SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934 FOR THE FISCAL YEAR ENDED JULY 31, 2001

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

                         COMMISSION FILE NUMBER 0-24283
                        --------------------------------
                        VOICEFLASH NETWORKS INCORPORATED
                 (Name of Small Business Issuer in Its Charter)

             FLORIDA                                      65-0623427
  -------------------------------                    -------------------
  (State or Other Jurisdiction of                    (I.R.S. Employer
   Incorporation or Organization)                    Identification No.)

                         6401 CONGRESS AVENUE, SUITE 250
                            BOCA RATON, FLORIDA 33487
               --------------------------------------------------
               (Address of Principal Executive Offices)(Zip Code)

                                 (561) 994-3223
                                 --------------
                (Issuer's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Securities Exchange Act of
1934:

     Title of Each Class           Name of Each Exchange on Which Registered
     -------------------           -----------------------------------------
            None                                      None

Securities registered under Section 12(g) of the Securities Exchange Act of
1934:

                     COMMON STOCK, PAR VALUE $.001 PER SHARE
                         COMMON STOCK PURCHASE WARRANTS
                     ---------------------------------------
                                (Title of Class)

Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]

State registrant's revenues for the year ended July 31, 2001 were $178,572

State the aggregate market value of the voting stock held by non-affiliates of
the registrant on October 31, 2001 computed by reference to the closing bid
price of the VoiceFlash Networks Incorporated Common Stock as reported by NASDAQ
on that date $5,556,092.

                      APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares outstanding of the registrant's Common Stock, par value
$.001 per share (the "Common Stock"), as of October 31, 2001, was 14,038,604.

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

                       DOCUMENTS INCORPORATED BY REFERENCE

None.
                                       1
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                                     PART 1

ITEM 1.  DESCRIPTION OF BUSINESS

INTRODUCTION

         VoiceFlash was organized to design, develop, commercialize and market
proprietary products and services that exploit recent advances in speech
recognition technologies. The Company also is developing secured voice enabled
applications that can be incorporated with emerging technologies in wireless
area networks with particular emphasis on point-of-sale equipment.

         VoiceFlash's initial product was the Virtual Operator(TM) a speech
driven auto-attendant and call routing turnkey product. The product is
generating only limited sales and the Company has been unable to successfully
create a substantial market for it. This has resulted in significant losses for
VoiceFlash over the past four years.

         Beginning in August 2000, the Company attempted to reposition itself in
the Mobile Commerce (mCommerce) industry by leveraging its existing speech
application technologies, incorporating emerging wireless technologies (i.e.
Bluetooth), and shifting its business model to one focused on developing
recurring revenue. VoiceFlash was also seeking to establish distribution
capacity for its technologies through a combination with a major distributor of
point-of-sale equipment.

         In November 2000, the Company announced the execution of a Merger
Agreement with Bristol Retail Solutions, a distributor of point of sale
equipment. The Company advanced Bristol an aggregate of $1,918,655 for working
capital purposes in contemplation of merging two entities.

         Effective June 29, 2001, Bristol merged with VoiceFlash. In connection
with the merger, VoiceFlash changed its name from Registry Magic Incorporated to
VoiceFlash Networks, Inc. In addition, VoiceFlash amended its articles of
incorporation to increase the number of authorized shares of common stock to
50,000,000 shares and amended its 1999 Stock Option Plan to increase the total
number of shares of common stock available under the plan to 5,000,000 shares.
Pursuant to the terms of the merger, each outstanding share of Bristol common
stock was exchanged for .65 a share of VoiceFlash common stock and each
outstanding publicly traded common stock purchase warrant of Bristol was assumed
by VoiceFlash to convert into a common stock purchase warrant of VoiceFlash
under the same terms and conditions as was applicable to Bristol's publicly
traded warrants.

         On July 7, 2001, the Company's subsidiary, Bristol Retail Solutions,
and its four operating subsidiaries filed voluntary petitions for reorganization
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Central District of California (Los Angeles), Case Nos.
LA01-30857-VZ, LA01-30872-VZ, LA01-30885-VZ, LA01-30893-VZ and LA01-30895-VZ.

         On August 27, 2001, Bristol's representative appeared before the U.S.
Bankruptcy Court and advised the court that Bristol was unable to obtain debtor-
in-possession financing. Accordingly, Coast Business Credit, a division of
Southern Pacific Bank began a Chapter 11 liquidation of the assets of Bristol.
Coast Business Credit is currently disposing its collateral in Bristol. Upon
Coast Business Credit's completion of the disposal of its collateral the Company
will voluntarily put Bristol and its subsidiaries in Chapter 7 Bankruptcy.

         On October 19, 2001, VoiceFlash acquired United Capturdyne
Technologies, Inc. ("UCT"), a supplier of advance transaction processing and
account management software for enterprise retail and service oriented
customers. Under the terms of the agreement, UCT shareholders received 1.2
million restricted shares of VoiceFlash common stock.

STRATEGY

         VoiceFlash's overall goal is to exploit its speech recognition
application expertise and combine it in a secured environment with the wireless
Internet, mobile commerce, and wireless LANs to move closer to the customer. By
broadening the spectrum of the Company's technologies to include Speech
Recognition and Verification, WAP, and wireless LANS (primarily Bluetooth), the
Company believes it can take advantage of recent technological developments that
are bringing the Internet, databases and LANS to the retail market.

                                       1
<PAGE>

The Company has developed products that integrate Bluetooth technology
with point-of-sale terminals. The Company plans on developing additional
products around this platform. Critical to the Company's ability to develop this
market is its need to combine its technology with its distribution capacity.
VoiceFlash believes that this focus will create the opportunity for the Company
to participate in the emerging mCommerce market. The Company believes that
recent developments in wireless delivery of information will transform a
consumer's everyday experience, specifically in environments where point-of-sale
transactional exchanges are becoming increasingly slow and cumbersome.

         VoiceFlash is revamping its business model to adapt to this
environment. The Company believes that in order to bring its applications to the
marketplace in a timely and efficient manner, it must employ its speech
technology applications with e-commerce products and services developed by
others and exploit marketing and distribution channels developed by others.
VoiceFlash believes that by entering into strategic alliances with partners that
have made such investments, its resources can be focused on the delivery of
solutions.

SALES AND MARKETING

         To date, marketing efforts have been conducted by Company personnel and
have focused on national and regional distribution companies and OEM telephone
switch and voicemail manufacturers.

         The Company intends to revamp its sales and marketing approach through
its combination with UCT. The Company intends to avail itself of UCT's sales
organization to market the Company's technology and products.

         UCT derives information from point of sale ordering payment capture and
historical data. UCT has a series of products, they are:

         Check Max - Check Max is an automatic clearinghouse. UCT is currently
providing services to fulfillment centers and mail order companies. The UCT
technology facilitates all aspects of the collection and payment process without
a physical paper check ever being mailed. By processing check orders
electronically, the fulfillment center can fill orders faster, and the immediate
debiting of the check or savings account significantly reduces the number of
returns for reasons of non-sufficient funds or accounts closed.

         Account Max - Account Max allows businesses to manage any type of
customer file. Property management companies and leasing companies can utilize
the Account Max software to manage their customer base, provide frequent
shopping programs, fleet cards, electronic gift certificates, effect payments
and facilitate collection activity where necessary. The Account Max product has
not been actively marketed today.

         Trans Max - Trans Max is a software switching program that allows
companies to accept credit card payment with a point of sale terminal and track
all credit card activity related to each customer account. This product has not
yet been marketed.

         Inter Max - Inter Max is a complete Internet billing service. This
program provides the ability to accept any method of payment for monthly service
access to the Internet. This product has not yet been marketed.

         SHARON - Shared on-line Rental Network - This program allows companies
to use car rental companies, airline and baggage departments to access the file
of an individual.

SUPPLIERS AND LICENSORS

         VoiceFlash's proprietary software incorporates core speech engine
technology developed by others for which VoiceFlash has obtained licenses.

         VoiceFlash's software products are designed to be used with personal
computers, specifically Intel(R) Pentium processors. Standard telephone
interface cards are also required for certain of the turnkey hardware products
if these products communicate via the telephone. VoiceFlash's telephony products
currently require telephone interface cards manufactured by Dialogic of
Parsippany, New Jersey, however there are a number of other manufacturers,
including Natural Microsystems, Rhetoric, and NewVoice from which VoiceFlash may
purchase cards on similar terms and conditions.

                                       2
<PAGE>

Certain of VoiceFlash's products also rely on special processing boards that are
manufactured by Dialogic as well. The loss of Dialogic as a source for these
cards could have a material adverse impact on VoiceFlash, since VoiceFlash might
not be able to offer all the features of a particular application if it were
required to rely on other suppliers.

         VoiceFlash's personal computer desktop software products require high
quality sound cards shipped with most PCs today, as well as high quality
noise-canceling microphones available from a number of suppliers including
Andrea Electronics. VoiceFlash's telephone based products are designed to be
used with Microsoft(R) Windows. Additionally, toolkits (i.e. collections of
programs that facilitate the creation of applications software) from engine
providers enable VoiceFlash to exploit speech recognition engine technologies
developed by different vendors. Typically, VoiceFlash selects engine toolkits
and speech recognition engine technology manufactured by the same entity.
Alternatively, VoiceFlash selects a programming toolkit to complement a specific
application based on the toolkit that produces the fastest results in a high
quality manner and yields efficiencies in hardware requirements.

PROPRIETARY RIGHTS

         VoiceFlash considers its software and applications as proprietary and
currently relies on a combination of copyright, trade secret and trademark laws
and license agreements to protect its intellectual property rights. VoiceFlash
also has entered and will enter into license agreements with end-users of the
products and applications, and has required all employees to enter into
confidentiality and non-disclosure agreements. Despite these precautions, it may
be possible for unauthorized third parties to copy aspects of VoiceFlash's
products or to obtain and use information that VoiceFlash regards as
proprietary.

COMPETITION

         The markets in which VoiceFlash operates is characterized by intense
competition. VoiceFlash's products will compete with many well-established
companies including IBM, AT&T, Digital Equipment, Lucent, Nortel and Unisys.
UCT's competition includes companies such as Global E Telecom, ACH Direct and
ACH Processing Co. These companies have substantially greater financial,
technical, personnel and other resources than VoiceFlash and UCT and have
established reputations for success in the development, licensing and sale of
their products and technology, especially the larger organizations. Several of
these competitors have the financial resources necessary to enable them to
withstand substantial price competition or downturns in their markets. In
addition, certain companies may be expected to develop technologies or products
that may be functionally similar to some or all of those being developed by
VoiceFlash.

EMPLOYEES

         VoiceFlash, as of July 31, 2001, has 10 full-time employees. Of such
employees, 2 persons are in management and finance; 2 persons are engaged in
sales and marketing; 2 persons are engaged in development; 3 are in product
support, and 1 person is in administration. No employee of VoiceFlash is covered
by a collective bargaining agreement or is represented by a labor union.
VoiceFlash considers its employee relations to be good. UCT has 14 employees, 2
of whom are in management, 2 of whom are in finance, 3 of whom are in sales and
marketing and 7 of whom are in administration.

ITEM 2.  DESCRIPTION OF PROPERTIES

         On March 1, 2001, VoiceFlash commenced a nineteen month lease of 3,882
square feet of office space in Boca Raton, Florida for a monthly base rental of
$5,742, plus VoiceFlash's proportionate share of taxes and operating expenses.

ITEM 3.  LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

         VoiceFlash or its wholly owned subsidiary is a party to the following
legal proceedings:

                                       3
<PAGE>

         On July 7, 2001, the Company's subsidiary, Bristol Retail Solutions,
and its four operating subsidiaries filed voluntary petitions for reorganization
under chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Central District of California (Los Angeles), Case Nos.
LA01-30857-VZ, LA01-30872-VZ, LA01-30885-VZ, LA01-30893-VZ and LA01-30895-VZ. On
August 27, 2001, Bristol's representative appeared before the U.S. Bankruptcy
Court and advised the court that Bristol was unable to obtain debtor-in-
possession financing. Accordingly, Coast Business Credit, a division of
Southern Pacific Bank began a Chapter 11 liquidation of the assets of Bristol.
Coast Business Credit is currently disposing its collateral in Bristol. Upon
Coast Business Credit's completion of the disposal of its collateral the Company
will voluntarily put Bristol and its subsidiaries in Chapter 7 Bankruptcy.

         The Company is also involved in two other litigation matters. In an
action in the Fifteenth Judicial Circuit in and for Palm Beach County, Florida
(Victor Go vs. VoiceFlash Networks, Inc. and Lawrence Cohen, Case No.
CA01-08787) a former employee of the Company has alleged that based upon certain
misrepresentations by the officers of the Company, he assumed a position of
employment with the Company and was later discharged after those representations
were not fulfilled. The Company intends to vigorously defend this case and to
assert affirmative defenses and counterclaims against the former employee based
upon improper and illegal behavior. An evaluation of the likelihood of the
outcome of this matter cannot be made at this time.

