SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               AMENDMENT NO. 1 TO
                                   FORM 10-KSB

                 Annual Report Under Section 13 or 15(d) of the
                         SECURITIES EXCHANGE ACT OF 1934

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

                              For Fiscal Year Ended
                                December 31, 2000

                            Commission File #0-30440

                              THE AUXER GROUP, INC.
             (Exact name of registrant as specified in its charter)

                                    Delaware
         (State or other jurisdiction of incorporation or organization)

                                   22-3537927
                      (IRS Employer Identification Number)

                12 Andrews Drive, West Paterson, New Jersey 07424
               (Address of principal executive offices )(Zip Code)

                                 (973) 890-4925
                (Registrant's telephone no., including area code)

(Former  name,  former  address and former  fiscal year,  if changed  since last
report)

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

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001
par value

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

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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of the 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. ( )

Revenues for year ended December 31, 2000: $10,993,570

Aggregate market value of the voting common stock held by non-affiliates of the
registrant as of November 8, 2001, was: $1,278,645 (based on a stock price of
$.01).

Number of shares of the registrant's common stock outstanding as of November 8,
2001 is: 131,475,066

Number of shares of the registrant's preferred stock outstanding as of November
8, 2001 is: 2,750,000.

Transfer Agent as of December 31, 2000:

                          Interstate Transfer Agent
                          874 E. 5900 South, Suite 101
                          Salt Lake City, Utah 84107



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PART I

ITEM 1.  DESCRIPTION OF BUSINESS

                                    Business

The Auxer Group, Inc. was incorporated in Idaho on June 24, 1920 under the name
"The Auxer Gold Mines, Inc." The Auxer Group's original business was mining.
Auxer's life was changed from a life of 50 years to a term of existence of
perpetuity on August 27, 1960. In 1972 the mining assets were transferred to
Idora Silver Mines, Inc. and Auxer maintained a dormant status for a majority of
the 1970's and 1980's.

Effective May 2, 1994, we began trading on the OTC Bulletin Board under the
symbol AUXI. On April 18,1995, Auxer acquired all of the issued and outstanding
shares of CT Industries, which became our wholly owned subsidiary and issued
4,000,000 shares of our common stock to shareholders of CT Industries. CT's
assets included the distribution rights to an oil treatment formulation, called
Formula 2000. At such time, Auxer moved its offices to Ridgewood, New Jersey.
Auxer continued to develop the engine treatment and test market the product it
acquired from CT Industries through infomercials and by sponsoring regional
races.

In 1996, Auxer established Wayne, New Jersey as its principal place of business
and acquired the issued and outstanding shares of two companies. On February 8,
1996, it acquired Universal Filtration Industries, Inc. a company that
manufactured and delivered products for dry cleaners. Auxer issued 1,500,000 of
its shares of common stock to Universal Filtration shareholders for all the
outstanding shares of Universal Filtration. 500,000 of the 1,500,000 shares were
issued and delivery was contingent upon meeting various performance objectives.
On March 24, 1999, our board of directors approved closing down Universal
Filtrations operating account. Currently, Universal Filtration is dormant with
no operating activity. Universal Filtration is no longer an active subsidiary.
No products are currently being developed or marketed.

On October 25, 1996, Auxer acquired Harvey Westbury Corporation, Inc. a light
manufacturer and wholesaler of aftermarket automotive products. Auxer issued
170,000 shares of its common stock to Harvey Westbury shareholders for all
outstanding shares of Harvey Westbury Corp. Consideration value was based upon
the market value of Auxer's securities at the time of the acquisition.

In August 1997, shareholders of Auxer voted to exchange their shares on a one
for one basis for shares in The Auxer Group, Inc., the new Delaware corporation.
The Auxer Group, was incorporated in the State of Delaware on August 11, 1997
and was authorized to issue 25,000,000 shares at $.001 par value. Of those
shares, 20,000,000 shares were common stock, while the remaining 5,000,000
shares were preferred stock. On September 22 1997, the Auxer Group filed an
amendment to its articles of incorporation whereby it increased its authorized
shares to 75,000,000. Of those shares, 50,000,000 shares are preferred stock. In
August 1997, Auxer merged into the Auxer Group. Effective on or about August 7,
1997, the Auxer Group began trading on the OTC Electronic Bulletin Board under
the symbol AXGI. In June 1998, the Auxer Group divested itself of its software
business for the amount of the investment, $353,000, which was received in the
form of a promissory note. As of September 30, 1999, the Auxer Group determined
the collectability of the promissory note was doubtful and wrote it off.

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On March 19, 1999 the Auxer Group amended its articles of incorporation to
increase the number of shares the Auxer Group had authority to issue to
175,000,000 shares. Of such shares, 150,000,000 shares are common stock, while
the remaining 25,000,000 shares are preferred stock.

On April 22, 1999, the Auxer Group purchased automotive parts inventory from
Ernest DeSaye, Jr., employed Mr. DeSaye and placed these assets in Hardyston
Distributors, Inc., one of the Auxer Group's wholly owned subsidiaries.
Hardyston was incorporated in New Jersey on April 22, 1999. The Auxer Group
issued 836,700 shares of its common stock plus $15,000 cash for the purchase of
the automotive parts inventory to Ernest DeSaye, Jr.

Effective September 4, 1999, the Auxer Group began trading on the National
Quotation Service Pink Sheets because it did not comply with the OTC Bulletin
Board Eligibility Rule.

Effective June 6, 2000, Auxer complied with the OTC Bulletin Board Eligibility
Rule and it began trading on the OTC Bulletin Board.

On July 12, 2000 the Auxer Group's board of directors approved the formation of
a telecommunication group for the purpose of acquiring and/or investing in
Telecommunications companies and/or related technology.

In July 2000, the Auxer Group signed two letters of intent. One letter of intent
was with Sponge Technologies to acquire assets of a switch operation. The other
was with Clifton Telecard Alliance, a northeast United States distributor of
prepaid phone cards, to acquire its assets.

In August 2000, shareholders of Auxer voted to amend its articles of
incorporation to increase its authorized number of shares of common stock to
1,000,000,000.

Auxer Telecom Inc. was incorporated on August 7, 2000 in Delaware. The Auxer
Group acquired 2 telecommunications excel switching platforms, which is a series
of equipment that enables companies to track and bill telecommunications
traffic. These assets were placed into Auxer Telecom Inc. on August 24, 2000.
Auxer Telecom Inc. is one of the Auxer Group's wholly owned subsidiaries. In
August 2000, the Auxer Group added two members to the Auxer Telecom team: Samir
Khalaf and Richard Lydiate. Mr. Khalaf is a special consultant in
telecommunications, financing, acquisitions and international business. Richard
Lydiate was responsible for the transition and overseeing of the switch
operations group in Los Angeles, California. Mr. Lydiate also assembled a
management team with experience in telecommunications sales & marketing,
engineering, switch operations and customer services.

On September 21, 2000, the Auxer Group purchased the assets of Clifton Telecard
Alliance, Inc., employed Mustafa Qattous and placed these assets in Clifton
Telecard, Inc., one of the Auxer Group's wholly owned subsidiaries. Clifton

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Telecard, Inc. was incorporated in Delaware on August 7, 2000. The Auxer Group
issued 2,000,000 of its common stock plus $500,000 in cash and $200,000 in
promissory notes to the shareholders of Clifton Telecard Alliance, Inc.

Financial conditions and results of operation for the acquisitions of the
telecommunications excel switching platforms and Clifton Telecard Alliance are
reflected as of the dates disclosed above.

On March 9, 2001 CT Industries, Inc.'s Board of Directors approved the expansion
of its business focus to include telecommunications related business.

On May 16, 2001, The Auxer Group sold 100% of the stock of Clifton Telecard,
Inc.

The following sets forth the valuation of the above-referenced acquisitions
based on the value per share:

<TABLE>
<CAPTION>
Acquisition                   Price Per Share       Less than Fair
                                                    Market Value
<S>                              <C>                   <C>
(i)Universal Filtration            $.05                No
(ii) Harvey Westbury               $.50                No
(iii) Hardyston Distributors     $.1075                No
(iv) CT Industries                $.001                No
(v)  Auxer Telecom Inc.            $N/A                No
(vi) Clifton Telecom Inc.         $.081                No
</TABLE>

Our auditors have stated in their opinion that there is substantial doubt
regarding our ability to continue as a going concern. We were a development
stage company with limited revenues, a history of significant losses and a
substantial accumulated deficit. Subsequent to December 31, 1997, the Auxer
Group's primary attention turned to routine on-going activities and ceased to be
a development stage company.

Neither the Auxer Group nor any of its subsidiaries has filed any petition for
bankruptcy and is not aware of any actions related to bankruptcy. Furthermore,
there are no known personnel of the Auxer Group who currently have any petitions
filed under the Bankruptcy Act or under any state insolvency laws.

The Auxer Group has formed 2 groups with focuses on telecommunications and
automotive industries.

The Auxer Group is a holding company that has a Telecommunications Group that
consists of two active subsidiaries, CT Industries, a wholesale distributor of
prepaid phone cards, and Auxer Telecom Inc., which provides telecommunication
services from telecommunications carriers to the telecommunications industry.
The telecommunication group accounted for 84.4% of the revenue in 2000 and 10.5%
of revenue in 2000 on a proforma basis less Clifton Telecard Alliance.

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Additionally, Auxer owns an automotive group with 2 active subsidiaries:
The Harvey Westbury Corporation Inc. and Hardyston Distributors, Inc. Harvey
Westbury assembles and packages automotive accessories under the name, easy
test, sells engine treatment under the name Formula 2000 Ultimate, and sells
waxes and polishes under the name Garry's Royal Satin to the automotive, marine,
and aviation industries. Hardyston Distributors, Inc. is a specialty distributor
of automotive parts and accessories to local mechanics, service stations, and
dealers.

The automotive group accounted for 15.6% of revenue in 2000 and 89.5% of revenue
in 2000 on a proforma basis less Clifton Telecard Alliance.

The Telecommunication Group

Industry Overview

The Auxer Group believes prepaid phone cards have been widely used throughout
Europe and Asia for more than fifteen years. The Auxer Group believes prepaid
phone cards were introduced into the North American marketplace by small long
distance consolidators and resellers, which purchase a high volume of long
distance minutes from major carriers at rates significantly lower than those
that could be obtained by individuals and small businesses and resell those
minutes to their established customer base. The Auxer Group believes prepaid
phone cards were originally introduced to meet very specific telephony
applications, and oriented towards the credit challenged components of the
marketplace. The Auxer Group believes prepaid services have evolved into a
widely accepted solution by both businesses and consumers.

Prepaid phone cards are an alternative to coin-operated calling, collect
calling, operator assisted calls and standard credit calling cards. Unlike
credit calling cards, which provide virtually unlimited credit and impose
surcharges on long distance services, prepaid phone cards are paid for in
advance and provide finite amounts of calling time. Shaped like a credit card,
the prepaid phone card easily fits into a standard wallet. Generally, the front
face denotes the denomination of the card. The back of the cards contains a
scratch-off surface covering the card number and personal identification number
PIN.

Most domestic prepaid cards utilize remote memory technology, which permits
users to place local, long distance and international calls from any touch-tone
phone by dialing a toll- free or local access number to connect to a prepaid
phone card switching platform. After being prompted to enter a PIN, the caller
is advised of the value remaining on the card and is prompted to enter the
telephone number to be called. The call is then routed to its destination. The
per- minute charges for the call are automatically decremented from the prepaid
account corresponding to the PIN as the call progresses. Prepaid phone cards are
distributed through a vast network of retail outlets, including convenience
stores, newsstands, grocery stores and discount stores. While prepaid phone card
products are also sold through vending machines and, more recently, over
Internet websites, the vast majority of phone card sales are still made through
retail outlets.

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The retail outlets are serviced by independent distributors, which often
distribute newspapers or other items to the retail outlets. As, a wholesale
distributor to these retail outlets, CT Industries which purchases large
quantities of prepaid phone cards from a long distance carrier or reseller, and
sells the cards in smaller quantities, together with cards from other carriers,
to the independent distributor for ultimate distribution to the retail outlet.
The discount from face value at which cards are bought and sold by the
participants in the distribution chain varies depending upon the carrier and the
features of the card, such as local versus toll free dial-up access, or the
rates and geographic regions for which the card can be used. For example, CT
Industries may sell a phone card with a face value ( a value at which the end
user would pruchase at the retail outlet) of $10 to a local distributor at a
discount to the face value such as $7.50. The local distributor would in turn
sell the same card to a retail outlet at a lesser discount to the face value
such as $8.50 which in turn, would sell the card to an end user at face value,
$10.

The Auxer Group believed entering the telecom industry in 2000 would be a good
strategy as management believed the prepaid industry was a market that
represented an opportunity to increase the Auxer Group's revenue. In 2000
management was introduced to opportunities to acquire distribution and
telecommunications equipment.

Review Of Products

The telecom group has two subsidiaries selling telecommunication services and
products, Auxer Telecom and CT Industries. Clifton Telecard, which was sold on
May 16, 2001 distributed prepaid phone cards and represented 100% of the
telecommunication group revenues during the year ending December 31, 2000 and
Auxer Telecom represented 100% of the telecom group's revenue on a proforma
basis less Clifton Telecard during the year ending December 31, 2000.

Prepaid Phone Cards Wholesale Distribution Operation

CT Industries, Inc.'s board of directors expanded its business focus in March
2001 to include telecommunications related business. CT Industries is now a
wholesale distributor of prepaid phone cards. Generally, each type of prepaid
phone card is available in $5, $10 and $20 denominations. With the exception of
the private label phone cards, which CT Industries prints and activates itself,
CT Industries purchases pre-printed, pre-activated phone cards from each of the
applicable telecommunications resellers or carriers and distributes the cards
through its network of independent distributors. CT Industries is in the process
of developing the X-Factor product line, which may contain feature products,
such as The X Cell Phone and the X Calling Card, the later of which is already
being distributed nationally. Additionally, CT Industries is attempting to gain
distribution in all 50 states as soon as possible. As of August 2001, CT
Industries currently had sold to distributors in 19 states. CT Industries is an
independent company unrelated to Clifton Telecard, which was formerly owned by
the Auxer Group and sold on May 16, 2001. The two companies continue to have a
vendor/client relationship. The two companies don't have any agreements
outlining this relationship. CT Industries handles walk-in customers in the West
Paterson, NJ area and will also provide warehouse space to handle inventory.

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<PAGE>

Switching Operations

Auxer Telecom is a reseller of telecommunication services, which consists of
buying volume time and breaking it up into smaller units for resale, provided
through a switching facility or the locations where the switching equipment is
stored. Auxer Telecom's systems are located in Los Angeles, California. The
switching operation provides a connection between the inbound traffic or phone
card end-users and the outbound carriers, such as Educational Communication
Systems (ECS) and Trans National Communications International (TNCI). Outbound
carriers are telecommunications companies or providers with their own switching
operations and/or communication or telephone lines between various destinations.
Inbound traffic describes the person using the phonecard to make a telephone
call. When a customer uses the card, the customer calls Auxer Telecom's
switching equipment by way of an 800 access number; thus representing the
inbound traffic. The switching equipment is engineered to select the most cost
effective outbound carrier based on the inbound phone card users desired
destination. Revenues for the switching operation are generated by selling phone
cards to wholesale distributors such as CT Industries at discount prices off the
face value of the card as discussed above. Wholesale distributor's such as CT
Industries, in turn, distribute the phonecards to local distributors and retail
outlets where end-users purchase the card for retail use. Auxer Telecom
provides the connection, customer service, engineering and networking services
to the end-user of the phonecard. Phonecard retail customers purchase the card
from retailers who purchase the card from distributors such as CT Industries.
Currently Auxer Telecom does not have any specific products under its name, but
plans to provide this service to wholesale card distributors.

Marketing

CT Industries' retail customers can use the prepaid phone cards it distributes
at any touch tone telephone by dialing an access number, followed by a PIN, or
personal identification number, assigned to each card and the telephone number
the customer seeks to reach. The carrier's switch completes the call, and its
debit card platform reduces the outstanding balance of the card during the call.

CT Industries focus has been on distribution in ethnic markets in the U.S. that
generate high levels of international traffic to specific countries. Recent
immigrants and members of ethnic communities are heavy users of international
long distance, given their desire to keep in touch with family members and
friends back home.

CT Industries has independent wholesalers and retailers throughout the New York,
New Jersey and Connecticut area as well as domestically throughout the United
States and is continually seeking to add distributors in other areas.

Auxer Telecom is not currently marketing its services to other wholesale
distributors.

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Source And Supply

CT Industries' arrangements with subcontractors and/or suppliers consists of
both purchase orders for phonecards which is either prepaid or on credit, and
purchasing time used to access network resources which is prepaid. The orders
have no guarantees of supply and are based on demand and availability of
resources and product; therefore, CT Industries may be at risk due to its
inability to obtain products from its suppliers in a timely fashion. The risk is
minimal since these products are easily accessible and several sources exist. CT
Industries purchases these products and/or access time from several suppliers to
include Auxer Telecom, Access International, Qwest Communications, 9278
Communications, Blackstone Communications, Axiom Communications, IDT
Communications, and Telestar.

Auxer Telecom's arrangements with subcontractors and/or suppliers consists of
purchasing time used to access network resources which is prepaid. The
arrangements have no guarantees of supply and are based on demand and
availability of resources; therefore, Auxer Telecom may be at risk due to its
inability to obtain use of access time from its carriers in a timely fashion.
The risk is minimal since access time from it suppliers is easily accessible and
several sources exist. Auxer Telecom purchases access time from
telecommunications suppliers to include Trans National Communications
International, Educational Communications Systems, ComLink, LinkNet, and World
Exchange.

Competition

The telecommunications services industry generally, and the prepaid phone card
industry specifically, is intensely competitive, rapidly evolving and subject to
constant technological change. There are several large and numerous small
competitors in the industry, and the Auxer Group's telecom group expects to face
continuing competition based on price and service offerings from existing
competitors and new market entrants. The principal competitive factors in the
market include price, quality of service, geographic presence, customer service,
reliability, network capacity and the availability of enhanced communications
services.

CT Industries' competitors include:

*    Other distributors and switching operations of prepaid products, such as
     Union Telecard Alliance and 9278 Communications;


*    Telecommunications companies that produce their own prepaid products, such
     as IDT Communcations and PT-1 Communications; and


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Auxer Telecom's competitors include other carriers and telecommunications
companies such as:

*        AT&T, MCI/Worldcom and Total-Tel USA

Many of our competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry than we
have. As a result, our competitors may be able to adopt more aggressive pricing
policies, which could hinder our growth.

Major Customers


CT Industries is a wholesale distributor of prepaid calling cards. CT Industries
has no clients that represent 20% or more of CT Industries total revenue. CT
Industries currently maintains an active client list of over 100 local
distributors and retailers such as Universal Telecom, The Bargain Place and
Triad Communications.



Auxer Telecom resells communication time primarily to wholesale distributors in
the United States. CT Industries represents approximately 90% of Auxer Telecom's
traffic.


Points Of Operation

CT Industries, Inc. and Auxer Telecom Inc. both maintain their headquarters and
administrative operations in West Paterson, New Jersey. CT Industries maintains
its main sales offices in West Paterson, New Jersey and Los Angeles, California.
Auxer Telecom maintains its customer service and engineering operations in Los
Angeles, California. Auxer Telecom houses its switch equipment in Los Angeles,
California.

Government Regulation

The telecommunications industry is regulated by the federal and state
governments of the United States. Federal laws and regulations created by the
Federal Communications Commission apply to interstate and international
telecommunications, while state regulatory authorities have jurisdiction over
telecommunications services that originate and terminate within the same state.
Various other international authorities also may seek to regulate
telecommunications services originating in their countries.

However, as of the date of this report, we do not require any government
approvals to manufacture, distribute and/or market prepaid phone cards.

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Intellectual Property

Neither CT Industries or Auxer Telecom own any material property in the form of
patents.

Auxer Telecom owns the right to the telecommunications billing software. of
Auxer Telecom, Inc. Additionally, CT Industries, Inc. has 9 private label cards
under the following trademarks: One Cent America, Jerusalem/Middle
East,Kamustahan Philippines, Brazil Campeao, El Sol Mexicano, New Jersey Para
Todos, Que Viva Mexico, and Humsafar.

The Automotive Group
Industry Overview

The following is an overview of the competition:

(1) FIRST BRANDS located in Danbury, Connecticut. This public company is listed
on the New York Stock Exchange under the symbol FBR. It sells car care products
consisting of waxes and polishes representing 30-50% of the market. Its
principal brand name is STP, which is an automotive additive. The brand name for
which it markets its wax is known as Simoniz. The product has been in existence
since the mid 1900's and is traditionally packaged in a yellow metal container
to include various sizes.

