U.S. SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549

                              Form 10-KSB

                     SOUTHERN GROUP INTERNATIONAL, INC.
                (Name of small business in its charter)

         Florida                                          65-06001272
         -------                                        ----------------
     (State or other                           (IRS Employer Identification No.)
jurisdiction of Incorporation)

                                  69 Mall Drive
           ---------------------------------------------------------
           Address of Principal Executive Office (street and number)

                             Commack, New York 11725
                            ------------------------
                            City, State and Zip Code

Issuer's telephone number:  (631) 543-2800

Securities to be registered under Section 12(b) of the Act:

Title of each class   N/A

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

                          Common Stock $.001 par value
                          ----------------------------
                                (Title of Class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act  during the past 12 months (or for
such shorter period that the registrant was required to file such reports),  and
(2) has been subject to such filing requirements for the past 90 days.
Yes_X_ No____


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

State issuer's revenue for its most recent fiscal year: $-0-

State the  aggregate  market  value of the voting  stock held by  non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked  priced of such stock,  as of a specified  date within the past 60
days (See definition of affiliate in Rule 12b-2): $-0-

Note:  If  determining  whether  a  person  is  an  affiliate  will  involve  an
unreasonable  effort and expense,  the issuer may calculate the aggregate market
value of the common  equity held by  non-affiliates  on the basis of  reasonable
assumptions, if the assumptions are stated.

(Issuers involved in bankruptcy proceedings during the past five years):

Check  whether the issuer has filed all  documents  and  reports  required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes ____ No ____

(Applicable  only  to  corporate   registrants)   State  the  number  of  shares
outstanding of each of the issuer's  classes of common equity,  as of the latest
practicable date: 1,402,200 as of November 30, 2000.

(Documents   incorporated   by  reference.   If  the  following   documents  are
incorporated  by reference,  briefly  describe them and identify the part of the
Form  10-KSB  (e.g.   Part  I,  Part  II,  etc.)  into  which  the  document  is
incorporated:  (1) any  annual  report  to  security  holders;  (2) any proxy or
information  statement;  and (3) any prospectus filed pursuant to Rule 424(b) or
(c) of the  Securities  Act of 1933  ("Securities  Act").  The listed  documents
should be clearly described for identification purposes.


<PAGE>



                                PART I

ITEM 1.   DESCRIPTION OF BUSINESS.

General

       The  Company was  incorporated  under the laws of the State of Florida on
August 10, 1995, and is in the early  developmental  and promotional  stages. To
date the Company's only activities have been  organizational  ones,  directed at
the raising of capital,  and preliminary  efforts to seek one or more properties
or businesses  for  acquisition.  The Company has not  commenced any  commercial
operations. The Company has no full-time employees and owns no real estate.

       The Company's business plan is to seek,  investigate,  and, if warranted,
acquire one or more properties or businesses. Such an acquisition may be made by
purchase, merger, exchange of stock, or otherwise, and may encompass assets or a
business  entity,  such as a corporation,  joint venture,  or  partnership.  The
Company has very limited  capital,  and it is unlikely  that the Company will be
able to take advantage of more than one such business  opportunity.  The Company
intends to seek opportunities demonstrating the potential of long-term growth as
opposed to short-term earnings.

       As of the end of its fiscal year ending  December 31,  1999,  the Company
had not identified any business opportunity that it plans to pursue, nor has the
Company  reached  any  agreement  or  definitive  understanding  with any person
concerning an acquisition.

       It is anticipated that the Company's officers and directors will initiate
contacts  with  securities  broker-dealers  and other  persons  engaged in other
aspects of corporate  finance to advise them of the  Company's  existence and to
determine if the  companies or  businesses  they  represent  have an interest in
considering a merger or acquisition with the Company.  No assurance can be given
that the Company will be successful in finding or acquiring a desirable business
opportunity,  given the  limited  funds that are  expected to be  available  for
acquisitions,  or that any  acquisition  that  occurs  will be on terms that are
favorable to the Company or its stockholders.

