SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                     Annual Report under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


                   For the fiscal year ended December 31, 2001

                             ARC COMMUNICATIONS INC.
                 (Name of Small Business Issuer in its charter)


         New Jersey                                             22-3201557
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)

788 Shrewsbury Avenue, Tinton Falls, New Jersey                  07724

Issuer's telephone number:  (732) 219-1766

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

Securities registered under Section 12(g) of the Act:

     (i)  Common Stock, $.001 Par Value; and

     (ii) Class A Preferred Stock, $.20 Par Value.

Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes: [X] No: [_]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-KSB or any
amendment to this Form 10-KSB [_]


The issuer's revenue for the fiscal year ended December 31, 2001 was $2,495,000

The aggregate market value of the voting stock held by non-affiliates of the
registrant is approximately $1,097,729 as of March 21, 2002.

     State the number of shares outstanding of each of the registrant's classes
of common equity as of the latest practicable date: 14,770,622 shares of the
registrant's common stock and 720,000 shares of the registrant's preferred stock
are issued and outstanding as of March 21, 2002.


Transitional Small Business Disclosure Format (check one):

Yes [_]        No [X]


<PAGE>

                                TABLE OF CONTENTS

                                     PART I

ITEM 1.      DESCRIPTION OF BUSINESS.........................................  1

ITEM 2.      DESCRIPTION OF PROPERTY.........................................  5

ITEM 3.      LEGAL PROCEEDINGS...............................................  5

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 PLAN OF OPERATION...........................................  7

ITEM 7.      FINANCIAL STATEMENTS............................................  9

ITEM 8.      CHANGES IN AND DISAGREEMENTS WITH
             ACCOUNTANT ON ACCOUNTING FINANCIAL DISCLOSURE................... 10


                                    PART III

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

ITEM 10.     EXECUTIVE COMPENSATION.......................................... 11

ITEM 11.     SECURITY OWNERSHIP OF CERTAIN
             BENEFICIAL OWNERS AND MANAGEMENT................................ 12

ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................  14

ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K................................ 14


SIGNATURES..................................................................  16





<PAGE>

PART I

Item 1.   Description of Business

a.   GENERAL

         Arc Communications is an interactive design firm specializing in
websites and CD-ROMs. Its clients are national and global audiences in North
America, Asia and Europe. Arc focuses its efforts in the healthcare,
pharmaceutical and technology industries.

         Arc's graphic design and interactive multi-media products use advanced
technologies to create media for corporate communications. Arc continues to
expand its business through existing products such as a 3-D animation design and
multimedia presentations.

         Interactive Sales Training Programs are a growing area of Arc's
business. Arc has formed strategic alliances with large advertising agencies
that have major pharmaceutical companies as their clients. By forming these
alliances, Arc's clients are able to use Arc's expertise in a variety of
interactive multimedia areas. Further, such strategic alliances enable Arc's
clients to use leading edge technologies without having to incur substantial
development costs. The training programs should have a positive impact on both
revenue and results due to the fact that the margins on these products are
substantially higher than those on Arc's core business. Arc earns revenues from
Interactive Sales Training Programs from billing for the creative development.
The expenses are principally payroll related, purchase costs are insignificant.

         Arc's subsidiary, Arc Mesa Educators Inc. ("Arc Educators") is in the
business of providing continuing education to a variety of professions with a
primary focus in the medical profession. By utilizing advanced technologies,
developed by Arc Educators, our goal is to provide a quality education combined
with a flexible learning environment that cannot be attained in a more
traditional continuing education program. Contemporary professionals needing
continuing education credits are drawn to our programs for their ease-of-use,
convenience, price, as well as the educational content and current topics of
interest that can enhance a professional practice.

         Arc Educators, develops and operates internet businesses and
electronically publishes interactive educational and reference material for the
medical and dental professions via its website located at http://www.arcmesa.com
(the "Mesa Web Site"), and provides continuing professional education on the
internet to the medical, dental and funeral director's professions. The Mesa Web
Site provides access to informative courses, administers state mandated testing
and provides immediate results in a live interactive setting.

         Arc Educators is an approved provider of continuing education for the
following:


     o    Accreditation Council for Continuing Medical Education (ACCME)
          Category 1 CME
     o    American Council On Pharmaceutical Education (ACPE)
     o    American Nurses Credentialing Center (ANCC)
     o    American Dental Association (ADA)
     o    Academy of General Dentistry (ADA CERP)
     o    American Registry of Radiologic Technologists

  Arc Educators also provides non clinical, custom-designed Continuing Education
seminars and conferences that are timely, relevant, convenient, and unique to
health care professionals, including physicians, pharmacists, nurses, and
dentists.

     Arc has the ability to design and create specific websites for a client and
may operate such a site if so desired. Arc also designs and develops interactive
<PAGE>

kiosks and advertising and promotional materials, including packaging for retail
products. Arc's Web expertise has positioned it to effectively transition into a
full service integrated, interactive marketing and communication company. Arc's
services are used by its clients to create a new medium for advertisement,
promotion and technical support of such customer's products and services. Web
sites can provide commercial organizations benefits in addition to those
available through conventional media, including the ability to enhance a
corporate brand, engage and entertain consumers, provide in-depth information,
reduce selling and operating costs, generate leads and build retail traffic,
expand distribution channels (otherwise known as e-commerce), promote major
sporting and entertainment events and monitor popularity of content, conduct
research, and build databases for on-going marketing efforts.

         Arc partners with clients to focus on how new and emerging technologies
can enable them to build one-on-one customer relationships. Tapping into
strategic expertise, media know-how, creative talent and technical excellence,
Arc guides clients to achieving a favorable return on investment from Web-based
marketing.

