ARC COMMUNICATIONS INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 and 1999


<PAGE>


ARC COMMUNICATIONS INC. AND SUBSIDIARIES

Contents

                                                                         Page

Consolidated Financial Statements

   Independent auditors' reports                                         F-2

   Balance sheet as of December 31, 2000                                 F-3

   Statements of operations for the years ended
      December 31, 2000 and 1999                                         F-4

   Statements of changes in stockholders' equity
      for the years ended December 31, 2000 and 1999                     F-5

   Statements of cash flows for the years ended
      December 31, 2000 and 1999                                         F-6

   Notes to financial statements                                         F-7


<PAGE>


INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Arc Communications Inc.
Tinton Falls, New Jersey

We  have   audited  the   accompanying   consolidated   balance   sheet  of  Arc
Communications  Inc. and  subsidiaries  as of December 31, 2000, and the related
consolidated statements of operations,  changes in stockholders' equity and cash
flows  for  each  of  the  years  in  the  two-year  period  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  generally   accepted  auditing
standards.  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 consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of Arc
Communications   Inc.  and  subsidiaries  as  of  December  31,  2000,  and  the
consolidated  results of their operations and their  consolidated cash flows for
each of the years in the two-year period then ended in conformity with generally
accepted accounting principles.



Richard A. Eisner & Company, LLP


Florham Park, New Jersey
March 1, 2001

                                      F-2
<PAGE>


ARC COMMUNICATIONS INC. AND SUBSIDIARIES

Consolidated Balance Sheet
December 31, 2000

<TABLE>
<CAPTION>

  ASSETS
  Current assets:
<S>                                                                                                 <C>
     Cash and cash equivalents                                                                      $     358,000
     Accounts receivable - net                                                                            547,000
     Other receivables                                                                                     65,000
     Prepaid expenses and other current assets                                                             26,000
                                                                                                    -------------

        Total current assets                                                                              996,000
                                                                                                    -------------

  Property and equipment, net                                                                             376,000
                                                                                                    -------------

  Other assets:
     Goodwill - net                                                                                        67,000
     Security deposits                                                                                     11,000
     Due from employees                                                                                    23,000
                                                                                                    -------------

        Total other assets                                                                                101,000
                                                                                                    -------------

                                                                                                    $   1,473,000
                                                                                                    =============

  LIABILITIES
  Current liabilities:

     Advances under line of credit                                                                  $     335,000
     Accounts payable and accrued expenses                                                                320,000
     Other liabilities                                                                                     96,000
                                                                                                    -------------

        Total current liabilities                                                                         751,000
                                                                                                    -------------

  Commitments and contingencies

  STOCKHOLDERS' EQUITY

  Preferred stock, 9% cumulative, stated value $.20; 5,000,000 shares authorized; 720,000
     shares issued and outstanding (at liquidating value)                                                 144,000
  Common stock, no par value, stated value $.001; 45,000,000 shares authorized;
     13,713,132 shares issued and outstanding                                                              14,000
  Additional paid-in capital                                                                            1,407,000
  Accumulated deficit                                                                                    (843,000)
                                                                                                    --------------

        Total stockholders' equity                                                                        722,000
                                                                                                    -------------

                                                                                                    $   1,473,000
                                                                                                    =============
</TABLE>

                                      F-3
<PAGE>


Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                    Year Ended December 31,
                                                                ------------------------------
                                                                    2000             1999
                                                                -------------    -------------

<S>                                                             <C>              <C>
Net sales                                                       $   4,206,000    $   3,629,000
                                                                -------------    -------------

Costs and expenses:
   Operating costs                                                    745,000          580,000
   Selling, general and administrative                              3,392,000        2,765,000
   Depreciation and amortization                                      153,000          144,000
                                                                -------------    -------------

      Total costs and expenses                                      4,290,000        3,489,000
                                                                -------------    -------------

Other income (expense):
   Interest income                                                     16,000           14,000
   Interest expense                                                   (32,000)         (42,000)
                                                                --------------    ------------

      Total other expense                                             (16,000)         (28,000)
                                                                --------------   --------------

Net income (loss)                                               $    (100,000)   $     112,000
                                                                ==============   =============

Net income (loss) available for common stockholders             $    (113,000)   $      99,000
                                                                ==============   =============

Basic and diluted income (loss) per share                           $(0.01)            $0.01
                                                                    =======            =====
</TABLE>