       The  Company's  search will be  directed  toward  small and  medium-sized
enterprises which have a desire to become public corporations and which are able
to satisfy,  or anticipate in the reasonably  near future being able to satisfy,
the minimum asset  requirements in order to qualify shares for trading on NASDAQ
or on an  exchange  such  as  the  American  or  Pacific  Stock  Exchange.  (See
"Investigation   and   Selection  of  Business   Opportunities").   The  Company
anticipates that the business opportunities presented to it will (i) be recently
organized  with no operating  history,  or a history of losses  attributable  to
under-capitalization  or  other  factors;  (ii)  be  experiencing  financial  or
operating  difficulties;  (iii) be in need of funds to develop a new  product or
service or to expand into a new market; (iv) be relying upon an untested product
or marketing concept; or (v) have a combination of the characteristics mentioned
in (i) through (iv). The Company intends to concentrate its acquisition  efforts
on properties or businesses that it believes to be undervalued.  Given the above
factors,  investors  should  expect that any  acquisition  candidate  may have a
history of losses or posibilities.

         The  Company  does not propose to  restrict  its search for  investment
opportunities  to  any  particular  geographical  area  or  industry,  and  may,
therefore,  engage in  essentially  any  business,  to the extent of its limited
resources. This includes industries such as service, finance, natural resources,
manufacturing, high technology, product development, medical, communications and
others. The Company's  discretion in the selection of business  opportunities is
unrestricted,  subject  to the  availability  of  such  opportunities,  economic
conditions, and other factors.

                                       1
<PAGE>


       As a consequence of the Company's  registration  of its securities  under
the  Securities  Exchange Act of 1934, any entity which has an interest in being
acquired by the  Company is  expected  to be an entity that  desires to become a
public  company  as a result  of the  transaction.  In  connection  with such an
acquisition, it is highly likely that an amount of stock constituting control of
the  Company  would be issued by the  Company or  purchased  from the  Company's
current  principal   shareholders  by  the  target  entity  or  its  controlling
shareholders.

       It is anticipated that business  opportunities will come to the Company's
attention from various sources,  including its officers and directors, its other
stockholders,   professional   advisors  such  as  attorneys  and   accountants,
securities  broker-dealers,   venture  capitalists,  members  of  the  financial
community,  and others who may present unsolicited proposals. The Company has no
plans,  understandings,  agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company.

Investigation and Selection of Business Opportunities

       To a large  extent,  a decision  to  participate  in a specific  business
opportunity may be made upon  management's  analysis of the quality of the other
company's  management  and  personnel,  the  anticipated  acceptability  of  new
products or marketing concepts, the merit of technological changes, and numerous
other factors which are difficult,  if not  impossible,  to analyze  through the
application of any objective criteria. In many instances, it is anticipated that
the historical  operations of a specific firm may not  necessarily be indicative
of the potential for the future because of the possible need to shift  marketing
approaches substantially,  expand significantly, change product emphasis, change
or substantially augment management,  or make other changes. Because of the lack
of training or  experience  of the  Company's  management,  the Company  will be
dependent  upon the owners of a business  opportunity  to identify such problems
and to  implement,  or be  primarily  responsible  for  the  implementation  of,
required changes.  Because the Company may participate in a business opportunity
with a newly  organized  firm or with a firm  which is  entering  a new phase of
growth,  it should be  emphasized  that the Company  will incur  further  risks,
because  management  in many  instances  will not have proved its  abilities  or
effectiveness,  the eventual market for such company's products or services will
likely not be established, and such company may not be profitable when acquired.

       It is  anticipated  that the Company will not be able to  diversify,  but
will essentially be limited to one such venture because of the Company's limited
financing.  This lack of  diversification  will not permit the Company to offset
potential losses from one business opportunity against profits from another, and
should be  considered an adverse  factor  affecting any decision to purchase the
Company's securities.

       It is emphasized that  management of the Company may effect  transactions
having a potentially adverse impact upon the Company's  shareholders pursuant to
the   authority  and   discretion  of  the  Company's   management  to  complete
acquisitions  without  submitting  any  proposal to the  stockholders  for their
consideration.  Company  management  does not generally  anticipate that it will
provide holders of the Company's  securities with financial  statements,  or any
other  documentation,  concerning a target  company or its business prior to any
merger or acquisition. In some instances, however, the proposed participation in
a  business   opportunity  may  be  submitted  to  the  stockholders  for  their
consideration, either voluntarily by Company management which elects to seek the
stockholders' advice and consent, or because state law so requires.

       The analysis of business opportunities will be undertaken by or under the
supervision of the Company's executive officers and directors.