         In an action in the Fifteenth Judicial Circuit in and for Palm Beach
County, Florida (John Falcone vs. VoiceFlash Networks, Inc. and Lawrence Cohen,
Case No. CA01-9621AG), filed on September 19, 2001, a former employee of the
Company has a claim against the Company for breach of contract, as well as a
claim that certain promises alleged to have been made by representatives of the
Company concerning a potential acquisition of the former employee's company were
false. The former employer is alleging $2 million in damages. The Company
intends to defend this case vigorously and to assert counterclaims against the
former employee. An evaluation of the likelihood of the outcome of this matter
cannot be made at this time.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

         On June 19, 2001, the Company held a special meeting of its
shareholders to consider and vote upon the following matters:

                  1. A proposal to approve and adopt amended Articles of
         Incorporation, pursuant to which the Company's corporate name would be
         changed to VoiceFlash Networks, Inc.

                  2. A proposal to approve and adopt amended Articles of
         Incorporation, pursuant to which the Company's authorized common stock
         would be increased from 30,000,000 to 50,000,000 shares.

                  3. A proposal to approve an amendment to the Company's 1999
         Stock Option Plan to increase the number of shares of common stock
         available for issuance under the plan from 500,000 to 5,000,000.

         The matters above were approved at the special meeting by the
shareholders of the Company and effectuated by the Company shortly thereafter.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

         The Company's Common Stock is traded on the NASDAQ SmallCap Market
under the symbol "VFNX." The following sets forth the range of high and low
closing bid prices for the Common Stock as reported on NASDAQ during each of the
periods presented during the respective fiscal years ended July 31. The
quotations set forth below are inter-dealer quotations, without retail mark-ups,
markdowns or commissions, and may not necessarily represent actual transactions.

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                  PERIOD                HIGH           LOW
                  ------                ----           ---

                  1999
                  ----
                  First Quarter         $11.95         $ 4.00
                  Second Quarter        $ 6.62         $ 2.50
                  Third Quarter         $11.50         $ 3.87
                  Fourth Quarter        $ 8.25         $ 3.00

                  2000
                  ----
                  First Quarter         $ 3.62         $ 1.06
                  Second Quarter        $ 4.56         $ 1.56
                  Third Quarter         $ 7.50         $ 1.50
                  Fourth Quarter        $ 2.75         $ 1.22

                  2001
                  ----
                  First Quarter         $ 1.90         $  .56
                  Second Quarter        $ 2.47         $  .62
                  Third Quarter         $ 3.56         $ 1.37
                  Fourth Quarter        $ 2.280        $  .710

                  2002
                  ----
                  First Quarter         $ 0.90         $ 0.20


As of July 31, 2001 there were 340 record holders of the Company's Common Stock.
The Company believes that there are substantially in excess of 300 beneficial
and round lot holders of the Company's Common Stock.

         The Company has outstanding 718,750 Redeemable Class A warrants
acquired in its acquisition of Bristol Retail Solutions. There is presently no
trading market for these warrants although the Company is attempting to list the
warrants on the OTC Bulletin Board.

         The Company has not paid any cash dividends on its Common Stock and
currently does not expect to declare or pay cash dividends in the foreseeable
future. The Company presently intends to retain any earnings that may be
generated to provide funds for the operation of business.

Related Stockholder Matters

         On November 22, 2000 the Company issued 500,000 shares of common stock
for $500,000 to an accredited investor. These shares were sold under the
exemption from registration provided by section 4(2) of the Securities Act.

         In March 2001 the Company issued 1,302,000 of common stock pursuant to
Regulation S. The Company sold the shares at $1.00 per share to 67 accredited
investors for net proceeds of $1,131,000. The Company paid a 10% placement fee,
closing fees and issued 130,200 three year warrants exercisable at $1.00 per
share to a placement agent in connection with this private offering.

         In April 2001 the Company issued warrants to purchase an aggregate of
725,000 shares of its common stock exercisable at prices ranging from $1.00 to
$1.50 per share to several consultants for services provided. These warrants
were issued under the exemption from registration provided by section 4(2) of
the Securities Act.

         In June 2001 the Company issued 148,000 of common stock pursuant to
Regulation S. The Company sold the shares of stock for $0.75 per share to
accredited investors for net proceeds of $99,720. The Company paid a 10%
placement fee, closing fees and issued the placement agent 14,800 shares of
common stock in connection with the sale of the stock.

         In June 2001 the Company issued issued 1,029,463 warrants at prices
ranging from $.01 to $6.00 and 2,488,037 options at prices ranging from $.19 to
$3.13 to the existing Bristol security holders in connection with the merger of
Bristol with and into a wholly owned subsidiary of the Company. Accordingly, the
Company has valued the warrants and options at their fair value and has recorded
an additional purchase price charge in the amount of approximately $4,001,000.
The options and warrants were issued under the exemption from registration
provided by section 4(2) of the Securities Act.

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<PAGE>

         On June 12, 2001, the Company issued three convertible promissory notes
totaling $175,000. These notes are convertible, at the option of the holder at
any time, at $1.00 per share. These note bear interest at 10.00% per annum,
payable in quarterly installments. The principal amount and all unpaid interest
will be due and payable on June 12, 2002. Such notes are convertible into common
stock at $1.00 per share. Along with these convertible promissory notes, the
Company issued 150,000 warrants to acquire shares of the Company's common stock.
The warrants are exercisable at $1.00 per share and expire five years from the
date of issuance. The notes and warrants were issued under the exemption from
registration provided by section 4(2) of the Securities Act.

         On June 26, 2001, the Company issued to Berthel SBIC, LLC. (Berthel)
500,000 shares of its Series A Convertible Preferred Stock and a warrant to
purchase 276,250 shares of its common stock. The warrant is exercisable at $.01
per share until January 12, 2005. The preferred shares and warrants were issued
in connection with the Company's merger with Bristol. The preferred shares and
warrants were issued under the exemption from registration provided by section
4(2) of the Securities Act.

         The holder of the Series A Preferred Stock is entitled to receive
cumulative cash dividends at a rate of $0.24 per year per share, payable
quarterly no later than the last business day of each March, June, September and
December. The Company recorded cumulative dividends of $10,000 as of July 31,
2001. The conversion rate of the Series A Preferred Stock is equal to the Base
Liquidation Preference, divided by the conversion price then in effect (the
"Conversion Price"). The Conversion Price shall initially be $2.046, but is
subject to adjustment as follows:

Except for (x) pursuant to options to purchase common stock of the Company
granted to employees or directors of the Company, approved by its Board of
Directors or a committee thereof, and having an exercise price per share not
less than eighty percent (80%) of the fair market value of a share of common
stock as of the date granted (provided that the "fair market value" used for the
purpose of such determination is not less than the average closing "bid" and
"ask" prices for the common stock of the Company on a registered securities
exchange (if available), for the thirty (30) trading days immediately preceding
such determination), or (y) as consideration for the acquisition by the Company
of the stock, or all or substantially all of the assets of another entity or
business, if, in such transaction the value placed on the common shares is
determined by the Board of Directors, acting in good faith, to be equal to or in
excess of what is then the fair market value of a common share, (the "Excluded
Issuances"), if at any time the Company shall issue or sell any common shares
for a consideration per share less than 92/100 Dollars ($0.92) (the "Trigger
Price") (other than dividends payable in common shares), or shall issue any
options, warrants or other rights for the purchase of such shares at a
consideration per share of less than the Trigger Price, the Conversion Price in
effect immediately prior to such issuance or sale shall be adjusted and shall be
equal to (x) the Conversion Price then in effect, multiplied by (y) a fraction,
the numerator of which shall be an amount equal to the sum of (a) the number of
common shares outstanding immediately prior to such issuance or sale multiplied
by the Conversion Price then in effect, and (b) the total consideration payable
to the Company upon such issuance or sale of such shares and such purchase
rights and upon the exercise of such purchase rights, and the denominator of
which shall be the amount determined by multiplying (aa) the number of common
shares outstanding immediately after such issuance or sale plus the number of
the common shares issuable upon the exercise of any purchase rights thus issued,
by (bb) the Conversion Price then in effect. If any options or purchase rights
that are taken into account in any such adjustment of the Conversion Price
subsequently expire without exercise, the Conversion Price shall be recomputed
by deleting such options or purchase rights. If the Conversion Price is adjusted
as the result of the issuance of any options, warrants or other purchase rights,
no further adjustment of the Conversion Price shall be made at the time of the
exercise of such options, warrants or other purchase rights.

During November, 2001, the Company entered into an employment contract with a
strategic planner. The Company intends to issue the strategic planner 250,000
shares of common stock.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

         The following discussion and analysis should be read in conjunction
with the financial statements of the Company and the notes thereto appearing
elsewhere herein.

RESULTS OF OPERATIONS

         Since its inception in October 1995, the Company's efforts have been
principally devoted to research, development and design of products, marketing
activities and raising capital.

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For the year ended July 31, 2001 product sales were $178,572 as compared to
$952,994 for the year ended July 31, 2000. The decrease in sales resulted from
no joint development projects and licensing fees and a corporate restructuring
to prepare for the planned merger with Synergex International, which was
terminated August 7, 2000. As part of the restructuring, certain sales staff and
other staff not directly focused on strategic projects were terminated. The
Company has currently developed products that focus utilizing Bluetooth
technology with point-of-sale terminals. It believes there is a large market for
these products. The Company is currently evaluating the future of its Virtual
Operator product.

         For the year ended July 31, 2001, cost of goods sold amounted to
$65,000 or 36% of sales compared to $593,371 or 62% of sales for the year ended
July 31, 2000, a decrease of $528,371 due to decreased hardware costs associated
with the Company's Virtual Operator.

         General and administrative expenses increased by $602,751 from
$2,645,467 for the year ended July 31, 2000 to $3,248,218 for the year ended
July 31, 2001. The increase in general and administrative expense was due to a
$1,458,515 value placed on warrants issued to consultants offset by a decrease
of $855,764 due to fewer sales and administrative staff during the year ended
July 31, 2001. The Company does not foresee a significant increase in general
and administrative costs from its present level.

         Research and development expenses for the year ended July 31, 2001 were
$505,084 compared to $704,904 for the year ended July 31, 2000, a decrease of
$199,820 due to a reduction of research and development staff. The Company has
reduced development staff in order to focus on strategic product development. If
the Company continues to develop additional products it may be required to hire
additional development staff. Research and development expenses incurred in the
course of establishing technological feasibility of the Company's software
applications have been charged to operations pursuant to Statement of Financial
Accounting Standards "SFAS" No. 86 "Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed".

         Depreciation expense decreased $75,280 for the year ended July 31, 2001
to $128,418 from $203,698 for the year ended July 31, 2000 primarily due to the
Company's depreciable assets being fully matured to their useful lives during
the year ended July 31, 2001.

         Acquisition expense decreased by $384,306 for the year ended July 31,
2001 to $0 from $384,306 for the year ended July 31, 2000. The decrease in
acquisition expense relates to expenses incurred with respect to the termination
of the Synergex merger recorded in the year ended July 31, 2000.

         Net interest (expense) income, for the year ended July 31, 2001
amounted to $(28,373)compared to net interest income of $185,029 for the year
ended July 31, 2000. The decrease in interest income was due primarily to the
reduction in the Company's cash balances and beneficial feature in connection
with the convertible note.

LIQUIDITY AND CAPITAL RESOURCES

         As of July 31, 2001, the Company had $12,171 in cash and cash
equivalents. The Company does not have any available lines of credit. Since
inception, and since the Company's initial public offering in June 1998, the
Company has financed its operations through loans from the Company's Chairman
and his wife and from private placements of both debt and equity. During the
year ended July 31, 2001 the Company sold stock in three private placements for
a net amount of $1,730,382 and issued three convertible notes in the total
amount of $175,000.

         Net cash used in operating activities increased by $954,111 to
$3,836,065 for the year ended July 31, 2001 from $2,881,954 for the year ended
July 31, 2000. The increase in net cash used in operating activities is
primarily due to the Company's discontinuance of Bristol.

         Net cash (used in) provided by investing activities during the year
ended July 31, 2001 and 2000 was $(63,174) and $97,477 respectively. The
expenditures are primarily related to purchases and sales of equipment.

         Net cash (used in) provided by financing activities during the year
ended July 31, 2001 amounted to $2,034,743, and for the year ended July 31, 2000
amounted to $(307,150). During the year ended July 31, 2001 the Company sold
stock in three private placements for a net amount of $1,730,382 and issued
three convertible notes in the total amount of $175,000.

                                       7
<PAGE>

         The report of the independent certified public accountants on the
Company's financial statements as of July 31, 2001 contains an explanatory
paragraph regarding an uncertainty with respect to the ability of the Company to
continue as a going concern. The Company is not generating significant revenues
and has an accumulated deficit of ($29,377,489). However, the Company believes
that its shift in focus to developing applications that focus on mCommerce and
its revised business model that centers around recurring revenue will provide
sufficient revenues and liquidity for the Company to operate for the next 12
months. However, there can be no assurances that the Company will be successful
in developing its business model and achieving a profitable level of operations.

RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133
requires companies to recognize ALL derivative contracts as either assets or
liabilities in the balance sheet and to measure them at fair value. If certain
conditions are met a derivative may be specifically designated as a hedge, the
objective of which is to match the timing of gain or loss recognition on the
hedging derivative with the recognition of (i) the changes in the fair value of
the hedged asset or liability that are attributable to the hedge risk, or (ii)
the earnings effect of the hedged forecasted transaction. For a derivative NOT
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change. As amended the effective date has been changed to all
fiscal quarters of fiscal years beginning after June 15, 2000.

         Historically VoiceFlash has not entered into any derivative contracts
in order to hedge existing risks or for speculative purposes. Accordingly,
VoiceFlash does not expect adoption of the now standards to affect its financial
statements.

         In March 2000, the Financial Accounting Standards Board (FASB) issued
FASB Interpretation No. 44 (Interpretation 44), ACCOUNTING FOR CERTAIN
TRANSACTIONS INVOLVING STOCK COMPENSATION. Interpretation 44 provides criteria
for the recognition of compensation expense in certain stock-based compensation
arrangements that are accounted for under Accounting Principles Board Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. Interpretation 44 is effective
July 1, 2000, with certain provisions effective retroactively to December 15,
1998 and January 12, 2000. There was no effect of the retroactive provisions of
Interpretation 44 on the Company's financial statements. Interpretation 44 is
not expected to have a material effect on the Company's financial statements.

         In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations" and
SFAS No. 142 "Goodwill and Intangible Assets ("SFAS No. 142"). SFAS No. 141
requires that all business combinations initiated after June 30, 2001 be
accounted for using the purchase method of accounting and prohibits the use of
the pooling-of-interests method for such transactions. SFAS No. 142 applies to
all goodwill and intangible assets acquired in a business combination. Under the
new standard, all goodwill, including goodwill acquired before initial
application of the standard, should not be amortized but should be tested for
impairment at least annually at the reporting level, as defined in the standard.
Intangible assets other than goodwill should be amortized over their useful
lives and reviewed for impairment in accordance with SFAS no. 121. The new
standard is effective for fiscal years beginning after December 15, 2001. The
Company must adopt this standard on January 1, 2002. As of July 31, 2001, the
Company had no unamortized goodwill.

         In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 ("SFAS 144"), "accounting for the Impairment or Disposal of
Long-lived Assets". SFAS 144 superceded Statement of Financial Accounting
Standards No. 121, "accounting for the Impairment of Long-lived Assets and
Assets to be Disposed of" and the accounting and reporting provisions of
Accounting Principles Board Opinion No. 30, "reporting the Results of Operations
- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transaction". SFAS
144 also amends Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for a subsidiary for
which control is likely to be temporary. The provision of SFAS 144 will be
effective for fiscal years beginning after December 15, 2001. The Company has
not yet determined the effect SFAS 144 will have on its financial position or
results of operations in future periods.

RISK FACTORS

         This Annual Report Form 10-KSB contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements,
other than statements of historical facts, included in or incorporated by
reference into this Form 10-KSB, are forward-looking statements. In addition,
when used in this document, the words "anticipate," "estimate," "intends,"
"project" and similar expressions are intended to identify forward-looking
statements. These forward-looking statements are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
projected. Although the Company believes that the expectations we include in
such forward-looking statements are reasonable, we cannot assure you that these
expectations will prove to be correct.

         Among the key risks that could cause actual results to differ
materially from expectations, estimates of costs, projected results or
anticipated results are as follows:

The outcome of Bristol's pending bankruptcy could adversely effect the Company's
operations and financial condition.

         Bristol is currently in Chapter 11 bankruptcy. Bristol has been unable
to obtain debtor in possession financing from a new lender and generate
sufficient cash from operations. VoiceFlash wrote-off $1,918,655 advanced to
Bristol as a result of the Bristol Bankruptcy. The proceedings will be converted
to a Chapter 7 liquidation proceeding.

                                       8
<PAGE>

The Company has continued operating losses which may result in significant
liquidity and cash flow problems.

         The Company has received only limited revenues from its inception in
October 1995 through July 31, 2001. Total revenues for the year ended July 31,
2000 and year ended July 31, 2001 were $952,994 and $178,572 respectively.
VoiceFlash has only a limited history upon which an investor can evaluate
prospects and future performance. Prospects must be considered in light of the
risks, expenses and difficulties frequently involved in the operations and
expansion of a new business in an evolving industry which has not obtained
widespread commercial acceptance and which experiences rapid technological
obsolescence and intense competition.

         From inception through July 2001, the Company has incurred cumulative
losses of $29,377,489 and losses may continue through the fiscal year ending
July 31, 2002. The Company expects to incur expenditures in connection with the
development and marketing of speech recognition and wireless applications and
UCT operations which will likely result in losses until such time, if ever, as
the Company is able to obtain sufficient contracts for speech recognition
products and wireless applications and services which will generate adequate
sources of revenue to support operations.

VoiceFlash's financial statements have been prepared assuming that the Company
will continue as a going concern.

         The auditor's report on VoiceFlash's 2001 financial statements states
that "the Company has suffered recurring losses from operations, has a cash
deficiency from operations and is experiencing operating losses that raise
substantial doubt about its ability to continue as a going concern." The Company
continues to explore the possibility of raising funds through available sources
which include equity and debt markets.

Since the Company has changed its business strategy through the acquisition of
UCT, it may not be able to successfully manage its new business operations.

         Prior to the Company's acquisition of UCT, the Company had no
experience as a supplier of advance transaction processing and account
management software for enterprise retail and service oriented customers. The
Company will incur significant operating expenses arising from the development
and expansion of its new operations.

Developing new products and product enhancements is a complex and uncertain
process requiring high levels of innovation, as well as the accurate
anticipation of technological and market trends.

         Broad market acceptance of products and future success will depend in
part on the following:

         o        the Company's ability to educate users about the benefits of
                  future products and services generally and the specific
                  benefits of products and services - the Company's ability to
                  adapt to emerging industry standards and respond to the
                  Company's competitors' product and service announcements;

         o        the Company's ability to develop and introduce competitive new
                  products and services and enhancements that meet changing
                  customer requirements and emerging industry standards; and

         o        the Company's ability to increase brand-name recognition.

         If the Company is not successful in meeting the goals listed above, it
may not be able to maintain or gain broad market acceptance for products and
services. Further, a decline in demand for software products and services
generally, could occur as a result of competitive technological change or other
factors.

The Company's revenue has been dependent on demand for a few products.

         The Company historically had a substantial portion of its revenue
generated from a few products. VoiceFlash's Virtual Operator product family
represented approximately 100% of revenue for the year ended July 31, 2001.

                                       9

The likelihood that these products will continue to contribute significant
revenue to the Company is subject to certain risks, including:

         o        the Company's ability to develop and introduce competitive new
                  products and services that meet changing customer
                  requirements; and

         o        the Company's ability to develop and introduce products and
                  services that meet emerging industry standards.

The Company has significant future capital requirements and needs additional
financing.

         In the future, and apart from immediate needs for capital resources,
the Company will continue to have significant capital requirements due to the
substantial costs associated with product development and refinement,
recruitment of skilled personnel and the marketing of innovative speech
recognition and business application products and related services. Cash
requirements for the purpose of developing products and services have been
substantial and, as a result, the Company has been dependent upon capital
resources provided by investors in order to finance operations.

         The Company has no current arrangements with respect to, or potential
sources of, additional financing and does not anticipate that existing
shareholders will satisfy any portion of the Company's future financing
requirements. If the Company is unable to obtain additional financing when
needed, this would have a material adverse effect on the Company's business,
including the curtailment of product and service development, marketing and
expansion activities.

If the Company is unable to raise additional capital as needed, the future
growth of the Company's business and operations would be severely limited.

         Historically, operations have been financed primarily through the
issuance of equity. The Company's growth strategy requires substantial capital
investment. Capital is typically needed not only for the acquisition of
additional companies, but also for the effective integration, operation and
expansion of these businesses. Capital is also necessary for the production and
marketing of newly acquired UCT operations. Future capital requirements,
however, depend on a number of factors, including the Company's ability to grow
its revenues and manage its business. Growth may depend upon the Company's
ability to raise additional capital, possibly through the issuance of long-term
or short-term indebtedness or the issuance of equity securities in private or
public transactions.

         If the Company raises additional capital through the issuance of debt,
this will result in increased interest expense. If the Company raises additional
funds through the issuance of equity or convertible debt securities, the
percentage ownership of VoiceFlash held by existing shareholders will be reduced
and those shareholders may experience significant dilution. In addition, new
securities may contain certain rights, preferences or privileges that are senior
to those of the Company's common stock. There can be no assurance that
acceptable financing for future acquisitions or for the integration and
expansion of existing operations can be obtained on suitable terms, if at all.

VoiceFlash does not meet required NASDAQ continued listing requirements and
therefore its securities are subject to possible delisting from NASDAQ.

         The Company's common stock is listed on the Nasdaq SmallCap Market. In
order to continue to be listed on Nasdaq, however, the Company must maintain:
(i) at least $2,500,000 in equity or $500,000 in net income in the latest fiscal
year or in two of the last three years or $35,000,000 in market capitalization,
(ii) a public float of at least 500,000 shares, (iii) a $1,000,000 market value
of public float, (iv) a minimum bid price of $1.00 per share, (v) at least two
market makers, (vi) at least 300 shareholders and (vii) at least two outside
directors. Currently the Company does not meet these maintenance standards.
VoiceFlash did not meet all these criteria as of the date of this report. The
failure to meet this maintenance criteria may result in the delisting of
VoiceFlash's securities from Nasdaq, and VoiceFlash's common stock would
thereafter be traded in the over-the-counter market. As a result of such
delisting, an investor could find it more difficult to dispose of or to obtain
accurate quotations as to the market value of the Company's common stock.

                                       10
<PAGE>

The Company may have difficulties in obtaining and maintaining proprietary
rights.

         The Company's success depends upon proprietary applications software
technology which may be difficult to obtain and protect. The Company currently
relies on a combination of contractual rights, trade secrets, know-how,
trademarks, non-disclosure agreements and technical knowledge to establish and
protect proprietary rights. The measures taken to protect proprietary rights may
not be adequate to prevent misappropriation of the technology or independent
development by others of products with features based upon, or otherwise similar
to, the Company's products. In the case of proprietary infringement, the Company
could, under certain circumstances, be required to modify its products or obtain
licenses, which could require cash or other consideration. The Company may not
have the resources to defend or prosecute a patent infringement or other
proprietary rights infringement action.

Fluctuations in the Company's operating results may adversely affect the
Company's stock price and purchasers of the Company's common stock may lose all
or a portion of their investment.

         Historically, there has been volatility in the market price for the
Company's common stock. Quarterly operating results, changes in general
conditions in the economy, the financial markets or the marketing industry, or
other developments affecting the Company or its competitors, could cause the
market price of the Company's common stock to fluctuate substantially. The
Company expects to experience significant fluctuations in future quarterly
operating results due to a variety of factors.

The conversion of notes and exercise of warrants issued in August 2001 to secure
financing will be dilutive to existing stockholders.

         The Company is obligated to register shares of its common stock
issuable upon conversion of notes and exercise of warrants which means that when
the note is converted or warrant is exercised, the holder may resell the common
stock received in the public market. The conversion or exercise may materially
adversely affect the market price of the Company's common stock and will have a
dilutive effect on the Company's existing stockholders.

The number of shares of common stock issuable upon conversion of 7% convertible
notes issued in August 2001 will increase as the market price of the Company's
common stock decreases.

         The Company has an aggregate of $750,000 principal amount of 7%
convertible notes outstanding as of the date of this report. The notes which are
convertible, in whole or in part, at the option of the holders into shares of
the Company's common stock at a conversion price equal to the lesser of:

                  (1)      $1.50;

                  (2)      80% of the average of the three lowest closing bid
                           prices for the Company's common stock for 30 trading
                           days prior to, but not including, the conversion date
                           on the Nasdaq SmallCap Market, Nasdaq National
                           Market, American Stock Exchange or New York Stock
                           Exchange (the principal trading exchange or market
                           for the Company's common stock); or

                  (3)      if not trading on a principal trading exchange or
                           market, 75% of the average of the three lowest
                           closing bid prices for the Company's common stock for
                           30 trading days prior to, but not including, the
                           conversion date, on such other principal market or
                           exchange where the Company's common stock is listed
                           or traded.

         The terms of the notes and warrants provide that the number of shares
of common stock into which they are convertible or exercisable, when added
together with all other shares of common stock beneficially owned by the holder
and its affiliates, cannot exceed 9.9% of the Company's total issued and
outstanding common shares at any one time. This 9.9% limitation, however, does
not prevent the note and warrant holders from continually liquidating shares of
common stock owned by them in order to convert or exercise all of the notes or
warrants into shares of common stock, subject to the terms of the notes and
warrants.