(2) TURTLE WAX,  INC.  located in Chicago,  Illinois.  This private  company has
several branches located throughout the nation. Over the years this company has
developed several car care trademarks and brand name subsidiaries such as
Lubricating 2001, Finish 2001, Formula 2001, and CD-2. Its most recognized
national brand name is Turtle Wax. Turtle Wax, Inc. has strong distributor and
major retailer penetration and undertakes extensive marketing and advertising to
help support its products.

Minnesota, Mining and Manufacturing, also known as 3M located in St. Paul,
Minnesota: This public company listed on the New York Stock Exchange symbol MMM,
is a major leader in several industries including the automotive and marine
industries. 3M's strength is its brand name recognition. Other Competition:

Other major competitors in the wax and polish industry include BLUE CORAL,
recently acquired by Quaker State and StarBrite Distributors, Inc. located in
Florida. Another popular brand name called MOTHER'S located in Huntington Beach,
California has recently introduced a complete car care product line to
compliment its wax items.

It Silicone and T-Bolt Rust Penetrant: While dozens of competitors market a
silicone spray, most notably Gunk and Prestone, others market a multipurpose
lubricator such as WD- 40 and Liquid Wrench.

Formula 2000 Ultimate Product Line: The Engine Treatment and Oil Additive market
is part of the Automotive Aftermarket Parts & Accessories Industry and the Auxer
Group categorizes within the chemical products group.

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Currently, the distribution of engine treatment follows the traditional paths
within the Aftermarket industry to include traditional wholesale distribution to
automotive retail chains or classical 3 tier, major retail chains or two tier
and direct telemarketing and infomercial settings.

The high-end brand names, where Formula 2000 Ultimate intends to be associated,
are products such as Slick 50, Duralube, MotorUp, and Prolong, which dominate
the retail shelves.

The mid-range products consist of non-brand name products and private label such
as TM8, Tech2000, made for Wal-Mart, and Lubricator2001 made by Turtlewax.
Typically, these products include PTFE, a non-stick chemical, and low end oil
additives packages. The low- end products consist of additional private label
brands and STP's brand of oil additives. Typically, these products consist only
of low-end packages which include cleaners and low grade oil alternatives.

The main competition within the marketplace comes from well-known names from the
automotive industry to include First Brands and Blue Coral, a wholly owned
subsidiary of Quaker State.

First Brands: This company has a recognized name in oil additives and engine
treatments with its brand name, STP. STP's product line is positioned as a
low-end product line with multiple product additives. The products are typically
a quality motor oil mixed with old, well known, low-end additive packages. STP
offers a full line of additive products.

Quaker State: Is a public company recognized for its line of motor oil products.
However,  the company owns the well recognized car care products  company,  Blue
Coral. Blue Coral acquired the Slick50 in 1994.

Slick50's initial engine treatment product was primarily a quality motor oil and
PTFE, a non-stick chemical, sometimes better recognized as DuPont's Teflon.
Additionally, Blue Coral has introduced a full line of additives and gas
treatments as well as semi-synthetic and full synthetic engine treatments.

Prolong: This company is private and is located in California. Prolong can be
found in the West region of the United States. The company has not changed its
format from a single showcase product, although the company has a full line of
additive products.

Prolong and DuraLube are typically not offered together; but either Prolong or
DuraLube are sold with Slick50.

DuraLube: This company is private and located in Eden, New York. DuraLube is
most noted for introduction of the chlorine-based treatments. DuraLube contends
its product is no longer chlorine- based. DuraLube offers a full line of
additives and treatments.

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<PAGE>

MotorUp: MotorUp is private and represents a small share of the market at 1% to
3% . MotorUp is located in Philadelphia. Additionally, this company popularized
the 15 oz. bottle, satisfaction guaranteed and A No Oil Change product. MotorUp
has a full line of additives including simple quality oil mixed with a strong
additive package. Currently, MotorUp is moving away from infomercials and
establishing distributors and retailers. The product can be found in some of the
less prominent retailers on special isle shelving.

Other Competition:

The Auxer Group's other competition is comprised of many mid-tier companies that
offer engine treatments as part of their additive product lines or private label
vendors.

Several mid-tier products tend to have some brand name recognition and include
Lubricator 2001, a Turtlewax product, TM8, Tech2000 a Wal-Mart Private Label,
R-2000 a Bilsteinproduct, Marvel Mystery Oil, and Tufoil.

Another indirect competitor to the engine treatment market is the recently
growing synthetic motor oils. Mobile introduced the Mobile One technology, and
has recently introduced TMP technology. Today, Mobile synthetic motor oil
technology nearly parallels Formula 2000 Ultimate's synthetic technology.

EasyTest Product Line:

Antifreeze & Battery Testers: The tester market primarily consists of a DIY, or
do it yourselfer client base. The distribution chain from manufacturer to
end-user, or consumer, generally follows a traditional route. It's a three level
process that starts with the manufacturer wholesaler who sells to the
distributor who, in turn, sells product to the Jobber, or reseller, and/or
retailer. The consumer can then purchase from the retailer to complete the
chain. The typical third level outlets are made up of automotive retailers,
service stations, convenience stores, grocery stores, etc.

Harvey Westbury Corp. is a manufacturer in the United States of these tester
items. Since the Easy-Test line offers several other products, Harvey Westbury
Corp. also acts as its own distributor.

The following is an overview of the competition:

JONI ENTERPRISES, LTD.- located in Taiwan, Republic of China. This company has
been competing with Harvey Westbury for over twenty years and currently leads
the market as the primary manufacturer. Joni also carries a small automotive
windshield accessory line.

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<PAGE>

THEXTON MFG., CO. - located in Minneapolis,  Minnesota.  This company only makes
the larger, professional type testers, which, furthermore,  represents less than
twenty  percent of its entire  revenue.  The company  primarily  specializes  in
automobile repairs and service equipment.

WILMAR CORPORATION - located in Seattle, Washington. This company specializes in
the manufacturing of plastic products. It is currently importing several items
to increase its catalog selection and acts as a distributor to several major
retail chains.

CUSTOM  ACCESSORIES,  INC. - located in Niles,  Illinois.  This private  company
specializes in automotive parts. Mobile Air Conditioning Accessories:  This vast
market  consists  of  compressors,  hoses,  valves,  refrigerants,   refrigerant
recovery, retrofit servicing, and accessories.

The automotive air conditioning accessories market primarily consists of
Jobbers, or reseller, and Do It Yourselfers. It's a three level process that
starts with the manufacturer wholesaler who sells to the distributor who, in
turn, sells product to the Jobber, or reseller, and/or retailer. The consumer
can then purchase from the retailer to complete the chain. The following is an
overview of the competition:

AEROQUIP CORP. - located in Maumee, Ohio.
This private company is headquartered in Ohio. The company specializes in a
variety of markets including Hose, Fittings, and Coupling manufacturing; Heating
and Cooling parts & Accessories manufacturing; Automotive and Aviation parts
manufacturing; Plastic Products and Plastic Extruders manufacturing; and Mold
Making. It is also important to note that the products sold from this company
mainly support the Jobber, or reseller, clientele.

WATSCO COMPONENTS, INC. - located in Hialeah, Florida.
This public company listed on the New York Stock Exchange under the symbol WSO,
retrofits refrigerant access valves, vacuum pumps, refrigerant recovery machines
& filters.

INTERDYNAMICS, INC. - located in Brooklyn, New York.
This private company specializes in the manufacture of automobile parts and
equipment. Its share of the AC accessories market includes AC testing and
charging accessories, refrigerants, and electronic climate control systems. Its
items can be found in the major discount chains such as Pep Boys, Western Auto,
and R&S Strauss.

Other Competition:
Another significant competitor in the accessories industry is

                                       14
<PAGE>

SCHRADER-BRIDGEPORT located in Altavista, Virginia.

CASTROL INDUSTRIAL North America, INC. located in Downers Grove, Illinois. It
manufactures Retrofit Kits found in the market to include its own brand name
CASTROL.

Crankcase Drain Plug Series - oil drain plugs: The other vendors currently known
to manufacture this product are Difco, Inc. and Cargo, Inc. Fleet Drain Plug
Series:

The markets for this product are companies with maintenance sections who perform
regular maintenance requirements on fleet operations, trucking outlets and
repair centers. There is only one other known distributor, IAS, in the United
States.

Carbon Monoxide Testers:
Market & Competition:
Carbon Monoxide is a colorless, odorless, poisonous gas byproduct of burning
oils and other fuels. It can be quickly absorbed by the body and cause such
symptoms as headache, dizziness, irritability, and nausea. Higher concentrations
of the gas are lethal. The distribution chain from manufacturer to end-user, or
consumer, generally follows a traditional route. It's a three level process that
starts with the manufacturer wholesaler who sells to the distributor who, in
turn, sells the product to the Jobber, or reseller, and/or retailer. The
consumer can then purchase from the retailer to complete the chain. The common
retail sources for these particular items are the major Discount Chains such as
Kmart and Home Depot.

Harvey Westbury currently directs its marketing efforts towards the aviation and
automotive safety arena. Several state and local municipalities mandate these
detectors for their department vehicles, as well as regulated flight school
facilities. The third aspect of growth is in technology. Harvey Westbury is one
of the few organizations that distribute the chemically treated indicator disk,
which currently acts as the main component in battery- powered models. The
competition within this industry is as follows:

FIRST ALERT, INC. - located in Aurora, Illinois.
This is a public company that introduced the CO detector. This company's primary
source of  revenue is from smoke  detectors.  First  Alert,  Inc.  products  are
retailed  under the brand name First  Alert that  offers a complete  line of gas
detectors.

QUANTUM GROUP, INC. - located in San Diego, California.
This private company specializes in safety equipment and measuring device
manufacturing. The company's full line of products is marketed under two brand
names, COSTARJ, and Quantum.
Other Competition:

                                       15
<PAGE>

Several other brand name companies exist in the market. Such competitive brand
names are Nighthawk, Lifesaver, S-Tech, American Sensors, Air-Zone, Emerson,
Macurco, and Safety1st.

Review Of Products

The automotive group currently has two subsidiaries selling automotive products.
Hardyston Distributors distributes a variety of automotive hard parts, which
represents 100% of its sales, and currently representing approximately 41.1% of
the Automotive Group's revenue during the year ending December 31, 2000. The
Harvey Westbury product lines, which include the products under the names Easy
Test and Garry's Royal Satin, represent the Automotive Group's other revenue of
approximately 58.9%.

Garry's Royal Satin Products:
Royal Satin Supreme: The product was designed with the intent to provide an even
longer lasting shine and better durability than King's Ransom for clear-coat
finishes.

Garry's Interior Car Care Products: Harvey Westbury Corp.'s products in this
category are a carpet cleaner, waterproofing spray, leather cleaner and plastic
and fiberglass cleaner. The products are currently packaged in spray tops,
however new packaging options are being reviewed.

Cream Paste Cleaner Wax: The product is used by detailing professionals. Its
blend of waxes and cleaner offers a one-step cleaning and waxing option or can
be applied after a compound in detailing practices.

Heavy Duty Rubbing Compound: This product is intended to complement to Harvey
Westbury Corp.'s cleaner wax for difficult oxidation problems that are too
difficult for normal oxidation.

Finishing Polish: The product offers the detailer an extra layer of protection
that is intended to get them through an entire season. Cleaner waxes on the
market typically fall short of performing more than 4 months. This polish and
protector is intended to give the boating enthusiast extra months of added shine
and protection from oxidation.

It Silicone and T-Bolt Rust Penetrant: Harvey Westbury markets a silicone and
multipurpose lubricant under the brand name It and T- Bolt.

Formula 2000 Ultimate Product Line: Harvey Westbury markets a synthetic
lubrication product designed for engines and transmission lubrication
enhancement. In 1997, Harvey Westbury Corp. created a new formula and now
markets this formula under the name "Formula 2000 Ultimate."

                                       16
<PAGE>

EasyTest Product Line:
The Easy Test product series was founded by Harvey Westbury. The products
consist of 3 types of antifreeze and battery testers, a carbon monoxide tester,
and drain plug series. Additionally, the air conditioning line is trademarked
under Easy Test as well as the Hatchback solar powered rechargeable light and
other accessory products.

Antifreeze & Battery Testers: The Harvey Westbury tester products are
manufactured at the its facilities in Farmingdale, NY. The main products are
anti-freeze and battery testers, which come in three different sizes. The first
type is a five-ball tester that consists of a four-inch glass catheter,
assembled together with a vinyl squeeze bulb and dispensing tail. The working
components in these items are five specific gravity balls that float at
different concentrated levels of the solution being tested. The solution for the
anti- freeze test involves a water to anti-freeze mix, while the battery test
involves a water to acid mix. Once the items are manufactured and assembled,
they are then packaged for retail distribution using Harvey Westbury's in-house
machinery and equipment. The same concept applies to the other two size types,
which are much larger and resemble a French horn and turkey-baster in their
respective shapes. Most items are sold under their registered trademark Easy-
Test7, however, Harvey Westbury Corp. also maintains several private label
contracts within the industry.

Mobile Air Conditioning Accessories: Harvey Westbury markets all of its
air-conditioning accessory items under the brand name Easy-Test. The product
line is mainly comprised of retrofit kits, recharge kits, charging hose,
fittings, manifold gauges, leak detector kits, thermometers, and protective
goggles. Additionally, the accessory items are designed to service all R-12,
also known as CFC-12 or Freon, and R134a, also known as HFC- 134a, automotive
systems.

Crankcase Drain Plug Series - oil drain plugs: Two series of crank case drain
plugs are currently packaged by Harvey Westbury Corp.. The group actively
markets the CDP series which is a strong rubber plug complete with an inserting
tool. The product is marketed to the do it yourself market and the quick oil
change chains. The product is purchased in single or six pack blister pack
options. The second series is a metal screw in product. The product is
self-tapping.

Carbon Monoxide Testers: Harvey Westbury assembles and packages Carbon Monoxide
devices that alert the consumer to the presence of carbon monoxide by changing
color. This small indicator is roughly 2" in diameter and is comprised of a
proprietary blend of chemicals, which react to carbon monoxide. The pill
indicator is affixed to an adhesive backed plastic applicator that allows the
item to be placed almost anywhere. In addition, the pill indicator changes back
to its original color after the carbon monoxide is removed which makes the item
reusable.

                                       17
<PAGE>

Depending on the surrounding climate, these detectors can last up to a full
year. Harvey Westbury offers two types of testers based on their levels of
detection sensitivity. Since carbon monoxide is measured in Part Per Millions,
one tester will react to carbon monoxide dosages of 50ppm and the other will
react at 100ppm.

Fleet Drain Plug Series: The Fleet drain plug series is an imported product. The
product is generally designed for large construction and farm equipment as well
as RVs. The product comes as a kit. The product allows the user to insert a
drain tube by screwing onto a permanent attachment to vehicles.

Marketing

Harvey Westbury Corp.'s web sites, which were introduced in 1999, are designed
to assist in marketing and sales lead generation. Due to the introduction of the
web sites, Harvey Westbury's Formula 2000 Ultimate, Easy Test, and Garry's
product lines have received requests for information on distribution both
domestically and internationally.

Harvey Westbury Corp. is engaged in business in several markets. Harvey Westbury
is conducting business with automotive retailers and distributors as well as
marine retailers and distributors. Harvey Westbury's revenues are less then 20%
with any individual customer. While the Harvey Westbury is not engaged in any
formal contracts with identified volumes, it has arrangements to private label
for Warren Distribution for Polar products and CarQuest Inc. for CarQuest
products. Harvey Westbury's products are packaged under several other unknown
brand names since the products are sold in bulk and packaged by other companies.

The Auxer Group's subsidiary, Harvey Westbury has entered into several licensing
agreements with third party distribution companies to private label products. In
August 1998 Harvey Westbury entered into a licensing agreement with Warren
Distribution to use the trademark Polar on its Easy Test Anti-freeze and Battery
Tester products, to be distributed through Warren Distribution. In October 1998,
Harvey Westbury entered into a licensing agreement with CARQUEST, Inc. to use
the trademark CARQUEST on its Easy Test Anti-freeze and Battery Tester products,
to be distributed internationally throughout CARQUEST's network of warehouse
distributors and retail outlets. As part of the agreement, Harvey Westbury is
required to maintain a minimum of $1 Million in product liability insurance.
Harvey Westbury is compliant with the term of this agreement. Additionally, the
agreement can be terminated at any time, with thirty days notice. On October 30,
2000, Harvey Westbury completed a Joint Venture agreement with United Suppliers
of America, Inc. United Suppliers of America Inc.'s trademarked product is
Autofrost. Harvey Westbury plans to produce Easy Test Autofrost Air Conditioning
Kits with Autofrost, an alternative refrigerant to CFC-12. Autofrost is a brand
name for alternative refrigerants, EPA accepted, 94% less Ozone depleting than
CFC-12, and 89% less global warming than CFC-12, based on information released
by United Suppliers of America. Under the terms of the agreement, Harvey
Westbury plans to develop, market and distribute a series of air conditioning
kits under the name of Easy Test Autofrost. Harvey Westbury plans to promote,
market, sell and package the product. Autofrost plans to supply the alternative
refrigerant.

                                       18
<PAGE>

Harvey Westbury: The Company is currently employing the strategies outlined
below:

Garry's Royal Satin Product Line: Garry's Royal Satin Marine Products: In 2001,
Harvey Westbury intends to continue focus on its sales and distribution efforts
for its marine products in the Northeast and Southeast region of the United
States. Harvey Westbury intends to promote Garry's Royal Satin Marine products
through local and regional magazine advertisements, discounted sales promotions,
and distribution of samples, and promotions at industry tradeshows.

It Silicone and T-Bolt Rust Penetrant: Harvey Westbury sells limited quantities,
representing less than 1% of total revenues of these products. No current
marketing programs are in place. Formula 2000 Ultimate Product Line: Harvey
Westbury sells limited quantities, representing less than 1% of total revenues
of these products. No current marketing programs are in place.

Easy Test Product Line: Antifreeze & Battery Testers: Harvey Westbury plans to
maintain an aggressive pricing format for this commodity item and to continue to
offer discounts to old clients for returning. Management continues to pursue
lower cost manufacturing opportunities in order to remain a low cost supplier of
these testers. Management intends to become a volume importer of inexpensive
testers and accessories. With Harvey Westbury's in-house packaging capabilities,
Harvey Westbury intends to pursue more private labeling arrangements. Harvey
Westbury intends grow its other Easy-Test products through its current tester
client base.

Mobile Air Conditioning Accessories: Harvey Westbury plans to distribute the
line of AC accessories and chemicals with a new catalog. Harvey Westbury intends
to be a low cost supplier of these accessory products.

Crankcase Drain Plug Series - oil drain plugs: Harvey Westbury intends to market
this product to its current tester client base. Harvey Westbury intends to be a
low cost supplier of these accessory products.

Carbon Monoxide Testers: Harvey Westbury intends to focus on maintaining its
current client base and to identify new clients with similar profiles.
Management believes it can market this product to the small aircraft aviation
industry where Garry's Royal Satin has a small client base.

Fleet Drain Plug Series: Harvey Westbury intends to reintroduce the product to
the client base as well as identify similar profile prospects through mailing
campaigns.

Sources And Suppliers

The Automotive Group currently has no contracts or arrangements with
subcontractors and/or suppliers. Therefore, the Automotive Group may be at risk
due to its inability to obtain products from its manufacturers in a timely
fashion. The risk is minimal since the raw materials for all of the Company's
current products are easily accessible and several sources exist.

                                       19
<PAGE>

Harvey Westbury's Easy Test Anti-freeze and Battery Testers. The 501 series
testers are assembled and packaged in West Paterson, New Jersey facility. The
701 and 901 series testers are assembled by the supplier and packaged in Harvey
Westbury's West Paterson, New Jersey facility. Harvey Westbury's Easy Test
Mobile Air Conditioning Accessories are assembled by the supplier and packaged
in Harvey Westbury's West Paterson, New Jersey facility. The Harvey Westbury
does not have any contractual agreements or licensing arrangements with its
suppliers for these products. There are no patents held by third parties. The
Auxer Group's subsidiary, Harvey Westbury sells automobile accessories under the
name East Test, which is a registered trademark, number 942648 registered on
Sept. 12, 1972 and renewed in 1993.

Harvey Westbury's Garry's chemical based products are manufactured and packaged
by a third-party chemical manufacturer in New York. Harvey Westbury does not
have any contractual agreements or licensing arrangements with its suppliers for
these products. There are no patents held by third parties. The formulations for
the products were developed by the manufacturer. Harvey Westbury created the
formulas for Garry's Royal Satin and Garry's Royal Satin Liquid. The name
Garry's Royal Satin is not a registered trademark. The Garry's Royal Satin
products are marketed and sold by Harvey Westbury.

Formula 2000 Ultimate products are manufactured and packaged by third-party
chemical manufacturers in New York. Harvey Westbury does not have any
contractual agreements or licensing arrangements with its suppliers for these
products. There are no patents held by third parties. Auxer created the formula
for these products which is currently marketed under the "Formula 2000 Ultimate"
name which is marketed and sold by Harvey Westbury. The name Formula 2000
Ultimate is not a registered trademark.