                                       2
<PAGE>


       Although  there are no current plans to do so, Company  management  might
hire an outside  consultant  to assist in the  investigation  and  selection  of
business  opportunities,  and in that  event,  might pay a finder's  fee.  Since
Company  management  has no  current  plans to use any  outside  consultants  or
advisors to assist in the investigation and selection of business opportunities,
no policies have been adopted regarding use of such consultants or advisors, the
criteria to be used in selecting such  consultants or advisors,  the services to
be provided, the term of service, or regarding the total amount of fees that may
be paid. However,  because of the limited resources of the Company, it is likely
that any such fee the  Company  agrees  to pay would be paid in stock and not in
cash.  Otherwise,  the Company  anticipates  that it will consider,  among other
things, the following factors:

       (a) Potential for growth and profitability,  indicated by new technology,
anticipated market expansion, or new products;

       (b)  Competitive  position as compared to other companies of similar size
and experience  within the industry  segment as well as within the industry as a
whole;

       (c)  Strength  and  diversity  of  existing  management,   or  management
prospects that are scheduled for recruitment;

       (d) Capital requirements and anticipated  availability of required funds,
to be  provided  from  operations,  through the sale of  additional  securities,
through joint ventures or similar arrangements, or from other sources;

       (e) The cost of participation by the Company as compared to the perceived
tangible and intangible values and potential;

       (f)  The extent to which the business opportunity can be advanced;

       (g) The Company's  perception of how any particular business  opportunity
will be received by the investment community and by the Company's stockholders;

       (h) The accessibility of required management  expertise,  personnel,  raw
materials, services, professional assistance, and other required items; and

       (i) Whether the financial condition of the business opportunity would be,
or would have a significant  prospect in the foreseeable future to become,  such
as to permit the securities of the Company,  following the business combination,
to qualify to be listed on an  exchange  or on a national  automated  securities
quotation system, such as NASDAQ, so as to permit the trading of such securities
to be exempt  from the  requirements  of Rule  15c2-6  recently  adopted  by the
Securities and Exchange Commission. See "Risk Factors - The Company - Regulation
of Penny Stocks."

       In regard to the possibility  that the shares of the issuer would qualify
for listing on NASDAQ, the current standards for initial listing include,  among
other  requirements  that the issuer have (1) net tangible assets of at least $4
million,  or a market  capitalization of at least $50 million,  or net income in
its latest  fiscal year of not less than  $750,000 in its latest fiscal year, or
in two of the last three fiscal years; (2) a public float (i.e., shares that are
not held by any  officer,  director  of 10%  stockholder)  of at least 1 million
shares; (3) a minimum bid price of at least $4 per share; (4) at least 300 round
lot stockholders (i.e.,  stockholders who own not less than 100 shares); and (5)
have an operating  history of at least one year or have a market  capitalization
of at least $50 million,.  Many, and perhaps most of the business  opportunities
that might be potential  candidates for a combination with the Company would not
satisfy the NASDAQ listing criteria.

                                       3
<PAGE>


       No one  of  the  factors  described  above  will  be  controlling  in the
selection of a business opportunity,  and management will attempt to analyze all
factors  appropriate to each  opportunity  and make a  determination  based upon
reasonable  investigative  measures and available  data.  Potentially  available
business  opportunities  may occur in many  different  industries and at various
stages  of  development,  all  of  which  will  make  the  task  of  comparative
investigation and analysis of such business  opportunities  extremely  difficult
and complex.  Potential  investors must recognize that, because of the Company's
limited capital available for investigation and management's  limited experience
in  business  analysis,  the Company may not  discover  or  adequately  evaluate
adverse facts about the opportunity to be acquired.

       The Company is unable to predict  when it may  participate  in a business
opportunity  and it  has  not  established  any  deadline  for  completion  of a
transaction.  It  expects,  however,  that the  process of  seeking  candidates,
analysis of specific  proposals and the selection of a business  opportunity may
require several additional months or more.

       Prior to making a decision to participate in a business opportunity,  the
Company  will  generally  request  that it be provided  with  written  materials
regarding the business  opportunity  containing  such items as a description  of
product, service and company history; management resumes; financial information;
available  projections,  with related  assumptions upon which they are based; an
explanation of proprietary products and services;  evidence of existing patents,
trademarks,  or services marks, or rights thereto; present and proposed forms of
compensation to management;  a description of transactions  between such company
and its  affiliates  during  relevant  periods;  a  description  of present  and
required  facilities;  an  analysis  of  risks  and  competitive  conditions;  a
financial  plan  of  operation  and  estimated  capital  requirements;   audited
financial  statements or an indication that audited statements will be available
within sixty (60) days following  completion of a merger transaction;  and other
information deemed relevant.

