SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB/A

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

                   For the fiscal year ended December 31, 2002


                             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.)


                        401 Hackensack Avenue, 3rd Floor
                          Hackensack, New Jersey 07601

                    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, 2002 was $1,057,000.

The aggregate market value of the voting stock held by non-affiliates of the
registrant is approximately $398,560 as of May 12, 2003.

The number of shares outstanding of the Issuer's common stock as of May 19, 2003
was 14,984,449.

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):

Yes [_] No [X]


                                       1
<PAGE>


                                TABLE OF CONTENTS



                                     PART II

ITEM 6.      MANAGEMENT'S DISCUSSION
             AND ANALYSIS OF FINANCIAL CONDITION
             AND PLAN OF OPERATION.......................................... 3

ITEM 7.      FINANCIAL STATEMENTS........................................... F-1


                                    PART III

ITEM 14.     CONTROLS AND PROCEDURES........................................ 5

SIGNATURES.................................................................. 6


                                       2
<PAGE>


EXPLANATORY NOTE

This Form 10-KSB/A is being filed as Amendment No. 2 to the Form 10-KSB of Arc
Communications Inc. filed with the Securities and Exchange Commission on May 19,
2003, as amended by the Form 10-KSB/A filed with the Securities and Exchange
Commission on May 29, 2003.


                                     PART II

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION

CRITICAL ACCOUNTING POLICY

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.

YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2001

The Company decided in 2002 to sell its continuing professional education
division to generate cash for working capital. The company plans to concentrate
on its multimedia product line which has higher gross margins. As a result of
the closing of the Company's educational seminar programs which generated a
substantial portion of the educational division's revenue the Company determined
in late 2002 to sell its continuing professional education business, ArcMesa
Educators, Inc. to Belcan Corporation of Cincinnati, Ohio. This took place on
April 1, 2003. This area of the Company's business had sustained continual
losses. This will allow the Company to concentrate on its core business and
provide it the resources to expand into other communications areas. The
Company's educational seminar programs is also the area of the Company's
business that had deferred revenue of $549,000 in 2001 and the reason that
deferred revenue was $0 in 2002 since it was no longer operational at the end of
2002.

Arc's net sales for the years ended December 31, 2002 and 2001 were $1,057,000
and $1,369,000, respectively, a decrease of 23 percent. The decrease in sales is
a result of web site development decreasing $78,000 (or 25%); full interactive
multi-media development decreasing $181,000 (or 42%); and Production/Print
services decreasing $8,000 (or 1.5%).

Revenue decline was driven by the continued slow down in the economy in the
Company's main areas of concentration which are technology and health care.

Operating costs for the years ended December 31, 2002 and 2001 were $102,000 and
$240,000, respectively. The decrease is due to the revenue declines and Arc's
ability to be more efficient in producing its product.

Selling, general and administrative expenses for the years ended December 31,
2002 and 2001 were $1,319,000 and $1,688,000, respectively. Selling, general and
administrative expenses for 2002 decreased $369,000 (or 22%). 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 from continued operations for the years
ended December 31, 2002 and 2001 were $105,000 and $141,000, respectively, a
decline of 26 percent. The decline is principally due to assets being
depreciated in 2001 which were fully depreciated as of December 31, 2001 which
the Company continued to use in 2002.

Accounts Receivable decreased from $905,000 in 2001 to $126,000 in 2002. At
December 31, 2001 Accounts Receivable from continuing Operations were $444,000
as compared to $126,000 at December 31, 2002. The Accounts Receivable for the
discontinued operations at December 31, 2001 were $461,000. This accounts for
over 50% in the reduction of the Company's Accounts Receivable from December 31,
2001 to December 31, 2002. The remainder reduction is due to continual decline
in revenue. The increase in the allowance resulted from a reduced credit quality
at December 31, 2002 compared to December 31, 2001.