Hardyston Distributors purchases automotive parts from several local
distributors in Northern New Jersey. Products are manufactured and packaged by
the supplier or manufacturer. Hardyston Distributors does not have any
contractual agreements or licensing arrangements with its suppliers for these
products. Hardyston Distributors purchases automotive parts for resale.

Harvey Westbury's Easy Test Testers and Accessories are imported from the
following suppliers in Taiwan and China: Pan Taiwan Enterprises, Co., Ltd, Yen
Jen, Three-In-One Enterprises and DHC. In Addition, another supplier is ATS,
based in the United States. The 501 series testers are assembled in Harvey
Westbury's West Paterson, New Jersey facility. Harvey Westbury's Easy Test
Mobile Air Conditioning Accessories are imported from such suppliers as Yen Jen
and Pan Taiwan Enterprises, Co., Ltd. in Taiwan; Aerosol based in Kansas, TCC
based in Texas; DuPont based in Wilmington, Delaware, Environmental Material
Corp. based on New Jersey and Allied Signal based in New Jersey. Some products
are manufactured at the Harvey Westbury Farmingdale, NY facility. Harvey
Westbury's Garry's Royal Satin and Formula 2000 Ultimate products are
manufactured and supplied by John Prior, Inc. and Innovative Chemical both based
in New York; CRC based on Pennsylvania; Penray based on Illinois; and Bernard
Laboratories based in Ohio. Hardyston Distributors purchases automotive parts
from several local distributors in Northern New Jersey including B&B Auto Parts
and Allendale Automotive Enterprises.

                                       20
<PAGE>

We have a market position of less than 5% for any of our products.

Garry's Royal Satin Product Line for Automotive, Marine & Aviation: The Wax and
Polish market is mainly comprised of waxes, polishes, and Protectants. The care
products industry is comprised of multiple types of products and brand names.
Any area or component of one vehicle has a particular product made to clean
and/or protect it. The products, mechanically, generally come in either aerosol
cans or plastic spray bottles with a typical range to include lubricants,
cleaners, sealants, adhesives, and protectants. In addition to the Automotive
Industry, Harvey Westbury is also involved in the Marine Waxes and Polishes
industry.

The wax market primarily consists of what Harvey Westbury terms Do It Yourselfer
client base. The distribution chain from manufacturer to end-user or consumer
generally follows a traditional route. It's a three level process that starts
with the manufacturer wholesaler who sells to the distributor who, in turn,
sells product to the Jobber, or reseller, and/or retailer. The consumer can then
purchase from the retailer to complete the chain. Major retailers command a
larger influence in the industry by being their own distributors. This push has
started to shift the distribution chain towards a two step process, which
entails the wholesaler selling direct to the retailer. Under this method, the
retailer can now handle more volume than the distributor, in most cases, and is
able to demand lower purchase levels. Electronic Data Inquiry systems are also
becoming more accepted by major retailers. These systems make it easier to order
directly from the manufacturer.

Harvey  Westbury  Corp.  falls  into the first  level of  distribution.  It is a
manufacturer  distributor of Garry's, which is its own line of car care products
to include waxes, pastes, cleaners & Protectants.

There are three primary strategies from which Harvey Westbury intends for this
segment of its business to provide opportunity for growth. The first of which is
better and more appealing packaging. Few product lines offer attractive, screw
top containers. The second is the one- step application process. Finally, sales
support can play a big factor. Market penetration exists for those manufacturers
who supply assistance with sales support. Harvey Westbury has just introduced a
new packaging scheme for its Royal Satin Wax Garry's line which involves a new
twist off plastic container for convenience along with a new color and label
design.

Major Customers

Harvey Westbury sells product to many national and international distributors
and retailers, such as Atlantic Pacific, PEP Boys, Carquest, FJ Distributors,
TRAK Auto, and National Wholesale Distributors. There are no clients of the
Automotive Group that represent 20% or more of the Automotive Group's total
revenues. Management does not believe it is dependent on any one or a few major
clients at this time.

                                       21
<PAGE>

Points Of Operation

Auxer, Harvey Westbury, Hardyston, all maintain their headquarters and
administrative operations in West Paterson, New Jersey.

Harvey Westbury maintains its main sales office in West Paterson, New Jersey.
Harvey Westbury manufacturers and warehouses its products in West Paterson, New
Jersey. The Easy Test product components are primarily manufactured by various
vendors throughout the United States and Internationally and assembled/packaged
at the West Paterson, New Jersey location. Garry's waxes, polishes, and
chemicals, as well as Formula 2000 Ultimate Engine Treatment are manufactured
and private labeled by several vendors throughout the United States and
warehoused at the West Paterson, New Jersey location. Hardyston Distributor's
has an additional location in Franklin, New Jersey. Hardyston distributes
automotive parts and accessories to the surrounding area automotive stores and
service stations.

Government Regulation

While numerous government regulations are developed directed at the automotive
and marine industries on an on-going basis; the Auxer Group does not believe
that there are any significant government regulations pending that would impact
the current product categories that the Auxer Group is currently marketing and
selling.

The Auxer Group does not have any material costs associated with the compliance
of any environmental laws. Harvey Westbury distributes air conditioning products
only. It does not manufacture any products requiring compliance with
environmental laws.

Intellectual Property

The Auxer Group does not own any material property in the form of patents. The
Automotive Group's subsidiary, Harvey Westbury, sells automotive accessories
under the name Easy Test, which is a registered trademark, number 942648 which
was registered on September 12, 1972 and renewed in 1993. The Auxer Group does
not have any contractual agreement or licensing arrangements for these products.
There are no patents held by third parties. Additionally, Harvey Westbury sells
waxes and polishes under the name Garry's Royal Satin, which is not a registered
trademark. Harvey Westbury previously was a distributor for Garry's Laboratories
based in Buffalo, New York. Garry's Laboratories registered and owned the
trademark. However, Garry's Laboratories ceased doing business and the trademark
registration expired. Harvey Westbury has continued to distribute the product
under the trade name "Garry's Royal Satin." Harvey Westbury's Garry's chemical
based products are manufactured and packaged by a third-party chemical
manufacturer in New York. The Auxer Group does not have any contractual
agreements or licensing arrangements with its suppliers for these products.
There are no patents held by third parties. The formulations for the products
were developed by the manufacturers.

                                       22
<PAGE>

In October 1995, Universal Filtration entered into an agreement with William
Hayday for the purchase of the worldwide non-transferable rights to market the
Fiona Micro Screen Filter and the rights to make any future modification to the
design. The term of the agreement was October 1, 1995 until September 30, 1999.
The agreement has expired.

On May 23, 1996, CT Industries entered into a supply agreement with MotionLube,
licensee of patented technology relating to vehicular and machinery lubricants
covered by Patent No. 5,385,683 whereas MotionLube will manufacture or cause to
be manufactured the product covered above which will be sold under the name
Formula 2000. The term of the agreement was for one year from the date of the
agreement, which will automatically renew annually provided no violations by
either party. The agreement was not renewed after the first year. Subsequently,
the Harvey Westbury created a new formula, specifically Formula 2000 Ultimate,
which Harvey-Westbury markets and sells. Formula 2000 Ultimate is not a
registered trademark. Formula 2000 Ultimate maybe a difficult name to register
as the name itself could be considered generic in nature. Additionally, Formula
2000 Ultimate could be considered similar to Turtle Wax's Formula 2001.
Management does not believe that the similarity could be a problem due to the
fact that Formula 2000 Ultimate is categorized as an engine lubricant product
and Formula 2001 is categorized as a wax and polish product. Should it ever be
determined that Formula 2000 Ultimate does in fact infringe on Turtle Wax's
trademark, Harvey Westbury would be required to sell its product under another
name. Management does not believe that this would impact sales of this product.

Harvey Westbury does not have any contractual agreements or licensing
arrangements with its suppliers for Garry's Royal Satin products. There are no
patents held by third parties or by Harvey Westbury.

Harvey Westbury does not have any contractual agreements or licensing
arrangements with its suppliers for these products. There are no patents held by
third parties. The formulations for the products were developed by the
manufacturer. Harvey Westbury owns the rights to the formulas for Garry's Royal
Satin and Garry's Royal Satin Liquid. The supplier owns the rights to the
formulas for the rest of the products under the Garry's line. Auxer does not
have any contractual agreements or licensing arrangements with its suppliers for
the Formula 2000 Ultimate products. There are no patents held by third parties.
Auxer owns the rights to the formula for these products.

Hardyston Distributors, doing business as The Mechanics Depot, does not have any
contractual agreements or licensing arrangements with its suppliers for Garry's
Royal Satin products. Hardyston Distributors purchases automotive parts for
resale.

Employees

The Auxer Group and its subsidiaries have 27 employees as follows: The Auxer
Group, Inc.: 4 - Management; 4 - Support Staff; Auxer Telecom, Inc.: 2 -
Management; 3 - Support Staff; CT Industries, Inc.: 1 Management; 1 Sales;
Harvey Westbury Corp.: 1 - Management; 2 - Warehouse Staff; and Hardyston
Distributors, Inc., doing business as The Mechanics Depot: 1 - Management; 6 -
Support Staff; and 2 - Warehouse Staff. The only employees that are not
full-time are 5 of the 6 support staff for Hardyston Distributors. No employees
are covered by labor agreements or contracts.

                                       23
<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY

Facilities-Properties

The Auxer Group entered into a five-year lease agreement with a non-affiliated
party beginning on February 1, 2000 and expiring January 31, 2005, for the
premises located at 12 Andrews Drive, West Paterson, New Jersey. Such premises
are approximately 18,000 square feet. A $15,583 security deposit was required
with minimum monthly payments to be paid as follows:

<TABLE>
<CAPTION>
PERIOD                           ANNUAL RENT                  MONTHLY RENT
<S>                                <C>                        <C>
Feb. 1, 2000 -
Jan. 31, 2001                      $85,000                    $7,083.34
Feb. 1, 2001 -
Jan. 31, 2002                      $89,250                    $7,437.50
Feb. 1, 2002 -
Jan. 31, 2003                      $93,500                    $7,791.67
Feb. 1, 2003 -
Jan. 31, 2004                      $97,850                    $8,145.84
Feb. 1, 2004 -
Jan. 31, 2005                      $102,000                   $8,250.00
</TABLE>

In addition to the minimum monthly rental payments, the Auxer Group must pay
real estate taxes, insurance, and utilities.

Since the acquisition of the assets of Clifton Telecard Alliance Inc., we made
payments under its lease of $5,487 per month. The space is located in North
Bergen, New Jersey and is approximately 2,800 square feet.

Since the sale of Clifton Telecard on May 16, 2001, The Auxer Group no longer
has this obligation.

Auxer Telecom Inc. entered into a month-to-month lease agreement with a
non-affiliated party beginning August 1, 2000 at a monthly rate of $2,500 for
facility space in Los Angeles, California. Such space is approximately 500
square feet. Auxer Telecom also leases office space in Los Angeles, California
on a month-to-month basis at the monthly rate of $7,766.00, which lease was
terminated in June 2001. Such space is approximately 1,800 square feet. On June
6, 2001, Auxer Telecom, Inc. entered into a month to month Service Agreement
with a nonaffiliated party at a monthly rate of $1500.00, which included
sub-leasing space for office purposes. Such space is approximately 500 square
feet.

                                       24
<PAGE>

The Auxer Group assumed the lease agreement with a non-affiliated party entered
into by Mr. Ernest DeSaye, Jr. beginning March 1, 1999 and expiring on February
28, 2000, at 22B Lasinski Road, Franklin, NJ. The option to renew for an
additional two years was invoked extending the expiration of the lease to
February 29, 2001. The lease was not renewed.

<TABLE>
<CAPTION>
Period                     Annual Rent                  Monthly Rent
<S>                        <C>                          <C>
3/1/99 -                   $8700.00                     $725.00
2/28/00

3/1/00 -                   $9000.00                     $750.00
2/28/01
</TABLE>

                                       25
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

The Auxer Group has the following pending or threatened litigation:

Ross & Craig Solicitors v. Auxer Industries, Inc. - Superior Court of New
Jersey, Law Division, Passaic County - Index No. L1598-98, filed on February 10,
1998. This is a case brought by an English partnership against us. Ross & Craig
is requesting the sum of $46,666.23 plus interest accruing from 1997 for work,
labor and services rendered. In January 2001, the Ross & Craig Solicitors case
was settled and the parties signed a settlement agreement. The Auxer Group
agreed to pay the sum of $35,000 in 18 monthly installments with an initial
payment of $5,000 and 17 payments of $1,764.70 subsequently. Payments commenced
in February 2001 and will be completed in August 2002. Eileen M. Huff, et. al.
v. Harvey Westbury Corp. and Auxer Industries, Inc. - Supreme Court of the State
of New York, Suffolk County, Index No. 29090-97, filed on November 24, 1997, and
Suffolk County District Court, First District Civil Court of New York, Index No.
CEC67098, filed on November 24, 1997; These cases all involved the Auxer Group's
purchase of Harvey Westbury. They are about the wrongful termination of one
employee seeking damages of $13,427.95, and the alleged non-payment of insurance
premiums for another seeking damages of $175,000. An additional case involving
the Auxer Group's purchase of Harvey Westbury was Lorraine Duff v. Harvey
Westbury & Auxer and Suffolk County District Court, First District Civil Court
of New York, Index No.CEC67- 98, filed on November 11, 1997. This case was about
wages due, seeking damages of $5,264.00. The Auxer Group filed answers to all
lawsuits. In July 1999, the Lorraine Duff case was settled and the parties
signed a settlement agreement. The Auxer Group agreed to pay the sum of $5,000
in 10 monthly installments of $500 each. Payments commenced in August 1999 and
continued until May 2000. All payments have been made and this case is
completed. In August 2000 both cases involving Eileen M. Huff were settled and
the parties signed a settlement agreement. The Auxer Group agreed to pay the sum
of $15,000 in 13 monthly installments with an initial payment of $3,000 and 12
payments of $1,000 subsequently. Payments commenced in September 2000 and will
be completed in September 2001.

Interdynamics, Inc. v. Harvey Westbury Corp and The Auxer Group, Inc. - United
States District Court, Eastern District of New York, Case No. 00-CV-7115, filed
on November 29, 2000. This case is an action for patent infringement seeking
monetary damages and injunctive relief, and requests that the Court order an
accounting for damages, and that the Court award interest, costs, and attorneys'
fees. Interdynamics alleges that at least two of Harvey Westbury's air
conditioner retrofitting kits, models number RC88500 and RC88700, directly
infringe on Interdynamics U.S. Patent No. 6,089,032, entitled "Method of
Retrofitting Air Conditioner and System Therefor." We have counterclaimed for
antitrust violations. On or about December 1999, Interdynamics stated to
customers and potential customers of Harvey Westbury that Interdynamics was

                                       26
<PAGE>

about to commence litigation against Harvey Westbury for offering for sale and
selling Harvey Westbury's line of air conditioning recharge kits containing R134
and that any company that would do business with Harvey Westbury would become
involved in that litigation. These statements were made with the intent to cause
the persons and business entities to whom such statements were made to cease
doing business with Harvey Westbury, or if they were not customers of Harvey
Westbury at that time to prevent such business entities from buying from Harvey
Westbury. Interdynamics Inc. actions constitute a violation of Section 2 of the

Sherman Act, 15 U.S.C. Sec. 2, in that these actions constitute monopolization
of the market both regionally and throughout the United State for R134 recharge
and/or retrofitting kits and kit components. The case is presently in the
discovery phase. A motion for preliminary injunctive relief was held in January
2001 and the Magistrate Judge denied Interdynamic's injunction in all respects.
The Auxer Group intends to vigorously defend this action and pursue its
antitrust case against Interdynamics. In the event that a monetary judgment is
eventually rendered against the Auxer Group, the judgment could be as high as 3
times the number of units sold multiplied by the difference between the Auxer
Group's selling price and the price at which Interdynamics could have sold its
product if not for the Auxer Group's sales. Management estimates a monetary
judgment against the Auxer Group and or its subsidiary, Harvey Westbury, could
be approximately $75,000.

The Auxer Group is not currently aware of any other pending, past or present
litigation that would be considered to have a material effect on the Auxer
Group. There are no known bankruptcy or receivership issues outstanding and has
no known securities law violations. Additionally, the Auxer Group has no known
legal proceedings in which certain corporate insiders or affiliates of the
issuer are in a position that is adverse to the issuer.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
None

                                       27
<PAGE>

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------

On March 20, 2001, there were approximately 472 shareholders of record of our
common stock. Based on information received from brokers and others in fiduciary
capacities, we estimate that the total number of shareholders of our common
stock exceeds 500. Our shares of common stock are currently traded on the OTC
Electronic Bulletin Board under the symbol "AXGI".

The reported high and low bid prices for our common stock are shown below for
each quarter during the last three complete fiscal years. The high and low bid
price for the periods in 1999 and 2000 shown below are quotations from the OTC
BB. The high and low bid prices for 2000 shown below are quotations from the
Pink Sheets. The quotations reflect inter-dealer prices and do not include
retail mark-ups, mark-downs or commissions. The prices do not necessarily
reflect actual transactions.
<TABLE>
<CAPTION>
Period                HIGH BID             LOW BID
------                --------             -------
<S>                   <C>                  <C>
1999

First Quarter         0.22                 0.001
Second Quarter        1.035                0.055
Third Quarter         0.09                 0.0600
Fourth Quarter        0.08                 0.01

2000

First Quarter         0.14                 0.04
Second Quarter        0.125                0.06
Third Quarter         0.14                 0.06
Fourth Quarter        0.09                 0.05
</TABLE>

DIVIDENDS

We do not intend to retain future earnings to support our growth. Any payment
of cash dividends in the future will be dependent upon: the amount of funds
legally available therefore; our earnings; financial condition; capital
requirements; and other factors which our Board of Directors deems relevant.

                                       28
<PAGE>

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

Certain matters discussed herein (including the documents incorporated herein by
reference) are forward-looking statements intended to qualify for the safe
harbors from liabilities established by the Private Litigation Reform Act of
1995. These forward-looking statements can generally be identified as such
because the context of the statement will include words such as we or Auxer
"believes," "plans," "intends," "anticipates," "expects," or words
of similar import. Similarly, statements that describe our future plans,
objectives, estimates, or goals are also forward-looking statements. Such
statements address future events and conditions concerning capital expenditures,
earnings, litigation, liquidity and capital resources and accounting matters.
Actual results in each case could differ materially from those currently
anticipated in such statements by reason of factors such as future economic
conditions, including changes in customer demands; future legislative,
regulatory and competitive developments in markets in which we operate; and
other circumstances affecting anticipated revenues and costs.

The following discussion should be read in conjunction with the consolidated
financial statements and notes. In addition to historical information, this
discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions, which could cause actual results to differ
materially from our expectations. Factors that could cause differences include,
but are not limited to, expected market demand for our products, fluctuations in
pricing for products distributed by us and products offered by competitors, as
well as general conditions of the telecommunications marketplace.

We are a holding company that previously formed a telecommunications group and
established two (2) subsidiaries, Clifton Telecard Inc., a wholesale distributor
of prepaid phone cards which was subsequently sold on May 16, 2001, and Auxer
Telecom Inc., which provides telecommunication services from telecommunications
carriers to the telecommunications industry. Additionally, Auxer owns an
automotive group with two active subsidiaries: The Harvey Westbury Corporation
Inc. and Hardyston Distributors, Inc. Harvey Westbury assembles and packages
automotive accessories under the name, Easy Test, sells engine treatment under
the name, Formula 2000 Ultimate and sells waxes and polishes under the name,
Garry's Royal Satin to the automotive, marine, and aviation industries.
Hardyston Distributors, Inc. is a specialty distributor of automotive parts and
accessories to local mechanics, service stations and dealers. On March 9, 2001,
CT Industries, Inc. changed its business focus to the telecommunications related
business.


                                       29
<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations for the Years December 31, 1999 and 2000.

The financial statements for the years ended December 31, 1999 and 2000 have
been prepared on a going concern basis. The issuance of a going concern opinion
by the auditors indicates that the auditors have substantial doubt about the
Auxer Group's ability to continue as a going concern. The Auxer Group incurred
net losses of $7,624,650 for period from April 18, 1995 to December 31, 2000.
These factors indicate that the Auxer Group's continuation, as a going concern
is dependent upon its ability to obtain adequate financing. If the Auxer Group
is unable to obtain adequate financing necessary to support the Auxer Group's
ability to continue its operations, advance its plan of operations, increase its
sales, increase its inventory and working capital, the Auxer Group would be
substantially limited. If the Auxer Group is unable to properly fund its plan of
operations, the Auxer Group's continuation would be jeopardized. Management's
plan to overcome its financial difficulties consists of raising additional
capital and increasing revenues from its subsidiaries. At this point, the Auxer
Group has no definite plans to raise money.

Results of operations for periods ended December 31, 1999 and 2000

Proforma financials below are adjusted to reflect the disposition of Clifton
Telecard, Inc. for the annual period ended December 31, 2000.