         The scope of our services has ranged from consulting services to
complete marketing-driven design and construction of multi-level Web sites. Arc
also offers numerous integrated services in addition to those discussed above,
particularly offline media planning and buying related to identification,
negotiation for and purchase of banners, sponsorship and proprietary
partnerships on Web sites.




b.   ARC'S STRENGTHS

Focus on Clients' Business Objectives

         Arc has made understanding its clients' business challenges the primary
focus that guides its customer services. Arc often works with its clients'
management to determine how best to integrate Web sites with the clients'
business goals.


Creative Expertise

         Arc believes that, in addition to the creative elements required in
traditional graphic design, superior interactive development requires that the
end product is easy-to-use, contains intuitive interfaces and seamless
integrated technologies and has an engaging look and feel. Management believes
that Arc's creative staff possesses a broad spectrum of expertise to meet
clients' creative needs. In order to maintain high levels of creativity and
quality, Arc intends to recruit the best talent available. However, competition
for creative personnel is especially intense and there can be no assurance that
Arc will attract or retain adequate creative talent to accomplish these goals.
For a discussion regarding material risks faced by Arc, please see
"COMPETITION."

c.   ARC'S STRATEGY

Capitalize on Accomplishments and Market Opportunities
Change

         Arc believes  that the  proliferation  of the Internet will continue to
provide substantial opportunities to Arc in spite of the downturn in the
industry and that its successfully completed projects will continue to enhance
its marketing efforts. Arc's management does not, however, believe that Arc's
primary business will be limited to the Internet. Arc has the ability to produce
digital content which may be carried over a variety of emerging technologies
such as digital satellite and interactive television. Although there is no
assurance that any of these technologies will achieve acceptance in the
marketplace, Arc believes its services could be utilized over these channels as
well.
<PAGE>

         Arc also believes that it is well-positioned to make advances in the
medical education marketplace. Deploying interactive solutions along with Arc
Educators' ability to provide accreditation to its programs Arc believes it has
created a differentiator in the market place.

Deploy Leading Technologies

         One of Arc's objectives is to apply both proven and emerging
technologies as they become available in order to maximize the effectiveness of
its Web site services. Arc has formed informal non-exclusive relationships with
key technology providers in an effort to gain access to, and influence the
features of, their technologies.

d.   MARKETING


         Arc markets its services directly and seeks to form strategic marketing
relationships with third parties. Presently, Arc has 3 employees dedicated to
business development. Additionally, 2 of Arc's executive officers spend a
portion of their time marketing Arc's services. Arc also seeks to attract new
clients through other methods, including referrals from existing clients. Arc
seeks to cross-sell its various services to its clients and prospective clients
through sales presentations that encourage clients to utilize all of Arc's
services.


e.   GOVERNMENT REGULATION

         Arc is not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally, and there are
currently few laws or regulations directly applicable to Web site service
companies and marketing and communications firms. However, due to the increasing
media attention focused on the Internet, it is possible that a number of laws
and regulations may be adopted with respect to the Internet, covering issues
such as user privacy, pricing and characteristics and quality of products and
services. The adoption of any such laws or regulations may decrease the growth
of the Internet, which could in turn decrease the demand for Arc's services and
products and increase the Company's cost of doing business or cause Arc to
modify its operations, or otherwise have an adverse effect on Arc's business,
operating results or financial condition. Moreover, the applicability to the
Internet of existing laws such as property ownership, libel and personal privacy
is uncertain. Arc cannot predict the impact, if any, that future regulation or
regulatory changes may have on its business. In addition, Web site developers
such as Arc face potential liability for the actions of clients and others using
their services, including liability for infringement of intellectual property
rights, rights of publicity, defamation, libel and criminal activity under the
laws of the U.S. and foreign jurisdictions. Although Arc maintains $2,000,000 of
general liability insurance, and a $2,000,000 umbrella policy, any imposition of
liability in excess of such policies limits or if not covered by such policies
could have a material adverse effect on Arc.

f.   COMPETITION

         The markets for Arc's services are highly competitive and are
characterized by pressures to incorporate new technologies, accelerate
completion schedules and reduce prices. Arc expects competition for its services
to intensify in the future, partly because there are no substantial barriers to
entry into Arc's business. Arc faces competition from a number of sources,
including potential customers that perform interactive marketing and
communications services and Web site development services in-house. These
sources also include other Web site service boutique firms, communications,
telephone and telecommunications companies, computer hardware and software
companies such as Microsoft Corporation and Adobe Systems Incorporated,
established online service companies, advertising agencies, internet-services
and access providers as well as specialized and integrated marketing
communication firms. Many of Arc's competitors or potential competitors have
longer operating histories, more substantial customer relationships and
significantly greater financial, managerial, technological, sales, marketing and
<PAGE>

other resources than the Company. Arc also competes on the basis of creative
reputation, price, reliability of services and responsiveness. There can be no
assurance that Arc will be able to compete and its inability to do so would have
a material adverse impact on Arc's business, financial condition and operating
results.

         Although Arc believes it has created a differentiator in the
marketplace by combining the best attributes of the Communications' group along
with the Education group this in no way ensures success in the medical education
space. There are numerous competitors which have longer operating histories,
more substantial customer relationships and significantly greater financial,
managerial, technological, sales, marketing and other resources than the
Company.

g.   EMPLOYEES


         At December 31, 2001, Arc had 15 employees, of which all are full-time
employees. Full-time employees include 4 in strategic planning, executive
management, business development; 2 account managers; 4 creative, production and
programming personnel, in addition to 5 administrative staff.


Item 2. Description of Property

     The Company maintains its sole corporate offices at 788 Shrewsbury Avenue,
Tinton Falls, New Jersey 07724 (the "Office"). The Office is comprised of 7,209
square feet with monthly rent of $11,414 (the "Lease")and the Company has
exercised its option for five more years commencing on December 1, 2001. In
addition the Company has added 1,949 square feet of rentable space at a monthly
rent of $3,086 which it now subleases to FCT America Limited for a term of five
years at a monthly rent of $3,086.