The loss from continuing operations for the years ended December 31, 2002 and
2001 aggregated $442,000 and $714,000 respectively and the per share amounts
totaled $0.03 and $0.05, respectively.

Net loss for the years ended December 31, 2002 and 2001 amounted to $449,000 and
$741,000, respectively, resulting in a decrease in losses of $292,000 (or 39%).
The Company continues to shed overhead and anticipates the losses to continue to
decline. As a result, loss per share was $0.03 for the year ended December 31,
2002 compared to the loss of $0.05 for the year ended December 31, 2001.


                                       3
<PAGE>

YEARS ENDED DECEMBER 31, 2001 AND DECEMBER 31, 2000

Arc's net sales for the years ended December 31, 2001 and 2000 were $1,369,000
and $3,183,000 respectively, a decrease of 58 percent. The decrease in sales is
a result of web site development decreasing $317,000 (or 50%); full interactive
multi-media development decreasing $120,000 (or 22%); and Production/Print
services decreasing $1,262,000 (or 67%).

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.

Operating costs for the years ended December 31, 2001 and 2000 were $240,000 and
$718,000 respectively, a decrease of 67%. 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 $1,688,000 and 2,325,000 respectively. Selling, general and
administrative expenses for 2001 decreased $637,000 (or 27%). 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 $151,000 and $133,000 respectively, an increase of 14 percent.

The income (loss) from continuing operations for the years ended December 31,
2001 and 2000 aggregated ($714,000) and $72,000, respectively and the per share
amounts totaled ($0.05) and $0.01, respectively

In April 2003 the Company sold its educational division, ArcMesa Educators, Inc.
to Belcan Corporation of Cincinnati, Ohio.

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 provided by operations for the year ended December 31, 2002 was $53,000. In
April of 2003 the Company sold its educational division, ArcMesa Educators, Inc.
to Belcan Corporation of Cincinnati, Ohio. The Company received $350,000 in cash
and a $100,000 note, due in April 2004. The net proceeds from the sale after
paying Sovereign Bank $150,000 is $200,000. The Company will use this for
working capital. In February 2003 the Company reduced its monthly payroll from
$55,000 to $22,000 per month. The Company also renegotiated its office lease in
February 2003 to reduce its rent from $11,500 to $3,500 per month. These savings
along with the net proceeds from the sale of ArcMesa will generate sufficient
cash to maintain an appropriate level of liquidity for the near term.

Net cash used in investing activities for the year ended December 31, 2002 was
$11,000 used for capital expenditures.

Cash flows used in financing activities total $86,000 as the company was
required to reduce its line of credit. During 2002 the Company reduced its
obligation to Sovereign Bank from $435,000 as of December 31, 2001 to $295,000
as of December 31, 2002. The company also used $150,000 from the proceeds of the
sale of ArcMesa to further reduce its obligation to Sovereign Bank. This leaves
a total of $145,000 outstanding to Sovereign Bank. Beginning May 1, 2003 the
Company is required to make monthly principal payments of $2,000. The remaining
amount comes due on April 1, 2004.

The Company has also substantially cut its overhead in February 2003. This
included the reduction in employees from 12 to 3. The Company does not believe
that it will have to raise additional capital during 2003 to satisfy its cash
requirements. It also does not intend to purchase any significant equipment in
2003.

In their report on the audit of the Company's financial statements for the years
ended December 31, 2002, and 2001 our independent auditors included an
explanatory paragraph in their report because of the uncertainty that we could
continue in business as a going concern. In the event we are unable to raise the
anticipated capital needs through some form of financing or increase our
revenues and cash flows, there would be substantial doubt about our ability to
continue as a going concern.

ITEM 7. FINANCIAL STATEMENTS

Please see the attached consolidated financial statements.

                                       4
<PAGE>

                                    PART III

ITEM 14. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms, and that such
information is accumulated and communicated to our management, including our
principal financial officer, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.