<TABLE>
<CAPTION>
                              Year ended          Year ended          +/-%         Proforma Year             +/-%
                               December          December 31,                     ended December
                               31, 1999              2000                            31, 2000

<S>                            <C>                 <C>                 <C>           <C>                      <C>
Net Sales                       871,259           10,993,570         +    1162%          1,697,894               +   95%
Gross Profit                    249,049              969,310          +   289%            547,524               +   120%
Selling, General &            1,302,418            3,619,994          +   178%          3,282,808               +   152%
Administrative
Expenses
Research &                            0                    0             0%                  0                  0%
Development Costs
Depreciation Costs               11,626              111,145          +   856%            110,119               +   847%
Amortization Costs                    0                    0             0%                  0                  0%
Interest                         10,618               36,524          +   244%             36,524               +   244%
Net Income (Loss)              (975,127)          (2,795,833)          n/a          (3,027,154)               n/a
Inventory                       290,725            1,226,807          +   322%            584,839               +   101%
</TABLE>

                                       30
<PAGE>

Proforma 2000 to History 1999 Financial Data Comparison

Net Sales

We had sales of $1,697,894 in 2000, on a proforma basis, compared to sales of
$871,259 in 1999 representing an increase of $826,635 or 95%.

There were sales of $1,494,657 in 2000, on a proforma basis compared to $871,259
in 1999 generated from the Automotive Group's air conditioning line and the
addition of the second warehouse facility. Another new source of revenue for the
Auxer Group was the prepaid phone card switch operation through the acquisition
of the Telecom Group in the third quarter of 2000, which generated sales of
$203,237.

Gross Profit Margins

We had gross profits of $547,524 and a gross profit of 28% in 2000, on a
proforma basis, compared to gross profits of $249,049 and a gross profit of 29%
in 1999 representing a decrease in the gross profit of 1%.

The decrease in gross profit was a result of the companies telecom group's
revenues through sales of prepaid phone cards, which are in general sold at a
lower gross profit margin than the automotive group's products.

Selling, General & Administrative Expenses


We had general and administrative expenses of $3,282,808 in 2000, on a proforma
basis, compared to $1,302,418 in 1999 representing an increase of $1,980,390 or
152%.

The increase in these expenses was a result of expenses related to the telecom
group's acquisition and operating expenses.

Research & Development Costs

We had research and development costs of $0 in 2000, on a proforma basis,
compared to $0 in 1999 representing no change.

Depreciation

We had depreciation expenses of $110,119 in 2000, on a proforma basis, compared
to $11,626 in 1999 representing an increase of $98,493 or 847%.

The increase in these expenses was a result of an increase in the equipment and
assets related to the acquisition of the telecom group.

                                       31
<PAGE>

Amortization Costs

We had amortization expenses of $0 in 2000, on a proforma basis, compared to $0
in 1999 representing no change. There were no costs that were capitalized or
amortized. All costs were expenses in the period they incurred.

Interest

We had interest expenses of $36,524 in 2000, on a proforma basis, compared to
$10,618 in 1999 representing an increase of $25,906 or 244%. The increase in
these expenses was a result of a higher average principal outstanding on Harvey
Westbury's credit facility.

Net Income (Loss)

We had net losses of $3,027,154 or a loss of $0.03 per share in 2000, on a
proforma basis, compared to losses of $975,127 or a loss of $0.02 per share in
1999 representing an increase in losses of $2,052,027 or $0.01 per share.

The increase in losses was a result of an increase in expenses, related to the
acquisition of the telecom group.

Inventory

We had inventory of $584,839 on December 31, 2000, on a proforma basis, compared
to inventory of $290,725 on December 31, 1999 representing an increase of
$294,114 or 101%.

The increase in inventory was a result of the Auxer Group's increase in air
conditioning inventory.

Historic 2000 to Historic 1999 Financial Data Comparison

Net Sales

We had sales of $10,993,570 in 2000 compared to sales of $871,259 in 1999
representing an increase of $10,122,311 or 1162%.

There was an increase in sales of $1,705,952 in 2000 compared to $871,259 in
1999 generated from the Automotive Group's air conditioning line and the
addition of the second warehouse facility. The primary revenue source for the
Auxer Group was prepaid phone cards through the acquisition of the Telecom Group
in the third quarter of 2000, which generated sales of $9,287,618.

                                       32
<PAGE>

Gross Profit Margins

We had gross profits of $969,310 and a gross profit of 9% in 2000 compared to
gross profits of $249,049 and a gross profit of 29% in 1999 representing a
decrease in the gross profit of 20%.

The increase in gross profit was a result of the companies telecom group's
increased revenues through sales of prepaid phone cards and the automotive
group's air conditioning line.

Selling, General & Administrative Expenses

We had general and administrative expenses of $3,619,994 in 2000 compared to
$1,302,418 in 1999 representing an increase of $2,317,576 or 178%.

The increase in these expenses was a result of expenses related to the telecom
group's acquisition and operating expenses.

Research & Development Costs

We had research and development costs of $0 in 2000 compared to $0 in 1999
representing no change.

Depreciation

We had depreciation expenses of $111,145 in 2000 compared to $11,626 in 1999
representing an increase of $99,519 or 856%.

The increase in these expenses was a result of an increase in the equipment and
assets related to the acquisition of the telecom group.

Amortization Costs

We had amortization expenses of $0 in 2000 compared to $0 in 1999 representing
no change. There were no costs that were capitalized or amortized. All costs
were expenses in the period they incurred.

Interest

We had interest expenses of $36,524 in 2000 compared to $10,618 in 1999
representing an increase of $25,906 or 244%. The increase in these expenses was
a result of a higher average principal outstanding on Harvey Westbury's credit
facility.

                                       33
<PAGE>

Net Income (Loss)

We had net losses of $2,795,833 or a loss of $0.03 per share in 2000 compared to
losses of $975,127 or a loss of $0.02 per share in 1999 representing an increase
in losses of $1,820,706 or $0.01 per share.

The increase in losses was a result of an increase in expenses, related to the
acquisition of the telecom group.

Inventory

We had inventory of $1,226,807 on December 31, 2000 compared to inventory of
$290,725 on December 31, 1999 representing an increase of $936,082 or 322%.

The increase in inventory was a result of the Auxer Group's increase in prepaid
phone card inventory as well as air conditioning inventory.

A substantial part of our growth has been achieved through acquisition within
the telecommunications industry. Given the acquisition and disposition of
Clifton Telecard, the results from operations from period to period are not
necessarily comparable. Clifton Telecard was sold on May 16, 2001.

Our principle source of revenue has been the telecom group's prepaid phone
cards. The telecom group's markets and distributes branded prepaid phone cards
produced by a variety of telecommunications long distance carriers and
resellers, as well as private label proprietary prepaid phone cards produced for
the Auxer Group by various long distance carriers and/or resellers.

Branded cards are purchased by the telecom group at a discount from the face
value of the card, and result to the distributor at a slightly lower discount.
The difference between the two discount rates, typically from 1% to 3%,
represents the grow margin retained by the telecom group. Purchases of branded
cards by the Auxer Group are made on varying terms, from C.O.D. to a net 21
basis, although the majority of the Auxer Group's purchases are made on credit
terms of 10 days or less. Sales by the telecom group of its product are
generally made on a net 30 basis.

Private label cards are generally designed and produced by the Auxer Group,
utilizing card numbers and PINs provided by the telecommunications' carrier or
reseller providing the long distance service for the card. The Auxer Group
incurs the upfront expense of printing the phone cards. However, the Auxer Group
does not pay the long distance carrier until it activates the cards, which
occurs upon the sale by the Auxer Group to the distributor. Accordingly, through
the use of private label cards, the Auxer Group's cost of inventory is
significantly reduced, as purchases are effectively made on an as-needed basis.

We plan to invest in marketing and advertising its products which may increase
sales. We believe increased marketing and advertising can impact our gross
revenues.

                                       34
<PAGE>

We plan to continue to pursue our acquisition strategy over the next twelve
months and believe this may impact our gross revenues and costs.

In June 2000 The Auxer Group unveiled its corporate strategy under three primary
objectives: first, continue to finance and grow Auxer's core automotive and
marine product lines and distribution network; second, grow the existing core
business through acquisition of new product lines; and third develop an
aggressive acquisition program in high growth industries such as internet and
telecommunications. The Auxer Group also signed with Global Management Group to
create an interactive investment relations web site. The web site allows all
current and potential investors, who register on-line to have immediate access
to all company new releases as they are released.

In June 2000 Harvey Westbury Corp. launched its new and expanded line of
automotive air conditioning chemicals, retrofit & recharge kits for the Summer
2000. The new additions include over 40 air conditioning kits, chemicals and
accessories. Harvey Westbury expected to exceed its projections of $750,000 for
the 2000 season. Actual sales did not exceed the projections as Harvey Westbury
actually sold $630,000 in air conditioning products for the 2000 season.

In July 2000 Harvey Westbury Corp.'s automotive air conditioning line gained new
distribution with National Wholesale Distributors, a major discount retail
chain. National Wholesale Distributors has 36 retail warehouses and 2
distribution centers throughout the Northeast United States. Also in July, Trak
Auto, a major automotive retailer, reordered Harvey Westbury's new kits and
accessories. Trak Auto's initial orders for Harvey Westbury's Air conditioning
products were over $225,000.

In July 2000 Auxer announced its telecommunication group projections of $60
Million in revenues with earnings of $3 to $6 Million on a per annum basis. In
July 2000 Auxer Group announced projected revenue for Clifton Telecard of $25 -
$35 Million based on a per annum basis. Projections were based on management's
internal business plan, Clifton Telecard's client base and growth potential. The
Telecom Group produced revenues of approximately $500,000 for the six month
period ending June 30, 2001. The above projections for revenues and earnings
were not met.

In August 2000, we acquired telecommunications equipment as part of our strategy
to form a telecom group. On August 24, 2000, we completed the transfer of assets
formerly associated with Sponge Technologies, Inc. to Auxer Telecom, Inc., a new
wholly-owned subsidiary of The Auxer Group. The subsidiary's operation has been
relocated from Santa Monica California to a location on Wilshire Blvd., Los
Angeles, California. Auxer Telecom has been established and engineered to manage
$60 Million in telecommunications traffic. More specifically, the operation,
personnel and equipment in California has been designed to be able to support
approximately $60 Million in initial traffic. We plan to add additional
equipment and personnel in the telecom group if revenues continue to grow.

                                       35
<PAGE>

The total price paid for the equipment by the Auxer Group was $568,000 payable
as follows: $10,000 upon the execution of the Agreement and commencing October
1, 2000 and continuing the first day of each successive month, Auxer Telecom
shall pay additional monthly installments of $10,000 for a series of 10
payments. On August 1, 2001 the Auxer Telecom shall pay the seller, Chasin of
Long Beach, Inc., doing business as Colbie Pacific Capital, the sum of $458,000.

In September 2000, our automotive group launched its fall and winter line of
Easy Test products, which included a new series of utility drop lights for
mechanics and endusers. Management announced these products could increased
revenues of the automotive group by $500,000 during the 2000 and 2001 winter and
spring seasons. The projections were based on potential sales from Harvey
Westbury's existing client base. Harvey Westbury's new products represented
approximately $95,000 through first quarter of 2001 based on The Auxer Group's
quarterly financial review.

On September 14, 2000, Auxer Telecom had completed the first phase and its
switches are operational and has completed carrier contracts with Pacific
Digital Networks for International, Long Distance, and Domestic services. The
Auxer Group entered into the final stages of negotiations with Clifton Telecard
Alliance.

On September 22, 2000, Auxer completed the acquisition of the assets of Clifton
Telecard Alliance, a wholesale distributor of prepaid phone cards. The assets
acquired were placed in a newly formed corporation called Clifton Telecard, Inc.
which is doing business as Clifton Telecard Alliance. Based on Clifton Telecard
Alliance's financial statements, management announced on September 22 that
Clifton Telecard's sales had nearly doubled during the year 2000 to a pace of
$30 Million on an annual basis. Management announced projections of $25 30
Million in revenue during its first twelve months of operation as part of the
Auxer Telecom Group. Additionally, management released a statement that Auxer
plans to grow and expand the operations to approximately $60 Million on an
annual basis. In the first quarter of 2001, the Telecom Group produced revenues
of over $7 Million dollars. These projections were based on estimates of monthly
revenue extrapolated out over twelve months and growth rates estimated based on
monthly revenue growth rates. The Auxer Group sold Clifton Telecard on May 16,
2001. The impact of this sale is discussed in this section.

In October 2000, our subsidiary, Harvey Westbury, entered into a joint venture
agreement with United Suppliers of America to market and distribute alternative
refrigerant products and kits. This relationship could produce increased
revenues for the automotive group in which management believes it can be a major
supplier of kits and accessories for the alternative and HFC 134a refrigerant
markets over the next couple of seasons. Management believes the market for
Alternative and HFC 134a refrigerant is approximately $135 Million. This
estimate is based managements review of clients and prospective clients
estimated potential sales. During the 2001 air conditioning season, Harvey
Westbury completed initial packaging and kit designs and initial kits were
tested during this season.

                                       36
<PAGE>

In October 2000, Clifton Telecard, Inc. launched its new website
www.cliftontelecard.com. Also in October Auxer Telecom completed all primary
systems testing to include switch systems, security systems, back-up systems,
customer services systems, servers and circuit connectivity between sites. In
addition management announced on October 24, 2000 the Telecom Group had
generated over $2.2 Million in revenue since the acquisition of Clifton Telecard
four weeks ago. The revenue was based on orders shipped for the period of
October 15 through October 21, 2000.

In October 2000, Harvey Westbury gained new distribution of its automotive air
conditioning line with FJ Auto Distributors in Puerto Rico. Also in October,
Harvey Westbury and its Easy Test Air Conditioning line was feature in the
October 18, 2000 edition of Ozone Depletion Today which is published by EIN
Publishing, Inc. The industry report highlights the company's efforts in
developing ozone-friendly alternative refrigerant kits.

On November 28, 2000, the Auxer Group unveiled its twelve month strategy. First,
the Auxer Group planned to complete the transition of Clifton's traffic to Auxer
Telecom over the following 60 days. Auxer Telecom was able to transfer all cards
by the end of January 2001. The African Talk and Original phone cards remained
with their original carriers due to cost. Second, the Auxer Group expected to
enter into formal negotiations with at least one, and possibly two more
acquisition candidates in the telecommunications industry, which it intended to
complete in the first and second quarters of 2001. During the first and second
quarters of 2001, the negotiations were postponed until the fall of 2001 Third,
Auxer Group planned to invest in several beta test programs being developed by
Auxer Telecom in the areas connected to broadband, virtual private networks, and
ATM/prepaid phone card combinations. These plans were put on hold in the second
quarter after management decided to restructure operations in Los Angeles. And
lastly, the Auxer Group believed it would be properly developed and in position
to apply for listing on the NASDAQ during the next fiscal year which was its
final objective for the year 2001. While the end of the year has not arrived,
management believes that this objective may be difficult to achieve by year end.
The Auxer Group's vision for year 2001 is to have Auxer on a sales pace of $180
Million per annum and assets under management in excess of $20 Million. While
the end of the year has not arrived, management believes that this objective may
be difficult to achieve by year end.

Throughout the fourth quarter of 2000, The Auxer Group issued a series of press
releases of weekly sales and projected 4th quarter sales. On October 2, 2000,
The Auxer Group estimated revenues for Clifton Telecard and the Telecom Group to
do $550,000 for the third quarter ending September 30, 2000. On October 3, 2000
The Auxer Group announced its Telecom Group was projecting revenues of $6 - $8
Million for the fourth quarter ending December 31, 2000. On October 10, 2000 The
Auxer Group announced estimated revenues for the Telecom Group were over
$520,000 for orders shipped during the period October 1 through October 7, 2000.
On October 17, 2000, The Auxer Group announced estimated revenues of $590,000
for orders shipped during the period October 8 through October 14, 2000. On
October 24, 2000 The Auxer Group announced estimated revenues of $2.2 Million
since the acquisition of Clifton Telecard on orders shipped since September,
2000. On October 30, 2000, The Auxer Group announce estimated revenues of
$570,000 for orders shipped during the period of October 22 through October 28,
200 0. Weekly revenues announced were confirmed in audited financial statements
for the period ending December 31, 2000. Actual revenues for the period ending
December 31, 2000 was $9,287,618 for the Telecom Group, of which $586,304 is
represented in the third quarter of 2000 and $8,701,314 is represented in the
fourth quarter of 2000. Revenues are based on The Auxer Group's financial review
for the three months ending September 30, 2000 and audited financials for the
year ending December 31, 2000.

                                       37
<PAGE>

Throughout the years 2000 and early 2001, The Auxer Group's Executive Vice
President, Ronald Shaver, conducted three interviews on August 7, 2000, October
17, 2000 and March 6, 2001 to answer investor questions. The during an interview
with Investornuts.com, management disclosed that "The Auxer Group's next six
months was dedicated to growing the Telecom Group through acquisition and growth
in sales." Management also disclosed "Auxer is currently in discussions on
several other telecommunications ventures to include projects in the area of
broadband technology and other cutting edge concepts." Management also disclosed
that, "If our two groups continue at the current pace and some of the
discussions the company is currently involved continue to materialize, we
believe this company could achieve revenue levels in excess of $150 Million for
the next year." Management also disclosed, "Auxer is expecting both of its
operating groups to show profits this year." At the time of the interviews The
Auxer Group was considering additional acquisitions, which would have supported
the above referenced revenue level. The acquisition never came to fruition. At
the time of the interview, management believed both of its operating groups
could show profits. These projections were based on management's business plans
and the client bases potential to purchase product from each of the operating
subsidiaries. The actual earnings results for The Auxer Group were losses of
$2.7 Million for the year ended December 31, 2000.

In January 2001 The Auxer Group announced that Auxer Telecom's switch received
holiday traffic of 1.2 Million minutes of telecommunications traffic during the
holiday season. The minutes reported were based on traffic reports generated
from Auxer Telecom's switch software. In March of 2001 CT Industries launched
its X-Factor line of products under the X-Factor trademark and logo. The first
series of products will be a prepaid calling card known as the X- Card.

On March 9, 2001, CT Industries, Inc.'s Board of Directors approved the
expansion of the business focus to include telecommunications related business.
As part of this expansion, CT Industries hired Nadia Mustafa, a former sales
manager of Clifton Telecard Alliance prior to the Auxer Group acquiring the
Clifton Telecard operation. Ms. Mustafa was contracted as Sales Manager for CT
Industries' phone card operations in March 2001 for a two (2) year term. The
terms of her employment are unrelated to Auxer's former subsidiary Clifton
Telecard and she is currently the Sales Manager of CT Industries.

In March 2001 The Auxer Group hired M. Johnson & Associates to provide investor
relations services to The Auxer Group and its subsidiaries. On March 14, 2001,
the Auxer Group added Benjamin Colarossi to the marketing team for the X-Factor.
Mr. Colarossi is a consultant to Auxer and is currently acting in that capacity.

On March 17, 2001, as part of a promotional campaign, the Dick Barbour Racing
Team unveiled the X-Factor logo on the number 15c Porsche at the 12 hours of
Sebring, a premier race of the American La Mans Series.

                                       38
<PAGE>

On March 22, 2001 The Auxer Group announced they achieved record revenues for
the year 2000 of $10.99 Million in sales for the year, compared to $871,000 that
The Auxer Group posted in 1999. The Telecom Group represented $8.5 Million of
those revenues in the fourth quarter of 2000. The Automotive Group represents
the remainder of revenues for the year 2000. Assets under management were $5.4
Million in 2000, compared to $471,000 posted in 1999. Revenues are based on
audited financial statements of The Auxer Group. On March 26, 2001 CT Industries
hosted its grand opening in West Paterson, NJ to assist Clifton Telecard's
growing sales. This new location will allow Clifton Telecard to handle
additional walk-in customers and will also provide additional warehouse space.
On April 16, 2001, management announced that Clifton Telecard's fourth quarter
sales were on a $34 Million annualized pace and that CT Industries' projected a
sales pace equivalent to its sister company, Clifton Telecard, by the third
quarter of 2001. These projections were based on Clifton Telecard's client base
and management's estimate of potential growth. The $34 Million pace was
extrapolated by multiplying Clifton Telecard's fourth quarter 2000 sales of $8.5
Million by four quarters. As of July 2001 CT Industries has distribution in
nineteen states. Its current business plan is to obtain distribution throughout
all 50 states. CT Industries currently has no new distribution agreements in
place.

On March 29, 2001, CT Industries reached an agreement with Universal Services &
Telcom, Inc. to distribute products under the X-Factor product line.

On April 14, 2001, the X-Factor debuted on NBC Sports in two thirty second
commercials, which telecast during the European Le Mans Series from England's
Donington Park circuit. The commercials were advertising the X-Factor Grand Prix
Sonoma, a North American Series race to be held on July 22, 2001.