Item 3. Legal Proceedings

         No material legal proceedings to which the Company (or any officer or
director of the Company, or any affiliate or owner of record or beneficially of
more than five percent of the Common Stock, to management's knowledge) is party
or to which the property of the Company is subject is pending, and no such
material proceeding is known by management of the Company to be contemplated.

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


         No matters were submitted to a vote of security-holders through the
solicitation of proxies or otherwise during the fourth quarter of the 2001
Fiscal Year.


PART II

Item 5. Market for Common Equity and Related Stockholders Matters

         MARKET.  Since October 21, 1996, the Company's  Common Stock has traded
on the  "OTC-Bulletin  Board.  The Common Stock is presently  trading  under the
symbol "ACOC".

         Since December 30, 1998, the Company's Class A Preferred Stock has
traded on the "OTC-Bulletin Board". The Class A Preferred Stock is presently
trading under the symbol "ACOCP".

         The Following table sets forth the range of high and low bid quotations
for the Company's Common Stock and Class A Preferred Stock during each calendar
quarter since they began trading, each of which has been rounded to the nearest
whole cent.


<PAGE>




SYMBOL            TIME PERIOD                         LOW BID          HIGH BID

ACOC

                  January 1 - March 31, 2000           .1875           2.50
                  April 1 - June 30, 2000              .50             1.25
                  July 1 - September 30, 2000          .44              .81
                  October 1 - December 31, 2000        .03              .31
                  January 1, 2001 - March 21, 2001     .06              .38
                  April 1 - June 30, 2001              .04              .11
                  July 1 - September 30, 2001          .02              .11
                  October 1 - December 31, 2001        .01              .12
                  January 1 - March 12, 2002           .02               .10



ACOCP

                  January 1 - March 31, 2000           .1875            .875
                  April 1 - June 30, 2000              .0625            .125
                  July 1 - September 30, 2000          .0625            .31
                  October 1 - December 31, 2000        .02              .31
                  January 1, 2001 - March 31, 2001     .02              .02
                      April 1 - June 30, 2001          .01              .02
                  July 1 - September 30, 2001          .003             .01
                  October 1 - December 31, 2001        .003             .08
                  January 1 - March 12, 2002           .003             .085




         The above prices were obtained from the National Quotation Bureau, Inc.
The quotations represent inter-dealer quotations without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.


         OUTSTANDING SHARES AND SHAREHOLDERS OF RECORD. As of December 31, 2001,
13,770,622 shares of Common Stock issued and outstanding which were held of
record by 268 persons. As of December 31, 2001, 720,000 shares of preferred
stock issued and outstanding which were held of record by 6 persons.

         DIVIDENDS. Since its inception, the Company has not paid any cash
dividends on its stock. There are no restrictions currently in effect which
preclude the Company from declaring dividends. However, dividends may not be
paid on the Common Stock while there are accrued but unpaid dividends on the
Class A Preferred Stock: 9% Cumulative, Convertible, Redeemable Preferred Stock.
As of December 31, 2001 accrued but unpaid preferred stock dividends aggregated
$30,000.00. It is the current intention of the Company to retain any earnings in
the foreseeable future to finance the growth and development of its business and
not pay dividends on the common stock.


         RECENT SALES OF UNREGISTERED SECURITIES.

        In 1999 the Company issued 2,500 shares of common stock for payment for
services rendered regarding the development of database development for Arc Mesa
Educators.

        In January 2000 the Company issued 10,000 shares of common stock for
payment for the purchase of the copyright for the Writing and Speaking for
Excellence Seminar series.


          In February 2001 the Company issued 2,500 shares of common stock for
payment for marketing consulting services.

          In February 2001 the Company issued 5,000 shares of common stock to an
employee for compensation for moving to New Jersey from Florida.

          In November 2001 the Company issued 1,000,000 shares of common stock
to certain employees for compensation.

<PAGE>


Item 6. Management's  Discussion and Analysis of Financial Condition and Plan of
        Operation

Years Ended December 31, 2001 and December 31, 2000

         Arc's net sales for the years ended December 31, 2001 and 2000 were
$2,482,000 and $4,206,000 respectively, a decrease of 41 percent. In Arc's
multi-media segment, sales for the years ended December 31, 2001 and 2000 were
$1,369,000 and $3,183,000 respectively, a decrease of 57 percent. In its
continuing education segment, sales for the years ended December 31, 2001 and
2000 were $1,113,000 and $1,023,000 respectively, an increase of 9 percent.

         Revenue decline was driven by the loss of three major customers and
decreases in sales volume from three other customers. The loss of the three
customers were due to the mergers of two companies to larger organizations and
the third ceasing operations. This represented a loss of $1,221,000 in revenue.
In addition three other major customer's revenues had a decrease of $512,000 in
revenue.

         The increase in revenue for continuing professional education, is
primarily due to the capability of delivering live educational seminars through
its distance learning company and the continued growth of our online continuing
education courses.

         Operating costs for the years ended December 31, 2001 and 2000 were
$277,000 and $745,000 respectively. The decrease is due to the overall revenue
declines across Arc's core businesses.

         Selling,  general  and  administrative  expenses  for the  years  ended
December 31, 2001 and 2000 were $2,786,000 and 3,392,000 respectively.  Selling,
general and administrative expenses for 2001 decreased $606,000 (or 18%). This
decrease was primarily due to reductions in selling expenses such as commissions
and travel expenses as a result of the decline in revenues along with the
continuing slashing of overhead to get it inline with the revenue declines.

         Depreciation and amortization expenses for the years ended December 31,
2001 and 2000 were $156,000 and $153,000 respectively, a modest increase of 2
percent.