       As part of the Company's investigation,  the Company's executive officers
and directors may meet personally  with management and key personnel,  may visit
and inspect material facilities,  obtain independent analysis or verification of
certain information provided,  check references of management and key personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.

       Company  management  believes that various  types of potential  merger or
acquisition  candidates might find a business combination with the Company to be
attractive.  These include  acquisition  candidates  desiring to create a public
market for their shares in order to enhance liquidity for current  shareholders,
acquisition  candidates  which have  long-term  plans for raising equity capital
through  the public  sale of  securities  and believe  that the  possible  prior
existence  of a public  market for their  securities  would be  beneficial,  and
acquisition  candidates which plan to acquire additional assets through issuance
of  securities  rather  than for  cash,  and  believe  that the  possibility  of
development of a public market for their  securities  will be assistance in that
process. Acquisition candidates which have a need for an immediate cash infusion
are not likely to find a potential  business  combination with the Company to be
an attractive alternative.

                                       4
<PAGE>

Form of Acquisition

       It is  impossible  to  predict  the  manner  in  which  the  Company  may
participate in a business opportunity.  Specific business  opportunities will be
reviewed  as well as the  respective  needs and  desires of the  Company and the
promoters of the opportunity and, upon the basis of that review and the relative
negotiating  strength of the Company and such promoters,  the legal structure or
method deemed by management to be suitable will be selected.  Such structure may
include,  but is not  limited  to,  share  exchanges,  mergers,  agreements  for
purchase of and sale of stock or assets,  leases,  licenses,  joint ventures and
other  contractual  arrangements.  The  Company may act  directly or  indirectly
through an interest in a partnership, corporation or other form of organization.
Implementing   such   structure  may  require  the  merger,   consolidation   or
reorganization  of the  Company  with other  corporations  or forms of  business
organization.  In  addition,  the present  management  and  stockholders  of the
Company most likely will not have control of a majority of the voting  shares of
the  Company  following  a  reorganization   transaction.  As  part  of  such  a
transaction,  the  Company's  directors  may  resign  and new  directors  may be
appointed without any vote by stockholders.

       It is  likely  that the  Company  will  acquire  its  participation  in a
business opportunity through the issuance of Common Stock or other securities of
the Company.  Although the terms of any such transaction cannot be predicted, it
should be noted that in  certain  circumstances  the  criteria  for  determining
whether or not an acquisition is a so-called "tax free" reorganization under the
Internal Revenue Code of 1986,  depends upon the issuance to the stockholders of
the  acquired  company  of more  than 80% of the  common  stock of the  combined
entities  immediately  following  the  reorganization.  If  a  transaction  were
structured to take  advantage of these  provisions  rather than other "tax free"
provisions provided under the Internal Revenue Code, the Company's  stockholders
in such  circumstances  would retain in the  aggregate  20% or less of the total
issued and  outstanding  shares.  This could  result in  substantial  additional
dilution in the equity of those who were  stockholders  of the Company  prior to
such  reorganization.  Any such issuance of additional shares might also be done
simultaneously  with a sale or transfer  of shares  representing  a  controlling
interest  in the  Company  by the  current  officers,  directors  and  principal
shareholders. (See "Description of Business - General").

       It is anticipated that any securities issued in any reorganization  would
be issued in reliance upon exemptions,  if any are available,  from registration
under  applicable  federal and state  securities  laws.  In some  circumstances,
however,  as a negotiated  element of the transaction,  the Company may agree to
register such securities  either at the time the transaction is consummated,  or
under  certain  conditions  or at specified  times  thereafter.  The issuance of
substantial  additional  securities  and their  potential  sale into any trading
market that might  develop in the  Company's  securities  may have a  depressive
effect upon such market.

       The Company will  participate  in a business  opportunity  only after the
negotiation  and  execution of a written  agreement.  Although the terms of such
agreement  cannot  be  predicted,  generally  such an  agreement  would  require
specific  representations and warranties by all of the parties thereto,  specify
certain events of default,  detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing,  outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.

       As a general matter,  the Company  anticipates  that it will enter into a
letter of intent  with the  management,  principals  or owners of a  prospective
business opportunity prior to signing a binding agreement.