Within 90 days prior to the date of this report, we carried out an evaluation,
under the supervision and with the participation of our management, including
the principal financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on the foregoing, our
principal financial officer concluded that our disclosure controls and
procedures were effective.

There have been no significant changes in our internal and disclosure controls
or in other factors that could significantly affect the internal or disclosure
controls subsequent to the date we completed our evaluation.


                                       5
<PAGE>


                                   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:  April 9, 2004                           Arc Communications Inc.



                                                By: /s/ Peter A. Bordes, Jr.
                                                    ----------------------------
                                                    Peter A. Bordes, Jr.
                                                    Chief Executive Officer


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


        /s/ Steven H. Meyer
        ------------------------------------
        Steven H. Meyer
        Director


        /s/ Peter A. Bordes
        ------------------------------------
        Peter A. Bordes
        Chief Executive Officer and Director




                                       6
<PAGE>


                                 CERTIFICATIONS

I, Michael Rubel, principal financial officer, certify that:

1.   I have reviewed this annual report on Form 10-KSB of Arc Communications
     Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   I am responsible for establishing and maintaining disclosure controls and
     procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
     registrant and have:

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to myself and others within
          those entities, particularly during the period in which this annual
          report is being prepared;

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented in this annual report my conclusions about the effectiveness
          of the disclosure controls and procedures based on my evaluation as of
          the Evaluation Date;

5.   I have disclosed, based on my most recent evaluation, to the registrant's
     auditors and the audit committee of the registrant's board of directors (or
     persons performing the equivalent functions):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   I have indicated in this annual report whether there were significant
     changes in internal controls or in other factors that could significantly
     affect internal controls subsequent to the date of my most recent
     evaluation, including any corrective actions with regard to significant
     deficiencies and material weaknesses.


Date: April 9, 2004

                                                 /s/ Michael Rubel
                                                 -----------------------------
                                                     Michael Rubel
                                                     principal financial officer



                                       7
<PAGE>


                    ARC COMMUNICATIONS INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2002




                                       8
<PAGE>




ARC COMMUNICATIONS INC. AND SUBSIDIARIES



Contents

                                                                            Page
                                                                            ----
Consolidated Financial Statements

   Independent auditors' report                                              F-2

   Balance sheet as of December 31, 2002                                     F-3

   Statements of operations for the years ended
      December 31, 2002 and 2001                                             F-4

   Statements of changes in stockholders' equity/capital
      deficiency for the years ended December 31, 2002 and 2001              F-5

   Statements of cash flows for the years ended
      December 31, 2002 and 2001                                             F-6

   Notes to financial statements                                             F-7



                                       F-1
<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, 2002, and the related
consolidated statements of operations, changes in stockholders' equity/capital
deficiency 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, 2002, 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.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has experienced recurring net losses and has a
working capital deficit and a capital deficiency that raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note A. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Eisner, LLP Florham Park, New Jersey April 25, 2003


                                      F-2

<PAGE>


ARC COMMUNICATIONS INC. AND SUBSIDIARIES

Consolidated Balance Sheet
December 31, 2002

<TABLE>
<CAPTION>
<S>                                                                                       <C>
ASSETS
Current assets:
   Accounts receivable - net                                                              $   126,000
   Assets of discontinued operations                                                           16,000
   Prepaid expenses and other current assets                                                    1,000
                                                                                          -----------

      Total current assets                                                                    143,000

Property and equipment, net                                                                   142,000
Other assets                                                                                   15,000
                                                                                          -----------

                                                                                          $   300,000
                                                                                          ===========

LIABILITIES
Current liabilities:
   Note payable                                                                           $   295,000
   Due to officers/stockholders                                                                74,000
   Accounts payable and accrued expenses                                                      294,000
   Liabilities of discontinued operations                                                      83,000
                                                                                          -----------

      Total current liabilities                                                               746,000
                                                                                          -----------