         Net loss for the years  ended  December  31,  2001 and 2000
amounted to $741,000 and $100,000 respectively. Decrease in revenues was the
primary factor for the decrease in net income. As a result, loss per share were
$0.05 for the year ended December 31, 2001 compared to the loss of $0.01 for the
year ended December 31, 2000.

Liquidity and Capital Resources

         Cash flow used by operations for the year ended December 31, 2001
was $399,000. The Company believes that its present client base will generate
sufficient revenue to maintain an appropriate level of liquidity for the near
term. If revenues continue to decline the company will have to seek additional
financial. To this end the company has secured a commitment from a high net
worth investor for working capital as needed up to $250,000.

         The Company maintains a line of credit of $750,000. As of December 31,
2001, $311,000 of the line credit remains available for future use subject to
collateral restrictions. The Company utilizes the line of credit for working
capital.

         Cash flow from investing activities was negative for the year ended
December 31, 2001. Net cash used in investing activities for the year ended
December 31, 2001 was $19,000 used for capital expenditures. The company
increased its credit usage by $104,000 for working capital.

Item 7.  Financial Statements

Please see the attached consolidated financial statements.

<PAGE>

















                    ARC COMMUNICATIONS INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2001





<PAGE>


ARC COMMUNICATIONS INC. AND SUBSIDIARIES

Contents

                                                                           Page
                                                                           ----

Consolidated Financial Statements

   Independent auditors' report                                             F-2

   Balance sheet as of December 31, 2001                                    F-3

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

   Statements of changes in stockholders' equity
      for the years ended December 31, 2001 and 2000                        F-5

   Statements of cash flows for the years ended
      December 31, 2001 and 2000                                            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, 2001, 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 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 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, 2001, 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
accounting principles generally accepted in the United States of America.


/s/Richard A. Eisner & Company, LLP
-----------------------------------
Richard A. Eisner & Company, LLP

Florham Park, New Jersey
March 7, 2002


                                      F-2
<PAGE>
<TABLE>
<CAPTION>

ARC COMMUNICATIONS INC. AND SUBSIDIARIES


Consolidated Balance Sheet
December 31, 2001
<S>                                                                                         <C>

ASSETS
Current assets:
   Cash and cash equivalents                                                                $    44,000
   Accounts receivable - net                                                                    905,000
   Other assets                                                                                   4,000
   Prepaid expenses and other current assets                                                      2,000
                                                                                            -----------

      Total current assets                                                                      955,000

Property and equipment, net                                                                     249,000

Other assets                                                                                     23,000
                                                                                            -----------

                                                                                            $ 1,227,000

LIABILITIES
Current liabilities:
   Advances under line of credit                                                            $   439,000
   Accounts payable and accrued expenses                                                        221,000
   Deferred revenue                                                                             549,000
                                                                                            -----------

      Total current liabilities                                                               1,209,000
                                                                                            -----------

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;
   14,770,632 shares issued and outstanding                                                      15,000
Additional paid-in capital                                                                    1,443,000
Accumulated deficit                                                                          (1,584,000)
                                                                                            -----------

      Total stockholders' equity                                                                 18,000
                                                                                            -----------

                                                                                            $ 1,227,000

</TABLE>
See notes to consolidated financial statements

                                      F-3
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Operations

                                                   Year Ended December 31,
                                               ----------------------------
                                                   2001              2000
                                               -----------      -----------
<S>                                            <C>              <C>
Net sales                                      $ 2,482,000      $ 4,206,000
                                               -----------      -----------

Costs and expenses:
   Operating costs                                 277,000          745,000
   Selling, general and administrative           2,786,000        3,392,000
   Depreciation and amortization                   156,000          153,000
                                               -----------      -----------

      Total costs and expenses                   3,219,000        4,290,000
                                               -----------      -----------

Other income (expense):
   Interest income                                   9,000           16,000
   Interest expense                                (25,000)         (32,000)
   Other income                                     12,000
                                                                -----------

      Total other expense                           (4,000)         (16,000)
                                               -----------      -----------

Net loss                                       $  (741,000)     $  (100,000)
                                               ===========      ===========

Net loss available for common stockholders     $  (754,000)     $  (113,000)
                                               ===========      ===========

Basic and diluted loss per share               $     (0.05)     $     (0.01)
                                               ===========      ===========


</TABLE>
See notes to consolidated financial statements
                                      F-4

<PAGE>
<TABLE>
<CAPTION>


Consolidated Statements of Changes in Stockholders' Equity


                                         Preferred Stock           Common Stock
                                      --------------------     --------------------                                        Total
                                      Shares                  Shares                    Additional       Accumulated   Stockholders'
                                      Issued      Amount      Issued       Amount    Paid-in Capital       Deficit         Equity
                                     -------     ---------  ----------    --------     -----------     -----------     ----------
<S>              <C>                    <C>      <C>         <C>          <C>          <C>             <C>               <C>
Balance, January 1, 2000                720,000  $ 144,000   13,703,132   $ 14,000     $ 1,375,000     $  (743,000)      $790,000

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

Issuance of common stock as
   compensation                                                  10,000                      3,000                          3,000

Net loss                                                                                                  (100,000)      (100,000)
                                     -------     ---------  ----------    --------     -----------     -----------     ----------

Balance, December 31, 2000            720,000    $ 144,000   13,713,132   $ 14,000     $ 1,407,000     $  (843,000)      $722,000
                                     =======     =========  ==========    ========     ===========     ===========     ==========

Issuance of options for services
   rendered                                                                                  4,000                          4,000

Issuance of common stock for
   services rendered                                             55,000                      3,000                          3,000

Issuance of common stock as
   compensation                                               1,002,500      1,000          29,000                         30,000

Net loss                                                                                                  (741,000)      (741,000)
                                     -------     ---------  ----------    --------     -----------     -----------     ----------