On May 16, 2001 The Auxer Group sold 100% of the stock of Clifton Telecard, Inc.
to Kattosko Communications in consideration for cash, elimination of debt, and a
note payable totaling $972,350. The method for determining the valuation was
based on CLifton Telecard's actual value of its tangible assets less its
accounts receivable, inventory and equipment. Clifton Telecard's accounts
receivable, inventory and all liabilities were retained by Clifton Telecard
because during negotiations, the parties agreed the assets and liabilities must
be retained by Clifton Telecard in order for Kattosko Communications to
effectively continue Clifton Telecard's operations. The total valuation of the
transactions was $972,350 which was determined based on the value of the current
bank account, valued at approximately $528,000, forgiveness of inter-company
debts netting at approximately $344,350 and a note payable in the amount of
$100,000. The Auxer Group and Kattosko Communications agreed that the valuation
of Clifton Telecard warranted a preminium or "goodwill" of $100,000 in the form
of a note payable. This was in addition to the value of the bank account of
$528,000 and the forgiveness of inter-company debt of $344,350. The valuation of
the premium or "goodwill" was negotiated based on the fact that CLifton
Telecard's net income from operations for the 1st quarter of 2001 was $1,249
derived from revenues of $7,185,748, or basically break-even. No basis in
valuation was determined for the other intangible assets which consisted
principally of the following trademarks: One Cent, Kamustahan, Humsafar, El Sol
Mexico, Jerusalem Middle East, Que Viva Mexico, African Talk, Para Todos, Brazil
Campeao, Original and African Voice. Since both the Auxer Group and Kattosko
Communications retained the rights to distribute these trademarks, the
trademarks were determined not to have any basis in valuation of the
transaction. In addition to the above consideration, terms and rights to above
trademarks, Kattosko Communications continues to have rights to purchase prepaid
cards from Auxer Telecom and The Auxer Group and its subsidiaries will have
rights to purchase prepaid phone cards from Kattosko Communications. The

                                       39
<PAGE>

negotiations were handled by the officers of The Auxer Group and Kattosko
Communications. In addition, Mustafa Qattous resigned as President of Operations
and terminated his employment contract. Under the terms of this termination, he
retains the initial 1,000,000 shares of common stock received, but forfeits any
remaining options and/or cash compensation outlined in his employment agreement.
The two companies continue to have a vendor/client relationship. The two
companies don't have any agreements outlining this relationship.

Management decided to divest of Clifton Telecard due to its declining
profitability. Additionally, management believed that CT Industries represented
potentially higher profit margins. During the second quarter, management
estimates the sale of Clifton Telecard impacted The Auxer Group's total revenues
were reduced by approximately $5.5 Million. During the third and fourth quarters
of 2001 and third quarter of 2001, management expects the impact of the sale of
Clifton Telecard to be approximately a $5 to 7 Million reduction in revenue per
quarter. Impact estimates are based on estimated quarterly revenues of Clifton
Telecard of approximately $6 Million. Clifton Telecard represented approximately
96 percent or $7 Million of The Auxer Group's revenue base during the first
quarter of 2001. Based on CT Industries client and prospective client list and
by retaining the rights to trademarks serviced by Auxer Telecom under the
agreement for the sale of Clifton Telecard Alliance, management believes that CT
Industries can achieve similar revenues during the fourth quarter of 2001. These
projections are based on CT Industries current and potential client base and its
plans to develop and introduce new products. Clifton Telecard represented
approximately 97 percent or $6.9 Million of Auxer's cost of goods and
approximately 15 percent or $281,000 of Auxer's general and administrative
expenses. Management estimates the impact of the sale of Clifton on the assets
of Auxer to be a reduction of approximately $3,000,000 and on the liabilities of
Auxer to be a reduction of approximately $3,000,000 based on the terms of the
sale agreement and the forgiveness of intercompany debts.

On May 22, 2001 The Auxer Group announced revenues for the first quarter of 2001
of $7.4 Million, compared with revenues of $535,540 for the first quarter 2000.
The increase in revenues was primarily attributed to the prepaid phone card
business of CT Industries, Auxer Telecom and Clifton Telecard. The Auxer Group
also reported losses of $1,957,333 for the first quarter 2001. These losses were
primarily related to new product development, consulting, and one-time financing
related expenses. The revenues reported were based on financial review conducted
by The Auxer Group's auditors.

On June 12, 2001 The Auxer Group announced its decision to reduce overhead by
restructuring several areas of its operation. Since June, The Auxer Group has
reduced its staff in Los Angeles to five personnel and reduced its facility
costs by relocating its staff. Additionally, CT Industries has implemented a
direct sales and marketing approach in an effort to minimize its costs. Also,
the Automotive Group has trimmed its operations and delivery staff in an effort
to cover its overhead.

                                       40
<PAGE>

For the period ending December 31, 2000, we began accounting for our segmented
information by groups due to the formation and acquisition related to the
telecommunications industry. Effective since the 3rd quarter of 2000, we segment
our information by automotive and telecom groups. The financial condition and
results of operations for Auxer Telecom, Inc. began to be reflected in The Auxer
Group's financial statements effective August 24, 2000. The financial condition
and results of operations for Clifton Telecard, Inc. began to be reflected in
The Auxer Group's financial statements effective September 22, 2000.

For the period ending December 31, 2000, the audited financials reflect a
reclassification of $102,000 of stock issued in connection with the acquisition
of assets of Clifton Telecard Alliance. The result of this reclassification
reflects a change in the purchase price of Clifton Telecard to $964,000. At the
time of the 8K/A filing on December 8, 2000 the purchase price was accounted for
based solely on the bill of sale of $862,000.

Our automotive sales of air conditioning products can be effected by the
intensity of the weather during the 2nd and 3rd quarter of the year.

We formed a telecom group consisting of two subsidiaries, Auxer Telecom and
Clifton Telecard, Inc. All of the revenue generated from Auxer Telecom was
related to distribution and sales from Clifton Telecard, Inc. for the period
ending December 31, 2000. The revenue has been accounted as intercompany sales
in the consolidated financial statements.

Our ability to achieve profitability will depend, in part, on our ability to
successfully increase our revenue from our operating groups. We will require
additional funding through external sources to achieve profitability. There is
no assurance that we will be able to successfully raise the additional funding
or increase its revenue in order to achieve profitability.

Section 5 violation

In 1998, 1999, and 2000, The Auxer Group completed a series of Regulation D,
Rule 504 Offerings which might be considered to violate Section 5 of the 1933
Securities Act as well as violate certain state securities laws that would allow
holders of the securities the right to rescind and demand the return of their
purchase price.

Our issuances of common stock pursuant to Regulation D Rule 504 in 1998, 1999
and 2000 might be considered a public offering in violation of the federal
securities laws. These issuances might also have been in violation of certain
state securities laws where holders of these securities might be granted the
right to rescind the sale of shares and demand that we return the purchase price
of the shares.

                                       41
<PAGE>

Section 5 of the 1933 Securities Act states that it is unlawful to sell
securities unless a registration statement is effective or an exemption from
registration can be relied upon. In the event that it would be determined that
we were in violation of Section 5 of the 1933 Act regarding our Regulation D
Rule 504 offerings due to the fact that we sold unregistered securities in our
1998, 1999 and 2000 Regulation D, Rule 504 offerings, Section 12(1) of the 1933
Act would apply regarding statute of limitations.

Pursuant to Section 12(1) of the 1933 Act, the statute of limitations for this
type of claim is one year after the date of the alleged violation and, if
successful, would entitle the investors of our common stock to rescind the
issuance of the securities to them and demand a return to them of the purchase
price of those securities. Thus, the limitation period began to toll as soon as
the violation of Section 5 has occurred, regardless of whether an investor was
aware of the violation. In this case, the Section 5 violation was the sale by us
of unregistered securities from January 1998 to January 2000. As of November 7,
2001, if Section 5 of the Securities Act of 1933 was violated, no claims could
be made since these violations occurred more than one year ago.

The Regulation D, Rule 504 Offerings discussed above may have violated
securities laws of several states in connection with the issuance of our common
stock. Similar to the recourse provided under the federal securities laws,
holders of these securities may be able to make a claim to rescind the sale or
issuance of these securities to them and demand a return of the purchase price
paid for these shares. Accordingly, if these stockholders rescind the sale of
these securities under federal law, they would not have the right to additional
payments from us under state law. As of November 7, 2001, if Section 5 of the
Securities Act of 1933 was violated, no claims could be made since these
violations occurred more than one year ago.

Internal and External Sources of Liquidity

Our subsidiary, Harvey Westbury had a credit facility agreement with Merchant
Financial Corporation. The credit facility up to $400,000 against a fixed
percentage of 75% of eligible accounts receivable and up to 40% of the eligible
inventory. The interest rate on the line of credit was calculated at a rate
equal to the prime rate plus 5% per annum above the prime rate of 6.75%
effective June 28, 2001. The credit facility agreement required a commitment fee
of 1% of the maximum credit line on each anniversary date of the signing of the
agreement. The anniversary date is July 11, 2000. On July 11, 2001, the
agreement was terminated. Both parties mutually agreed not to extend the terms
of the credit facility. Merchant Financial Corporation determined the account
did not meet minimum outstanding balances sufficient for justifying
administration costs. On September 26, 2001, the outstanding balance for the
credit facility with Merchant was paid in full. By terminating this credit
facility, Harvey Westbury could be prevented from receiving adequate funding to
properly operate and pay for product on a timely basis.

                                       42
<PAGE>

In January 2001, we refinanced our note payable to shareholders listed in the
Selling Security Holder section in the amount of $551,685 and borrowed an
additional $360,000 as part of an issuance of 8% convertible debentures which
are due on January 16, 2006, totaling $911,685, plus interest. The Debentures
may be converted into our common stock by multiplying the conversion amount that
a Regulation D Investor converts times 65% or the Conversion Factor of the
market price of our common stock. The market price is calculated by averaging
the 3 lowest closing bid prices on our common stock for the 10 trading days
prior to conversion. We executed a Registration Rights Agreement with each
Regulation D Investor. Such agreement requires us to register the maximum number
of shares issuable upon conversion of the Debentures. In addition, the
Registration Rights Agreement requires this registration statement to become
effective by May 31, 2001 or the Conversion Factor shall decrease based on the
following: September 29, 2001
or later: 50%

For the year ending December 31, 2000, we paid for operations by raising
$3,229,639 through common stock issuance and debt borrowings after payments to
short term debts.

At December 31, 2000, we had total current assets of approximately $3,789,623.
This included $282,023 in cash, $1,226,807 of inventory and $2,247,688 of
accounts receivable. Our cash balances vary significantly from day-to-day due to
the large volume of purchases and sales made by us from the various prepaid
phone cards companies and the numerous distributors to whom we sell cards. Due
to the shorter credit terms made available to us from the telecommunications
companies from whom we buy branded cards, as compared to the credit terms made
available by us to our customers, we, from time-to-time, require infusions of
cash in order to maintain our preferential buying/purchasing terms, which are
made by us from time-to-time to take advantage of favorable pricing
opportunities. To date, we have satisfied such cash requirements by loans and/or
private financing to provide us with liquidity to meet our future needs. There
can be no assurance that we will be able to obtain such financing on
commercially reasonable terms, or otherwise, or that it will be able to
otherwise satisfy our short- term cash flow needs from other sources in the
future.

In December, we raised $551,685 in notes payable. The notes were refunded in
January 2001 with short term notes as part of an issuance of 8% convertible
debentures, due on January 16, 2006, totaling $911,685.

                                       43
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

The following are the financial statements of the Company, together with the
report of auditors.

                          Index to Financial Statements
                              The Auxer Group, Inc.
<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        ----
<S>                                                                     <C>
Accountant's Report                                                     F-2

Consolidated Balance Sheets                                             F-3-4

Consolidated Statement of Income and Retained Earnings                  F-5

Consolidated Statement of Changes in Stockholders' Equity               F-6

Consolidated Statement of Cash Flows                                    F-7

Notes to Consolidated Financial Statements                              F-8-19
</TABLE>

<PAGE>

To the Board of Directors and Shareholders
of The Auxer Group, Inc.

                          Independent Auditor's Report

         We have audited the accompanying consolidated balance sheet of The
Auxer Group, Inc. as of December 31, 2000 and 1999 and the related statements of
operations, cash flows and shareholders' equity for the years then ended. 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 audit.

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

         In our opinion, the financial statements referred to above represent
fairly, in all material respects, the financial position of The Auxer Group,
Inc. as of December 31, 2000 and 1999 and the results of its operations,
shareholders equity and cash flows for the years then ended in conformity with
generally accepted accounting principles.

         The accompanying financial statements have been prepared assuming that
The Auxer Group, Inc. will continue as a going concern. As more fully described
in Note 2, the Company has incurred operating losses since inception and
requires additional capital to continue operations. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans as to these matters are described in Note 2. The financial
statements do not include any adjustments to reflect the possible effects on
recoverability and classification of assets or the amounts and classifications
of liabilities that may result from the possible inability of The Auxer Group,
Inc. to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

KALOSIEH, SHACKIL & MEOLA, CPAs PA


Fair Lawn, New Jersey
February 15, 2001

                                       F-2

<PAGE>

                              THE AUXER GROUP, INC.

                           CONSOLIDATED BALANCE SHEET

                                     Assets
<TABLE>
<CAPTION>
                                                                  Year End                Year End
                                                                December 31, 2000    December 31, 1999
Current assets
<S>                                                                  <C>                      <C>
       Cash                                                            $ 282,023                $ 8,400

       Accounts receivable (net of allowances
       $65,223 in 2000, $19,639 in 1999)                               2,247,688                 92,370

       Inventory                                                       1,226,807                290,725

       Prepaid expenses                                                   33,105                      -

       Other receivables                                                       -                 23,283
                                                             --------------------    -------------------
       Total current assets                                            3,789,623                414,778
                                                             --------------------    -------------------
Property and Equipment

       Vehicles                                                           38,036                  7,700

       Furniture and fixtures                                             23,329                  9,234

       Machinery and equipment                                           666,464                 44,129

       Leasehold improvements                                              2,121                  5,757
                                                             --------------------    -------------------
                                                                         729,950                 66,820
       Less:  accumulated depreciation                                   (99,570)               (34,062)
                                                             --------------------    -------------------
       Property and equipment (Net)                                      630,380                 32,758
                                                             --------------------    -------------------
Other assets

       Security deposit                                                  140,482                 24,299

       Other receivables                                                  42,334                      -

       Goodwill (net of amortization of $42,347 in 2000)                 804,592                      -
                                                             --------------------    -------------------
       Total other assets                                                987,408                 24,299
                                                             --------------------    -------------------
Total assets                                                         $ 5,407,411              $ 471,835
                                                             ====================    ===================

</TABLE>

                                       F-3

<PAGE>

                              THE AUXER GROUP, INC.

                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
  Liabilities and Stockholders' Equity
                                                             Year End             Year End
                                                          December 31, 2000    December 31, 1999
Current liabilities
<S>                                                          <C>                <C>
       Accounts payable and accrued expenses                 $ 2,150,606        $   107,887

       Credit line                                                64,849             31,368

       Deferred sales                                            846,363                 --

       Notes payable                                           1,564,353             82,523

       Notes payable-shareholders                                 87,859             77,390
                                                             -----------        -----------

Total current liabilities                                      4,714,030            299,168

Long-term debt, less current maturities                            3,178              1,155
                                                             -----------        -----------

Total liabilities                                              4,717,208            300,323

Stockholders' equity

       Capital stock - authorized 1,000,000,000 shares           104,047             56,747
       $.001 par value per share 104,037,030 and
       56,736,797 shares outstanding  in 2000 and
       1999 respectively

       Preferred stock - authorized 25,000,000 shares              2,750              2,750
       $.001 par value per share, 2,750,000 shares
       outstanding in 2000 and 1999 respectively

       Additional paid in capital                              8,208,056          4,940,832

       Accumulated deficit                                    (7,624,650)        (4,828,817)
                                                             -----------        -----------

Total stockholders' equity                                       690,203            171,512
                                                             -----------        -----------

Total liabilities and stockholders' equity                   $ 5,407,411        $   471,835
                                                             ===========        ===========
</TABLE>

                                       F-4

<PAGE>

                              THE AUXER GROUP, INC.

          CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
                                                       Year End             Year End
                                                   December 31, 2000    December 31, 1999
<S>                                                   <C>                 <C>
Income                                                $ 10,993,570        $   871,259

Less:  Cost of goods sold                               10,024,260            622,210
                                                      ------------        -----------
Gross profit                                               969,310            249,049
                                                      ------------        -----------
Operations:

       General and administrative                        3,619,994          1,302,418

       Depreciation and amortization                       111,145             11,626

       Interest expense                                     36,524             10,618
                                                      ------------        -----------
       Total expenses                                    3,767,663          1,324,662
                                                      ------------        -----------
Income (loss) from operations                           (2,798,353)        (1,075,613)

Other income (expense)

       Interest income                                       5,037                706

       Loss on abandonment                                  (2,517)                --
                                                      ------------        -----------
Net income (loss) before extraordinary items            (2,795,833)        (1,074,907)

Extraordinary item, gain on forgiveness of debt                 --             99,780
                                                      ------------        -----------
Net income (loss)                                       (2,795,833)          (975,127)

Accumulated deficit at beginning                        (4,828,817)        (3,853,690)
                                                      ------------        -----------
Accumulated deficit at end                            $ (7,624,650)       $(4,828,817)
                                                      ============        ===========
Net income (loss) per common share                    $      (0.03)       $     (0.02)
                                                      ============        ===========
</TABLE>

                                       F-5

<PAGE>

                              THE AUXER GROUP, INC.

            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                  Preferred  Preferred Stock Common Stock    Common Stock     Additional   Accumulated
                                    Stock    Par Value $.001    Shares     Par Value $.001  Paid in Capital  Deficit
                                   Shares        Amount                         Amount
                                   ------        ------                         ------
                                     (A)                         (B)
<S>                                <C>              <C>        <C>                <C>          <C>         <C>
Balances at December 31, 1998              -            $ -     36,361,097         $ 36,361    $ 3,657,004 $ (3,853,690)
                                 ---------------------------------------------------------------------------------------

Common stock issued for cash                                    17,950,000           17,960        732,099

Common stock issued for services                                   589,000              589         43,651

Common Stock Issued for debt

extinguishments                                                  1,000,000            1,000          9,220

Common stock issued for
acquisition                                                        836,700              837         89,108

Stock issued                       2,750,000          2,750                                        409,750

Net loss for the year                                                                                          (975,127)
                                 ---------------------------------------------------------------------------------------

Balances at December 31, 1999      2,750,000        $ 2,750   $ 56,736,797         $ 56,747    $ 4,940,832 $ (4,828,817)
                                 =======================================================================================

Common stock issued for cash                                    36,225,233           36,225      1,401,661

Common stock issued for goods
and services                                                     8,075,000            8,075      1,604,563

Common stock issued for
acquisition                                                      3,000,000            3,000        261,000

Net loss for the year                                                                                        (2,795,833)
                                 ---------------------------------------------------------------------------------------

Balances at December 31, 2000      2,750,000        $ 2,750    104,037,030        $ 104,047    $ 8,208,056 $ (7,624,650)
                                 =======================================================================================
</TABLE>

Preferred stock, par value $.001, convertible to 10 shares of common stock,
25,000,000 shares authorized, 2,750,000 shares and outstanding at December 31,
2000.

Common stock, par value $.001, 1,000,000,000 shares authorized, 104,037,030
shares issued and outstanding at December 31, 2000.

                                       F-6

<PAGE>
                              THE AUXER GROUP, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
                                                           Year End              Year End
                                                         December 31, 2000   December 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                        <C>                     <C>
Net income (loss)                                          $ (2,795,833)           $ (975,127)
Depreciation and amortization                                   111,145                11,626
Common stock issued for services                              1,612,638                44,240
Loss on abandonment                                               2,517                     -
Extraordinary item, gain on forgiveness of debt                       -                99,780
                                                             (1,069,533)             (819,481)
(Increase) decrease in:

      Accounts receivable                                    (1,326,896)              (58,847)
      Inventory                                                (392,216)             (126,423)
      Prepaid expenses                                          (25,105)                    -
      Subscriptions receivables                                       -                15,125
      Other receivables                                         (19,051)                    -

Increase (decrease) in:

      Accounts payable and accrued expense                      665,082               (94,745)
      Deferred sales                                            846,363                     -
                                                       -----------------     -----------------
TOTAL CASH FLOW FROM OPERATIONS                              (1,321,356)           (1,084,371)

CASH FLOWS FROM INVESTING ACTIVITIES

      Purchase property, inventory and equipment               (385,892)              (21,398)
      Acquisition                                              (877,988)                    -
      Security deposit                                         (106,780)              (16,447)
                                                       -----------------     -----------------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES                   (1,370,660)              (37,845)
                                                       -----------------     -----------------
CASH FLOWS FROM FINANCING ACTIVITIES

      Borrowings/payments under line of credit agreement (net)   33,481                 5,575
      Proceeds from short-term debt                           1,507,496                     -
      Payments on short-term debt                               (22,538)              (99,780)
      Proceeds on long-term debt                                      -                 5,000
      Payments on long-term debt                                 (1,155)               (1,322)
      Shareholder loan payable                                   10,469                55,497
      Sale of common stock                                    1,437,886               750,059
      Sale of preferred stock                                         -               412,500
                                                       -----------------     -----------------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES                    2,965,639             1,127,529

NET INCREASE IN CASH                                            273,623                 5,313
CASH BALANCE BEGINNING OF PERIOD                                  8,400                 3,087
                                                       -----------------     -----------------
CASH BALANCE END OF PERIOD                                    $ 282,023               $ 8,400
                                                       =================     =================
</TABLE>
Supplemental Disclosures of Cash Flow Information:

Acquisitions Note: In connection with the acquisition of the assets of
Clifton Telecard Alliance Inc., the Company issued 3 million shares of common
stock valued at $264,000.