       Such a  letter  of  intent  will set  forth  the  terms  of the  proposed
acquisition but will not bind either the Company or the business  opportunity to
consummate  the  transaction.  Execution  of a letter of intent will by no means
indicate that  consummation  of an acquisition is probable.  Neither the Company
nor the business  opportunity will be bound to consummate the acquisition unless
and until a definitive  agreement concerning the acquisition as described in the
preceding paragraph is executed.  Even after a definitive agreement is executed,
it is possible that the acquisition would not be consummated should either party
elect to  exercise  any right  provided  in the  agreement  to  terminate  it on
specified grounds.

                                       5
<PAGE>


      It  is   anticipated   that  the   investigation   of  specific   business
opportunities   and  the   negotiation,   drafting  and  execution  of  relevant
agreements,  disclosure documents and other instruments will require substantial
management time and attention and substantial  costs for accountants,  attorneys
and others.  If a decision  is made not to  participate  in a specific  business
opportunity,  the costs theretofore incurred in the related  investigation would
not be  recoverable.  Moreover,  because  many  providers  of goods and services
require  compensation  at the time or soon  after  the goods  and  services  are
provided, the inability of the Company to pay until an indeterminate future time
may make it impossible to procure goods and services.

Competition

      The Company expects to encounter substantial competition in its efforts to
locate attractive opportunities,  primarily from business development companies,
venture capital  partnerships and  corporations,  venture capital  affiliates of
large  industrial  and financial  companies,  small  investment  companies,  and
wealthy  individuals.  Many of these  entities will have  significantly  greater
experience,  resources  and  managerial  capabilities  than the Company and will
therefore  be in a  better  position  than  the  Company  to  obtain  access  to
attractive business opportunities.  The Company also will experience competition
from other  public  "blind  pool"  companies,  many of which may have more funds
available than does the Company.

Administrative Offices

         The Company  currently  maintains  a mailing  address at 69 Mall Drive,
Commack, New York. The Company's telephone number there is (631) 543-2800.

       Other than this mailing address,  the Company does not currently maintain
any other office  facilities,  and does not anticipate the need for  maintaining
office  facilities at any time in the  foreseeable  future.  The Company pays no
rent or other fees for the use of this mailing address.

Employees

       The  Company  is  a  development  stage  company  and  currently  has  no
employees.  Management of the Company expects to use consultants,  attorneys and
accountants as necessary, and does not anticipate a need to engage any full-time
employees so long as it is seeking and evaluating  business  opportunities.  The
need for employees and their  availability  will be addressed in connection with
the  decision  whether or not to acquire or  participate  in  specific  business
opportunities.  No remuneration will be paid to the Company's officers except as
set forth under "Executive  Compensation"  and under "Certain  Relationships and
Related Transactions."

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.

         Except for  historical  matters,  the  matters  discussed  in this Form
10-KSB are forward-looking statements based on current expectations, and involve
risks and uncertainties. Forward-looking statements include, but are not limited
to, statements under the following headings:

       (i) "Description of Business - General" - the general  description of the
Company's  plan to seek a merger  or  acquisition  candidate,  and the  types of
business opportunities that may be pursued.

       (ii)  "Description of Business - Investigation  and Selection of Business
Opportunities"  - the  steps  which  may be  taken  to  investigate  prospective
business  opportunities,  and the  factors  which  may be used  in  selecting  a
business opportunity.

       (iii)  "Description  of Business - Form of  Acquisition"  - the manner in
which the Company may participate in a business acquisition.

                                       6
<PAGE>


       The   Company   wishes  to  caution   the  reader  that  there  are  many
uncertainties  and unknown  factors  which could affect its ability to carry out
its business plan in the manner described herein.

ITEM 2.   DESCRIPTION OF PROPERTY.

         The Company  currently  maintains  a mailing  address at 69 Mall Drive,
Commack, New York 11725, which is the address of its President. The Company pays
no rent for the use of this mailing  address.  The Company does not believe that
it will need to  maintain  an office  at any time in the  foreseeable  future in
order to carry  out its  plan of  operations  described  herein.  The  Company's
telephone number is (631) 543-2800.

     The  Company  currently  has no  investments  in real  estate,  real estate
mortgages,  or real estate  securities,  and does not anticipate making any such
investments  in the future.  However,  the policy of the Company with respect to
investment in real estate  assets could be changed in the future  without a vote
of security holders.

ITEM 3. LEGAL PROCEEDINGS.

         The Company is not a party to any  pending  legal  proceedings,  and no
such proceedings are known to be contemplated.