Balance, December 31, 2001           720,000     $ 144,000  14,770,632    $ 15,000     $ 1,443,000     $(1,584,000)    $   18,000
                                     =======     =========  ==========    ========     ===========     ===========     ==========

</TABLE>
See notes to consolidated financial statements


                                      F-5
<PAGE>
<TABLE>
<CAPTION>

Consolidated Statements of Cash Flows

                                                                             Year Ended December 31,
                                                                           -------------------------
                                                                              2001           2000
                                                                           ---------      ---------
<S>                                                                        <C>            <C>
Cash flows from operating activities:
Net loss                                                                   $(741,000)     $(100,000)
   Adjustments to reconcile net loss to net cash (used in) provided by
      operating activities:
        Depreciation and amortization                                        156,000        153,000
        Write-off of goodwill                                                 57,000
        Provision for uncollectible accounts                                  34,000         61,000
        Issuance of options for professional services                          4,000         29,000
        Issuance of common stock as compensation                              33,000          3,000
        Changes in:
           Accounts receivable                                              (392,000)       116,000
           Prepaid expenses and other current assets                          39,000         (8,000)
           Security deposits                                                  (4,000)        (3,000)
           Due from employees                                                  5,000
           Accounts payable and accrued expenses                             (99,000)         5,000
           Other receivables/liabilities                                     514,000         10,000
                                                                           ---------      ---------

              Net cash (used in) provided by operating activities           (399,000)       271,000

Cash flows from investing activity:
   Expenditures for property and equipment                                   (19,000)      (156,000)

Cash flows from financing activity:
   Proceeds from (repayments to) line of credit                              104,000       (109,000)
                                                                           ---------      ---------

Net (decrease) increase in cash and cash equivalents                        (314,000)         6,000
Cash and cash equivalents - beginning of year                                358,000        352,000
                                                                           ---------      ---------

Cash and cash equivalents - end of year                                    $  44,000      $ 358,000
                                                                           =========      =========

Supplemental disclosures of cash flow information:
   Interest                                                                $  25,000      $  32,000


</TABLE>
See notes to consolidated financial statements

                                      F-6

<PAGE>
ARC COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements



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.

As a result of the reduction in the multimedia segment during the year ended
December 31, 2001, the Company has reduced its operating costs and selling,
general and administrative expenses to levels commensurate with the reduced
volume and anticipates that the cash flow from operations and borrowings
available under its line of credit will be sufficient to continue maintain
operations for the next twelve months. Additionally, the Company has a
commitment from an investor to infuse up to $250,000 should the Company need
additional funds to operate.


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

[1]    Principles of consolidation:

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

[5]    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
       $52,000 as of December 31, 2001.

[4]    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 exercise
       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, 2001
       and 2000 aggregated 13,849,000 and 13,713,000, respectively; options
       (1,725,000 in 2001 and 1,555,000 in 2000) have been excluded since they
       are anti dilutive.

                                      F-7


<PAGE>
ARC COMMUNICATIONS INC. AND SUBSIDIARIES


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[5]    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.

[6]    Goodwill:

       The carrying value of goodwill is analyzed quarterly by the Company based
       upon the expected cash flows of the acquired enterprise. At December 31,
       2001, the Company determined that the asset is impaired due to the
       continual professional education segment's negative book value and net
       loss. As a result, the Company wrote off the remaining unamortized
       balance aggregating $57,000. Amortization expense amounted to $10,000 for
       each of the years ended December 31, 2001 and December 31, 2000.

[7]    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.
       Revenue from continuing professional education courses is recognized upon
       the scoring of the related test. Revenue from seminars is recognized upon
       the completion of the seminar.

[8]    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 to 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 plan.

[9]    Advertising:

      The Company follows the policy of charging the costs of advertising to
      expense as incurred. During 2001 and 2000, the Company recorded
      advertising expense of $9,000 and $33,000, respectively.


[10]   Use of estimates:

      The preparation of financial statements in conformity with accounting
      principles generally accepted in the United States of America 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.



                                      F-8
<PAGE>
ARC COMMUNICATIONS INC. AND SUBSIDIARIES


NOTE C - PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2001 consists of:

          Equipment and furniture                       $   1,018,000
          Leasehold improvements                              108,000
                                                        -------------
                                                            1,126,000
          Accumulated depreciation                           (877,000)
                                                        --------------

                                                        $     249,000
                                                        =============


Depreciation expense aggregated $146,000 and $143,000 for the years ended
December 31, 2001 and 2000, 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 .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                              $    162,000
          Accrued payroll                                     57,000
          Other                                                2,000
                                                          ----------

                                                        $    221,000
                                                        ============


NOTE F - INCOME TAXES

The significant components of the Company's deferred tax asset and liability as
of December 31, 2001 are as follows:

          Deferred income tax asset:
             Net operating losses carryforwards         $    677,000
             Other                                            23,000
                                                        ------------
                                                             700,000

          Deferred income tax liability:
             Accrual to cash adjustment                      (55,000)
             Property and equipment                            7,000
                                                        ------------
                                                             (48,000)
          Net deferred tax asset                             652,000
          Valuation allowance                               (652,000)
                                                        -------------

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


                                      F-9
<PAGE>
ARC COMMUNICATIONS INC. AND SUBSIDIARIES


NOTE F - INCOME TAXES (CONTINUED)

The significant components of the provision for income taxes for the years ended
December 31, 2001 and 2000 are as follows:

                                                        2001           2000
                                                    ----------      ----------
          Deferred:
             Federal                                $  254,000      $   16,000
             State                                      74,000           4,000
             Change in valuation allowance            (328,000)        (20,000)
                                                    ----------     -----------

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


As of December 31, 2001, the Company has net operating loss carryforwards of
approximately $1,730,000 for federal income tax purposes, which expire through
2021.