                                      F-4
<PAGE>

Consolidated Statements of Changes in Stockholders' Equity

<TABLE>
<CAPTION>
                                             Preferred Stock                Common Stock
                                          Shares                       Shares
                                          Issued        Amount         Issued        Amount
                                        -----------  ------------  ------------- ------------
<S>                                         <C>        <C>           <C>            <C>
Balance, December 31, 1998                  750,000    $  150,000    13,750,632     $ 14,000

Issuance of common stock and options
   services rendered                                                      2,500
Cancellation of preferred stock             (30,000)       (6,000)
Cancellation of common stock
   subject to an escrow agreement                                       (50,000)
Net income
                                        -----------  ------------  ------------- ------------

Balance, December 31, 1999                  720,000       144,000    13,703,132       14,000

Issuance of options for services
   rendered

Issuance of common stock as
   compensation                                                          10,000
Net loss
                                        -----------  ------------  ------------- ------------

Balance, December 31, 2000                  720,000    $  144,000    13,713,132   $   14,000
                                        ===========  ============  ============= ============

<CAPTION>

                                                                               Total
                                              Additional       Accumulated   Stockholders'
                                           Paid-in Capital       Deficit       Equity
                                           ---------------   ------------   ------------
<S>                                         <C>                <C>             <C>
Balance, December 31, 1998                  $ 1,352,000        $ (855,000)     $661,000

Issuance of common stock and options
   services rendered                             23,000                          23,000
Cancellation of preferred stock                                                  (6,000)
Cancellation of common stock
   subject to an escrow agreement
Net income                                                        112,000       112,000
                                           ---------------   ------------   ------------

Balance, December 31, 1999                    1,375,000          (743,000)      790,000

Issuance of options for services
   rendered                                      29,000                          29,000

Issuance of common stock as
   compensation                                   3,000                           3,000
Net loss                                                         (100,000)     (100,000)
                                           ---------------   -------------  -------------

Balance, December 31, 2000                  $ 1,407,000       $  (843,000)     $722,000
                                           ===============   =============  =============

</TABLE>

                                      F-5
<PAGE>


Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                          -----------------------------
                                                                               2000            1999
                                                                          -------------   -------------

Cash flows from operating activities:
<S>                                                                       <C>             <C>
Net income (loss)                                                         $    (100,000)  $     112,000
   Adjustments to reconcile net loss to net cash provided by
      operating activities:
        Depreciation and amortization                                           153,000         144,000
        Provision for uncollectible accounts                                     61,000          73,000
        Issuance of options for professional services                            29,000          23,000
        Issuance of common stock as compensation                                  3,000
        Changes in :
           Accounts receivable                                                  116,000        (261,000)
           Prepaid expenses and other current assets                             (8,000)          8,000
           Security deposits                                                     (3,000)          1,000
           Due from employees                                                     5,000          (8,000)
           Accounts payable and accrued expenses                                  5,000          72,000
           Other receivables/liabilities                                         10,000          21,000
                                                                          -------------   -------------

              Net cash provided by operating activities                         271,000         185,000
                                                                          -------------   -------------

Cash flows from investing activity:
   Expenditures for property and equipment                                     (156,000)       (101,000)
                                                                          -------------   -------------

Cash flows from financing activity:
   Proceeds from (repayments to) line of credit                                (109,000)         44,000
                                                                          -------------   -------------

Net increase in cash and cash equivalents                                         6,000         128,000
Cash and cash equivalents - beginning of year                                   352,000         224,000
                                                                          -------------   -------------

Cash and cash equivalents - end of year                                   $     358,000   $     352,000
                                                                          =============   =============

Supplemental disclosures of cash flow information:
   Interest                                                               $      32,000   $      43,000
</TABLE>

                                      F-6
<PAGE>


ARC COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
December 31, 2000 and 1999


NOTE A - ORGANIZATION AND DESCRIPTIONS OF BUSINESS

Arc Communications Inc. (the "Company") is a full-service  marketing  consulting
and New Media design firm specializing in sports  marketing,  technology and the
pharmaceutical  industry.  Services  include  marketing,   consulting,   website
development,  electronic commerce, interactive multi-media,  graphics design and
imaging.

