                  Approved       Reserved
                                                                                 for Grant
                                                                  ---------------------------
      <S>                                                         <C>          <C>
      Incentive Stock Option Plan                                 1992             39,222
      Incentive Stock Option Plan No. 2                           1994             28,571
      Incentive Stock Option Plan No. 3                           1997             80,000
      Incentive Stock Option Plan No. 4                           1998             85,000
      Incentive Stock Option Plan No. 5                           1999            150,000
                                                                               --------------

      Total shares reserved for granting                                          382,793
      Options previously granted                                                 (318,535)
                                                                               --------------
      Reserved  shares  transferred to the 2001 Stock  Incentive
      Plan                                                                         64,259
                                                                               ==============
</TABLE>

For options granted under the above Incentive Stock Option Plans, the option
price per share may not be less than the fair market value of the stock on the
date of the grant, the terms of the options are ten years from the date of
grant, and options vest over a five-year period beginning on the date of grant.
If immediately before a grant an employee owns more than 10% of the total
combined voting stock of the Company, the exercise price shall be at least 110%
of the fair market value of the stock on the date of the grant and the options
expire five years from the date of grant.

A summary of option activity for the years ended December 31, 2001 and 2000 for
the Company's stock option plans are as follows:

<TABLE>
<CAPTION>
                                                                               Weighted
                                                              Number            Average
                                                            of Options       Option Prices
                                                         ------------------------------------
    <S>                                                  <C>                <C>
    Balance, January 1, 1999                                    83,071           $0.30
         Granted                                                35,000            0.34
         Exercised                                                   -               -
         Expired                                               (22,000)           0.11
                                                         ------------------

    Balance, December 31, 2000                                  96,071            0.36
         Granted                                               274,000            0.10
         Exercised                                                   -               -
         Expired                                              (140,368)           0.18
                                                         ------------------

    Balance, December 31, 2001                                 229,703            0.25
                                                         ==================
</TABLE>

                                      F-14

<PAGE>

                 STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   __________

Nonqualified Stock Option Plans
-------------------------------

Since 1992, the shareholders have approved several Nonqualified Stock Option
Plans authorizing the issuance of options to employees and consultants.

The Company has granted options under these non-qualified stock option plans
which are detailed below.

<TABLE>
<CAPTION>
                                                                                       Shares
                                                                    Date Plan         Reserved
                                                                    Approved          for Grant
                                                                  -----------------------------------
      <S>                                                         <C>               <C>
      Nonqualified Stock Option Plan                                  1992               8,571
      Nonqualified Stock Option Plan No. 2                            1994              71,428
      Nonqualified Stock Option Plan No. 3                            1995              13,571
      Nonqualified Stock Option Plan No. 4, 5 and 6                   1996             282,500
      Nonqualified Stock Option Plan No. 7                            1997             100,000
      Nonqualified Stock Option Plan No. 8 and 9                      1998              50,000
      Nonqualified Stock Option Plan No. 10 and 11                    1999           1,160,000
      Nonqualified Stock Option Plan No. 12                           2000           1,600,000
                                                                                 --------------------

      Total shares reserved for granting                                             3,286,070
      Options previously issued                                                     (2,589,248)
                                                                                 --------------------

      Reserved shares transferred to the 2001 Stock Incentive
      Plan                                                                             696,822
                                                                                 ====================
</TABLE>

Options granted under the Nonqualified Stock Option Plans are accounted for
based upon their fair value at the date of their issuance. The option price per
share under these plans may be greater than or less than the fair market value
of the stock on the date of the grant. Both the option price and the terms of
the options are determined by the Board of Directors or a committee of the Board
as of the date of the grant. Generally, the terms of the options are ten years
from the date of grant, and options vest 100% on the date of grant.