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

                                                       2001                2000
                                                       ----                ----

          Statutory federal income tax rate           (34.0)%            (34.0)%
          Prior year overaccrual                                           9.6
          Nondeductible expenses                         .4                3.0
          Other                                         (.7)               7.4
          Increase in valuation allowance              34.3               14.0
                                                     -------            ------

          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 $9,000 and $17,000 for 2001 and 2000,
respectively.


NOTE H - STOCKHOLDERS' EQUITY

[1]      Common stock:

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

       During 2001, the Company issued 55,000 shares of common stock for
       consulting services rendered and recorded an expense of $3,000 based on
       the fair value of the common stock on the dates of issuance.
       Additionally, the Company issued 1,002,500 shares of common stock to
       certain employees and recorded an expense of $30,000 based on the market
       value of the common stock on the dates of issuance.

                                      F-10
<PAGE>
ARC COMMUNICATIONS INC. AND SUBSIDIARIES


NOTE H - STOCKHOLDERS' EQUITY (CONTINUED)

[2]    Preferred stock:

       Dividends in arrears as of December 31, 2001 aggregated $ 43,000.

[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 plan consistent with the methodology
       prescribed under SFAS No. 123, the Company's pro forma net loss and net
       loss per share for 2001 would have been approximately ($767,000) and
       $(.06), respectively and for 2000 pro forma net loss and net loss per
       share would have approximated ($235,000) and $(.02), respectively. The
       weighted average fair value of the options granted during 2001 and 2000
       were $.01 and $.40 per share, respectively, on the date of grant using
       the Black-Scholes option pricing model with the following assumptions;
       dividend yield 0%, volatility 120% and 480%, expected life 4 years, risk
       free interest rate of approximately 3.91% and 6.3%.

The following table summarizes stock options transactions:
<TABLE>
<CAPTION>

                                                                 Year Ended December 31,
                                                ----------------------------------------------------
                                                         2001                         2000
                                                -----------------------        ---------------------
                                                               Weighted                     Weighted
                                                                Average                      Average
                                                               Exercise                     Exercise
                                                 Shares          Price         Shares         Price
                                                 ------          -----         ------         -----
<S>                                             <C>              <C>           <C>            <C>
   Options:
      Outstanding at beginning
        of year                                 1,330,000        $0.50         1,250,000      $0.50
      Granted                                     490,000         0.01           200,000       0.50
      Cancelled                                  (320,000)        0.50          (120,000)      0.50
                                                ---------                      ---------

      Outstanding at end of year                1,500,000        $0.34         1,330,000      $0.50
                                                =========                      =========

      Exercisable at year end                     935,000          $0.43         715,000       $0.50
                                               ==========                      ========
</TABLE>
During the year ended December 31, 2001, the board of directors granted options
on the Company's common stock when combined with previous grants exceeded the
number of shares available under the plan. Accordingly an option on 10,000
shares could not be granted until other options were cancelled or authorized
shares under the plan was increased. In February 2002, certain options were
cancelled and these issued.


                                      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, 2001:

<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               2001         Life (in Years)       Price              2001            Price
               ------               ----         ---------------       -----              ----            -----

<S>            <C>               <C>                  <C>              <C>                <C>             <C>
               $0.50             1,010,000            1.15             $0.50              810,000         $0.43
               $0.01               490,000            3.80              $0.01             122,500         $0.01

</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, 2001 and 2000,
the Company recognized an expense of $4,000 and $29,000, 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, 2001, minimum aggregate rentals are as follows:

                   Year Ending
                   December 31,                  Lease         Sub-Lease
                   ------------                  -----         ---------

             2002                                 273,000          37,000
             2003                                 254,000          37,000
             2004                                 220,000          37,000
             2005                                 212,000          37,000
             2006                                 193,000          34,000
                                             ------------    ------------

             Minimum payments                $1,152,000      $    182,000
                                             ==========      ============


Total rent expense for the years ended December 31, 2001 and 2000 aggregated
$257,000 and $195,000, respectively.

The Company sublet office space commencing August 1, 2001, sub-lease rental
income aggregated $12,000 during the year ended December 31, 2001.


NOTE J - MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK

For the year ended December 31, 2001, one customer accounted for 24% of sales.
Three customers accounted for 20%, 14% and 10% of sales for the year ended
December 31, 2000.

                                      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.
<TABLE>
<CAPTION>
                                                                   2001            2000
                                                               ----------      ----------
                              Revenues
<S>                                                            <C>             <C>
             Multi-media                                       $1,369,000      $3,183,000
             Continuing professional education                  1,113,000       1,023,000
                                                               ----------      ----------

                Total consolidated revenues                     2,482,000       4,206,000
                                                               ==========      ==========

          Net income (loss)
             Multi-media                                        (715,000)         72,000
             Continuing professional education                   (26,000)       (172,000)
                                                               ----------      ---------

                Total consolidated net loss                    $(741,000)      $(100,000)
                                                               ==========      ==========

          Assets
             Multi-media                                          749,000       1,280,000
             Continuing professional education                    478,000         193,000
                                                              -----------      ----------

                Total consolidated assets                      $1,227,000      $1,473,000
                                                               ==========      ==========

</TABLE>
                                      F-13
<PAGE>

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

        None.




PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons


Name                   Age       Position
----                   ---       --------


Steven H. Meyer        40        Chief Executive Officer, President and Director

Michael Rubel          47        Chief Operating Officer, Director

Kenneth P. Meyer       43        Vice President and Director


Thom Rittenhouse       36        Vice President New Media Services

         The Board of Directors of the Company consists of three persons.
Directors serve until the next annual meeting of shareholders or until their
successors are duly elected and qualified. Officers are elected to serve,
subject to the discretion of the Board of Directors, until their successors are
appointed. None of the Directors of the Company hold directorships in any other
public companies.