The Company,  through its  subsidiaries,  electronically  publishes  interactive
educational  and  reference  material  for the medical  and dental  professions,
provides on-line continuing  professional  education to the medical,  dental and
funeral   director's   professions  and  provides   on-line   personal   medical
information.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

[1]    Principles of consolidation:

       The accompanying  consolidated  financial statements include the accounts
       of the  Company  and all of its  subsidiaries  after  elimination  of all
       significant intercompany accounts and transactions.

[2]    Cash and cash equivalents:

       The Company  considers all highly liquid  investments  with a maturity of
       three months or less at the date of purchase to be cash equivalents.

       The Company  maintains cash balances in various  financial  institutions.
       Management   periodically   evaluates  the  credit   worthiness  of  such
       institutions.

[3]    Use of estimates:

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

[4]    Allowance for doubtful accounts:

       The Company  establishes  an allowance for  uncollectible  trade accounts
       receivable  based  on  management's   evaluation  of   collectibility  of
       outstanding accounts  receivable.  The allowance for doubtful accounts is
       $67,000 as of December 31, 2000.

[5]    Per share information:

       Basic earnings (loss) per share is computed by dividing income  available
       to common  stockholders  (net income or loss adjusted for preferred stock
       dividends  of  $13,000 in each year) by the  weighted  average  number of
       common shares outstanding.  Diluted earnings (loss) per share is computed
       by dividing  income  available  to common  stockholders  by the  weighted
       average shares outstanding, assuming all dilutive potential common shares
       were issued using,  with respect to the assumed  proceeds from the excess
       of dilutive  options and warrants,  the treasury stock method  calculated
       based upon  average  market price for the period.  The  weighted  average
       number of common shares  outstanding for the year ended December 31, 2000
       and 1999  aggregated  13,713,000 and  13,739,000,  respectively,  and all
       options  (1,555,000  in 2000 and  1,475,000  in 1999) have been  excluded
       since they are anti dilutive.


                                      F-7
<PAGE>


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[6]    Property and equipment:

       Property and equipment are stated at cost and are  depreciated  using the
       straight-line  method  over  their  estimated  useful  lives  of 5 years.
       Leasehold  improvements  are amortized over the shorter of the lease term
       or the lives of the respective asset.

[7]    Goodwill:

       Goodwill is being amortized on a straight-line  basis over 10 years.  The
       carrying  value of goodwill is analyzed  quarterly  by the Company  based
       upon the  expected  cash flows of the acquired  enterprise.  Amortization
       expense amounted to $10,000 for each of the years ended December 31, 2000
       and 1999. Accumulated  amortization aggregated $31,000 as of December 31,
       2000.

[8]    Revenue recognition:

       The  Company  recognizes  income  from  sales at the date the  product is
       shipped and as professional  services are performed.  Revenue from custom
       software development is recognized based on its percentage of completion.

[9]    Stock-based compensation:

       Statement of Financial  Accounting  Standards  No. 123,  "Accounting  for
       Stock-Based Compensation" ("SFAS 123") allows companies to either expense
       the  estimated  fair value of stock  options or to continue to follow the
       intrinsic value method set forth in APB Opinion 25, "Accounting for Stock
       Issued to Employees" ("APB 25") but disclose the pro forma effects on net
       income had the fair value of the options been  expensed.  The Company has
       elected to continue to apply APB 25 in  accounting  for its stock  option
       incentive plans.

[10]   Advertising:

       The Company  follows the policy of charging the costs of  advertising  to
       expense  as  incurred.   During  2000  and  1999,  the  Company  recorded
       advertising expense of $33,000 and $33,000, respectively.

[11]   Recent Accounting Pronouncements:

       In December 1999, the  Securities  and Exchange  Commission  issued Staff
       Accounting Bulletin No. 101 (SAB 101), "Revenue  Recognition in Financial
       Statements,"  providing  guidance on the  recognition,  presentation  and
       disclosure  of revenue in  financial  statements.  The  Company  does not
       expect the adoption of SAB 101 to have an impact on the Company'  results
       of operations, financial position or cash flows.

                                      F-8
<PAGE>


NOTE C - PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2000 consists of:

          Equipment and furniture                       $   1,001,000
          Leasehold improvements                              106,000
                                                        -------------
                                                            1,107,000
          Accumulated depreciation                           (731,000)
                                                        -------------
                                                        $     376,000
                                                        =============


Depreciation  expense  aggregated  $143,000  and  $134,000  for the years  ended
December 31, 2000 and 1999, respectively.