Commitments and contingencies

CAPITAL DEFICIENCY
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;
   14,984,459 shares issued and outstanding                                                    15,000
Additional paid-in capital                                                                  1,428,000
Accumulated deficit                                                                        (2,033,000)
                                                                                          -----------

      Total capital deficiency                                                               (446,000)
                                                                                          -----------

                                                                                          $   300,000
                                                                                          ===========
</TABLE>



See notes to consolidated financial statements F-3


                                      F-3
<PAGE>

ARC COMMUNICATIONS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                                                        ----------------------------
                                                                            2002            2001
                                                                        ------------    ------------
<S>                                                                     <C>             <C>
Net sales                                                               $  1,057,000    $  1,369,000
                                                                        ------------    ------------
Costs and expenses:
   Operating costs                                                           102,000         240,000
   Selling, general and administrative                                     1,319,000       1,688,000
   Depreciation and amortization                                             105,000         151,000
                                                                        ------------    ------------

      Total costs and expenses                                             1,526,000       2,079,000
                                                                        ------------    ------------
Other income (expense):
   Interest income                                                             2,000           9,000
   Interest expense                                                          (27,000)        (25,000)
   Other income                                                               37,000          12,000
                                                                        ------------    ------------

      Total other income (expense)                                            12,000          (4,000)
                                                                        ------------    ------------

Loss from continuing operations before benefit for income taxes             (457,000)       (714,000)

Benefit for income taxes                                                      15,000
                                                                        ------------    ------------

Loss from continuing operations                                             (442,000)       (714,000)

Loss from discontinued operations                                             (7,000)        (27,000)
                                                                        ------------    ============

Net loss                                                                    (449,000)       (741,000)
Preferred stock dividend imputed                                             (13,000)        (13,000)
                                                                        ------------    ------------

Net loss attributable to common stockholders                            $   (462,000)   $   (754,000)
                                                                        ============    ============

Weighted average common shares outstanding                                14,775,000      13,849,000
                                                                        ============    ============

Basic and diluted loss per share - continuing operations and net loss
   Continuing operations                                                $      (0.03)   $      (0.05)
                                                                        ============    ============
   Net loss                                                             $      (0.03)   $      (0.05)
                                                                        ============    ============
</TABLE>


See notes to consolidated financial statements F-4


                                      F-4
<PAGE>

ARC COMMUNICATIONS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY/CAPITAL DEFICIENCY

<TABLE>
<CAPTION>
                                        Preferred Stock             Common Stock                                          Total
                                 -------------------------  -------------------------                                  Stockholders'
                                    Shares                     Shares                    Additional     Accumulated   Equity/Capital
                                    Issued        Amount       Issued        Amount    Paid-in Capital    Deficit       Deficiency
                                 -----------   -----------  -----------   -----------  ---------------  -----------   --------------
<S>                                  <C>       <C>           <C>          <C>            <C>            <C>            <C>
Balance, January 1, 2000             720,000   $   144,000   13,713,132   $    14,000    $ 1,407,000    $  (843,000)   $   722,000

Stock based compensation for
   professional services                                                                       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
Repurchase and
Cancellation of common stock                                 (4,469,270)       (4,000)      (192,000)                     (196,000)

Common shares issued in private
placement net of costs                                        4,683,097         4,000        177,000                       181,000

Net loss                                                                                                   (449,000)      (449,000)
                                 -----------   -----------  -----------   -----------    -----------    -----------    -----------

Balance, December 31, 2002           720,000   $   144,000   14,984,459   $    15,000    $ 1,428,000    $(2,033,000)   $  (446,000)
                                 ===========   ===========  ===========   ===========    ===========    ===========    ===========
</TABLE>