A summary of option activity for the years ended December 31, 2001 and 2000
under the above Nonqualified Stock Option Plans are as follows:

<TABLE>
<CAPTION>
                                                                                     Weighted
                                                                  Number              Average
                                                                of Options         Option Prices
                                                             ---------------------------------------
    <S>                                                      <C>                   <C>
    Balance, January 1, 1999                                       1,495,774         $  0.17
         Granted                                                     407,675            0.16
         Exercised                                                  (200,000)           0.09
         Expired                                                           -               -
                                                             ------------------

    Balance, December 31, 2000                                     1,703,449            0.16
        Granted                                                      530,000            0.10
         Exercised                                                  (142,986)           0.12
         Expired                                                     (38,128)           0.35
                                                             ------------------

    Balance, December 31, 2001                                     2,052,335            0.17
                                                             ==================
</TABLE>

Additional SFAS 123 Disclosures
-------------------------------

The following table summarizes additional information about the stock options
outstanding under the Company's stock option plans at December 31, 2001:

                                      F-15

<PAGE>

<TABLE>
<CAPTION>

                                      Options Outstanding                         Options Exercisable
                    ----------------------------------------------------- -----------------------------------
                                         Weighted-
                                          Average            Weighted                           Weighted
    Actual Range        Options          Remaining            Average           Options          Average
   of Exercise       Outstanding at     Contractual          Exercise         Exercisable        Exercise
      Prices            12/31/01        Life (years)          Price           at 12/31/01         Price
------------------- ----------------- ----------------- ----------------- ----------------- -----------------
<S>                 <C>               <C>               <C>               <C>               <C>

  $0.08 - $0.15          1,978,964          8.3            $ 0.11            1,616,164           $ 0.13
  $0.18 - $0.35             53,000          8.1              0.25               33,000             0.29
  $0.38 - $0.41            328,074          5.6              0.38              328,074             0.38
                    -----------------                                     -----------------
                         2,360,038                                           1,977,238
                    =================                                     =================
</TABLE>


The Company applies Accounting Principles Board Opinion No. 25 (APB 25),
"Accounting for Stock Issued to Employees", and related interpretations in
accounting for its equity participation programs. Accordingly, no compensation
cost has been recognized for its incentive and nonqualified stock option plans
related to stock options granted to employees as the exercise price of the stock
options was the same as the fair market value of the underlying common stock on
the date of the grant. However, the Company has adopted the disclosure-only
provisions of Statements of Financial Accounting Standards No. 123, "Accounting
for Stock-based Compensation" ("SFAS 123") as they pertain to the recognition of
compensation expense attributable to option grants.

For disclosure purposes, the fair value of each stock option is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions used for stock options granted in 2001 and 2000.

                                                       2001         2000
                                                     ---------   ---------
    Average risk-free rate of return                   6.0%        6.5%
    Life of options  in years                          5.0         5.0
    Average stock price volatility                     116%        125%
    Dividend yield                                       0%          0%

Had compensation cost been based upon the fair value of the option on the date
of grant, as prescribed by SFAS No. 123, the Company's pro forma net income
(loss) and pro forma net income (loss) per share for the years ended December
31, 2001 and 2000 using the Black-Scholes option pricing model would have been
as follows:

                                                           2001        2000
    Net income (loss)
         As reported                                   $ (123,420)    $  24,434
         Pro forma                                       (439,900)     (265,360)

    Net income (loss) per share  - basic and diluted
         As reported                                   $    (0.01)    $    0.01
         Pro forma                                          (0.05)        (0.03)

The weighted-average fair values of the stock options granted (both incentive
and nonqualified) in 2001 and 2000 was $0.12 and $0.09, respectively.