                                       11
<PAGE>

The variable conversion price formula for outstanding convertible notes could
negatively affect the market price of the Company's common stock.

         The following are special risks which result from the variable
conversion price formula of the notes which were issued in August 2001:

*        Reduction in stock price. The conversion price of the notes is variable
         based on the future trading prices of the Company's common stock, with
         a current ceiling conversion price of $1.50 per share. As a result of
         the market-related conversion price, the number of shares of common
         stock issuable upon conversion of the notes will be inversely
         proportionate to the market price of the common stock at the dates upon
         which the conversion price may be determined.

*        Effect of short sales by third parties. As a result of the
         market-related conversion price of the notes, third parties may take
         significant short positions in the Company's common stock. If this
         occurs, these short positions may have the effect of depressing the
         trading price of the Company's common stock which would result in
         additional dilutive issuance of stock upon the conversion of the notes.
         In addition, other selling security holders may take short positions in
         the Company's common stock which while not effecting the exercise price
         of the underlying warrants or options held by these selling security
         holders, could have the effect of depressing its trading value and
         therefore result in additional dilutive issuance of stock upon the
         conversion of the notes.

*        Effect of additional shares in market. To the extent that holder of the
         notes converts a portion of the notes and then sell its common stock in
         the open market, the Company's common stock price may decrease due to
         the additional shares in the market, possibly allowing the holder to
         convert the remaining notes into greater amounts of common stock,
         further depressing the stock price.

In the event the Company is prohibited from or fails to timely register the
shares of common stock underlying recently issued convertible notes and
warrants, the Company will be obligated to redeem securities held by these
noteholders.

         If the Company fails to file and use all reasonable commercial efforts
to cause to be declared effective a registration statement on Form S-3, in order
to register the shares of common stock underlying recently convertible notes and
warrants by November 15, 2001, the Company will be obligated to redeem the
convertible notes and warrants. Under the mandatory redemption, the Company will
have to pay the noteholders a sum of money determined by (1) multiplying up to
the outstanding principal amount of the notes designated by the holders by 130%
or (2) multiplying the number of shares otherwise deliverable upon conversion of
an amount of note and/or interest at the then conversion price that would be in
effect on the deemed conversion rate by the highest closing price of the
Company's common stock on the principal market from the deemed conversion date
prior to the receipt of a mandatory redemption payment, whichever is greater,
together with accrued but unpaid interest. The mandatory redemption payment is
100% of the principal amount of the notes designated by holder together with
accrued but unpaid interest if the event giving rise to the mandatory redemption
payment is a consequence exclusively of the Company's failure to obtain the
approval of its shareholders as required by Nasdaq rules and regulations. As of
the date of this report, the Company has neither filed a registration statement
on Form S-3 nor received shareholder approval for the issuance of the shares
underlying the convertible notes and warrants.

Provisions of the Company's articles of incorporation and bylaws may delay or
prevent a take-over which may not be in the best interests of the Company's
shareholders.

         Provisions of the Company's articles of incorporation and bylaws may be
deemed to have anti-takeover effects, which include when and by whom special
meetings of the Company's shareholders may be called, and may delay, defer or
prevent a takeover attempt. In addition, certain provisions of the Florida
Business Corporation Act also may be deemed to have certain anti-takeover
effects which include that control of shares acquired in excess of certain
specified thresholds will not possess any voting rights unless these voting
rights are approved by a majority of a corporation's disinterested shareholders.

                                       12
<PAGE>

         In addition, the Company's articles of incorporation authorize the
issuance of up to 5,000,000 shares of preferred stock with such rights and
preferences as may be determined from time to time by the Company's board of
directors, of which 500,000 shares are currently issued and outstanding. The
Company's board of directors may, without shareholder approval, issue preferred
stock with dividends, liquidation, conversion, voting or other rights which
could adversely affect the voting power or other rights of the holders of the
Company's common stock.

ITEM 7.  FINANCIAL STATEMENTS

         See "Index to Financial Statements" for the financial statements
included in this Form 10-KSB.

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

         On September 25, 2001, the Board of Directors of the Company approved
the engagement of Feldman, Sherb & Co., P.C. as independent auditors of the
Company for the fiscal year ended July 31, 2001 and 2000. In so doing, the Board
determined not to renew the engagement of, and thereby dismissed, effective
September 25, 2001, BDO Seidman, LLP, independent auditors of the Company. On
October 1, 2001, the Company filed an 8-K announcing the changes.

         The audit reports of BDO Seidman, LLP on the Company's financial
statements for the two years ended July 31, 2000 and 1999 did not contain an
adverse opinion or disclaimer of opinion, and were not qualified or modified as
to uncertainty, audit scope, or accounting principles; however, BDO Seidman,
LLP's opinion dated November 3, 2000, relative to the financial statements as of
and for the year ended July 31, 2000, included an explanatory paragraph relative
to the Company's ability to continue as a going concern.

         During the two fiscal years ended July 31, 2000 and 1999, and any
subsequent interim period preceding the dismissal, there were no disagreements
with BDO Seidman, LLP on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope and procedures which, if not
resolved to the satisfaction of BDO Seidman, LLP would have caused BDO Seidman,
LLP to make reference to the subject matter in their report.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS,
         COMPLIANCE WITH SECTION 16(a)

DIRECTORS AND EXECUTIVE OFFICERS

         The following table sets forth the names and ages of our current
directors and executive officers, the principal officers and positions held by
each person. The executive officers are elected annually by the board of
directors. The executive officers serve terms of one year or until their death,
resignation or removal by the board of directors. There are no family
relationships between any of the directors and executive officers. In addition,
there was no arrangement or understanding between any executive officer and any
other person pursuant to which any person was selected as an executive officer.

         The directors and executive officers of VoiceFlash are as follows:

NOW                                 AGE            POSITION WITH VOICEFLASH

Lawrence Cohen                      56             Chairman of the Board, Acting
                                                   Chief Executive Officer

John Falcone(3)                     33             President

Cornelia Eldridge(1)(2)             59             Director

Charles Scher                       44             Treasurer and Secretary

(1)      Member of the Audit Committee of the board of directors.
(2)      Member of the Compensation Committee.
(3)      Mr. Falcone resigned August 1, 2001.

         VoiceFlash's board of directors held meetings and took action by
unanimous written consent four times during 2001.

                                       13
<PAGE>

         The VoiceFlash audit committee, consisting solely of Cornelia Eldridge
held one meeting in 2001. The functions of the audit committee are to review
annual and quarterly financial statements, meet with VoiceFlash's independent
auditors and address accounting matters or questions raised by the auditors.

         The compensation committee of the VoiceFlash board of directors,
consisting solely of Cornelia Eldridge held one meeting in 2001. The functions
of the compensation committee are to review compensation of officers and
employees and administer and award options under all stock option plans of
VoiceFlash.

         LAWRENCE COHEN has served as Chairman of the Board since he founded
VoiceFlash in October 1995. Since February 2000, Mr. Cohen has served as acting
Chief Executive Officer of VoiceFlash. Mr. Cohen has been engaged in providing
financial consulting and merchant banking services to early-stage companies for
more than the past 25 years. He has served as Chairman of the Board and Chief
Executive Officer of Bristol Retail Solutions, Inc. (OTCBR: BRTL), a
point-of-sale equipment distributor, since he co-founded such company in April
1996. He is also the co-founder of Apollo BioPharmaceuticals, Inc., a
privately-held company in Massachusetts engaged in the development of
neuroprotective pharmaceuticals, and currently Chairman of the Board of McLaren
Automotive Group, Inc., formerly ASHA Corp. (Nasdaq:MCLN), an automotive design
and motorsports group. Between November 1990 and September 1996, Mr. Cohen
served as Chairman of the Board of BioTime, Inc. (Nasdaq:BTIM), a biotechnology
firm he founded to develop an artificial blood plasma substitute. He was
co-founder of Cryomedical Sciences (Nasdaq:CMSI), a low temperature surgery
company, and served as its President from November 1990 to November 1991.

         CORNELIA ELDRIDGE has served as a director of VoiceFlash since October
1998. Ms. Eldridge is President of Eldridge Associates, Inc., a management-
consulting firm she founded in 1981. Ms. Eldridge currently serves on the Board
of Directors of DE Frey Inc., a financial services firm, and SysComm, the
largest assembler and reseller of IBM mid-range computers.

         CHARLES SCHER, a certified public accountant, has served as Secretary
and Treasurer of VoiceFlash since May 2001. From August 1999 until May 2001, he
was employed as chief financial officer of Streamline Publishing Inc., a
publishing company. From August 1995 until August 1999 he was employed as Audit
manager of American Express Tax & Business Service (formerly Millward & Co.,
CPA's). From January 1990 until August 1995, Mr. Scher was employed by Arthur
Andersen & Co (Cape Town, South Africa) as a manager and then as a National
Partner. From January 1986 until January 1990 he served as managing Director of
Abie Scher Farms. From January 1983 until January 1986, he was employed as
Senior Accountant with Bruk Rosenberg & Co., CA's.

SECTION 16(a) COMPLIANCE

None.

ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The following table sets forth the aggregate compensation paid to
Lawrence Cohen and John Falcone (the "Named Executive Officer") by the Company.
No other executive officer of the Company was paid a total annual salary and
bonus for the fiscal year ended July 31, 2001 which was $100,000 or more.

                                                      Securities       Other
Name and Principal    Fiscal                          Underlying       Annual
     Position          Year      Salary      Bonus     Options      Compensation
------------------    ------    ---------    -----    ----------    ------------

Lawrence Cohen,        2001     $115,500      -0-       125,000         -0-
Chairman, CEO          2000     $115,500      -0-         -0-           -0-
                       1999     $115,500      -0-         -0-           -0-

John Falcone(1),       2001     $120,000      -0-       450,000         -0-
President & CEO        2000     $ 93,333      -0-         -0-           -0-

(1)      Mr. Falcone resigned in August 2001.

                                       14
<PAGE>

EMPLOYMENT AGREEMENTS

         Effective December 21, 1997, the Company entered into a three-year
employment agreement with Lawrence Cohen providing for base annual salary of
$115,500.During the year ended July 31,2001, the Board of Directors extended the
employment agreement through December 19,2003. The employee may receive annual
bonuses at the discretion of the Company, with bonuses to be determined by the
Compensation and Audit Committee. No formula or criteria have been specifically
determined. The agreements provide for severance equal to one year's salary in
the event of (i) non-renewal of the agreement upon expiration other than for
cause or (ii) a change of control of the Company as a result of which the
employee is not retained by new management on a comparable basis. In addition,
the agreements contain confidentiality provisions and 12-month post termination
non-competition restriction which may be imposed by the Company provided the
employee receives a lump sum payment equal to one year's salary within 30 days
of termination of employment. Under Florida law, a court of competent
jurisdiction may determine not to enforce such non-competition restrictions or
partially enforce or modify such provisions.

OPTION GRANTS IN LAST FISCAL YEAR

         There were 475,000 stock options granted to the Named Executive
Officers during the fiscal year ended July 31, 2001.

         1997 STOCK OPTION PLAN

         The 1997 Stock Option Plan (the "Plan") provides for the grant of
options to purchase up to 5,000,000 shares of Common Stock to employees,
officers, directors, and consultants of the Company. Options may either be
"incentive stock options" within the meaning of Section 422 of the United States
Internal Revenue Code of 1986, as amended (the "Code"), or non-qualified
options. Incentive stock options may be granted only to employees of the
Company, while non-qualified options may be issued to non-employee directors,
consultants, and others, as well as to employees of the Company.

         The Plan will be administered by the Board of Directors or a committee
thereof, who determine, among other things, those individuals who shall receive
options, the time period during which the options may be partially or fully
exercised, the number of shares of Common Stock issuable upon the exercise of
each option, and the option exercise price.

         The exercise price of an incentive stock option may not be less than
the fair market value per share of Common Stock on the date the option is
granted. The exercise price of a non-qualified option may be established by the
Board of Directors. The aggregate fair market value (determined as of the date
the option is granted) of Common Stock for which any person may be granted
incentive stock options which first become exercisable in any calendar year may
not exceed $100,000. No person who owns, directly or indirectly, at the time of
the granting of an incentive stock option to such person, 10% or more of the
total combined voting power of all classes of stock of the Company (a "10%
Shareholder") shall be eligible to receive any incentive stock options under the
Plan unless the exercise price is at least 110% of the fair market value of the
shares of Common Stock subject to the option, determined on the date of grant.
Non-qualified options are not subject to such limitation.

         Incentive stock options may not be transferred by an optionee other
than by will or the laws of descent and distribution, and, during the lifetime
of an optionee, the option will be exercisable only by the optionee. In the
event of termination of employment other than by death or disability, the
optionee will have no more than three months after such termination during which
the optionee will be entitled to exercise the option, unless otherwise
determined by the Board of Directors. Upon termination of employment of an
optionee by reason of death or permanent and total disability, an optionee's
options remain exercisable for one year thereafter to the extent such options
were exercisable on the date of such termination. No similar limitation applies
to non-qualified options.