Debt Extinguishment

Note: During 1999, the Company issued 1,000,0000 shares of common stock valued
at $10,220 to reduce short-term debt.
                                       F-7

<PAGE>

                             THE AUXER GROUP, INC.

                        NOTES TO THE FINANCIAL STATEMENTS

     Note 1 - Organization of Company
              -----------------------

     a.  Creation of the Company

     Auxer Industries, Inc. (the "Company") was formed on June 20, 1920 under
the laws of the State of Idaho as The Auxer Gold Mines. On May 2, 1995, the
certificate of incorporation was amended to change the name of the Company to
Auxer Industries, Inc.

     On August 11, 1997 the Company incorporated in the State of Delaware under
the name The Auxer Group, Inc. In September 1997 the shareholders of the company
voted to exchange their shares on a one for one basis for shares in the new
company, The Auxer Group, Inc. The new corporate name was effective January 1,
1998 for accounting and tax purposes.

      On November 3, 2000. the certificate of incorporation was amended to
change the number of authorized shares to 1 billion of common stocks, at $.001
par value.

      b.  Description of the Company

     The Company is an investment holding company that is comprised of six
subsidiaries: the Harvey Westbury Corporation, Hardyston Distributors, Inc., CT
Industries, Auxer Telecom, Inc., Clifton Telecard, Inc. and Universal Filtration
Industries.

     On April 18, 1995, the Company acquired CT Industries, Inc. ("CT"), a New
Jersey corporation based in West Paterson, New Jersey. CT is a distributor of
various automotive products.

     On February 8, 1996, the Company acquired Universal Filtration Industries,
Inc. ("Universal Filtration") a New York corporation. Based in West Paterson,
New Jersey, Universal Filtration has developed the "Fiona Micro Screen Filter",
a replacement upgrade to a component of machinery used by the dry cleaning
industry.

     On October 25, 1996, the Company acquired Harvey Westbury Corp. ("Harvey
Westbury"), a New York corporation. Based in West Paterson, New Jersey, Harvey
Westbury is a manufacturer and wholesaler of various automotive, marine and
aviation products.

     On April 22, 1999, the Company formed Hardyston Distributors, Inc., d/b/a
The Mechanics Depot, a Nevada corporation. Based in northern New Jersey,
Hardyston Distributors is an automotive parts distributor.

     On August 7, 2000, the Company formed Auxer Telecom Inc., a Delaware
corporation. Auxer Telecom is a reseller of telecommunications access services
with operations based in Los Angeles, CA.

     On August 7, 2000, the Company formed Clifton Telecard Inc., a Delaware
corporation. Based in Northern New Jersey, Clifton Telecard is a wholesale
distributor of prepaid phone cards.

     Note 2 - Summary of Significant Accounting Policies
              ------------------------------------------

     a.  Basis of Financial Statement Presentation

     The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company incurred net losses of
$7,624,650 for period from April 18, 1995 to December 31, 2000. These factors
indicate that the Company's continuation as a going concern is dependent upon
its ability to obtain adequate financing.

                                       F-8

<PAGE>

     The Company will require substantial additional funds to finance its
business activities on an ongoing basis and will have a continuing long-term
need to obtain additional financing. The Company's future capital requirements
will depend on numerous factors including, but not limited to, continued
progress developing additional products, improve manufacturing efficiency, build
an inventory to meet fulfillment requirements for the Company's various
automotive products and the completion of planned acquisitions. The Company
plans to engage in such ongoing financing efforts on a continuing basis.

     The consolidated financial statements presented consist of the company and
its wholly owned subsidiaries CT, Universal Filtration, Harvey Westbury,
Hardyston Distributors Inc., Auxer Telecom, Inc. and Clifton Telecard, Inc., all
of which are under common control. Material inter-company transactions and
balances have been eliminated in the consolidation.

     b.  Earnings (Loss) per share

      Basic earnings (loss) per share is based on the weighted effect of all
common shares issued and outstanding, and is calculated by dividing net income
by the weighted average shares outstanding during the period. Diluted earnings
(loss) per share is calculated by dividing net income by the weighted average
number of common shares used in the basic earnings per share calculation plus
the number of common shares that would be issued assuming conversion of all
potentially dilutive common shares outstanding. Dilutive earnings (loss) per
share are not presented since diluted securities have an anti-dilutive effect.

     c.  Receivables

     Allowances against receivables are provided equal to the estimated
collection losses that will be incurred in collection of all receivables and a
reserve for returns and discounts traditionally taken. Estimated allowances are
based on historical collection experience coupled with review of current status
of the existing receivables and amounted to $65,223 at December 31, 2000 and
$19,639 at December 31, 1999, respectively.

     d.  Property and Equipment

     Property and equipment are recorded at cost and are depreciated under the
straight-line methods over the estimated useful lives of the related assets.
Expenditures for major renewals and betterments that extend the useful lives of
property and equipment are capitalized. Expenditures for maintenance and repairs
are charged to expense as incurred.

<TABLE>
<CAPTION>
                                      Cost at        Accumulated
                                      12/31/00       Depreciation
                                                     12/31/00
<S>                                   <C>            <C>
Vehicles                              $ 38,036       $9,454
Machinery and equipment                666,464       81,740

Furniture and fixtures                  23,329        8,073

Leasehold improvements                   2,121          303
</TABLE>

                                       F-9

<PAGE>

<TABLE>
<CAPTION>
                                      Cost at        Accumulated Depreciation
                                      12/31/99       12/31/99
<S>                                   <C>            <C>
Vehicles                              $7,700         $1,540

Machinery and equipment               44,129         25,766

Furniture and fixtures                 9,234          3,516

Leasehold improvements                 5,757          3,240
</TABLE>

       e.   Intangible Assets

       Goodwill purchased as a part of the acquisition of the assets of Clifton
Telecard Alliance Inc. as further described in Note 3, is being amortized on a
straight-line basis over an estimated beneficial life of five years.

       f.   Revenue recognition

     The Company acts as principal in its revenue generating transactions, takes
title to its products, and has risks and rewards of ownership. The Company
recognizes revenues as earned. Amounts billed in advance of the period in which
service is rendered are recorded as a liability under "deferred revenue." The
Company's revenue recognition policy for each product and subsidiary are the
same.

     g.  Research and development expenses

     Research and development costs are charged to operations when incurred.

     h.  Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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. Accordingly, actual results could differ from those estimates.

     i.  Impairment of Long-Lived Assets

     In the event that facts and circumstances indicate that the carrying value
of long lived assets, including associated intangibles, may be impaired, an
evaluation of recoverability is performed by comparing the estimated future
undiscounted cash flows associated with the asset to the assets carrying amount
to determine if a write down to market value or discounted cash flows is
required.

      j.   Off Balance Sheet Risk

     The Company purchased prepaid phone cards from various telephone companies
who agree to provide long distance phone service to the cardholder after the
Company activates the phone card when it is sold. In the event the long distance
service provider does not provide the service or goes out of business the
Company would be responsible for refunding the purchase price of the phone card.

     The Company mitigates its risk by dealing with well-capitalized long
distance service providers.

                                      F-10

<PAGE>

     Note 3 - Acquisitions
              ------------

     a.  Acquisition of CT Industries, Inc.

     On April 18, 1995, the Company acquired all the capital stock of CT, owned
equally by Eugene Chiaramonte, Jr. and Howard Tapen, for 4,000,000 shares of
common stock. The transaction has been accounted for as a reverse acquisition
and using the purchase method of accounting with historic costs being the basis
of valuation.

     b.  Acquisition of Universal Filtration Industries, Inc.

     On August 7, 1996, the Company acquired all of the common shares of
Universal Filtration for 1,100,000 shares of common stock.

     c.  Acquisition of Harvey Westbury Corp.

     On October 25, 1996, the Company acquired all of the common shares of
Harvey Westbury for 170,000 shares of common stock.

     d.  Acquisition of the assets of Hardyston Distributors

     On April 22, 1999 the Company issued 836,700 shares of common stock at
$.1075 per share plus $15,000 for the purchase of inventory and sundry equipment
from Mr. Ernest DeSaye, a sole proprietor.

e.   Acquisition of Telecommunications Switch Operations

     On August 24, 2000 the Company acquired 2 telecommunications excel
switching platforms from Colbie Pacific Capital, an unrelated party, in exchange
for a note payable in the amount of $558,000 (includes imputed interest at 12%
of $48,660). The Company placed these assets into its wholly-owned subsidiary
Auxer Telecom Inc. Operations started in December 2000.

f.   Acquisition of Wholesale Prepaid Phone Distribution Operation

     On September 22, 2000 the Company acquired the assets of Clifton Telecard
Alliance Inc., (CTA), a New Jersey based telecommunications company for a total
purchase price of $964,000

     The Company paid $500,000 to the shareholders of CTA at closing, issued 3
million shares of common stock valued at $264,000, and issued a note payable to
them for $200,000 due in 2001, as more fully described in Note 5.

     The excess of the amount paid over the fair value of CTA's identifiable net
assets was $846,939, which has been reflected in the balance sheets as goodwill.
The Company expects to benefit from the goodwill acquired in this transaction
over a period of five years, and is amortizing the amount recorded using the
straight-line method over that period.

     Note 4 - Inventory
              ----------

         Inventory consists of raw materials, work in process and finished goods
and is valued at the lower of cost determined on the first-in, first-out method
or market.

                                      F-11

<PAGE>

     Note 5 - Accounts Payable and Accrued Expenses
              -------------------------------------

     Accounts payable and accrued expenses consist of the following at December
 31, 2000 and December 31, 1999:

<TABLE>
<CAPTION>
                                                        2000            1999
                                                        ----            ----
<S>                                                  <C>              <C>
     Accounts payable on trade with other vendors    $2,123,903       $104,612
     Accrued Salaries                                    20,000              0
     Payroll Taxes Payable                                6,285          3,275
     Sales Tax Payable                                      418              0
                                                     ----------       --------
                                                     $2,150,606       $107,887
                                                     =========         =======
</TABLE>

     Note 6 - Debt
              ----

     a.  Security Agreement

     The Company has entered into a security agreement with Merchant Financial
Corp. to borrow money secured by the receivables evidenced by invoices of Harvey
Westbury Corp. and personal guarantees of certain officers. Merchant agreed to
lend an amount equal to 75% of the net value of all Harvey Westbury's accounts
receivable at an interest rate of prime plus 5%. The balance outstanding on the
line of credit at December 31, 2000 was $64,849.

     b.  Notes Payable
<TABLE>
<CAPTION>
     The following is a summary of short-term-term debt at December 31:         2000             1999
                                                                                ----             ----
<S>                                                                         <C>                 <C>
     Notes Payable to Creative Capital, payable on

     demand plus interest at a rate of 8%                                      $80,000          $80,000

     Notes payable in connection with the purchase of the
     assets of CTA, principal payable in full on March 20,2001                 200,000                0

     Note payable to Colbie Pacific Capital, due August 1, 2001, payable in 10
     monthly principal and interest payments of $10,000, one principal and
     interest

     payment of $458,000, secured by equipment                                 489,411                0

     Note payable to shareholders, payable on demand
     with no interest                                                          240,000                0

     Note payable to certain shareholders, payable January 16, 2001, plus
     interest at a rate of 15%.

     See Note 15 - Subsequent Events                                           551,685                0
                                                                               -------         --------
                                                                            $1,561,096          $80,000
                                                                            ==========          =======
</TABLE>

                                                   F-12

<PAGE>
<TABLE>
<CAPTION>
     Long-term debt is as follows:
<S>                                                                            <C>               <C>
     13.5% installment note, collateralized by vehicle,
     payable in monthly installments of $239 with the
     final payment due May, 2001                                               $ 1,406           $3,678

     11.5% installment note, collateralized by vehicle,
     payable in monthly installments of  $188 with the
     final payment due May, 2003                                                5,029                 0
                                                                                -----         ---------
                                                                                6,435             3,678
                           Less current maturities                             (3,257)           (2,523)
                                                                               -------          -------
                                                                               $3,178            $1,155
                                                                               ======            ======
</TABLE>

         Note 7 - Related Party Transactions
                  --------------------------

         Issuance of Common Shares

         On April 18, 1995, the Company acquired all the capital stock of CT,
owned equally by Eugene Chiaramonte, Jr. and Howard Tapen, for 4,000,000 shares
of common stock.

         Note 8 - Income Taxes
                  ------------

         The Company provides for the tax effects of transactions reported in
the financial statement. The provision, if any, consists of taxes currently due
plus deferred taxes related primarily to differences between the basis of assets
and liabilities for financial and income tax reporting. The deferred tax assets
and liabilities, if any, represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of December 31, 2000, the Company had
no material current tax liability, deferred tax assets, or liabilities to impact
on the Company's financial position because the deferred tax asset related to
the Company's net operating loss carry forward and was fully offset by a
valuation allowance.

         The Company has net operating loss carry forwards for income tax
purposes of $7,624,650 at December 31, 2000, and $(4,828,817) at December 31,
1999, respectively. These carry forward losses are available to offset future
taxable income, if any, and expires starting in the year 2011. The Company's
utilization of this carry forward against future taxable income may become
subject to an annual limitation due to a cumulative change in ownership of the
company of more than 50 percent.

<TABLE>
<CAPTION>
Deferred  tax asset:        Dec 31, 2000           Dec 31, 2001
------------------          ------------           ------------
<S>                         <C>                    <C>
Net Operating loss carry    $2,592,381             $1,641,798
forward
Valuation allowance         (2,592,381)            (1,641,798)
                            ---------------------- ----------------------
Net deferred tax assets     $0                     $0
                            ---------------------- ----------------------
</TABLE>

         The Company recognized no income tax benefit for the loss generated for
the periods through December 31, 2000.

         SFAS No. 109 requires that a valuation allowance be provided if it is
more likely than not that some portion of all of a deferred tax asset will not
be realized. The Company's ability to realize benefit of its deferred tax asset
will depend on the generation of future taxable income. Because the Company has
yet to recognize significant revenue from the sale of its products, the Company
believes that a full valuation allowance should be provided.

                                      F-13

<PAGE>
         Note 9 - Business and Credit Concentrations
                  ----------------------------------

         The amount reported in the financial statements for cash, trade
accounts receivable and investments approximates fair market value. Because the
difference between cost and the lower of cost or market is immaterial, no
adjustment has been recognized and investments are recorded at cost.

         Financial instruments that potentially subject the company to credit
risk consist principally of trade receivables. Collateral is generally not
required.

     Note 10 - Commitments and Contingencies
               -----------------------------

Lease agreement for office space

     The Company entered into a three-year lease agreement with a nonaffiliated
party beginning on November 1, 1996 at 30 Galesi Drive, Wayne, New Jersey for
office space. A $1,800 security deposit was required with minimum monthly rental
payments to be paid as follows:

<TABLE>
<CAPTION>
Period                                       Annual Rent             Monthly Rent
-------                                      -----------             ------------
<S>                                           <C>                      <C>
December 1, 1998 to November 30, 1999         $23,777.04               $1,981.42
</TABLE>

      Effective November 30, 1999, the Company continued to lease the property
on a month-to-month basis at the same rate as the last period through February
29, 2000 at which time the lease expired.

      The Company entered into a six month 15 day lease agreement with a new
affiliated party beginning September 1, 2000 and expiring on March 15, 2001 at a
monthly rate of $7,766 for office space in Los Angeles, California.

       In connection with the asset purchase of Clifton Telecard Alliance (CTA),
the Company agreed to obtain its own lease from CTA's landlord. As of this date,
no agreement has been reached. The Company continues to pay the monthly rent
under the terms of CTA's lease agreement.

Lease Agreement for Industrial Facility

     The Company entered into a three-year lease agreement with a non-affiliated
party beginning on April 1, 1995 and expiring April 1, 1998, at 15 Heisser
Court, Farmingdale, New York, for the Harvey Westbury operations. On February
23, 1998, the lease was extended to expire on April 30, 1999. On March 29, 1999
the lease was extended to expire on April 30, 2000. A $5,770 security deposit
was required with minimum monthly rental payments to be paid as follows:
<TABLE>
<CAPTION>
Period                                        Annual Rent              Monthly Rent
-------                                       -----------              ------------
<S>                                            <C>                      <C>
May 1, 1998 to April 30, 1999                  $35,604.00               $2,967.00

May 1, 1999 to April 30, 2000                  $36,024.00               $3,002.00
</TABLE>

      The Company assumed the lease agreement with a non affiliated party
entered into by Mr. Ernest DeSaye, Jr. beginning March 1, 1999 and expiring on
February 28, 2000, at 22B Lasinski Road, Franklin, NJ. The option to renew for
an additional two years was invoked extending the expiration of the lease to
February 28, 2001.

                                      F-14

<PAGE>

<TABLE>
<CAPTION>

Period                                                    Annual Rent             Monthly Rent
-------                                                   -----------             ------------
<S>                                                        <C>                      <C>
March 1, 1999 to February 28, 2000                         $8,700.00                $725.00

March 1, 2000 to February 28, 2001                         $9,000.00                $750.00
</TABLE>

The Company entered into a five-year lease agreement with a non-affiliated party
beginning on February 1, 2000 and expiring January 31, 2005, at 12 Andrews
Drive, West Paterson, NJ for their Wayne, NJ and Farmingdale, NY operations. A
$15,583 security deposit was required with minimum monthly payments to be paid
as follows:

<TABLE>
<CAPTION>

              Period                    Annual Rent        Monthly Rent
              ------                    -----------        ------------
<S>                                      <C>                 <C>
     Feb. 1, 2000 - Jan. 31, 2001        $ 85,000            $7,083.34
     Feb. 1, 2001 - Jan. 31, 2002          89,250             7,437.50
     Feb. 1, 2002 - Jan. 31, 2003          93,500             7,791.67
     Feb. 1, 2003 - Jan. 31, 2004          97,850             8,145.84
     Feb. 1, 2004 - Jan. 31, 2005         102,000             8,250.00
</TABLE>

In addition to the minimum monthly rental payments, the Company must pay real
estate taxes, insurance, and utilities

The Company entered into a month-to-month lease agreement with a non-affiliated
party beginning August 1, 2000 at a monthly rate of $2,500 for facility space in
Los Angeles, California.

      c.  Equipment Leases

      The Company leases equipment under several non-cancelable operating leases
with unrelated parties, which expire from September 2001 through October 2003.
The lease expense for the years ended December 31, 2000 and 1999 totaled $37,559
and $9,523, respectively.

      The following is a schedule of future minimum rental payments required
under the above non- cancelable operating leases:

<TABLE>
<CAPTION>
         Year Ending December 31:
         ------------------------
<S>      <C>               <C>
         2001              $        24,380
         2002                       11,140
         2003                        8,067
         2004                        3,006
                                     ------
         Total             $        46,593
                                    ======
</TABLE>

     Note 11 - Development Stage Company
               -------------------------

         The Company was considered to be a development stage company with
little operating history and having conducted research and development and test
market activities, funded the production of multiple sales videos of the
Company's expanded product lines for television and cable presentation, obtained
financing, hired personnel and developed consulting relationships for the period
April 18, 1995 to December 31, 1997. The Company will also be dependent upon its
ability to raise additional capital to complete its marketing program, acquiring
additional equipment, management talent, inventory and working capital to engage
in profitable business activity. Subsequent to December 31, 1997, the Company's
primary attention turned to routine, on-going activities and ceased to be a
development stage enterprise.

                                      F-15

<PAGE>

     Note 12 - Segment Information
               -------------------

     Management Policy in Identifying Reportable Segments
     ----------------------------------------------------

The Company's reportable business segments are strategic business units that
offer distinctive products and services that are marketed through different
channels. They are managed separately because of their unique technology,
marketing, and distribution requirements.