                                      F-16

<PAGE>

9.       INCOME TAXES

No provision for U.S. federal or state income taxes have been recorded in any
period, as the Company has incurred operating lossed in 2001 and 2000. Deferred
income taxes reflect the net effect of temporary differences between carrying
amount of assets and liabilities for financial reporting and the amounts used
for income tax purposes. Significant componets of the Company's deferred tax
assets for federal and state income taxes as of December 31, 2001 and 2000 are
as follows:

                                                    2001              2000
                                                    ----              ----
         Net operating loss carryforwards      $  5,842,000     $   5,807,000
         Other                                       26,000            17,000
                                               ------------     -------------
                                                  5,868,000         5,824,000
         Valuation allowance                   $ (5,868,000)    $  (5,824,000)
                                               ------------     -------------
                                               $        --                --
                                               ============     =============

Realization of deferred tax assets at the balance sheet date are dependent on
the Company's ability to generate future taxable income which is uncertain.
Accordingly, management has provided a full valuation allowance against the
Company's deferred tax assets as of December 31, 2001 and 2000.

The Company has available, for U.S. income tax purposes, net operating loss
carryforwards of approximately $15,192,000 at December 31, 2001, which can be
used to offset future taxable income through 2021. The Company's utilization of
its net operating loss carryforward may be limited pursuant to Internal Revenue
Code Section 382 due to cumulative changes in ownership in excess of 50% within
a three year period.

The primary difference in the Company's federal statutory income tax rate and
the Company's effective rate is primarily attributed to the impact of state
income taxes and the recording of a valuation allowance due to the uncertainty
of the amount of future tax benefits that is more likely than not to be
realized.

A reconciliation between the statutory federal income tax rate and the effective
rate of income tax expense is as follows:

                                                      Year Ended December 31,
                                                      2001             2000
                                                  ------------      -----------
         Statutory federal income tax rate              34%                34%
         State income taxes                              5%               (88%)
         True-up of deferred taxes                      --               (702%)
         Change in valuation allowance                 (35%)              733%
         Other                                          (4%)               23%
                                                  ------------      -----------
                                                         0%                 0%
                                                  ============      ===========

10.      LEASES

The Company leases office space under noncancelable operating leases, which
expire at various dates through 2005. The future annual minimum rental payments,
under these leases at December 31, 2001 are as follows:

                  2002                     $ 67,000
                  2003                       71,000
                  2004                       74,000
                  2005                        6,000

Rental expense for the years ended December 31, 2001 and 2000, was approximately
$80,000 and $65,000, respectively.

                                      F-17

<PAGE>

11.      RETIREMENT AND OTHER BENEFIT PLANS

Effective January 1, 1994, the Company established a defined contribution
retirement plan covering eligible full-time employees. Under this plan,
participants can contribute up to the lesser of 15% of their compensation or the
maximum allowable by IRS regulations, currently $10,500. Employees may direct
the investment of their contributions among several mutual fund options. The
Company may make discretionary contributions out of current or accumulated net
profit. No contributions for the years ended December 31, 2001 and 2000 were
made.

12.      RELATED PARTY TRANSACTIONS

During 2001, non-employee directors exercised options to purchase 142,986 shares
of the Company's common stock with a fair value of $16,778. The proceeds were
used to satisfy accrued liabilities.

In addition, the Company granted to a non-employee director options with the
fair value of $12,000 as payment for penalties owed this director in connection
with non registered subordinated debentures which had been previously accrued.

The Company also entered into an agreement during the year ended December 31,
2000 under which it provided services to Varsity Heavy Duty, a company which is
held in the majority by a shareholder. The Company provided Varsity Heavy Duty
these services at a discount from its standard rates in exchange for a 10%
interest. The discount approximated $6,000 and $48,000 on sales totaling $28,655
and $332,244 during the years ended December 31, 2001 and 2000, respectively.
The Company is accounting for this investment using the cost method and has
assigned no value to it.

13.    COMPREHENSIVE INCOME

The components of accumulated other comprehensive income, net of related tax, at
December 31, 2001 and December 31, 2000 are as follows:

                                                             December 31,
                                                       2001            2000
                                                      ----             ----

Redemption of investments                          $  (32,956)     $      ---
Unrealized (loss) gain on marketable securities       (13,817)         69,269
                                                   ----------      ----------
                                                   $  (50,130)     $   69,269
                                                   ==========      ==========



                                      F-18