         Options under the Plan must be issued within ten years from the
effective date of the Plan, which is March 12, 1997. Incentive stock options
granted under the Plan cannot be exercised more than ten years from the date of
grant. Incentive stock options issued to a 10% Shareholder are limited to five
year terms. Options granted under the Plan generally provide for the payment of
the exercise price in cash and may provide for the payment of the exercise price
by delivery to the Company of shares of Common Stock already owned by the
optionee having a fair market value equal to the exercise price of the options
being exercised, or by a combination of such methods.

                                       15
<PAGE>

Therefore, if so provided in an optionee's options, an optionee may be able to
tender shares of Common Stock to purchase additional shares of Common Stock and
may theoretically exercise all of his stock options with no additional
investment other than the purchase of his original shares.

         Any unexercised options that expire or that terminate upon an
employee's ceasing to be employed by the Company become available again for
issuance under the Plan.

         The Plan may be terminated or amended at any time by the Board of
Directors, except that the number of shares of Common Stock reserved for
issuance upon the exercise of options granted under the Plan may not be
increased without the consent of the shareholders of the Company.

         Options to purchase 289,350 shares of Common Stock have been granted
pursuant to the Plan leaving a balance of 10,650 shares of Common Stock
available for issuance. The Company did not issue options from this Plan for the
year ended July 31, 2001. During the year-ended July 31,2001, the Company
retired 77,350 options held by employees no longer employed by the Company and
100,000 options held by a director expired.

         1999 STOCK OPTION PLAN

         The Company submitted for shareholder approval at its 2000 Annual
Meeting of Shareholders the 1999 Stock Option Plan ("1999 Plan"). Under the 1999
Plan, the Company will reserve an aggregate of 500,000 shares of Common Stock
for issuance pursuant to options granted under the 1999 Plan. The 1999 Plan
contains essentially the same terms and conditions as the existing 1997 Plan.
During the year ended July 31,2001, the Company increased the number of shares
of Common Stock applicable to the Plan to 5,000,000.

         Options to purchase 3,610,663 shares of Common Stock have been granted
pursuant to the Plan, leaving a balance of 1,183,333 shares of Common Stock
available for issuance. The Company issued options to purchase an aggregate of
745,578 shares of Common Stock exercisable at $1.15 to $1.32 per share over a
five-year term to employees of the Company.

AGGREGATED FISCAL YEAR END OPTION VALUE TABLE

         The following table sets forth certain information concerning
unexercised stock options held by the Named Executive Officers as of July 31,
2001. No stock options were exercised by the Named Executive Officers during the
period ended July 31, 2001. No stock appreciation rights were granted or are
outstanding.
<TABLE>
<CAPTION>
                      Number of Unexercised Options            Value of Unexercised In The Money
                         Held at July 31, 2001                    Options at July 31, 2001(1)
                      ------------------------------           ---------------------------------
Name                  Exercisable      Unexercisable           Exercisable         Unexercisable
-----------------     -----------      -------------           -----------         -------------
<S>                    <C>                  <C>                   <C>                   <C>
John Falcone             450,000            -0-                   -0-                   -0-

Lawrence Cohen         1,652,500            -0-                   -0-                   -0-

Cornelia Eldridge        165,000            -0-                   -0-                   -0-
</TABLE>

(1)      Dollar values are calculated based on the difference between the option
         exercise price and $.75, the closing price of the Company's Common
         Stock on July 30, 2001, as reported by NASDAQ.

                                       16
<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of July 31, 2001, information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
person who is known by the Company to own beneficially more than 5% of its
Common Stock, (ii) each director and nominee for director, (iii) each Named
Executive Officer (as defined herein), and (iv) all directors and executive
officers as a group. Unless otherwise indicated below, the persons in the table
above have sole voting and investment power with respect to all shares shown as
beneficially owned by them, subject to community property laws where applicable.
A person is deemed to be the beneficial owner of securities that can be acquired
by such person within 60 days from the date of this report upon the exercise of
options. Each person's percentage of ownership is determined by assuming that
any options held by such person have been exercised. As of July 31, 2001 there
were 12,838,604 shares of Common Stock outstanding. Unless otherwise indicated
below, the address of each person is c/o the Company at 6401 Congress Avenue,
Suite 250, Boca Raton, Florida 33487.

                                                               PERCENTAGE OF
NAME AND ADDRESS OF            SHARES OF COMMON STOCK       OUTSTANDING SHARES
 BENEFICIAL OWNERS               BENEFICIALLY OWNED        BENEFICIALLY OWNED(1)
--------------------------     ----------------------      ---------------------
Lawrence Cohen(1)                     4,202,044                   29.0%

Cornelia Eldridge(2)                    165,000                    1.3%

Charles Scher(3)                         50,000                    0.4%

John Falcone(4)                         450,000                    3.4%

All officers and directors
as a group (4 persons)                4,867,044                   34.1%

(1)      Includes (i) 1,652,500 shares of Common Stock underlying immediately
         exercisable options and (ii) 2,549,544 shares owned by Alliant. Alliant
         is wholly owned by East Ocean Limited Partnership, as to which Mr.
         Cohen is the general partner and members of Mr. Cohen's family are
         limited partners. Mr. Cohen disclaims beneficial ownership with respect
         to the limited partnership interests owned by members of his family.

(2)      Includes 165,000 shares of Common Stock underlying vested options at an
         exercise price ranging from $1.375-$3.75.

(3)      Includes 50,000 shares of Common Stock underlying vested options at an
         exercise price of $1.55.

(4)      Includes 450,000 shares of Common Stock underlying vested options at an
         exercise price of $1.375.  Mr. Falcone resigned on August 1, 2001.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Company completed a merger with Bristol Retail Solutions in May
2001. Both companies had certain common shareholders and members of management.
Larry Cohen, Chairman and CEO of VoiceFlash, also serves as Chairman of Bristol
Retail Solutions. David Kaye, former director of VoiceFlash was President and
CEO of Bristol Retail Solutions.

                                       17
<PAGE>

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

         A.       EXHIBITS:

                  Exhibit
                  Number   Description

                  1.1      Form of Underwriting Agreement(1)
                  2.1      Agreement and Plan of Merger with Bristol(2)
                  3.1      Articles of Incorporation, as amended(1)
                  3.15     Articles of Amendment(2)
                  3.2      By-Laws(1)
                  4.1      Form of Common Stock Certificate(1)
                  4.4      Form of Representative's Warrants(1)
                  4.5      7% Convertible Note issued to Alpha Capital(3)
                  4.6      7% Convertible Note issued to Stonestreet Limited
                           Partnership(3)
                  4.7      Common Stock Purchase Warrant issued to Alpha
                           Capital(3)
                  4.8      Common Stock Purchase Warrant issued to Stonestreet
                           Limited Partnership(3)
                  4.9      Form of Additional Common Stock Purchase Warrants
                           issued to Gem Studio, Inc., Alpha Capital and
                           Stonestreet Limited Partnership*
                  10.0     Employment Agreement with Lawrence Cohen(1)
                  10.1     Stock Option Plan(1)
                  10.2     Form of Alpha Capital and Stonestreet Limited
                           Partnership Subscription Agreement(3)
                  10.3     Amendment to Subscription Agreement with Alpha
                           Capital and Stonestreet Limited Partnership*

-----------------------
 *       Filed herewith
(1)      Filed as an exhibit to the Company's Registration Statement on Form
         SB-2 (File No. 333-47715) as filed with and declared effective by the
         Commission on May 28, 1998.
(2)      Filed as an exhibit to the Company's Registration Statement on Form S-4
         (File No. 333-55638) as filed with and declared effective by the SEC on
         May 9, 2001.
(3)      Filed as an exhibit to the Company's Current Report on Form 8-K filed
         with the Commission on August 17, 2001.

         B.       REPORTS ON FORM 8-K

                  On October 1, 2001 the Company filed a report on Form 8-K
indicating a change in its auditors.

                                       18
<PAGE>

                                   SIGNATURES

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

                                                   VOICEFLASH MAGIC INCORPORATED

DATE: November 8, 2001                                 /s/ LAWRENCE COHEN
                                                   -----------------------------
                                                   Lawrence Cohen,
                                                   Chief Executive Officer

         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated:

DATE: November 8, 2001                                 /s/ LAWRENCE COHEN
                                                   -----------------------------
                                                   Lawrence Cohen, Director and
                                                   Chief Executive Officer

DATE: November 8, 2001                                 /s/ CORNELIA ELDRIDGE
                                                   -----------------------------
                                                   Cornelia Eldridge, Director

DATE: November 8, 2001                                 /s/ CHARLES SCHER
                                                   -----------------------------
                                                   Charles Scher, Treasurer and
                                                   Secretary
                                                   Principal Financial and
                                                   Accounting Officer

                                       19
<PAGE>

                        VOICEFLASH NETWORKS INCORPORATED
                         (Formerly Registry Magic, Inc.)

                              FINANCIAL STATEMENTS

                       YEARS ENDED JULY 31, 2001 AND 2000

                                      INDEX




                                                                        PAGE

                                                                        --------

Report of Independent Certified Public Accountants                      F-2

Balance Sheet                                                           F-3

Statements of Operations                                                F-4

Statements of Stockholders' Deficit                                     F-5

Statements of Cash Flows                                                F-6

Notes to Financial Statements                                           F-7 - 19

















                                       F-1
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders of
VoiceFlash Networks Incorporated

We have audited the accompanying balance sheet of VoiceFlash Networks
Incorporated, as of July 31, 2001 and the related statements of operations,
stockholders' deficit and cash flows for the two years ended July 31, 2001 and
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of VoiceFlash Networks
Incorporated, as of July 31, 2001 and the results of its operations and its cash
flows for the two years ended July 31, 2001 and 2000, in conformity with
accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations,
has a cash deficiency from operations and is experiencing ongoing operating
losses 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 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


                                        /s/ Feldman Sherb & Co., P.C.
                                        -----------------------------
                                        Feldman Sherb & Co., P.C.
                                        Certified Public Accountants

New York, New York
October 23, 2001

                                       F-2
<PAGE>

                                            VoiceFlash Networks, Inc.
                                         (formerly Registry Magic, Inc.)

                                                  Balance Sheet

                                                  July 31, 2001


                                                     ASSETS
<TABLE>
<CAPTION>

Current assets:
<S>                                                                                                    <C>
     Cash                                                                                              $            12,171
     Accounts receivable, net of allowance of $362,151                                                              12,940
     Note receivable, short-term                                                                                    48,332
     Other current assets                                                                                           10,185
                                                                                                          -----------------
         Total current assets                                                                                       83,628


Property and equipment, net                                                                                        116,848

Note receivable, long-term                                                                                          72,307

Other assets                                                                                                        17,444
                                                                                                          -----------------
                                                                                                       $           290,227
                                                                                                          =================
</TABLE>

                                      LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>

Current liabilities:
<S>                                                                                                    <C>
     Accounts payable and accrued expenses                                                             $           313,268
     Convertible notes payable, net of discount                                                                     92,000
                                                                                                          -----------------
         Total current liabilities                                                                                 405,268

Commitments and contingencies                                                                                            -

Series A Redeemable Preferred Sock, $.001 par value - 5,000,000
     shares authorized; 500,000 shares issued and outstanding                                                    1,000,000

Stockholders' deficit:
     Common stock, par value $.001 - 50,000,000 shares authorized,
         12,838,604 issued and outstanding                                                                          12,838
     Additional paid in capital                                                                                 28,249,610
     Accumulated deficit                                                                                       (29,377,489)
                                                                                                          -----------------
         Total stockholders' deficit                                                                            (1,115,041)
                                                                                                          -----------------

                                                                                                       $           290,227
                                                                                                          =================
</TABLE>

                                 See notes to accompanying financial statements.

                                                      F-3

<PAGE>

                                            VoiceFlash Networks, Inc.
                                         (formerly Registry Magic, Inc.)

                                            Statements of Operations

<TABLE>
<CAPTION>

                                                                                                      Years Ended July 31,
                                                                                            ---------------------------------------
                                                                                                  2001                  2000
                                                                                            ------------------    -----------------
Revenues:
<S>                                                                                       <C>                   <C>
     Product sales                                                                        $           178,572   $          952,994
                                                                                            ------------------    -----------------
Costs and expenses:
     Cost of sales                                                                                     65,000              593,371
     General and administrative expenses                                                            3,248,218            2,645,467
     Research and development                                                                         505,084              704,904
     Depreciation                                                                                     128,418              203,698
     Acquisition costs                                                                                      -              384,306
     Interest expense                                                                                 106,256                    -
     Interest income                                                                                  (77,883)            (185,029)
                                                                                            ------------------    -----------------
                                                                                                    3,975,093            4,346,717
                                                                                            ------------------    -----------------

Loss from continuing operations                                                                    (3,796,521)          (3,393,723)
                                                                                            ------------------    -----------------

Loss from discontinued operations                                                                 (13,950,120)                   -
                                                                                            ------------------    -----------------

Net loss                                                                                          (17,746,641)          (3,393,723)

Preferred stock dividend                                                                              (10,000)                   -
                                                                                            ------------------    -----------------
Net loss applicable to common stockholders                                                $       (17,756,641)  $       (3,393,723)
                                                                                            ==================    =================

Basic and diluted net loss to common stockholders per share
     Continuing operations                                                                $             (0.56)  $            (0.62)
     Discontinued operations                                                                            (2.07)                   -
                                                                                            ------------------    -----------------
        Net loss to common stockholders                                                   $             (2.63)  $            (0.62)
                                                                                            ==================    =================

Basic and diluted weighted average common shares outstanding                                        6,750,991            5,503,295
                                                                                            ==================    =================


</TABLE>

                                 See notes to accompanying financial statements.