     Types of Products and Services
     ------------------------------

     The Company is an investment holding company that is comprised of six
subsidiaries: The Harvey Westbury Corp., Hardyston Distributors Inc., CT
Industries, Auxer Telecom Inc., Clifton Telecard Inc. and Universal Filtration
Industries, Inc. Harvey Westbury is a manufacturer and wholesaler of various
automotive, marine and aviation products. Hardyston Distributors is a Northern
New Jersey based automotive parts distributor. CT Industries is a distributor of
various automotive products. Auxer Telecom is a reseller of telecommunications
access services. Clifton Telecard is a Northern New Jersey based wholesale
distributor of prepaid phone cards. Universal Filtration has in the past
manufactured and distributed filters used by the dry cleaning industry and is
currently inactive.

     Segment Profit or Loss
     ----------------------

     The Company's accounting policies for segments are the same as those
described in the summary of significant accounting policies. Management
evaluates segment performance based on segment profit or loss before income
taxes and nonrecurring gains and losses. Transfers between segments are
accounted for at market value. Operating expenses, such as rent, utilities,
payroll and insurance, are attached to a segment are identified and allocated
accordingly. Substantially all of the general and administrative expenses
incurred pertain to merger and acquisition expenditures, including legal,
administrative, and consulting fees, which are primarily allocated to the parent
company.

     Major Customer Information
     --------------------------

     In 2000, sales to two customers represented $329,000 and $258,000
respectively, of the Company's consolidated revenue. These customers are served
by the automotive group's operating segment.

                                      F-16

<PAGE>

     Note 13 - Stock Option Plan
               -----------------

         The Company has a Stock Option Plan (Plan) under which selected
individuals may be granted options to purchase shares of the Company's
authorized but unissued common stock. The maximum numbers of shares available
for issuance under the Plan is 2 million shares. As of December 31, 2000 the
maximum number of shares available for future grants under the Plan is 0 shares.
Under the Plan, the option exercise price may be more, equal to or less than the
fair market value of the Company's common stock at the date of grant. Options
currently expire no later than 5 years from the grant date and are 100% vested.
Proceeds received by the Company from exercises of stock options are credited to
common stock and additional paid in capital. Additional information with respect
to the Plan's stock option activity is as follows:

<TABLE>
<CAPTION>
                                            Number of       Weighted Average Exercise
                                            Shares          Price
                                            ------          -----
<S>                                          <C>             <C>
         Outstanding at December 31, 1999            0           0
         Granted                             2,000,000          05
         Exercised                                   0           0
         Cancelled                                   0           0
                                       ---------------      --------
         Outstanding at December 31, 2000    2,000,000       $0.05

         Options exercisable at
          December 31, 1999                          0           0
                                             =========    ========
         Options exercisable at
          December 31, 2000                  2,000,000       $0.05
                                             =========      ======
</TABLE>

The following tables summarize information about stock options outstanding and
exercisable at December 31, 2000:

<TABLE>
<CAPTION>

                                      Stock Options Outstanding
                                      -------------------------
   Range of Exercise           Number of Share         Weighted Average             Weighted Average
   Price                       Outstanding             Remaining Contractual        Exercise Price
                                                       Life in Years
<S>                            <C>                           <C>                         <C>
   $0.05                       2,000,000                     4.3                         $0.05
   =====                       =========                   ===========                   =====
</TABLE>

                                        F-17

<PAGE>

<TABLE>
<CAPTION>
                                      Stock Options Exercisable
                                      -------------------------
    Range of Exercise           Number of Shares       Weighted Average
    Price                       Outstanding            Exercise Price
    -----                       -----------            --------------
<S>                            <C>                         <C>
   $0.05                       2,000,000                   $0.05
   =====                       =========                   =====
</TABLE>

The Company accounts for its plan under APB Option No. 25 (Accounting for Stock
Issued to Employees). Accordingly, compensation expense is recognized in the
Company's financial statements when the exercise price of the Company's employee
stock options is less than the market price of the Company's common stock on the
date of grant. During 2000, the Company recorded compensation costs of $20,000
related to the stock option plan.

The pro forma net income impact under Financial Accounting Standards Board
Statement No. 123 (Accounting for Stock-Based Compensation) is not material.

Note 14 - Stockholders' Equity
          --------------------

         On January 2, 1999, the Company issued 1,500,000 shares and 1,250,000
shares of the Company's preferred stock valued at $.15 per share to Eugene
Chiaramonte, Jr. and Ronald Shaver respectively as repayment of loans in the
amount of $15,000, reimbursement of expenses of $12,500, and deferred
compensation of $208,500 and $173,750 respectively.

         The Preferred Stock is convertible, at the holder's option, at any time
into shares of the Company's Common Stock at a rate of ten shares of Common
Stock for each share of Preferred Stock.

Note 15 - Subsequent Events
          -----------------

     In January 2001, the Company refinanced its note payable to certain
shareholders in the amount of $551,685 and borrowed an additional $360,000 as
part of an issuance of 8% convertible debentures, due on January 16, 2006,
totaling $911,685. The notes are convertible by the holders into shares of the
Company's common stock at any time at a conversion price per share equal to
sixty-five percent (65%) (the "Discount Multiplier") of the Market Price. In the
event that the Registration Statement has not been declared effective by the SEC
within one hundred and twenty (120) days after the Closing Date (the "Due
Date"), then the Discount Multiplier shall decrease by two and one-half percent
(2.5%) effective as of the Due Date to sixty-two and one-half percent (62.5%)
and shall further decrease by two and one-half percent (2.5%) for each
thirty-day period occurring after the Due Date that the Registration Statement
has not been declared effective by the SEC, to not less than fifty percent
(50%). The notes are redeemable at the option of the Company at 130% of the
principle amount plus accrued interest. The proceeds were primarily used for
general corporate purposes.

                                      F-18

<PAGE>

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

Our accountant is Kalosieh, Shackil & Meola, CPAs, PA, independent certified
public accountants (formerly known as Edelman & Kalosieh, CPAs, P.A.). We do not
presently intend to change accountants. At no time has there been any
disagreements with such accountants regarding any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.

                                       44
<PAGE>

PART III

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

Our directors and officers as of December 31, 2000, are set forth below. The
directors hold office for their respective term and until their successors are
duly elected and qualified. Vacancies in the existing Board are filled by a
majority vote of the remaining directors. The officers serve at the will of the
Board of Directors.
<TABLE>
<CAPTION>
NAME                                        AGE           POSITION
                                            ---           --------
<S>                                         <C>           <C>
Eugene Chiaramonte, Jr.                     56            Director, President, Treasurer
                                                          Secretary and Chief Executive Officer

Ronald Shaver                               34            Executive Vice President

Ernest DeSaye, Jr.                          37            Manager,  Hardyston
                                                          Distributors, doing business
                                                          as The Mechanics Depot

Mustafa Qattous                             30            Former President of Operations,
                                                          Clifton Telecom Inc.
                                                          (Telecommunications Division)
</TABLE>

Eugene Chiaramonte Jr. has served as Director, President and Chief Executive
Officer of the Auxer Group since April 1995. He assumed the position of
Secretary and Treasurer in 1998. Mr. Chiaramonte was a founder and has
served as Director and Secretary of the Auxer Group's subsidiary, CT Industries
since June 1994. Additionally, he has served as Director and Secretary of the
Harvey Westbury Corp. since October 1996 and a co-founder, Director and
Secretary of Hardyston Distributors since April 1999, is a Director and
Secretary of Auxer Telecom Inc. since August 2000.

Ronald Shaver has served as the Executive Vice President of the Auxer Group
since July 2000. He is a Director and Chief Executive Officer of Auxer Telecom,
Inc. since August 2000. He has served as Director and is acting in the capacity
of President of the Harvey Westbury Corp since October 1996. Additionally, he is
a co- founder and has served as a Director and is acting in the capacity of
President and Chief Executive Officer of Hardyston Distributors since April
1999. From 1995 to 1996, Mr. Shaver was a management consultant with George S.
May International. From 1993 to 1995, he was a Vice President of Atlantic
Venture Group, an investment banking firm. From 1989 to 1993, Mr. Shaver served
with the Corps of Engineers, U.S. Army with tours at Ft. Leonard Wood, Mo,
Republic of South Korea, and United States Military Academy, West Point. Mr.
Shaver is currently a Captain in the United States Army Reserve. He received his
MBA from CW Post-Long Island and BS in Engineering from the University of Kansas
and is a graduate of the National Engineer Center.

Ernest DeSaye has served as the Manager for Hardyston Distributors, doing
business as The Mechanics Depot, since April 1999. From 1991 to April 1999, Mr.
DeSaye had operated as a sole proprietor distributing automotive parts and
accessories to the local automotive community. From 1981 to 1991,he was a chief
mechanic and co-owner at Vernon Transmission and Auto Repair.

                                       45
<PAGE>

Mustafa Qattous has served as President of Operations for Clifton Telecom Inc.
since August 2000. From March 1999 to August 2000, Mr. Qattous was president and
co-founder of CT Alliance, Inc. from May 1997 to March 1999, Mr. Qattous was a
co-owner of Metropolitan International , a pre-paid phone-card distributor. From
1995 to May 1997, Mr. Qattous was a sole proprietor and sales representative for
the prepaid phone card distribution industry.

CERTAIN LEGAL PROCEEDINGS

No director, nominee for director, or executive officer of the Company has
appeared as a party in any legal proceeding material to an evaluation of his
ability or integrity during the past five years.

Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------

On December 6, 2000, we filed Form 3's for Messrs Chiaramonte and Shaver. Such
Form 3's were filed late. A Form 5 will not be filed for our fiscal year ended
December 31, 2000 since all reportable transactions for this fiscal year were
reported on Form 3's filed with the Commission.

ITEM 10. EXECUTIVE COMPENSATION

The following information relates to compensation received by our Chief
Executive Officer in 2000, to our executive officers who were serving as of
December 31, 2000, whose salary and bonus during fiscal 2000 exceeded $100,000.
In 1999, no officer received compensation in excess of $100,000.

Summary Compensation Table
<TABLE>
<CAPTION>

Name &                                            Other             All
Principal Position      Year          Salary      Bonus             Annual            Other
------------------      ----          -----      ------             Compensation      Compensation
                                                                    ------------      ------------
<S>                     <C>         <C>           <C>               <C>               <C>
Eugene Chiaramonte      2000         $78,000      $      0          $      0          $      0
Chief Executive         1999         $60,000      $      0          $      0          $208,500
Officer (1)(4)          1998         $     0      $      0          $      0          $      0

Ronald Shaver (2)       2000        $101,400      $      0          $      0          $      0
OPeration & Finance     1999        $      0      $      0          $ 70,000          $173,750
                        1998        $      0      $      0          $ 40,000          $      0

Ernest DeSaye Jr. (3)   2000        $ 47,300      $      0          $      0          $      0
Hardyston OPerations    1999        $ 45,000      $      0          $      0          $      0
                        1998        $      0      $      0          $      0          $      0

Mustafa Qattous (5)     2000        $260,000      $      0          $      0          $      0
Clifton Telecard Operations
</TABLE>

                                       46
<PAGE>

(1)  In January 1999, Mr. Chiaramonte was issued 1,500,000 shares of the Auxer
     Group's preferred stock valued at $225,000 of which $15,000 was issued to
     repay a loan and $208,000 was issued as deferred compensation. Mr.
     Chiaramonte was paid no compensation during the years of 1997 and 1998.
     Beginning in April 1999, the Auxer Group paid Mr. Chiaramonte a salary at
     the rate of $60,000 per annum. Mr. Chiaramonte was granted 100,000 shares
     on May 1, 2000 of the Auxer Group's common stock under the August 19, 1997
     Nonstatutory Option Plan. Mr. Chiaramonte was granted options to purchase
     7,500,000 shares under Auxer's 2000 stock option plan on June 26, 2001 of
     the Auxer Group's common stock.
(2)  In January 1999, Mr. Shaver was issued 1,250,000 shares of the Auxer
     Group's preferred stock valued at $187,500 of which $12,500 was
     reimbursement of expenses and $173,750 was issued as deferred compensation.
     In 1998 and 1999 compensation includes consulting fees related to Harvey
     Westbury. Mr. Shaver was granted options to purchase 565,000 shares on May
     15, 2000 of the Auxer Group's common stock under the August 19, 1997
     nonstatutory option plan. Mr. Shaver was granted options to purchase
     7,500,000 shares under Auxer's 2000 stock option plan on June 26, 2001 of
     the Auxer Group's common stock.
(3)  Mr. DeSaye was not an officer of the Auxer Group's subsidiary Hardyston
     Distributors, doing business as The Mechanics Depot, until April 1999. Mr.
     DeSaye is being paid a salary of $47,300 per annum in 2000. Mr. DeSaye was
     granted options to purchase 100,000 shares on May 1, 2000 of the Auxer
     Group's common stock under the August 19, 1997 nonstatutory option plan.
(4)  The Auxer Group in error accrued as salary for Mr. Chiaramonte for the
     years ended December 31, 1995, 1996, and 1997 at $100,000 per year for the
     total of $300,000. On July 6, 1999, the parties agreed that the accrued
     compensation would not be paid. In addition, the Auxer Group retroactively
     restated the financial statements for the years ended December 31, 1998 and
     1997 to reflect a one time change in accounting principals.
(5)  Mr. Ryan Shaver was not an officer of The Auxer Group's subsidiary CT
     Industries, Inc. until February 2001. Mr. Shaver was being paid a salary of
     $47,425 in 2000. Mr. Shaver was granted options to purchase 500,000 shares
     on May 15, 2001 of the Auxer Group's common stock under the August 19, 1997
     nonstatutory option plan. Mr. Shaver was granted options to purchase
     2,000,000 shares under Auxer's 2000 stock option plan on June 26, 2001 of
     the Auxer Group's common stock.
(6)  Ms. Mustafa is the Sales Manager of The Auxer Group's subsidiary CT
     Industries, Inc. and is not an officer of The Auxer Group or any of its
     subsidaries. Ms. Mustafa began her employment in March 2001 and is being
     paid a salary of $40,000 per annum.

The following table sets forth information with respect to the grant of options
to purchase shares of common stock during the fiscal year ended December 31,
1999, to each person named in the Summary Compensation Table.

                                       47
<PAGE>

                      Option/SAR Grants In The Last Fiscal Year

<TABLE>
<CAPTION>
                                    NUMBER OF             % OF TOTAL
                                      SECURITIES         OPTIONS/SARs
                                    UNDERLYING           GRANTED TO         EXERCISE OR        EXPIRATION
                                      OPTIONS/SARs         EMPLOYEES          BASE PRICE          DATE
NAME                                  GRANTED (#)          IN FISCAL YEAR      ($/SH)
                                      -----------          --------------      ------
<S>                                    <C>                 <C>                   <C>           <C>
Eugene Chiaramonte, Jr.               100,000                5%                  $0.05          5-1-2005
                                    7,500,000               39%                  $0.01         6-15-2006

Ronald Shaver                         565,000             28.3%                  $0.05          5-15-2005
                                    7,500,000               39%                  $0.01          6-15-2006

Ernest DeSaye, Jr                     100,000                5%                  $0.05           5-1-2005

Mustafa Qattous                             0                0                       0                  0
</TABLE>

The Auxer Group's stockholders approved the adoption of a Nonstatutory Option
plan on August 11, 2000. The Auxer Group reserved 25,000,000 shares of the Auxer
Group's common stock which may be granted to employees, officers, directors,
consultants of the Auxer Group and any other parties who have made a significant
contribution to the business and success of the Auxer Group. As of July 2001,
19,250,000 options had been granted to Eugene Chiaramonte, Jr., Ronald Shaver,
Ryan Shaver and other Auxer employees.

The Auxer Group's stockholders approved the adoption of a Nonstatutory Option
plan at the August 19, 1997 shareholder's meeting at which the Auxer Group
reserved 2,000,000 shares of the Auxer Group's common stock which would be
granted to employees, officers, directors, and consultants to the Auxer Group.
The option plan was to be administered by the Board of Directors and would not
qualify as "incentive stock options" under Section 422 of the Internal Revenue
Code.

The Plan shall be administered by the board of directors of the Auxer Group or
by an option committee to be established by the board of directors of the Auxer
Group. Participants in the Plan shall be employees, officers, directors,
consultants of the Auxer Group or any other business and success of the Auxer
Group as may be selected from time to time by the Board in its discretion.

No options shall be granted under the Plan after March 31, 2001, but Options
already granted may extend beyond that date. The number of Shares which may be
issued under the Plan shall not exceed 2,000,000 in the aggregate. To the extent
that any Option granted under the Plan shall expire or terminate unexercised or
for any reason become unexercisable. Such Shares shall thereafter be available
for further grants under the Plan.

                                       48
<PAGE>

As of June 30, 2001 options under the Plan approved on August 19, 1997 were no
longer allowed to be granted; all 2,000,000 reserved shares of the Auxer Group's
common stock were issued prior to March 31, 2001.

All options granted under the Plan shall be subject to the following terms and
conditions:

(a)  The exercise price under each option shall be determined by the Board and
     may be more, equal to or less than the then current market price of the
     Shares as the Board may deem to be appropriate;

(b)  Period of an Option shall not exceed five years from the date of grant;

(c)  Each Option shall be made exercisable at such time or times, whether or not
     in installments, as the Board shall prescribe at the time the Option is
     granted and the person electing to exercise an Option shall give written
     notice to the Auxer Group of his/her election and of the number of shares
     he/she has elected to purchase and shall at the time of such exercise
     tender the purchase price of the shares he/she has elected to purchase.

(d)  Upon exercise of any Option granted, payment in full shall be made at the
     time of such exercise for all such shares then being purchased.

(e)  No options may be transferred by the Participant otherwise than by will or
     by the laws of descent and distribution, and during the participant's
     lifetime the Option may be exercised only by the Participant.

(f)  If the Participant is an employee and his/her employment terminates for any
     reason other than his/her death, the Participant may, unless discharged for
     cause, afterwards exercise his/her Option.

(g)  If prior to the expiration date of a participant Option, an Optionee shall
     retire or resign with the Auxer Group's consent, such Option may be
     exercised in the same manner as if the Optionee had continued in the Auxer
     Group's employ.

(h)  If a participant dies at a time when he/she is entitled to exercise an
     Option, then at any time or times within 1 year after his/her death, or
     such further period as the Board may allow, such Option may be exercised,
     as to all for any of the shares which the Participant was entitled to
     purchase prior to his/her death.

     In the event of a stock dividend, stock split or recapitalization or merger
     in which the Auxer Group is the surviving corporation, or other similar
     capital change, the number and kind of shares of stock or securities of the
     Auxer Group to be subject to the Plan and to Options then outstanding or to
     be granted under, the maximum number of Shares or securities which may be
     issued or sold under the Plan, the exercise price and other relevant
     provisions shall be appropriately adjusted by the Board of the Auxer Group,
     the determination of which shall be binding on all persons.

                                       49
<PAGE>

The Board may at any time discontinue granting options under the Plan. The Board
of the Auxer Group may at any time amend the Plan or amend any outstanding
option for the purpose of satisfying the requirements of any changes in
applicable laws or regulations or for any other purpose which may at the time be
permitted by law.

As of December 31, 2000, 2,000,000 options had been granted and no options had
been exercised.

The following table sets forth information with respect to the exercise of
options to purchase shares of our common stock during the fiscal year ended
December 31, 2000, to each person named in the Summary Compensation Table and
the unexercised options held as of the end of 2000 fiscal year.

Aggregated Option/SAR Exercises In Last Fiscal Year And 2000 Fiscal Year End
Option/SAR Values
<TABLE>
<CAPTION>
                                                                                 NUMBER OF             VALUE OF
                                                                                 SECURITIES            UNEXERCISED
                                    SHARES               VALUE                   UNDERLYING            IN-THE-MONEY
                                    ACQUIRED             REALIZED                UNEXERCISED           OPTIONS/SARs AT
                                    ON         ($)                               OPTIONS/SARs AT       2000 FISCAL YEAR
                                                                                 2000 FISCAL           END ($)
                                    EXERCISE                                     YEAR END (#)          EXERCISEABLE/
                                   (#)                                           EXERCISABLE/          UNEXERCISABLE
NAME                                                                             UNEXERCISABLE
<S>                                    <C>                     <C>                       <C>           <C>
Eugene Chiaramonte, Jr.                0                       0                         NONE           0
Ronald Shaver                          0                       0                         NONE           0
Ernest DeSaye Jr.                      0                       0                         NONE           0
Mustafa Qattous                        0                       0                         NONE
</TABLE>

Long-Term Incentive Plans-Awards In Last Fiscal Year
<TABLE>
<CAPTION>

                                NUMBER OF         PERFORMANCE OR           ESTIMATED FUTURE
                                SHARES,           OTHER PERIOD             PAYOUTS UNDER NON-
                                UNITS OR          UNTIL                    STOCK PRICE-BASED
                                OTHER RIGHTS      MATURATION OR               PLANS
NAME                                              PAYOUT
                                                                           THRESHOLD          TARGET
<S>                                     <C>                <C>                      <C>            <C>
Eugene Chiarmonte, Jr.                  0                  0                        0              0
Ronald Shaver                           0                  0                        0              0
Ernest DeSaye Jr.                       0                  0                        0              0
Mustafa Qattous                         0                  0                        0              0
</TABLE>

                                       50
<PAGE>

Executive Employment Agreements:

Effective June 26, 2001, the Auxer Group entered into an Employment Agreement
with Eugene Chiaramonte, Jr. Mr. Chiaramonte was employed as President of the
Auxer Group. The Agreement is for a term of 1 year. The terms of the Agreement
are as follows: Gross salary:$5,770 bi-weekly as gross salary; Term: 1 year
commencing June 26, 2001; Additional compensation: Employee will be granted the
option to purchase an aggregate of 7,500,000 shares of The Auxer Group, Inc.
common stock, $0.001 par value per share, at an exercise price of $0.01. Mr.
Chiaramonte's employment only requires him to devote 50% of his time to the
business of the Auxer Group. Mr. Chiaramonte is presently not involved in any
other business activities and devotes 100% of his time to the business of the
Auxer Group.