       No director,  officer or affiliate of the Company, and no owner of record
or beneficial  owner of more than 5.0% of the securities of the Company,  or any
associate of any such director, officer or security holder is a party adverse to
the Company or has a material  interest  adverse to the Company in  reference to
pending litigation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

       No  matters  were  submitted  to a vote of the  security  holders  of the
Company  during the fiscal year which ended  December 31, 1999,  nor in the nine
month period ended September 30, 2000.

                                     Part II

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

      There has been no  established  public  trading  market for the  Company's
securities  since its  inception  on August 10,  1995.  However,  the  Company's
securities are traded on the National  Quotation  Bureau pink sheets with no bid
and no offer.  The  Company's  trading  symbol is SGPI. As of September 30, 2000
there were 1,402,200 shares outstanding,  and the Company has 65 shareholders of
record. No dividends have been paid to date and the Company's Board of directors
does not anticipate paying dividends in the foreseeable future.

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

         The Company remains in the development stage and, since inception,  has
experienced  no  significant   change  in  liquidity  or  capital  resources  or
stockholders  equity other than the receipt of proceeds in the amount of $63,064
for its inside capitalization  funds.  Substantially all of such funds have been
used to pay expenses incurred by the Company.

                                       7
<PAGE>


      The Company intends to seek to carry out its plan of business as discussed
herein.  In order to do so, it will  require  additional  capital to pay ongoing
expenses,   including   particularly  legal  and  accounting  fees  incurred  in
conjunction  with future  compliance with its on-going  reporting obligations.

Results of Operations

During the period from August 10, 1995  (inception)  through  December 31, 1999,
the  Company has an  accumulated  deficit of $72,083.  During this  period,  the
Company  has  engaged in no  significant  operations  other than  organizational
activities,  acquisition of capital,  preparation and filing of the registration
of its  securities  under  the  Securities  Exchange  Act of 1934,  as  amended,
compliance with its periodical reporting  requirements,  and efforts to locate a
suitable  merger or  acquisition  candidate.  No revenues  were  received by the
Company during this period.

      For the fiscal year ending  December  31,  2000,  the Company  anticipates
incurring a loss as a result of expenses  associated  with  compliance  with the
reporting  requirements  of the  Securities  Exchange Act of 1934,  and expenses
associated  with locating and  evaluating  acquisition  candidates.  The Company
anticipates  that until a business  combination is completed with an acquisition
candidate,  it will not generate revenues.  It may also continue to operate at a
loss after completing a business combination,  depending upon the performance of
the acquired business.

Need for Additional Financing

      It is  anticipated  that the Company  will require  additional  capital in
order  to meet  its  cash  needs  for the  next  year,  including  the  costs of
compliance with the continuing reporting requirements of the Securities Exchange
Act of 1934, as amended.

    No  specific  commitments  to  provide  additional  funds  have been made by
management  or  other  stockholders,  and  the  Company  has no  current  plans,
proposals,  arrangements or understandings  with respect to the sale or issuance
of  additional  securities  prior to the  location  of a merger  or  acquisition
candidate. Accordingly, there can be no assurance that any additional funds will
be available to the Company to allow it to cover its  expenses.  Notwithstanding
the foregoing,  to the extent that  additional  funds are required,  the Company
anticipates  receiving  such  funds in the  form of  advancements  from  current
shareholders  without  issuance of  additional  shares or other  securities,  or
through the private  placement of  restricted  securities  rather than through a
public offering.

       The  Company  does  not  currently  contemplate  making  a  Regulation  S
offering.

      The Company may also seek to compensate providers of services by issuances
of stock in lieu of cash. For  information as to the Company's  policy in regard
to  payment  for   consulting   services,   see   "Certain   Relationships   and
Transactions."

Year 2000 Compliance

     Year 2000  issues are not  currently  material to the  Company's  business,
operations or financial condition, and the Company does not currently anticipate
that it will incur any material  expenses to  remediate  Year 2000 issues it may
encounter.  However,  Year  2000  issues  may  become  material  to the  Company
following its completion of a business combination  transaction.  In that event,
the Company  will be required to adopt a plan and a budget for  addressing  such
issues.



                                       8
<PAGE>

ITEM 7. FINANCIAL STATEMENTS.