                                                      F-4

<PAGE>

                                            VoiceFlash Networks, Inc.
                                         (formerly Registry Magic, Inc.)

                                        Statement of Stockholders' Deficit

                                             Year ended July 31, 2001
<TABLE>
<CAPTION>


                                                    Common Stock              Additional
                                            ------------------------------      Paid-in         Accumulated
                                                Shares          Amount          Capital           Deficit               Total
                                            ---------------   ------------  ----------------   ---------------    ------------------
<S>                                         <C>               <C>           <C>                <C>                <C>
Balance at July 31, 1999                         5,878,000    $     5,878   $    14,029,754    $   (8,227,125)    $       5,808,507

     Repurchase of common stock                   (600,000)          (600)          (59,400)                -               (60,000)
     Exercise of stock options                     102,068            102            45,748                 -                45,850
     Net loss                                            -              -                 -        (3,393,723)           (3,393,723)
                                            ---------------   ------------  ----------------   ---------------    ------------------

Balance at July 31, 2000                         5,380,068          5,380   $    14,016,102    $  (11,620,848)    $       2,400,634

     Sale of common stock                        1,964,800          1,965         1,728,417                 -             1,730,382
     Warrants issued for consulting services             -              -         1,458,515                 -             1,458,515
     Common stock issued in connection
        with the acquisition of
        discontinued subsidiary                  5,493,736          5,493         6,861,678                 -             6,867,171
     Valuation of options and warrants in
         connection with the acquisition of
         discontinued subsidiary                         -              -         4,009,898                 -             4,009,898
     Beneficial conversion feature in
        connection with convertible notes                -              -            80,000                 -                80,000
     Issuance of warrants in connection
        with convertible notes                           -              -            95,000                 -                95,000
     Dividends- preferred stock                          -              -                 -           (10,000)              (10,000)
     Net loss                                            -              -                 -       (17,746,641)          (17,746,641)
                                            ---------------   ------------  ----------------   ---------------    ------------------

Balance at July 31,2001                         12,838,604    $    12,838   $    28,249,610    $  (29,377,489)    $      (1,115,041)
                                            ===============   ============  ================   ===============    ==================

</TABLE>

                                 See notes to accompanying financial statements.

                                                      F-5
<PAGE>

                                            VoiceFlash Networks, Inc.
                                         (Formerly Registry Magic, Inc.)

                                            Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                                               Years Ended July 31,
                                                                                          -------------------------------
                                                                                              2001             2000
                                                                                          --------------   --------------
OPERATING ACTIVITIES:
<S>                                                                                    <C>               <C>
     Net loss                                                                          $    (17,746,641) $    (3,393,723)
     Adjustments to  reconcile net loss to net
        cash used in operating activities:
          Depreciation                                                                          128,418          203,698
          Common stock and option conversion expense                                                  -           43,000
          Loss from discontinued operations                                                  13,950,120                -
          Issuance of warrants for consulting services                                        1,458,515                -
          Amortization of beneficial conversion feature                                          80,000
          Amortization of debt discount                                                          12,000                -
     Changes in operating assets
        Accounts receivable                                                                     193,626          396,043
        Inventories                                                                             107,950          148,285
        Other current assets                                                                      6,660            5,759
        Other assets                                                                             (6,434)          28,138
        Accounts payable and accrued expenses                                                    52,772         (313,154)
                                                                                          --------------   --------------
     Net cash used in continuing operations                                                  (1,763,014)      (2,881,954)
     Net cash used in discontinued operations                                                (2,073,051)               -
                                                                                          --------------   --------------
          NET CASH USED IN OPERATING ACTIVITIES:                                             (3,836,065)      (2,881,954)
                                                                                          --------------   --------------

INVESTING ACTIVITIES:
     (Purchase) / sales  of equipment, net                                                      (63,174)          97,477
                                                                                          --------------   --------------

FINANCING ACTIVITIES:
     Net proceeds from the exercise of stock options                                                  -            2,850
     Repurchase of common stock                                                                       -          (60,000)
     Sale of common stock                                                                     1,730,382                -
     Proceeds from convertible notes                                                            175,000                -
     Due (from) / to related party                                                              100,000         (100,000)
     Repayments (advances) to Synergex                                                           29,361         (150,000)
                                                                                          --------------   --------------
        NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                   2,034,743         (307,150)
                                                                                          --------------   --------------

Net decrease in cash                                                                         (1,864,496)      (3,091,627)

Cash at beginning of year                                                                     1,876,667        4,968,294
                                                                                          --------------   --------------

Cash at end of year                                                                    $         12,171  $     1,876,667
                                                                                          ==============   ==============

Supplemental disclosures of cash flow information:
     Cash paid for interest                                                            $              -  $             -
                                                                                          ==============   ==============
     Cash paid for taxes                                                               $              -  $             -
                                                                                          ==============   ==============

Non-cash disclosure:
     Conversion of options to common stock                                             $              -  $        43,000
                                                                                          ==============   ==============
     Discount on convertible notes                                                     $         95,000  $             -
                                                                                          ==============   ==============
     Issuance of preferred stock in connection with the acquisition                           1,000,000  $             -
       of discontinued sub$idiary                                                         ==============   ==============

     Issuance of common stock in connection with the acquisition                       $      6,867,171  $             -
       of discontinued sub$idiary                                                         ==============   ==============

     Options and warrants issued in connection with the acquisition                    $      4,009,898  $             -
       of discontinued sub$idiary                                                         ==============   ==============
</TABLE>

                                 See notes to accompanying financial statements.

                                                      F-6
<PAGE>

                        VOICEFLASH NETWORKS INCORPORATED
                         (Formerly Registry Magic, Inc.)

                          NOTES TO FINANCIAL STATEMENTS


Registry Magic Inc. (the "Company") was incorporated on October 11, 1995. The
Company changed its name to VoiceFlash Networks Incorporated on June 22, 2001.
The Company is engaged in the development and marketing of proprietary
applications software incorporating core speech recognition technology. The
Company's products are designed to enable a user to perform tasks or retrieve
information by speaking into a telephone or to a computer in a natural
conversational manner. The Company has developed voice recognition products that
span the spectrum of applications from telephony to point-of-sale human
interface solutions. The Company also is developing secured voice enabled
applications that can be incorporated with emerging technologies in wireless
area networks with particular emphasis on point-of-sale equipment. The Company's
offices are located in Boca Raton, Florida. The Company currently only has one
operating segment.


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

         b.       Cash Equivalents - The Company considers all highly liquid
                  debt instruments with original maturities of three months or
                  less to be cash equivalents. Cash equivalents include
                  investments in money market accounts.

         c.       Concentration of Credit Risk - Credit losses, if any, has been
                  provided for in the financial statements based on management's
                  expectations. The Company's accounts receivable are subject to
                  potential concentrations of credit risk. The Company does not
                  believe that it is subject tom any unusual or significant
                  risks, in the normal course of business.

         d.       Research and  Development  Costs - Costs incurred to establish
                  the  technological  feasibility of computer software products
                  are charged to operations as incurred.


         e.       Property and Equipment - Property and equipment is recorded at
                  cost. Depreciation is calculated on a straight-line basis over
                  the estimated useful lives of the assets, which range from
                  three to five years.

         f.       Fair Value of Financial Instruments - The Company's financial
                  instruments consists principally of cash and cash equivalents,
                  accounts receivable, accounts payable and accrued liabilities.
                  The carrying amounts of such financial instruments as
                  reflected in the balance sheet approximate their estimated
                  fair value as of July 31, 2001. The estimated fair value is
                  not necessarily indicative of the amounts the Company could
                  realize in a current market exchange or of future earnings or
                  cash flows.

         g.       Revenue Recognition - Revenue from the sale of software
                  products is recognized at the time of sale and shipment of the
                  product. Revenue from product development is recognized when
                  development is complete.

                                      F-7
<PAGE>

         h.       Income Taxes - The Company accounts for income taxes pursuant
                  to the provisions of Statement of Financial Accounting
                  Standards (SFAS) No.109, "Accounting for Income Taxes," which
                  requires, among other things, a liability approach to
                  calculating deferred income taxes. The asset and liability
                  approach requires the recognition of deferred tax liabilities
                  and assets for the expected future tax consequences of
                  temporary differences between the carrying amounts and the tax
                  bases of assets and liabilities. The Company has had losses
                  since inception and accordingly has not provided for income
                  taxes. Realization of the benefits related to the net
                  operating loss carry forwards may be limited in any one year
                  due to IRS Code Section 382, change of ownership rules.

         i.       Net Loss Per Common Share - The Company accounts for earnings
                  per share ("EPS") pursuant to SFAS No. 128, "Earnings Per
                  Share." Net loss per common share (basic and diluted) is based
                  on the net loss divided by the weighted average number of
                  common shares outstanding during each year.

                  The Company's potentially issuable shares of common stock
                  pursuant to outstanding stock purchase options and warrants,
                  for fiscal years ended July 31, 2001 and 2000 (totaling
                  1,183,337 shares and 604,500 shares with prices ranging from
                  $.21 to $6.76 and $3.50 to $9.06, respectively) are excluded
                  from the Company's diluted computation as their effect would
                  be antidilutive to the Company's net loss per share.

         j.       Long-Lived Assets - In accordance with SFAS No. 121
                  "Accounting for Impairment of Long-Lived Assets and for
                  Long-Lived Assets to be Disposed of," the Company includes as
                  a component of income from continuing operations before taxes
                  on income, the impairment loss on assets to be held and losses
                  on assets expected to be disposed of.

         k.       Stock Based Compensation - SFAS No. 123, "Accounting for Stock
                  Based Compensation," establishes a fair value method for
                  accounting for stock-based compensation plans either through
                  recognition or disclosure. The Company did not adopt, for
                  employee options the fair value based method but instead
                  discloses the pro forma effects of the calculation required by
                  the statement.

         l.       Preferred Stock - The Board of Directors is authorized to
                  issue shares of preferred stock and to determine the dividend,
                  liquidation, conversion and redemption, and other rights,
                  preferences and limitations of such shares without any further
                  vote or action of the shareholders. Accordingly, the Board of
                  Directors has the power, without shareholder approval, to
                  issue preferred stock with dividend, liquidation, conversion,
                  voting, or other rights which could negatively affect the
                  voting power or other rights of the holders of the Common
                  Stock.

                                      F-8
<PAGE>

         m.       Recent and Future Accounting Pronouncements -

                  (i)      In June 1998, the Financial Accounting Standards
                           Board issued SFAS No. 133, "Accounting for Derivative
                           Instruments and Hedging Activities". SFAS No. 133
                           requires companies to recognize all derivative
                           contracts as either assets or liabilities in the
                           balance sheet and to measure them at fair value. If
                           certain conditions are met, a derivative may be
                           specifically designated as a hedge, the objective of
                           which is to match the timing of gain or loss
                           recognition on the hedging derivative with the
                           recognition of (i) the changes in the fair value of
                           the hedged asset or liability that are attributable
                           to the hedged risk or (ii) the earnings effect of the
                           hedged forecasted transaction. For a derivative not
                           designated as a hedging instrument, the gain or loss
                           is recognized in income in the period of change. As
                           amended, the effective date is for all fiscal
                           quarters of fiscal years beginning after June 15,
                           2000.

                           Historically, the Company has not entered into
                           derivatives contracts either to hedge existing risks
                           or for speculative purposes. Accordingly, the Company
                           does not expect adoption of the new standard to
                           affect its financial statements.

                  (ii)     In March 2000, the Financial Accounting Standards
                           Board (FASB) issued FASB Interpretation No. 44
                           ("Interpretation 44"), "Accounting For Certain
                           Transactions Involving Stock Compensation".
                           Interpretation 44 provides criteria for the
                           recognition of compensation expense in certain
                           stock-based compensation arrangements that are
                           accounted for under Accounting Principles Board
                           Opinion No. 25, "Accounting For Stock Issued To
                           Employees". Interpretation 44 is effective July 1,
                           2000, with certain provisions effective retroactively
                           to December 15, 1998 and January 12, 2000. There was
                           no effect of the retroactive provisions of
                           Interpretation 44 on the Company's financial
                           statements. Interpretation 44 is not expected to have
                           a material effect on the Company's financial
                           statements.