Effective June 26, 2001, the Auxer Group entered into an Employment Agreement
with Ronald Shaver. Mr. Shaver was employed as Executive Vice President of the
Auxer Group. The terms of the Agreement are as follows: Gross salary: $5,770
bi-weekly as gross salary; Term: 1 year commencing June 26, 2001; Additional
compensation: Employee will be granted the option to purchase an aggregate of
7,500,000 shares of The Auxer Group, Inc. common stock, $0.001 par value per
share, at an exercise price of $0.01. Mr. Shaver's employment only requires him
to devote 50% of his time to the business of the Auxer Group. Mr. Shaver is
presently not involved in any other business activities and devotes 100% of his
time to the business of the Auxer Group.

Effective April 22, 1999, the Auxer Group entered into an Employment Agreement
with Ernest DeSaye Jr. Mr. DeSaye was employed as manager of the Auxer Group's
subsidiary, Hardyston Distributors, doing business as The Mechanics Depot. The
Agreement is for a term of 5 years and provides for an annual base salary in
1999 of $45,000 with a 5% increase being made on each anniversary date of this
Agreement. The Agreement provides for incentive payments in cash and stock or
stock options based on gross profits of Hardyston Distributors. More
specifically, the terms are as follows: Gross salary: $1,731 bi-weekly with a 5%
increase on each anniversary of the agreement; Term: 5 years commencing April
22, 1999; Additional compensation: 1% of the gross profits of Hardyston
Distributors derived from accounts purchased by the Auxer Group on the date of
the acquisition April 22, 1999; 2% of the gross profits on all new clients for
the initial 12 month period of the client's billings; stock or stock options
equal to 1% of gross profits on all supervised accounts in excess of $1,000,000
in total revenue for a fiscal year; stock or stock options equal to .5% of gross
profits on all supervised accounts in excess of $2,000,000 in total revenue for
a fiscal year.

                                       51
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                             Principal Shareholders

The following table sets forth information regarding the Auxer Group's common
and preferred stock beneficially owned on November 6, 2001, for (i) each
shareholder known by the Auxer Group to be the beneficial owner of 5% or more of
the Auxer Group's outstanding common and preferred stock, (ii) each of the Auxer
Group's executive officers and directors, and (iii) all executive officers and
directors as a group. In general, a person is deemed to be a "beneficial owner"
of a security if that person has or shares the power to vote or direct the
disposition of such security. A person is also a beneficial owner of any
security of which the person has the right to acquire beneficial ownership
within 60 days. At November 6, 2001, there were 131,475,066 shares of common
stock outstanding and 158,975,066 shares of common stock on a fully diluted
basis if preferred shares were converted at the rate of 10 shares of common
stock for each share of preferred stock and 2,750,000 shares of preferred stock
outstanding. Class of Security- Common Stock

<TABLE>
<CAPTION>
                                               Number of Shares of
Name of Beneficial                             Common Stock                       % of Beneficial
Identity of Group                              Beneficially Owned                 Ownership
                                               ------------------                 ---------
<S>                                             <C>                               <C>
Eugene Chiaramonte, Jr.                           17,173,886                       10.80%

Ronald Shaver                                     13,100,000                        8.24%

Ernest DeSaye, Jr.                                   836,700                        0.53%

Ryan Shaver                                                0                           0%

Nadia Mustafa                                              0                           0%

Starling Corp.(1)                                 20,260,000                        8.05%
c/o Perrin Holden Davenport Capital Corp.
5 Hanover Square, Mezzanine Level
New York, New York 10004

Ted Liebowitz (2)                                 17,630,000                        7.01%

All Executive Officers and Directors
as a Group (  5 persons)                            31,110,586                       19.57%
</TABLE>

                                       52
<PAGE>

Class of Security- Preferred Stock

<TABLE>
<CAPTION>
Name and Address of                             No. of Shares                   Percent
Beneficial Owner                                Beneficially Owned              of Class
                                                ------------------              --------
<S>                                               <C>                            <C>
Eugene Chiaramonte, Jr.                           1,500,000                      54.5%
                                                  Converts To:
                                                  15,000,000
                                                  Common Stock

Ronald Shaver                                     1,250,000                      45.5%
                                                  Converts To:
                                                  12,500,000
                                                  Common Stock

All Executive Officers and Directors
as a Group (2 persons)                            2,750,000                       100%
</TABLE>

(1) Lawrence Abrams is the principal shareholder of Starling Corp. Starling
Corp. is a Regulation D Investor in the Auxer Group's recent financing. The
documents related to the financing prohibit Starling Corp. from converting
debentures to shares so that Starling Corp. can not own 10% or more of the
outstanding shares of the common stock of the Auxer Group. The percentage of
shares listed for Starling Corp. only assume that the maximum amount of shares
being registered, 92,468,501, will be issued. 2,725,000 of such shares have been
issued to date. Therefore, 251,443,567 shares are being used for this
calculation for Starling Corp. only.

(2) The documents related to the financing prohibit Ted Liebowitz from
converting debentures to shares so that Ted Liebowitz can not own 10% or more of
the outstanding shares of the common stock of the Auxer Group. The percentage of
shares listed for Ted Liebowitz only assume that the maximum amount of shares
being registered, 92,468,501, will be issued. 2,725,000 of such shares have been
issued to date. Therefore, 251,443,567 shares are being used for this
calculation for Ted Liebowitz only.

The addresses for the above individuals is c/o The Auxer Group, Inc., 12 Andrews
Drive, West Paterson, New Jersey 07424.

                                       53
<PAGE>

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

In January 1999, the Auxer Group issued  2,750,000  shares of preferred stock to
Mr.  Chiaramonte,  Jr.  and Mr.  Shaver  in  connection  with  loans  due to Mr.
Chiaramonte  and  expenses  reimbursed  for Mr.  Shaver.  In January  1999,  Mr.
Chiaramonte  was issued  1,500,000  shares of the Auxer Group's  preferred stock
valued at $225,000, of which $15,000 was issued to repay a loan and $208,500 was
issued as  deferred  compensation.  In  January  1999,  Mr.  Shaver  was  issued
1,250,000  shares of the Auxer Group's  preferred  stock valued at $187,500,  of
which  $12,500  was issued to  reimburse  expenses  and  $173,750  was issued as
deferred compensation.

In April 1999, the Auxer Group issued 836,700 shares of its common stock to Mr.
DeSaye Jr. in connection with the purchase of automotive parts inventory and
assets valued at $104,945. The Auxer Group also paid $15,000 in cash towards the
purchase price. The Auxer Group's subsidiary Hardyston Distributors, doing
business as The Mechanics Depot, entered into a 5 year employment agreement with
Mr. DeSaye whereas he will be compensated with a salary of $45,000 per annum in
1999 with a 5% increase annually during the term of the employment agreement.
Under the terms of the agreement, Mr. DeSaye will receive stock options or
additional stock in connection with the performance of Hardyston Distributors.

The Auxer Group had a consulting relationship with Mr. Ronald Shaver. Mr. Shaver
was a consultant to Harvey-Westbury Corp.

On September 21, 2000, in connection with the sale of the assets of Clifton
Telecard Alliance, Mr. Mustafa Qattous was issued 1,000,000 shares of our common
stock at a value of $81,000. Additionally, Mustafa Qattous signed an employment
agreement with Clifton Telecard, Inc. for three years, effective September 22,
2000, at a rate of $10,000 bi-weekly. On May 16, 2001, Mustafa Qattous resigned
from his position as President of Operations and his employment agreement was
terminated. Under the terms of the agreement, Mustafa Qattous kept his initial
1,000,000 shares our of common stock and forfeited any remaining compensation
against his three contracts including any additional options and/or cash.

On May 16, 2001, we sold 100% of the stock of Clifton Telecard, Inc. to Kattosko
Communications. Mohd Qattous, the father of Mustafa Qattous, our president of
operations at the time of the sale, is the principal shareholder, officer and
director of Kattosko Communications. At the same time as this transaction
closed, Mustafa Qattous resigned as our president of operations and his
employment agreement with us was terminated.

                                       54
<PAGE>

                                RECENT FINANCING

In December 2000, we entered into 6 bridge loan agreements with the following
parties aggregating $545,000: Kador Investment Co. Ltd. invested $100,000, Ted
Liebowitz invested $100,000, Starling Corp. invested $200,000, Jacqueline
Balough invested $25,000, Rina Sugarman invested $70,000 and Leon Kahn invested
$50,000. Such parties bridge investors each received a promissory note or bridge
loan note from us in the principal amount set forth above and converted their
bridge loan notes into a Regulation D offering which was undertaken in January
2001. In addition to the bridge investors, the following parties invested in the
Regulation D offering aggregating $360,000: Yosef Davis invested $100,000, Louis
Wolcowitz invested $35,000, Joseph McGuire and Wilma Rossi, jointly, invested
$50,000, Michael Koretsky invested $25,000, Farnsworth Associates, Inc. invested
$25,000, Kurt Fichthorn invested $50,000 and Ted Liebowitz invested $75,000.
This amount by Mr. Liebowitz was in addition to his bridge loan investment of
$100,000. The bridge investors converted their bridge notes in to the Regulation
D offering at the following amounts based on interest on the bridge loan notes:
Kador Investment Co. Ltd. invested $101,300), Ted Liebowitz invested $101,300),
Starling Corp. invested $202,600, Jacqueline Balough invested $25,325, Rina
Sugarman invested $70,676.67 and Leon Kahn invested $50,483.34. The bridge
investors and the investors in the Regulation D offering shall be collectively
referred to as the "Regulation D Investors." Perrin, Holden and Davenport
Capital Corp. arranged the financing and received warrants to purchase 1,165,000
shares of our common stock. The exercise price of such warrant is based on the
closing bid price of our shares of common stock on the date the warrant was
issued. In addition, Intercontinental Capital Corp. and Seth A. Farbman each
received 67,500 warrants to purchase shares of our common stock at $0.0833 per
warrant. Additionally, International Capital Corp. received a finders fee of
$5,400 for introducing us to Perrin Holden and Davenport.

Specifically, Intercontinental Capital Corp. and Seth A. Farbman did not
negotiate the transactions, did not have contact with or solicit any of the
purchasers, did not hold any funds or securities, did not participate in the
establishment of the purchase price or any of the terms of the services or
agreements, the warrants referenced were not based on a specified percentage of
aggregated funds raised and did not prepare or offer any materials for the
transaction.

                                       55
<PAGE>

<TABLE>
<CAPTION>
INVESTOR                        AMOUNT OF INVESTMENT(1)             MAXIMUM AMOUNT TO BE      AMOUNT
                                                                    OFFERED FOR SECURITY      OWNED AFTER OFFERING
                                                                    HOLDER'S ACCOUNT(2)       IS COMPLETED(3)
<S>                            <C>                                 <C>
Kador Investment                $100,000 ($101,300 with             10,130,000                -0-
Co. Ltd.(4)                     interest)
Ted Liebowitz                   $100,000 ($101,300 with             10,130,000                -0-
                                interest)
                                $75,000                              7,500,000                -0-
Starling Corp.(4)               $200,000 ($202,600 with             20,260,000                -0-
                                interest)
Jacqueline Balough              $25,000 ($25,325 with                2,532,500                -0-
                                interest)
Rina Sugarman                   $70,000 ($70,676.67                  7,067,667                -0-
                                with interest)
Leon Kahn                       $50,000 ($50,483.34                  5,048,334                -0-
                                with interest)
Yosef Davis                     $100,000                            10,000,000                -0-
Louis Wolcowitz                 $35,000                              3,500,000                -0-
Joseph McGuire and
Wilma Rossi                     $50,000                              5,000,000                -0-
Michael Koretsky                $25,000                              2,500,000                -0-
Farnsworth
Associates Inc.(4)              $25,000                              2,500,000                -0-
Kurt Fichthorn                  $50,000                              5,000,000                -0-
                                -------                             ---------
                               $905,000                            91,168,501
                              ($911,685.01 with interest)         (based on $911,685.01)
</TABLE>

(1) The Bridge Loan Notes accrued interest prior to conversion into the
Regulation D offering. Each Bridge Loan investor converted their respective
Bridge Loan Notes into 8% Convertible Debentures in the Regulation D offering.
The principal amount of the 8% Convertible Debentures for such investors
includes interest accrued on the Bridge Loan Notes.

(2) The conversion has been calculated based on the maximum number of shares the
investors can receive in accordance with the 8% Convertible Debentures.

(3) The percentages are based on a total of 221,218,567 shares. This number has
been calculated as follows: outstanding shares as of November 6, 2001 -
131,475,066; plus maximum amount of shares registered - 92,468,501; less
2,725,000 shares previously issued as part of the shares being registered. The
maximum number of shares is based on a conversion price of $0.01 per share.

                                       56
<PAGE>

(4) The principals for the following corporations are as follows: Kador
Investment Co. Ltd.: Gerald Selbst; Starling Corp.: Lawrence Abrams; and
Farnsworth Associates, Inc.: Michael Koretsky; Perrin Holden & Davenport Capital
Corp. - Nelson Braff and Jody Eisenman; and Intercontinental Capital Corp. -
Gerald Alexander.

To date, we have issued the following shares to the Regulation D Investors which
shares were issued as part of the December 2000 bridge loan agreements:

Kador Investment Co. Ltd. - 500,000 shares; Ted Liebowitz - 500,000 shares;
Starling Corp. - 1,000,000 shares; Jacqueline Balough - 125,000 shares Rina
Sugarman - 350,000 shares; Leon Kahn - 250,000 shares. These shares are included
in the above table and are being registered for resale in this document.

Terms of the Regulation D Offering

Each Regulation D Investor received an 8% Convertible Debenture in the principal
amount set forth above. The debentures are all dated January 16, 2001 are for a
term of 5 years and accrue interest at the rate of 8% per annum. At our option,
interest on the Debentures may be payable by conversion into our Common Stock.
Notwithstanding same, we must pay interest in cash prior to this registration
statement becoming effective.

The Debentures may be converted into our common stock by multiplying the
conversion amount that a Regulation D Investor converts times 65% or the
Conversion Factor of the market price of our common stock. The market price is
calculated by averaging the 3 lowest closing bid prices on our common stock for
the 10 trading days prior to conversion. We executed a Registration Rights
Agreement with each Regulation D Investor. Such agreement requires us to
register the maximum number of shares issuable upon conversion of the
Debentures. In addition, the Registration Rights Agreement requires this
registration statement to become effective by May 31, 2001 or the Conversion
Factor shall decrease based on the following:

September 29, 2001 or later: 50%

Additional terms of the Regulation D offering are as follows:

o    If a Valuation Event occurs, we are required to notify the Regulation D
     investors within 2 days. The Regulation D investors may convert the
     Debentures based on the current Market price of our common stock on any
     trading day during the valuation period, which is 10 trading days prior to
     conversion. A Valuation Event includes, but is not limited to, such events
     as subdividing or combining our common shares, distribution of our common
     shares, issuance of our common shares or our warrants or options at prices
     lower than our closing bid price on such date.

                                       57
<PAGE>

o    The Regulation D investors can not convert the Debentures to cause any
     investor to own 10% or more of our issued and outstanding common stock at
     any time.

o    We have the option to redeem the Debentures at any time prior to conversion
     at a price equal to 130% of the principal amount of any Debenture plus
     accrued interest at the time of conversion.

                                       58
<PAGE>

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

(a)   The following documents are filed as part of this report:

1.   Financial statements; see index to financial statements and schedules
     in Item 7 herein.

2.   Financial statement schedules; see index to financial statements and
     schedules in Item 7 herein.

3.  Exhibits:

The following exhibits are filed with this Form 10-KSB and are identified by the
numbers indicated.

                EXHIBIT INDEX

     2.0  Plan of Reincorporation (1)

     3.1  Articles of Incorporation of The Auxer Group, Inc. and Articles of
          Amendment (1) (6)

     3.2  By-laws of The Auxer Group, Inc. (1)

     4.1  Certificate of Designations of Preferred Stock of The Auxer Group,
          Inc. (1)

     4.2  Non-Statutory Stock Option Plan (1)

     10.1  Asset Purchase Agreement effective September 27, 2000 with Clifton
           Telecard, Inc. and Clifton Telecard Alliance, Inc. (2)

     10.2 Contract for the Sale of Goods effective August 10, 2000 by Auxer
          Telecom, Inc. (our wholly owned subsidiary) from Chasin of Long Beach,
          Inc. dba Colbie Pacific Capital (3)

     10.3  Acquisition Agreement and Plan of Reorganization between the Auxer
           Gold Mines and CT Industries Inc. (1)

     10.4  Acquisition Agreement of Harvey-Westbury Corp. (1)

     10.5  Carquest Products, Inc. License Agreement (1)

     10.6 Agreement of Business Combination By Exchange of Assets for Stock
          between The Auxer Group, Inc. and Ernest DeSaye, Jr. doing business as
          Hardyston Distributors (1)

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<PAGE>

     10.7  Agreement and Plan of Acquisition between Auxer Industries, Inc. and
           Universal Filtration Industries, Inc. (1)

     10.8  Merchant Financial Corp. Agreement (6)

     10.9  PMR and Associates Investor Relation Agreement dated January 4, 1999
           (1)

     10.10 PMR and Associates Investor Relations Services Agreement dated April
           6, 1999 (1)

     10.11 PMR and Associates Management Consulting Services Agreement dated
           July 1, 1999 (1)

     10.12 Employment Agreement - Eugene Chiaramonte, Jr. (5)

     10.13 Employment Agreement - Ronald Shaver (4)

     10.14 Employment Agreement and Addendum - Ernest DeSaye, Jr. (1)

     10.15 Employment Agreement - Mustafa Qattous (6)

     10.16 Joint Venture Agreement between Harvey Westbury Corp. and USA
           United Suppliers of America, Inc. (6)

     21    Subsidiaries (1)

(1)  Incorporated by reference to the Registrant's Form 10-SB (SEC File No.
     0-26187).

(2)  Incorporated by reference to the Registrant's Form 8-K filed October 11,
     2000 (SEC File No. 0-30440)

(3)  Incorporated by reference to the Registrant's Form 8-K filed September 8,
     2000 (SEC File No. 0-30440)

(4)  Incorporated by reference to the Registrant's Form S-8 filed May 23,
     2000 (SEC File No. 333-37620)

(5)  Incorporated by reference to the Registrant's Form S-8 filed May 25,
     2000 (SEC File No. 333-37788)

(6)  Filed with the original Form 10-KSB on March 22, 2001 (SEC File No.
     0-30440)

(b)  On November 7, 2000, we filed an 8-K Amendment with the Securities
     and Exchange Commission for the Contract for the Sale of Goods between
     Auxer Telecom, Inc. a wholly owned subsidiary of The Auxer Group, Inc. and
     Chasin of Long Beach, Inc. d/b/a/ Colbie Pacific Capital ("Colbin") dated
     August 25, 2000. (See SEC File No. 0-30440)

     On October 11, 2000 and December 8, 2000 (amendment ), we filed
     8-K's with the Securities and Exchange Commission for the Asset Purchase
     Agreement effective September 27, 2000 between Clifton Telecard Inc., a
     wholly owned subsidiary of the Auxer Group, Inc. and Clifton Telecard
     Alliance Inc. which included financial statements of Clifton Telecard Inc.
     (See SEC File No. 0-30440)

     On May 31, 2001, we filed an 8-K with the Securities and Exchange
     Commission for the Stock Purchase Agreement effective May 16, 2001 with
     Kattosko Communications, Inc. for the sale of all of the issued and
     outstanding shares of Clifton Telecard, Inc.


                                       60
<PAGE>

                                   SIGNATURES

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

                              THE AUXER GROUP, INC.

                              By:   /s/ Eugene Chiaramonte, Jr.
                                   -----------------------------
                                       EUGENE CHIARAMONTE, JR.
                                       President, Chief Executive Officer
                                       and Director

Dated: November 12, 2001

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name                                Title                                 Date
----                                -----                                 ----

<S>                                 <C>                                   <C>
/s/ Euguen Chiaramonte, Jr.         Chief Executive Of                    November 12, 2001
---------------------------         President and Director

/s/ Ron Shaver                      Executive Vice President              November 12, 2001
---------------------------

</TABLE>

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