NOTE D - ADVANCES UNDER LINE OF CREDIT

Advances  under a $750,000 line of credit bear interest at the bank's prime rate
plus 1.5% and are collateralized by the Company's accounts receivable.  The line
of credit is due on demand.

NOTE E - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses are:

          Accounts payable                              $    260,000
          Accrued payroll                                     36,000
          Other                                               24,000
                                                        ------------
                                                        $    320,000
                                                        ============

NOTE F - INCOME TAXES

The significant  components of the Company's deferred tax asset and liability as
of December 31, 2000 are as follows:

          Deferred income tax asset:
             Net operating losses carryforwards         $    423,000
             Other                                             5,000
                                                        -------------
                                                             428,000
                                                        -------------

          Deferred income tax liability:
             Accrual to cash adjustment                       89,000
             Property and equipment                           15,000
                                                        ------------
                                                             104,000
                                                        ------------
          Net deferred tax asset                             324,000
          Valuation allowance                               (324,000)
                                                        ------------

          Net deferred tax asset                        $          0
                                                        ============

                                      F-9
<PAGE>

NOTE F - INCOME TAXES (CONTINUED)

The significant components of the provision for income taxes for the years ended
December 31, 2000 and 1999 are as follows:

                                                  2000             1999

          Deferred:
             Federal                           $ 16,000         $(119,000)
             State                                4,000           (35,000)
             Change in valuation allowance      (20,000)          154,000
                                               ---------        ---------

                Total deferred income taxes    $      0         $       0
                                               =========        =========


As of December 31, 2000,  the Company has net operating  loss  carryforwards  of
approximately  $1,039,000 for federal income tax purposes,  which expire through
2020.

The difference  between the statutory  federal income  (benefit) tax rate on the
Company's  pre-tax income (loss) and the Company's  effective income tax rate is
summarized as follows:

                                                 2000              1999

          Statutory federal income tax rate     (34.0)%             34.0%
          Prior year overaccrual                  9.6               90.6
          Change in tax rate                                        21.4
          Decrease (increase) in valuation
             Allowance                           14.0             (142.8)
          Nondeductible expenses                  3.0                1.8
          Other                                   7.4               (5.0)
                                               --------          ----------

          Effective income tax rate                 0%                 0%
                                               ========          ==========


NOTE G - RELATED PARTY TRANSACTION

Legal   fees   paid   to   corporate   counsel,   with   which   the  son  of  a
director/shareholder is affiliated,  were $17,000 and $37,000 for 2000 and 1999,
respectively.

NOTE H - STOCKHOLDERS' EQUITY

[1]    Common stock:

       In connection with the Company's 1997 acquisition of a subsidiary, 50,000
       shares were issued subject to an escrow agreement  whereby,  if a certain
       performance  benchmark was met on or before  October 31, 1999, the shares
       would  be  released.  The  benchmark  was not met  and  the  shares  were
       cancelled in 1999.


                                      F-10
<PAGE>

       In January 2000,  the Company  issued 10,000 shares of common stock to an
       employee  and  recorded an expense of $3,000 at fair value on the date of
       issuance.

NOTE H - STOCKHOLDERS' EQUITY (CONTINUED)

[2]    Preferred stock:

       Dividends in arrears as of December 31, 2000 aggregated $ 30,000.

       During  1999,   30,000  shares  of  the   preferred   stock  and  related
       subscription receivable were canceled.

[3]    Stock options:

       The Company  has a stock  option  plan under  which  1,500,000  shares of
       common stock are reserved for issuance upon exercise of either  incentive
       or  nonincentive  stock options which may be granted from time to time by
       the Board of Directors to  employees  and others.  The Board of Directors
       determines  the option  price (not to be less than fair market  value for
       incentive  options) at the date of grant. The options have a maximum term
       of 4 years.

       The Company  applies APB 25 in accounting for its stock option  incentive
       plan and, accordingly, recognizes compensation expense for the difference
       between the fair value of the  underlying  common  stock and the exercise
       price of the option at the date of grant. Had  compensation  cost for the
       Company's stock option plan been determined  based upon the fair value at
       the grant date for awards under the plans consistent with the methodology
       prescribed  under SFAS No. 123, the  Company's pro forma net loss and net
       loss per share for 2000  would  have been  approximately  ($235,000)  and
       $(.02), respectively and for 1999 pro forma net income and net income per
       share  would  have  approximated  $90,000  and  $.01,  respectively.  The
       weighted  average fair value of the options  granted during 2000 and 1999
       were $.40 and $.20 per share,  respectively,  on the date of grant  using
       the  Black-Scholes  option pricing model with the following  assumptions;
       dividend yield 0%, volatility 480% and 486%,  expected life 4 years, risk
       free interest rate of approximately 6.3% and 5.3%.