         On April 10, 2001, the Board of Directors of the Company removed Ms.
Ethel Kaplan as a member for "cause" and appointed Michael Rubel, the Company's
Chief Operating Officer, to serve as a director until the next annual meeting of
the Registrant. At the present time, there is no dispute between the Registrant
and Ms. Kaplan regarding her removal.


         STEVEN H. MEYER has served as the Company's Chief Executive Officer and
President  since its  inception.  From 1987 to 1992,  Mr. Meyer  founded and was
employed  by Slide  Effects,  Inc.  Mr.  Meyer  received a Bachelor of Fine Arts
degree from  Syracuse  University  in 1983.  Mr. Meyer is the brother of Kenneth
Meyer who is also an officer and director of the Company.

         MICHAEL RUBEL has served as the Company's Chief Operating Officer since
July of 1998 and as a Director since April of 2001. Mr. Rubel was the co-founder
and eventually President and Chief Executive Officer of CMP Advertising ("CMP")
from 1976 to 1992. He then formed The Navesink River Group which merged with the
Company. Mr. Rubel received Bachelor of Science degree in accounting from
Fairleigh Dickenson University in 1975.

         KENNETH P. MEYER has served as the Company's Vice President and
Director since 1993. Mr. Meyer was a Vice President of Slide Effects, Inc. from
1989 to 1993. Mr. Meyer attended the University of Florida from 1976 to 1982
majoring in Fine Arts. Mr. Meyer is the brother of Steven Meyer who is also an
officer and director of the Company.

         THOM RITTENHOUSE, has served as the Corporation's Vice President of New
Media Services,  since 2000. Mr. Rittenhouse joined the Corporation in September
1993 as an art director in charge of interactive  multi-media.  Prior to joining
the  Corporation,  Mr.  Rittenhouse  ran his own design firm in New Jersey.  Mr.
Rittenhouse  is  responsible  for  the  Corporation's   expanding  role  in  the
architecture    of    electronic     commerce,     business-to-business,     and
business-to-consumer  web sites as well as the  management  of art directors and
html and java programmers.



<PAGE>

Item 10.  Executive Compensation


      Compensation Pursuant To Plans

         Total cash compensation paid to all executive officers as a group for
services provided to Arc and its subsidiaries in all capacities during the
fiscal year ended December 31, 2001 aggregated $351,912. Set forth below is a
summary compensation table prepared in accordance with the applicable rules of
the Securities and Exchange Commission.

<TABLE>
<CAPTION>

                                           SUMMARY COMPENSATION TABLE


                                      Annual Compensation                            Long Term Compensation
                                      -------------------                        -----------------------------
                                                                Other Annual      Securities
                                                                Compensa-         Underlying       All Other
Name                       Year       Salary ($)    Bonus         tion ($)         Options        Compensation
---------------            ----       ----------    -----       ------------      ----------      ------------
 <S>                        <C>         <C>          <C>            <C>            <C>                <C>
Steven H. Meyer            2000        121,384      none           3,146

                           2001        111,142      none           1,800           75,000(1)          none


Michael Rubel              2000        131,000      none             761

                           2001        125,000      none           2,520          550,000(2)          none


Kenneth P. Meyer           2000        121,384      none           6,714

                           2001        107,744      none           3,706           75,000(1)          none


</TABLE>



(1)  75% of these options are vested as of December 31, 2001.

(2)  Mr. Rubel holds options to purchase 550,000 shares of the Company's Common
     Stock pursuant to his employee Stock Option Agreement. Of those 550,000
     options, 325,000 have vested.



OPTIONS OF MANAGEMENT
<TABLE>
<CAPTION>

     Individual Grants for current fiscal year



                    Number of     Percentage of
                    Securities    Total Options
                    Underlying    Granted to
                    Options       Employees in
                    Granted       Fiscal Year in
                                  which Options    Exercise   Expiration
Name                              were Granted     Price      Date
--------------------------------------------------------------------------
<S>                  <C>              <C>            <C>      <C>
  Michael Rubel      250,000          50%            $0.01    October 18, 2005
  Thom Rittenhouse   250,000          50%            $0.01    October 18, 2005
</TABLE>

Item 11.  Security Ownership of Certain Beneficial Owners and Management

Common Stock


         The following table sets forth the number of shares of the Company's
common stock beneficially owned by each officer and director of the Company and
each shareholder who holds more than 5% of the outstanding common stock of the
Company as of March 21, 2002. At such date there were 14,770,622 shares of
common stock (the "Common Stock") and 720,000 shares of preferred stock,
respectively, issued and outstanding. Unless specifically indicated otherwise,
all such ownership interests are direct.

<PAGE>
<TABLE>
<CAPTION>



Title of Class       Name and Address
Common Stock         of Beneficial Owner                   Amount            Percent of Class
------------         -------------------                   ------            ----------------
<S>             <C>                                      <C>                    <C>
               Ethel Kaplan (1)                          4,529,270              28.64%
               6 Edwards Point Road

               Rumson, New Jersey 07760


               Steven H. Meyer(2)(6)(8)                  2,377,020              15.03%
               26 Oxford Drive

               Wayside, New Jersey 07712


               Kenneth P. Meyer(3)(7)(8)                 2,375,687              15.02%
               7 Wemrock Drive

               Wayside, New Jersey 07712 2563


               Michael Rubel(4)(9)                         962,500               6.08%
               3 Aspen Court

               Wayside, New Jersey 07712


               Thom Rittenhouse(5)(10)                     695,700               4.4%
               26 Jacob Drive
               Howell, New Jersey 07731
                                                         ----------             ------

               TOTAL                                     10,940,177             69.17%

</TABLE>
(1)  Does not include 90,000 shares held by three trusts to which Ms. Kaplan as
     custodian under the uniform gift to minors act.