See notes to consolidated financial statements F-5


                                      F-5
<PAGE>

ARC COMMUNICATIONS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                                                         -----------------------
                                                                           2002          2001
                                                                         ----------   ----------
<S>                                                                      <C>          <C>
Cash flows from operating activities:
Net loss                                                                 $ (449,000)  $ (741,000)
   Adjustments to reconcile net loss to net cash provided by (used in)
      operating activities:
        Depreciation and amortization                                       109,000      156,000
        Write-off of goodwill                                                             57,000
        Provision for uncollectible accounts                                 61,000       34,000
        Stock based compensation for professional services                                 4,000
        Issuance of common stock as compensation                                          33,000
        Changes in:
           Accounts receivable                                              713,000     (392,000)
           Prepaid expenses and other current assets                                      39,000
           Security deposits                                                              (4,000)
           Due from employees                                                 8,000
           Accounts payable and accrued expenses                            156,000      (99,000)
           Billings in excess of costs, net                                (545,000)     514,000
                                                                         ----------   ----------

              Net cash provided by (used in) operating activities            53,000     (399,000)
                                                                         ----------   ----------

Cash flows from investing activities:
   Expenditures for property and equipment                                   (8,000)     (19,000)
   Cash included in assets held for sale                                     (3,000)
                                                                         ----------   ----------

              Net cash used in investing activities                         (11,000)     (19,000)
                                                                         ----------   ----------

Cash flows from financing activities:
   Proceeds from (repayments of) line of credit                            (144,000)     104,000
   Proceeds from due to officers/stockholders                                74,000
   Proceeds from issuance of common stock                                   181,000
   Repurchase of common stock                                              (196,000)
   Bank overdraft                                                            (1,000)
                                                                         ----------   ----------

              Net cash (used in) provided by financing activities           (86,000)     104,000
                                                                         ----------   ----------

Net decrease in cash and cash equivalents                                   (44,000)    (314,000)
Cash and cash equivalents - beginning of year                                44,000      358,000
                                                                         ----------   ----------

Cash and cash equivalents - end of year                                  $        0   $   44,000
                                                                         ==========   ==========

Supplemental disclosures of cash flow information:
   Interest                                                              $   25,000   $   25,000
</TABLE>


See notes to consolidated financial statements F-6


                                      F-6
<PAGE>

ARC COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements December 31, 2002 and 2001

NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS

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

The Company has experienced recurring net losses and has a working capital
deficit and capital deficiency and needs to raise capital to sustain operations.
There is no assurance that the Company's continuing multi-media segment will be
successful. The Company will continue to require the infusion of capital until
operations become profitable. During 2003, the Company sold its continuing
professional education segment as described in Note C. In addition, during 2003,
the Company anticipates seeking additional capital, increasing sales, and
continuing to restrict expenses. Substantial doubt exists about the ability of
the Company to continue as a going concern. These financial statements make no
adjustment to the classification or amount of assets or liabilities that may be
necessary as a result of the going concern uncertainty.

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:

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

[3] 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 $25,000 as of December 31,
2002.

[4] Per share information:

Basic earnings (loss) per share is computed by dividing income (loss)
attributable 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 (loss) attributable 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 (basic and diluted) for the year ended December 31, 2002 and 2001
aggregated 14,775,000 and 13,849,000, respectively; stock options (950,000 in
2002 and 1,500,000 in 2001, respectively) have been excluded since they are anti
dilutive.

[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.

                                       F-7


<PAGE>

ARC COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements December 31, 2002 and 2001

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[6] Goodwill:

At December 31, 2001, the Company determined that the asset was 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 the year ended December
31, 2001.

[7] Revenue recognition:

The Company recognizes income from sales at the date the product is shipped and
as professional services is performed. Revenue from custom software development
is recognized based on its percentage of completion using the cost to cost
method. Upon determining that there is a loss on custom software development,
the Company provides for the entire anticipated loss in that period.

[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 and provide the disclosures
required by SFAS No. 123 and SFAS 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure", which was released in December 2002 as
an amendment of SFAS No. 123. The following table illustrates the effect on net
income and earnings per share if the fair value based method had been applied to
all awards.