The following table summarizes stock options transactions under the plan:

<TABLE>
<CAPTION>
                                                       Year Ended December 31,

                                                 2000                         1999
                                                       Weighted                     Weighted
                                                        Average                      Average
                                                       Exercise                     Exercise
                                         Shares          Price         Shares         Price
                                     ------------    -----------    -----------   -----------
<S>                                     <C>              <C>            <C>           <C>
   Options:
      Outstanding at beginning
        of year                         1,250,000        $0.50          460,000       $0.50
      Granted                             200,000         0.50          765,000        0.50
      Canceled                            120,000         0.50
                                     ------------                   -----------

      Outstanding at end of year        1,330,000        $0.50        1,250,000       $0.50
                                     ============                   ===========

      Exercisable at year end             715,000        $0.50          390,000       $0.50
                                     ============    ===========    ===========   ===========
</TABLE>

                                      F-11
<PAGE>


NOTE H - STOCKHOLDERS' EQUITY (CONTINUED)

The following table summarizes  information about stock options  outstanding for
which the  Company  has an  obligation  to issue  shares  of common  stock as of
December 31, 2000:

<TABLE>
<CAPTION>
                         Options Outstanding                         Options Exercisable
            ----------------------------------------------        --------------------------
               Number                                                Number
            Outstanding         Weighted          Weighted        Exercisable       Weighted
Range of       as of             Average          Average            as of           Average
Exercise    December 31,        Remaining         Exercise        December 31,      Exercise
 Prices         2000         Life (in Years)       Price              2000            Price
--------    ------------     ---------------      --------        ------------      --------
<S>          <C>                  <C>              <C>                <C>             <C>
 $0.50       1,330,000            2.24             $0.50              715,000         $0.50
</TABLE>


In March 1999, the Company entered into a two year  consulting  agreement with a
public relations company.  Under the terms of the agreement,  the Company issued
225,000  options  exercisable at $1.00 per share with an estimated fair value of
the date of grant of $56,000. During the years ended December 31, 2000 and 1999,
the Company recognized an expense of $29,000 and $23,000, respectively.

NOTE I - COMMITMENTS

The Company  leases office space and equipment  under  operating  leases with an
initial or remaining  term in excess of one year,  expiring  through 2006. As of
December 31, 2000, minimum aggregate rentals are as follows:

          Year Ending
          December 31,

             2001                      $205,000
             2002                       223,000
             2003                       204,000
             2004                       174,000
             2005                       174,000
             Thereafter                 160,000
                                   ------------
                                     $1,140,000


Total rent  expense for the years ended  December  31, 2000 and 1999  aggregated
$195,000 and $167,000, respectively.

NOTE J - MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK

For the year ended December 31, 2000, three customers accounted for 20%, 14% and
10% of sales,  respectively.  One of these customers  accounted for 23% of sales
for the year ended December 31, 1999. The aggregate accounts receivable balances
as of December 31, 2000 for these customers were $275,000.


                                      F-12
<PAGE>

NOTE K - SEGMENT INFORMATION

The Company has two reportable segments; multi-media and continuing professional
education.  The  multi-media  products  business  is  comprised  of  interactive
multi-media  programs,  printing and internet site  development.  The continuing
professional  education business (CPE) is comprised of the traditional hard copy
examinations and examinations taken on the internet.

                                                  2000            1999
Revenues
   Multi-media                                  $3,183,000      $2,975,000
   Continuing professional education             1,023,000         654,000
                                             -------------   -------------
      Total consolidated revenues                4,206,000      $3,629,000
                                             =============   =============

Net income (loss)
   Multi-media                                      72,000        $226,000
   Continuing professional education              (172,000)       (114,000)
                                             --------------  -------------
      Total consolidated net income (loss)       $(100,000)       $112,000
                                             ==============  =============

Assets
   Multi-media                                   1,280,000      $1,402,000
   Continuing professional education               193,000         168,000
                                             -------------   -------------
      Total consolidated assets                 $1,473,000      $1,570,000
                                             =============   =============

                                      F-13