(2)  Steven Meyer is a Director,  the Chief Executive  Officer and the President
     of the Company.

(3)  Kenneth Meyer is a Director and the Vice President  of the
     Company.

(4)  Michael Rubel is a Director and Chief Operating Officer of the Company.

(5)  Thom Rittenhouse is the Vice President of New Media Services.

(6)  Includes the option to purchase 75,000 shares of the Company's Common Stock
     pursuant to Mr. Meyer's Stock Option Agreement, 75,000 shares are currently
     vested or will vest within 60 days.

(7)  Includes the option to purchase 75,000 shares of the Company's Common Stock
     pursuant to Mr. Meyer's Stock Option Agreement, 75,000 shares are currently
     vested or will vest within 60 days .

(8)  Kenneth Meyer and Steven Meyer are brothers.

(9)  Includes the option to purchase 550,000 shares of the Company's Common
     Stock pursuant to Mr. Rubel's Stock Option Agreement,362,500 shares are
     currently vested or will vest within 60 days.

(10) Includes the option to purchase 350,000 shares of the Company's Common
     Stock pursuant to Mr. Rittenhouse's Stock Option Agreement, 162,500 shares
     are currently vested.




SHAREHOLDERS AGREEMENT

         On August 22, 1994, Steven H. Meyer, Kenneth P. Meyer, Ethel Kaplan,
Peter C. Cosmas (collectively, the "Shareholders" for the purposes of this
section) and Arc Slide Technologies Ltd. ("ASTL") entered into a shareholders
agreement whereby the Shareholders agreed to restrict the transfer of their
shares of ASTL for the term of such agreement (the "Shareholders Agreement"). In
1997 the shareholders received one share of ASTL for every share of Arc. ASTL
subsequently changed its name to Arc Communications Inc. Thus, the Shareholders
Agreement restricts all transfers of the Shareholders' Arc's shares with the
<PAGE>

exception of transfers of their respective shares to their immediate family
members. Although the Shareholders Agreement has been amended numerous times and
Mr. Cosmas is no longer a party to such agreement, such agreement remains in
effect between Steven H. Meyer, Kenneth P. Meyer and Ethel Kaplan.

         Mr. Cosmas is a former director of the Company.



Item 12.  Certain Relationships and Related Transactions

         The Company was not during the last two years and is not presently a
party to any transaction exceeding $60,000 with any of the following persons:
(i) any director or executive officer of the Company; (ii) any nominee for
election as a director; (iii) any holder of 5% or more of any class of the
Company's voting securities; and (iv) any member of the immediate family of any
person in (i),(ii) or (iii) above.


Item 13.  Exhibits and Reports on Form 8-K

(a)  Index to Exhibits

3.1       Certificate of  Incorporation  of Arc Slide  Technologies  Ltd., dated
          October 21, 1992.(1)

3.2       Certificate of Amendment to the  Certificate of  Incorporation  of Arc
          Slide Technologies Ltd., dated August 1, 1994.(1)

3.3       By-laws of Arc Slide Technologies Ltd., adopted August 1, 1994.(1)

3.4       Certificate of Amendment to the  Certificate of  Incorporation  of Arc
          Slide Technologies Ltd., dated October 13, 1997,  changing the name of
          the  corporation  to  Arc  Communication,  Inc.,  and  increasing  the
          authorized common stock to 50,000,000 shares.(1)

3.5       Letter  from  the  Florida  Department  of State  indicating  that the
          Articles of Merger were filed on November 19, 1997.(1)

3.6       Articles of Merger of Arc Communications  Inc., a Florida corporation,
          into its  wholly-owned  subsidiary  Arc  Communications,  Inc.,  a New
          Jersey corporation dated November 21, 1997.(1)

3.7       Certificate  of  Merger  of  Navesink  River  Group  Inc.,   into  Arc
          Communications Inc., dated December 19, 1997.(1)

3.8       Plan of Merger of Navesink River Group Inc.,  into Arc  Communications
          Inc., dated December 19, 1997.(1)

3.9       Unanimous Consent of Directors in Lieu of Special meeting of directors
          of ARC Communications dated July 14, 1998.(1)

3.10      Certificate of Amendment to the  Certificate of  Incorporation  of Arc
          Communications Inc., dated August 31, 1998.(1)

3.11      Certificate of Amendment to the  Certificate of  Incorporation  by the
          Board of  Directors  of Arc  Communications  Inc.  dated  September 1,
          1998.(1)

3.12      Class A Preferred Stock Provisions dated September 15, 1998.(1)

9.1       Shareholders  Agreement  between  Steven H.  Meyer,  Kenneth P. Meyer,
          Ethel Kaplan,  Peter C. Cosmas and Arc Slide Technologies,  Inc. dated
          August 22, 1994.(1)

10.1      Sublease agreement dated August 1, 2001 between Arc Communications
          Inc. and FCT America Limited.

<PAGE>



21.1      Arc Communications Inc.'s Subsidiaries

27.1      Financial Data Schedule

(1)       Filed as the same encumbered exhibit to a Registration Statement (File
          No. 0-26213) filed on October 5, 1999.




                                   SIGNATURES

In accordance with the Section 13 or 15(d) of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


Date:                                       Arc Communications Inc.



                                            By:   /s/ Michael Rubel
                                                  ------------------------------
                                                  Michael Rubel
                                                  Chief Operating Officer


In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant, and in the capacities and on the
date indicated.


/s/ Steven H. Meyer
------------------------------------
name: Steven H. Meyer
      CEO, President and Director


/s/ Michael Rubel
------------------------------------
name: Michael Rubel
      Chief Operating Officer, Secretary and Director


/s/ Kenneth P. Meyer
------------------------------------
name: Kenneth P. Meyer
      Vice President and Director