3.   RELATED PARTY TRANSACTIONS

As of the date hereof,  Seema Wasil and Rahul  Rametra , two of the officers and
directors of the Company,  are the owners of 29,000  shares of its common stock,
constituting  approximately 2% of the Company's  issued and outstanding  shares.
Ms. Wasil and Mr. Rametra are the daughter and nephew of Surinder  Rametra,  who
owns 34% of the issued and  outstanding  shares of the Company and who  provides
the office space for the Company, and Nirmala Rametra who owns 11% of the issued
and outstanding shares of the Company.

4.   INCOME TAXES

The Company has a Federal net  operating  loss  carryforwards  of  approximately
$72,083  expiring in the year 2019. The tax benefit of this net operating losses
is  approximately   $13,021  and  has  been  offset  by  a  full  allowance  for
realization.  This  carryforward  may be  limited  upon  the  consummation  of a
business  combination  under IRC Section 381. For the period ended  December 31,
1999 the valuation allowance increased by $12,473.

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

       The Company has had no change in, or disagreements with, it's independent
accountant since the date of inception.

                                   Part III

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

       The directors and executive officers currently serving the Company are as
follows:

Name                       Age              Position(s) held
----                       ---              ------------------------
Konrad C. Kim              29               President, Director

Seema Wasil                30               Secretary, Director

Rahul Rametra              27               Director

       The directors named above will serve until the next annual meeting of the
Company's stockholders. Thereafter, directors will be elected for one year terms
at the annual stockholders'  meeting.  Officers will hold their positions at the
pleasure of the board of directors,  absent any employment  agreement,  of which
none  currently  exists  or  is   contemplated.   There  is  no  arrangement  or
understanding  between any of the  directors  or officers of the Company and any
other person  pursuant to which any director or officer was or is to be selected
as a director or officer.

       The  directors  and  officers  will  devote  their time to the  Company's
affairs on an "as needed" basis,  which,  depending on the circumstances,  could
amount to as little as two hours per month,  or more than forty hours per month,
but more than likely will fall within the range of five to ten hours per month.

Biographical Information

       Konrad  C.  Kim-  received  a  Bachelor  of  Science  degree  from  the
University  of Wisconsin in 1992.  From 1995 - 1997 he was a Consultant  Systems
Administrator  for SONY  Entertainment,  Columbia  House,  and The Village Voice
newspaper.  From  1997 - 1999 he was a  Technical  Systems  Analyst  at  Moody's
Investor's Services. Since 1999 he has been a Systems Engineer at Gateway.com.


                                       9
<PAGE>


       Seema  Wasil-  earned a Bachelors  Degree  in  Accounting  from   Hofstra
University  in 1991 and a Masters  Degree in Special  Education  from Hofstra in
1993.  From  1995 to 1998 she  worked in the  Accounting  and  Public  Relations
departments  of Atec Group,  Inc. a publicly  traded  Company.  From 1999 to the
present, she has been a Vice-President of Stern Capital Partners, Ltd, a private
consulting firm.

       Rahul Rametra-  received a Bachelors  Degree from State University of New
York, Stony Brook in 1995, and earned a Masters Degree in Finance from C.W. Post
University in 1998. He has been employed by ATEC Group,  Inc.  since 1995 and is
currently  a sales  representative  for Atec  Group,  Inc.  and Chief  Operating
Officer of Nexar, Inc. a subsidiary of Atec Group, Inc.

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

         Seema  Wasil and Rahul  Rametra  were each  required to file an Initial
Statement of  Beneficial  ownership of  Securities  on Form 3 at the time of the
registration of the Company's securities under Section 12(g) of the Act. Neither
of them  made a timely  filing on Form 3.  They  have  each  represented  to the
Company that they will  complete all required  filings under Section 16(a) on or
before December 31, 2000.

ITEM 10.  EXECUTIVE COMPENSATION.

       No officer or director  received any remuneration from the Company during
the fiscal  year.  Until the  Company  acquires  additional  capital,  it is not
intended that any officer or director will receive compensation from the Company
other than  reimbursement for  out-of-pocket  expenses incurred on behalf of the
Company. See "Certain  Relationships and Related  Transactions." The Company has
no stock option, retirement, pension, or profit-sharing programs for the benefit
of  directors,  officers  or other  employees,  but the Board of  Directors  may
recommend adoption of one or more such programs in the future.

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

       The  following  table sets  forth,  as of the end of the  Company's  most
recent  fiscal  year,  the number of shares of Common  Stock owned of record and
beneficially by executive officers,  directors and persons who hold 5.0% or more
of the  outstanding  Common Stock of the Company.  Also  included are the shares
held by all executive officers and directors as a group.