                  (iii)    In July 2001, the Financial Accounting Standards
                           Board issued Statement of Financial Accounting
                           Standards ("SFAS") No. 141 "Business Combinations"
                           and SFAS No. 142 "Goodwill and Intangible Assets
                           ("SFAS No. 142"). SFAS No. 141 requires that all
                           business combinations initiated after June 30, 2001
                           be accounted for using the purchase method of
                           accounting and prohibits the use of the
                           pooling-of-interests method for such transactions.
                           SFAS No. 142 applies to all goodwill and intangible
                           assets acquired in a business combination. Under the
                           new standard, all goodwill, including goodwill
                           acquired before initial application of the standard,
                           should not be amortized but should be tested for
                           impairment at least annually at the reporting level,
                           as defined in the standard. Intangible assets other
                           than goodwill should be amortized over their useful
                           lives and reviewed for impairment in accordance with
                           SFAS no. 121. The new standard is effective for
                           fiscal years beginning after December 15, 2001. The
                           Company must adopt this standard on January 1, 2002.
                           As of July 31, 2001, the Company had no unamortized
                           goodwill.

                                      F-9
<PAGE>

                  (iv)     In August 2001, the FASB issued Statement of
                           Financial Accounting Standards No. 144 ("SFAS 144"),
                           "accounting for the Impairment or Disposal of
                           Long-lived Assets". SFAS 144 superceded Statement of
                           Financial Accounting Standards No. 121, "accounting
                           for the Impairment of Long-lived Assets and Assets to
                           be Disposed of" and the accounting and reporting
                           provisions of Accounting Principles Board Opinion No.
                           30, "reporting the Results of Operations - Reporting
                           the Effects of Disposal of a Segment of a Business,
                           and Extraordinary, Unusual and Infrequently Occurring
                           Events and Transaction". SFAS 144 also amends
                           Accounting Research Bulletin No. 51, "Consolidated
                           Financial Statements," to eliminate the exception to
                           consolidation for a subsidiary for which control is
                           likely to be temporary. The provision of SFAS 144
                           will be effective for fiscal years beginning after
                           December 15, 2001. The Company has not yet determined
                           the effect SFAS 144 will have on its financial
                           position or results of operations in future periods.

         n.       Going Concern - The Company's financial statements are
                  presented on a going concern basis, which contemplates the
                  realization of assets and the satisfaction of liabilities in
                  the normal course of business. The Company has experienced
                  recurring losses and a cash deficiency from operations. In
                  order to remain a going concern, the Company must obtain
                  additional sources of cash and ultimately achieve profitable
                  operations. The Company's plans for raising additional sources
                  of cash primarily rely on the Company's intent to raise
                  capital through private placement offerings of shares of
                  common stock. Additionally, the Company is planning to
                  introduce new product lines. The Company's overall goal is to
                  exploit its proprietary speech recognition application
                  expertise and combine it in a secured environment with the
                  wireless Internet, mobile commerce, and wireless LANs. By
                  broadening the spectrum of the Company's technologies to
                  include Speech Recognition and Verification, WAP, and wireless
                  LANs, the Company believes it can take advantage of recent
                  technological developments that are bringing the Internet,
                  databases and LANs to the retail market. The Company has
                  developed products that integrate technology with
                  point-of-sale terminals. The Company plans on developing
                  additional products around this platform.

                  The Company's continued existence is dependent upon its
                  ability to resolve its liquidity problems by raising
                  additional cash, developing new product lines, controlling
                  operating expenses and by achieving profitable operations. No
                  assurances can be made that the Company can obtain additional
                  sources of cash or that operations can produce a positive cash
                  flow or that the Company will be successful in achieving the
                  above stated goals.

                  The financial statements do not include any adjustments to
                  reflect the possible future effects on the recoverability and
                  classification of assets or the amounts and classification of
                  liabilities that may result from the possible inability of the
                  Company to continue as a going concern.

                                      F-10

<PAGE>

2.       ACQUISITION

         The Company completed the acquisition of Bristol Retail Solutions, Inc.
         ("Bristol") in June 2001. Bristol is a dealer of retail point-of-sale
         systems in the United States, with sales, service and support offices
         in 10 cities located in six states. The purchase price for Bristol was
         (i) the issuance of .65 of a share of the Company's common stock for
         every 1 share of Bristol's common stock, based on 8,451,902 shares of
         Bristol common stock which converted to 5,493,736 shares of the
         Company's stock at a price of $1.25 per share (ii) the issuance of
         500,000 shares of the Company's Series A Convertible Preferred Stock at
         $2.00 per share amounting to $1,000,000 for the Bristol Convertible
         Series C Preferred Stock and (iii) the Company assuming all outstanding
         warrants and options of Bristol at a rate of .65 of the Company's
         shares for every 1 share of Bristol's warrants and / or options
         outstanding at the date of acquisition. The Company valued the warrants
         and options issued for the Bristol acquisition based on the
         Black-Scholes option-pricing model and used the following assumptions:
         expected stock price, volatility of 172%, risk-free interest rate of
         6.02% and expected lives ranging from one to five years.

         The following table gives a summary of the acquisitions in financial
         terms:

             Purchase Price                                         $11,877,069
             Acquisition Costs                                           86,543
             Fair Value of Assets Acquired                            8,200,000)
             Fair Value of Liabilities Assumed                        8,200,000
                                                                    ------------
             Goodwill                                               $11,963,612
                                                                    ============

         The detailed components consists of the following:

            Common Stock (5,493,736 shares)                         $ 6,867,171
            Series A Convertible Preferred Stock                      1,000,000
            Value of the Company's Warrants and Options issued        4,009,898
                                                                    ------------
                                                                    $11,877,069
                                                                    ============

         Fair Value of assets acquired:

            Cash                                                    $   200,000
            Accounts receivable                                       2,300,000
            Inventory                                                 3,300,000
            Property, plant and equipment                               200,000
            Intangible assets                                         2,000,000
            Other                                                       200,000
                                                                    ------------
                                                                    $ 8,200,000
                                                                    ============

         Fair Value of liabilities assumed:

            Accounts payable                                        $ 3,500,000
            Accrued expenses and customer deposits                    2,000,000
            Notes payable                                             2,700,000
                                                                    ------------
                                                                    $ 8,200,000
                                                                    ============

         In July 2001 Bristol entered into bankruptcy under Chapter 11 of the
         United States bankruptcy code. As of July 31, 2001, the Company's
         wholly owned subsidiary was unable to adopt a plan of reorganization
         and has since adopted a plan to discontinue the operations. This
         resulted in a charge to operations of $13,950,120 comprised of the
         write off of Goodwill of $11,963,612, the write-off of advances to
         Bristol by the Company totaling $1,918,655, and operating losses by
         Bristol since the acquisition of $67,853.

                                      F-11
<PAGE>

3.       PROPERTY AND EQUIPMENT

         The Company's property and equipment is summarized as follows:


            Office equipment            $  93,846
            Computers                     442,455
                                        ----------
                                          536,301
            Accumulated depreciation     (419,453)
                                        ----------
                                        $ 116,848
                                        ==========


4.       CONVERTIBLE NOTES PAYABLE

         On June 12, 2001, the Company entered into three convertible promissory
         notes totaling $175,000. These notes are convertible, at the option of
         the holder at any time, at $1.00 per share. These note bears interest
         at 10.00% per annum, payable in quarterly installments. The principal
         amount and all unpaid interest will be due and payable on June 12,
         2002. Such notes and unpaid interest are convertible into common stock
         at $1.00 per share at any time during the term of the notes.

         The Company has recorded a beneficial conversion feature of $80,000,
         representing the difference between the fair market value of the
         Company's common stock on the date of the loan and the conversion
         price. The Company has expensed the entire $80,000 for the year ended
         July 31, 2001.

         Along with these convertible promissory notes, the Company issued
         150,000 warrants to acquire shares of the Company's common stock. The
         warrants are exercisable at $1.00 per share and expire five years from
         the date of issuance. The Company has recorded these warrants as a
         discount to the convertible promissory notes for $95,000. The discount
         was derived from the Black-Scholes option-pricing model based on the
         following assumptions: expected stock price volatility of 129%;
         risk-free interest rate of 5.25%; and an expected 5-year life. The
         discount will be amortized as interest expense over one year. With
         respect to such discount, the Company recorded interest expense of
         $12,000 for the year ended July 31, 2001.

                   Convertible Notes             $175,000
                   Discount on notes              (95,000)
                                                 ---------
                                                   80,000
                   Amortization of discount        12,000
                                                 ---------
                                                 $ 92,000
                                                 =========

                                      F-12

<PAGE>

5.       CONVERTIBLE PREFERRED STOCK

         On June 26, 2001, the Company issued to Berthel SBIC, LLC. ("Berthel"),
         as part of its acquisition of Bristol, 500,000 shares of its Series A
         Convertible Preferred Stock (the Series A) and a warrant to purchase
         276,250 shares of its common stock for $1,000,000. The warrant has an
         exercise price per share of $.01 and is exercisable until January 12,
         2005.

         The holder of the Series A Preferred Stock are entitled to receive
         cumulative cash dividends at a rate of $0.24 per year per share,
         payable quarterly no later than the last business day of each March,
         June, September and December. The Company recorded cumulative dividends
         of $10,000 as of July 31, 2001. The purchaser received warrants to
         purchase 276,500 shares of common stock. These warrants were valued at
         $376,414 by the Company using a Black-Scholes option-pricing model


6.       STOCKHOLDERS' EQUITY

         On June 19, 2001, the Company amended the Articles of Incorporation,
         pursuant to which the Company's authorized common stock was increased
         from 30,000,000 to 50,000,000 shares.

         a.       During October 1999, the Company entered into Settlement
                  Agreements and General Releases with two former employees.
                  Under the terms of these Agreements, the Company dismissed
                  with prejudice a pending action against one of the former
                  employees. Also, as part of these Settlement Agreements, the
                  employees sold to the Company 600,000 shares of Common Stock
                  for $60,000. The parties exchanged general releases as part of
                  these Settlement Agreements.

         b.       In August 1999, a former employee of the company exercised
                  90,000 stock options to purchase 77,405 shares of common stock
                  at an exercise price of $.50 per share of common stock. The
                  purchase price consisted of a cashless exercise provision
                  utilizing 12,595 shares of common stock and $2,850.

                  In April 2000, a former director and a current officer of the
                  Company converted 85,000 common stock options exercisable at
                  $3.75 into 24,663 shares of common stock. These options
                  contained a cashless exercise feature, which allowed the
                  excess of the common stock market value over the option price
                  to be used as currency to purchase the shares underlying the
                  option. In connection with this conversion, the Company
                  recorded $43,000 as compensation expense, which is attributed
                  to the difference between the exercise price and the market
                  value of the common stock on the date of conversion.

         c.       In  November 2000, the Company sold 500,000 shares of common
                  stock for $500,000 to an accredited investor.

         d.       In March 2001 the Company issued 1,302,000 of common stock
                  pursuant to Regulation S. The Company sold 1,302,000 shares of
                  stock at $1.00 per share to accredited investors for net
                  proceeds of $1,130,662. The Company paid a 10% placement fee,
                  closing fees and issued 130,200 three-year warrants
                  exercisable at $1.00 per share. The issuance of these shares
                  of stock and warrants will have a dilutive effect on future
                  earnings per share.

         e.       In April 2001 the Company issued warrants to purchase an
                  aggregate of 725,000 shares of its common stock exercisable at
                  prices ranging from $1.00 to $1.50 per share to several
                  consultants for services provided. Accordingly, the Company
                  has valued the warrants at their fair value and has recorded a
                  charge to operations in the amount of approximately
                  $1,458,515. This expense is reflected in general and
                  administrative expenses in the accompanying condensed
                  statements of operations.

                                      F-13
<PAGE>

         f.       In June 2001 the Company issued 148,000 shares of common stock
                  pursuant to Regulation S. The Company sold 148,000 shares of
                  stock at $0.75 per share to accredited investors for net
                  proceeds of $99,720. The Company paid a 10% placement fee,
                  closing fees and issued 14,800 shares of common stock in
                  connection with the sale of the stock.

         g.       In June 2001 the company issued 5,493,736 of common stock
                  pursuant to the acquisition of Bristol Retail Solutions. These
                  shares were valued at $6,867,171, which was the price at the
                  date of the acquisition. The company issued 1,029,464 warrants
                  at prices ranging from $.01 to $6.00 and 2,488,037 options at
                  prices ranging from $.19 to $3.13 to the existing Bristol
                  holders at the date of acquisition. Accordingly, the Company
                  has valued the warrants and options at their fair value and
                  has recorded a charge in the amount of approximately
                  $4,001,000. This expense is reflected in loss from
                  discontinued operations in the accompanying condensed
                  statement of operations.