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                         -----------------------
                                                            2002          2001
                                                         ---------     ---------
<S>                                                      <C>           <C>
Reported net loss from continuing operations             $(442,000)    $(714,000)

Add stock based employee compensation included in
    reported net loss from continuing operations                 0             0

Deduct stock based employee compensation
     determined under the fair value based method, net
     of related tax effects                                (20,000)      (26,000)
                                                         ---------     ---------

Pro forma net loss from continuing operations            $(462,000)    $(740,000)
                                                         =========     =========
Basic and diluted loss per share from continuing
     operations

As reported                                              $    (.03)    $    (.05)
                                                         =========     =========

Pro forma                                                $    (.03)    $    (.06)
                                                         =========     =========
</TABLE>

The weighted average fair value of the options granted for both 2002 and 2001 is
$.01 per share on the date of grant using the Black-Scholes option pricing model
with the following assumptions; dividend yield 0%, volatility 110% and 120% in
2002 and 2001,respectively, expected life 4 years, risk free interest rate of
approximately 4.3% and 3.9% in 2002 and 2001, respectively.


                                       F-8


<PAGE>

ARC COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements December 31, 2002 and 2001

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[9]  Advertising:

      The Company follows the policy of charging the costs of advertising to
      expense as incurred. During 2002 and 2001, the Company recorded
      advertising expense of $2,000 and $3,000, 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.

[11] Recent accounting pronouncements:

      In June 2001, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards ("SFAS") No. 141, Accounting for Business
      Combinations, and SFAS No. 142, Accounting for Goodwill and other
      Intangible Assets, effective for fiscal years beginning after December 15,
      2001. Under SFAS No. 141, a company must use the purchase method of
      accounting for all business acquisitions. Under SFAS No. 142, goodwill and
      intangible assets deemed to have indefinite lives will no longer be
      amortized but will be subject to annual impairment tests in accordance
      with the statements. The Company adopted these standards effective January
      1, 2002.

      In August 2001, the FASB issued SFAS No. 144, Accounting for the
      Impairment or Disposal of Long-Lived Assets. This statement superseded
      SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
      Long-Lived Assets to Be Disposed Of and addresses financial accounting and
      reporting for impairment of long-lived assets to be held and used, and
      long-lived assets and components of an entity to be disposed of. The
      Company adopted this statement on January 1, 2002.

      In December 2002, the FASB issued SFAS No. 148, "Accounting for
      Stock-Based Compensation - Transition and Disclosure" as an amendment to
      SFAS No. 123 to provide alternative methods of transition for an entity
      that voluntarily changes to the fair value based method of accounting for
      stock-based employee compensation. It also amends the disclosure
      provisions of SFAS No. 123 to require prominent disclosure about the
      effects on reported net income (loss) of an entity's accounting policy
      decisions with respect to stock-based employee compensation and amends APB
      Opinion No. 28 to require disclosure about those effects in interim
      financial information. The disclosure provisions are effective for fiscal
      years ending after December 15, 2002 and for interim periods beginning
      after December 15, 2002. The Company follows the intrinsic value method of
      accounting for stock-based employee compensation, but will continue to
      evaluate the benefits of a voluntary change to the fair value based
      method.

[12] Reclassification:

      Certain reclassifications have been made to the consolidated statement of
      operations for the year ended December 31, 2001 to conform to the current
      year presentation.

                                       F-9

<PAGE>

ARC COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements December 31, 2002 and 2001

NOTE C - DISCONTINUED OPERATIONS

During 2002, the management of the Company committed to a plan to sell its
continuing professional education segment. The segment provides continuing
professional education to various professions with a primary focus on the
medical profession. On April 1, 2003, the Company sold the continuing
professional education segment for approximately $350,000 in cash. Additionally,
the Company signed a non-compete agreement. In connection with this agreement,
the buyer will pay $100,000 on April 1, 2004. The estimated gain on the sale
aggregates $417,000.