7.       STOCK OPTIONS AND WARRANTS

         In March 1997, the Company adopted a Stock Option Plan (the "1997
         Plan") under which 300,000 shares of common stock are reserved for
         issuance upon exercise of stock based awards, including non-qualified
         stock options. The 1997 Plan is also authorized to issue short-term
         cash incentive awards. The 1997 Plan is administered by either the
         Board or such committees, officers and/or employees of the Company as
         the Board may so designate. The purchase price of each share of common
         stock purchased upon exercise of any option granted is as follows: (i)
         incentive stock options shall be equal to or greater than the fair
         market value of the common stock on the date of grant as required under
         Section 422 of the Internal Revenue Code, (ii) options granted to 10%
         holders and designated by the plan administrator as incentive stock
         options shall be at least 110% of the fair market value of the common
         stock on the date of grant as required under Section 422 of the
         Internal Revenue Code, (iii) non-employee director options shall be
         equal to or greater than the fair market value of the common stock on
         the date of the grant. Pursuant to the plan, options to purchase 47,500
         shares of common stock exercisable at $7.88 to $8.00 or the number of
         already owned shares of stock equal in value to the total exercise
         price of the options were granted during the year ended July 31, 1999.
         No options under this plan were granted during the years ended July 31,
         2000 and 2001. These options vest over terms up to five years from the
         grant date with expiration dates beginning in 2001.

                                      F-14

<PAGE>

         In March 1999, the Company adopted a Stock Option Plan (the "1999
         Plan") under which 500,000 shares of common stock are reserved for
         issuance upon exercise of stock based awards including, non-qualified
         stock options. In May 2001 the Company increased the number of shares
         of common stock in the 1999 Plan to 5,000,000. The 1999 Plan is also
         authorized to issue short-term cash incentive awards. The 1999 Plan is
         administered by either the Board or such committees; officers and/or
         employees of the Company as the Board may so designate. The purchase
         price of each share of common stock purchased upon exercise of any
         option granted is as follows: (i) incentive stock options shall be
         equal to or greater than the fair market value of the common stock on
         the date of grant as required under Section 422 of the Internal Revenue
         Code, (ii) options granted to 10% holders and designated by the plan
         administrator as incentive stock options shall be at least 110% of the
         fair market value of the common stock on the date of grant as required
         under Section 422 of the Internal Revenue Code, (iii) non-employee
         director options shall be equal to or greater than the fair market
         value of the common stock on the date of the grant. Pursuant to the
         1999 Plan, options to purchase 363,600 shares of common stock
         exercisable at $3.00 to $3.63 or the number of already owned shares of
         stock equal in value to the total exercise price of the options, have
         been granted as of July 31, 1999. A total of 1,121,000 options to
         purchase shares of common stock exercisable at prices ranging between
         $1.37-$1.75 were granted to existing employees of the Company during
         the year ended July 31, 2001. In addition, the Company granted
         2,489,663 options to purchase shares of common stock at prices ranging
         between $.12-$2.03 to existing warrant and option holders of Bristol as
         part of the acquisition cost. Such options were valued at $4,009,898
         upon acquisition, which has been charged to discontinued operations for
         the year ended July 31, 2001. (see Note 2).

         Subsequent to year-end, the Company issued five-year non-statutory
         options to purchase 350,000 shares of common stock exercisable at $.72
         was granted to two directors and one employee. These options have
         available a cashless exercise provision whereby the holder can exercise
         the options based on a formula pursuant to the stock option agreement.

         The following table illustrates the Company's stock option and warrants
         issuances and balances outstanding during the years ended July 31, 2001
         and 2000. The Company generally issues warrants to purchase shares of
         common stock in connection with debt and equity financing and to
         non-employee consultants.

                                      F-15

<PAGE>
<TABLE>
<CAPTION>

                                                                  OPTIONS                               WARRANTS
                                                     ----------------------------------    -----------------------------------
                                                                           Weighted                               Weighted
                                                         Shares             Average            Shares              Average
                                                       Underlying          Exercise          Underlying           Exercise
                                                        Options             Price             Warrants             Price
                                                     ---------------     --------------    ----------------    ---------------
        <S>                                             <C>              <C>               <C>                 <C>
        Outstanding at August 1, 1999                   1,569,376        $     3.58               -            $       -
                  Granted                                    -                  -                 -                    -
                  Canceled / Forfeited                   (913,376)             3.76               -                    -
                  Exercised                              (175,000)             2.08               -                    -
                                                     ---------------     --------------    ----------------    ---------------
        Outstanding at July 31, 2000                      481,000        $     3.87               -            $       -
                  Granted                               3,610,663              0.66           1,884,464               1.57
                  Canceled / Forfeited                   (298,500)             2.58               -                    -
                  Exercised                                  -                  -                 -                    -
                                                     ---------------     --------------    ----------------    ---------------
        Outstanding at July 31, 2001                    3,793,163        $      .91           1,884,464        $      1.57
                                                     ===============     ==============    ================    ===============
</TABLE>

         The following is additional information with respect to the Company's
         options and warrants as of July 31, 2001

<TABLE>
<CAPTION>

                                 OPTIONS OUSTANDING                                                  OPTIONS
                                                                                                   EXERCISABLE
   --------------------------------------------------------------------------------    ------------------------------------
                                                    Weighted
                                                     Average           Weighted                                 Weighted
                                                    Remaining           Average                                  Average
       Range of                  Number            Contractual         Exercise             Number              Exercise
      Exercise Price          Outstanding             Life               Price            Exercisable            Price
   --------------------     ----------------     ---------------    ---------------    ------------------    --------------
   <S>                      <C>                  <C>                <C>                <C>                   <C>
        $.12-$.49                 2,359,663        9.47 years       $     .21                  2,282,332     $    .20
      $1.38 - $1.87               1,049,750        4.62 years       $    1.51                    937,250     $   1.51
      $2.03 - $3.75                 367,250        2.74 years       $    3.48                    367,250     $   3.48
      $5.00 - $7.00                  16,500        1.48 years       $    6.76                     16,500     $   6.76
                            ----------------                                           ------------------
                                  3,793,163                                                    3,603,332
                            ================                                           ==================

<CAPTION>
                                                                                                     WARRANTS
                                WARRANTS OUTSTANDING                                               EXERCISABLE
   --------------------------------------------------------------------------------    ------------------------------------
                                                    Weighted
                                                     Average           Weighted                                 Weighted
                                                    Remaining           Average                                  Average
       Range of                  Number            Contractual         Exercise             Number              Exercise
      Exercise Price          Outstanding             Life               Price            Exercisable            Price
   --------------------     ----------------     ---------------    ---------------    ------------------    --------------
   <S>                      <C>                  <C>                <C>                <C>                   <C>
        $.01-$.01                   302,236        1.33 years       $     .01                    302,256     $    .01
      $.65 - $1.15                1,082,500        3.35 years       $     .98                    457,500     $    .83
      $2.31 - $3.90                 499,728        1.42 years       $    3.81                    499,728     $   3.81
                            ----------------                                           ------------------
                                  1,884,464                                                    1,259,484
                            ================                                           ==================
</TABLE>

                                                      F-16

<PAGE>

         SFAS No. 123, Accounting for Stock-Based Compensation, requires the
         Company to provide pro forma information regarding net loss and net
         loss per share as if compensation cost for the Company's stock option
         plan had been determined in accordance with the fair value based method
         prescribed in SFAS No. 123. The Company estimates the fair value of
         each stock option at the grant date by using the Black-Scholes
         option-pricing model with the following weighted-average assumptions
         used for grants in 2000 and 2001: no dividend yield percent; expected
         volatility of 129.0%; risk-free interest rate of 6.0% and expected
         lives ranging between 4 and 5 years for the 1997 Plan, 1999 Plan and
         non-plan options.

         Had compensation cost for the Company's option plans been determined in
         accordance with SFAS 123, the Company's net loss and loss per share
         would have been increased to the pro forma amounts indicated below:

                                                        Year Ended July 31,
                                                 -------------------------------
                                                      2001             2000
                                                 --------------   --------------
         Net loss:                As reported    $ (17,746,641)   $ (3,393,723)
                                  Pro forma      $ (18,285,650)   $ (3,414,845)

         Net loss per share:
             Basic and diluted    As reported    $       (2.63)   $       (.62)
             Basic and diluted    Pro forma      $       (2.71)   $       (.62)


8.       INCOME TAXES

         At July 31, 2001, the Company had a net operating loss carryforward
         (NOL) of approximately $27,800,000, which expires through 2021.


         The net deferred tax asset is comprised of the following at July 31,
2001:

            Deferred tax assets:
                        Prepaid royalty expense           $          20,000
                        Start up costs                              156,000
                        Allowance for doubtful accounts             362,000
                        Net operating loss carryforward          10,425,000
                                                          -------------------
                                                                 10,963,000
                                                          -------------------

            Deferred tax liability
                        Depreciation                                (36,000)
                                                          -------------------

            Net deferred tax asset                               10,927,000
            Deferred tax asset valuation allowance              (10,927,000)
                                                          -------------------
                                                          $               -
                                                          ===================

         Realization of any portion of the Company's deferred tax asset at July
         31, 2001 is not considered to be more likely than not and accordingly a
         $10,927,000 valuation allowance has been provided.

         The loss carryforwards are subject to limitations on annual utilization
         because there are "equity structure shifts" or "owner shifts" involving
         5% stockholders (as these are defined in Section 382 of the Internal
         Revenue Code), which have resulted in a more than 50% change in
         ownership.

                                      F-17
<PAGE>

9.       SYNERGEX MERGER

         On August 7, 2000, the Company and Synergex International Corporation
         ("Synergex") terminated a Plan of Merger and accordingly, the Company
         wrote off acquisition costs of approximately $384,000. In connection
         with the termination of the Merger, the Company terminated a Management
         Services Agreement whereby Synergex agreed to provide the Company with
         executive accounting, sales, marketing and other management services as
         agreed upon by the parties. The Company paid Synergex $135,872 for
         these services. The Company's personnel will resume these functions.

         In connection with the merger the Company had advanced Synergex
         $150,000 pursuant to a promissory note. Synergex has agreed to repay
         the principal amount of $150,000 plus interest equal to prime plus 2%
         in 36 equal monthly installments beginning September 1, 2000. The
         balance on the note on July 31,2001 is $120,639.


10.      COMMITMENTS AND CONTINGENCIES

         a.       Employment Agreements - In December 1997, the Company entered
                  into a three-year employment agreement with its Chairman of
                  the Board, which provides for a base salary of $115,500. In
                  the event of a change of control of the Company, where the
                  Chairman is not retained on a comparable basis by new
                  management, the Chairman will receive lump sum payments
                  equivalent to one year's salary. In addition, in the event of
                  the non-renewal of the employment agreement, the Chairman will
                  be entitled to the same lump sum payments.

                  During the year ended July 31, 2001 the Company extended this
                  agreement through December 19, 2003.

         b.       Lease - The Company leases offices premises under an operating
                  lease. The future minimum payments, excluding escalation
                  charges, are as follows:

                                    Year Ending July 31,
                             -----------------------------------
                             2002                       $ 69,000
                             2003                         11,500

                  Total rent expense charged to operations for the years ended
                  July 31, 2001 and 2000 was approximately $42,000 and $88,000.

         c.       Litigation - The Company is a defendant in two separate
                  lawsuits filed by former employees for alleged breach of
                  contract of approximately $2M. The Company believes the suits
                  are completely without merit and intends to vigorously defend
                  its position and thus has not made an accrual at year-end.

                                      F-18
<PAGE>

11.      SUBSEQUENT EVENTS

         a.       Acquisition - On October 19, 2001, the Company acquired all
                  the outstanding common stock of United Capturdyne Technologies
                  Incorporated, a Florida Corporation. In exchange, the Company
                  issued to the shareholders of United Capturdyne Technologies
                  Incorporated 1,200,000 shares of common stock, valued at
                  $600,000. The common stock was valued based on the trading
                  price at the acquisition date.

         b.       Convertible Notes- On August 6, 2001, the Company sold two 7%
                  Convertible Notes to accredited investors for an aggregate
                  amount of $750,000. These Convertible Notes are due August 6,
                  2004. The Holders have the right to convert any outstanding
                  and unpaid portion of the note into fully paid and
                  non-assessable shares of common stock of the Company. The
                  notes may be converted prior to its mandatory conversion date
                  by either the Company or the note holders upon satisfaction of
                  certain conditions.

                  Along with the convertible notes, the Company issued 300,000
                  warrants to acquire shares of the Company's common stock. The
                  warrants are exercisable as follows: 150,000 warrants at $1.50
                  per share and 150,000 warrants at $.20 per share and expire
                  five years from the date of issue. The Company has recorded
                  these warrants as a discount to the convertible notes for
                  $177,480. The discount was derived from the Black-Scholes
                  option-pricing model based on the following assumptions:
                  expected stock price; volatility of 129.0%; risk-free interest
                  rate of 6.0%; and an expected 5-year life. The discount will
                  be amortized in the year ended July 31, 2002.

                                      F-19
<PAGE>