The loss from discontinued operations reflects the results of operations of the
discontinued segment for the years ended December 31, 2002 and 2001. The assets
and liabilities of the subsidiary are classified separately in the consolidated
balance sheet at December 31, 2002. The assets, liabilities and income (loss)
from discontinued operations in the consolidated financial statements consist of
the following:

                                         As of December
                                            31, 2002
                                         --------------
Assets
Cash and cash equivalents                   $ 3,000
Accounts receivable - net                     6,000
Inventory                                     1,000
Property and equipment - net                  6,000
                                            -------

                                            $16,000
                                            =======

Liabilities
Accounts payable and accrued expenses       $83,000
                                            =======

                                              Year ended December 31,
                                            --------------------------
                                                2002           2001
                                            -----------    -----------
Results of operations
Net sales                                   $   778,000    $ 1,113,000
                                            -----------    -----------
Costs and expenses
Operating costs                                  13,000         37,000
Selling, general and administrative costs       746,000      1,098,000
Depreciation and amortization                     4,000          5,000
                                            -----------    -----------
                                                763,000      1,140,000
                                            -----------    -----------
                                                 15,000        (27,000)
Provision for income taxes                       22,000
                                            -----------    -----------

Loss from discontinued operations           $    (7,000)   $   (27,000)
                                            ===========    ===========



                                      F-10


<PAGE>

ARC COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements December 31, 2002 and 2001

NOTE D - PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2002 consists of:

Equipment and furniture    $ 1,001,000
Leasehold improvements         108,000
                           -----------
                             1,109,000
Accumulated depreciation      (967,000)
                           -----------
                           $   142,000
                           ===========


Depreciation expense aggregated $105,000 and $141,000 for the years ended
December 31, 2002 and 2001, respectively.

NOTE E - NOTE PAYABLE

During the year ended December 31, 2002, the Company maintained a $750,000 line
of credit which was collateralized by the accounts receivable. Advances under
the line of credit were due on demand. During 2002, the bank demanded repayment
of the outstanding advances. In August 2002, the Company and the bank entered
into a stipulation agreement which required monthly payments of $3,000 plus
interest at 7% per annum and maintenance of accounts receivable aggregating at
least $250,000. As of December 31, 2002, the Company was in default of the
covenant.

During April 2003, the Company and the bank entered into a second stipulation
agreement requiring the Company to make monthly payments of $2,000 per month
plus interest at 7% per annum and maintain accounts receivable at the lesser of
$150,000 or 111% of the note payable. In connection with the sale of the
continuing education segment, the Company repaid $150,000.

NOTE F - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses are:

Accounts payable           $   268,000
Accrued payroll                 21,000
Other                            5,000
                           -----------
                           $   294,000
                           ===========

NOTE G - INCOME TAXES

The significant components of the Company's deferred tax asset and liability as
of December 31, 2002 are as follows:

Deferred income tax asset:
   Net operating loss carryforwards   $   728,000

Deferred income tax liability:
   Accrual to cash adjustment              97,000
   Property and equipment                   8,000
                                      -----------
                                          105,000
                                      -----------
Net deferred tax asset                    833,000
Valuation allowance                      (833,000)
                                      -----------
Net deferred tax asset                $         0
                                      ===========


                                      F-11

<PAGE>

ARC COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements December 31, 2002 and 2001

NOTE G - INCOME TAXES (CONTINUED)

The significant components of the provision for income taxes for the years ended
December 31, 2002 and 2001 are as follows:

                                       2002         2001
                                    ---------    ---------
Current - federal                   $  15,000
                                    ---------
Deferred:
   Federal                            105,000    $ 254,000
   State                               76,000       74,000
   Change in valuation allowance     (181,000)    (328,000)
                                    ---------    ---------

      Total deferred income taxes           0            0
                                    ---------    ---------

   Provision for income taxes       $  15,000    $       0
                                    =========    =========

As of December 31, 2002, the Company has net operating loss carryforwards of
approximately $1,788,000 for federal income tax purposes, which expire through
2022. As a result of the continuing losses, the Company has determined that it
is more likely than not that it will not be able to utilize its deferred tax
assets; accordingly, it has provided a valuation allowance which offsets the
deferred tax asset.

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

                                      2002     2001
                                     -----    -----
Statutory federal income tax rate    (34.0)%  (34.0)%
Nondeductible expenses                           .3
Other                                  2.5     (2.7)
Increase in valuation allowance       28.0     36.4
                                     -----    -----

Effective income tax rate              3.5%       0%
                                     =====    =====

NOTE H - RELATED PARTY TRANSACTION

Legal fees paid to corporate counsel, with which the son of a
director/shareholder is affiliated, were $9,000 for 2001.

NOTE I - STOCKHOLDERS' EQUITY

[1] Common stock:

During 2002, the Company purchased 4,469,270 shares of its common stock owned by
two related shareholders at a cost of $196,000. These shares were cancelled upon
acquisition.

Additionally during 2002, the Company issued 4,683,097 shares of common stock in
a private placement in exchange for $181,000. This included 225,000 shares of
common stock issued to an unaffiliated third party for consulting services in
connection with the private placement.

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-12

<PAGE>

ARC COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements December 31, 2002 and 2001

NOTE I - STOCKHOLDERS' EQUITY (CONTINUED)

[2] Preferred stock:

Dividends in arrears as of December 31, 2002 aggregated $ 56,000.

[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 following table summarizes stock options transactions:

                                            Year Ended December 31,
                               -------------------------------------------------
                                         2002                     2001
                               -----------------------   -----------------------
                                             Weighted                  Weighted
                                              Average                   Average
                                             Exercise                  Exercise
                                 Shares        Price       Shares        Price
                               ----------   ----------   ----------   ----------
Options:
   Outstanding at beginning
     of year                    1,500,000   $     0.50    1,330,000   $     0.50
   Granted                         10,000         0.01      490,000         0.01
   Cancelled                     (560,000)        0.50     (320,000)        0.50
                               ----------                ----------

   Outstanding at end of year     950,000   $     0.24    1,500,000   $     0.34
                               ==========                ==========

   Exercisable at year end        685,000   $     0.32      935,000   $     0.43
                               ==========                ==========


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, 2002:

<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               2002         Life (in Years)       Price              2002            Price
-----------         -----------      ---------------    -----------       -----------      -----------
<S>                    <C>                <C>              <C>               <C>              <C>
   $0.50               450,000            0.38             $0.50             437,500          $0.50
   $0.01               500,000            2.80             $0.01             247,500          $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, which was expensed over the life of the agreement.

                                      F-13

<PAGE>

ARC COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements December 31, 2002 and 2001

NOTE J - 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, 2002, minimum aggregate rentals are as follows:

        Year Ending
        December 31,                   Lease       Sub-Lease
--------------------------         ------------    ------------
   2003                            $    146,000    $     37,000
   2004                                  88,000          37,000
   2005                                  80,000          37,000
   2006                                  72,000          34,000
                                   ------------    ------------

   Minimum payments                $    386,000    $    145,000
                                   ============    ============


Total rent expense for the years ended December 31, 2002 and 2001 aggregated
$158,000 and $257,000, respectively.

The Company sublet office space commencing August 1, 2001; sub-lease rental
income aggregated $37,000 and $12,000 during the years ended December 31, 2002
and 2001.

NOTE K - MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK

For the year ended December 31, 2002, four customers accounted for 32%, 13%, 13%
and 11% of sales. One customer accounted for 24% of sales for the year ended
December 31, 2001.


                                      F-14

<PAGE>





                                  END OF FILING