Name and                            Number of Shares            Percent of
Address                             Owned Beneficially          Class Owned
-----------------------------------------------------------------------------

Surinder Rametra                      475,000(4)          34%
27 Riesling Ct
Commack, NY 11725

Beresford Overseas Limited            300,000             21%
P.O. Box 174
St. James Chambers
Athol Street
Douglas, Isle of Man 1M99 1PP

Nirmala Rametra(1)                    152,000(4)           11%
27 Riesling Court
Commack, NY 11725

Seema Wasil(2)                         27,000(2)           ***
27 Riesling Court
Commack, NY 11725


                                       10
<PAGE>


Rahul Rametra                           2,000(3)          ***
209 Crombie Street
Huntington Station, NY 11746

All Directors and                      29,000              2%
Executive officers (3)persons)

*** Less than 1%

(1)  Nirmala Rametra is the wife of Surinder Rametra.

(2)  Seema   Wasil  is  the   Secretary   and   Director   of   Southern   Group
International,Inc., and is the daughter of Surinder Rametra and Nirmala Rametra.

(3) Rahul Rametra is a Director of Southern Group  International,  Inc., and the
nephew of Surinder Rametra and Nirmala Rametra.

(4) Does not include 57,000 shares held by S&N Associates, Inc. a corporation of
which Surinder Rametra and Nirmala Rametra are the sole shareholders.

All of the above  disclaim  any  beneficial  ownership in shares owned by family
members.

Changes in Control

         A  change  in  control  of  the  Company  will   probably   occur  upon
consummation  of  a  business  combination,  which  is  anticipated  to  involve
significant change in ownership of stock of the company, membership of the board
of  directors.  The extent of any such change or control in  ownership  or board
composition cannot be predicted at this time.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Indemnification of Officers and Directors

       As  permitted by Florida law,  the  Company's  Articles of  Incorporation
provide that the Company  will  indemnify  its  directors  and officers  against
expenses and liabilities they incur to defend,  settle,  or satisfy any civil or
criminal  action  brought  against them on account of their being or having been
Company directors or officers unless,  in any such action,  they are adjudged to
have  acted   with  gross   negligence   or  willful   misconduct.   Insofar  as
indemnification  for liabilities arising under the Securities Act of 1933 may be
permitted to directors,  officers or persons controlling the Company pursuant to
the foregoing provisions,  the Company has been informed that, in the opinion of
the Securities and Exchange  Commission,  such indemnification is against public
policy as expressed in that Act and is, therefore, unenforceable.

Conflicts of Interest

       None of the  officers of the  Company  will devote more than a portion of
his time to the affairs of the Company.  There will be  occasions  when the time
requirements  of  the  Company's  business  conflict  with  the  demands  of the
officers' other business and investment  activities.  Such conflicts may require
that the Company attempt to employ additional  personnel.  There is no assurance
that the services of such persons will be available or that they can be obtained
upon terms favorable to the Company.

                                       11
<PAGE>


       Each  of  the  Company's   officers  and  directors  also  are  officers,
directors,  or both of several  other  corporations.  These  companies may be in
direct competition with the Company for available opportunities.

       Company management,  and the other principal shareholders of the Company,
intend to actively  negotiate or otherwise  consent to the purchase of a portion
of their  common  stock as a condition  to, or in  connection  with,  a proposed
merger or acquisition  transaction.  Members of management acquired their shares
for  services  rendered at a price of $0.001 per share,  and the total  purchase
price for all presently issued and outstanding  shares. It is anticipated that a
substantial premium may be paid by the purchaser in conjunction with any sale of
shares by officers,  directors or  affiliates  of the Company which is made as a
condition  to,  or  in  connection   with,  a  proposed  merger  or  acquisition
transaction.  The  fact  that a  substantial  premium  may be  paid  to  Company
officers, directors and affiliates to acquire their shares creates a conflict of
interest for them and may  compromise  their state law  fiduciary  duties to the
Company's  other  shareholders.  In  making  any such  sale,  Company  officers,
directors  and  affiliates  may consider  their own personal  pecuniary  benefit
rather  than  the  best  interests  of  the  Company  and  the  Company's  other
shareholders,  and the other  shareholders  are not  expected to be afforded the
opportunity  to  approve  or  consent  to  any  particular  buy-out  transaction
involving shares held by members of Company management.

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

       (a)  The Exhibits listed below are filed as part of this Annual Report.

Exhibit No.     Document
------------    ---------------

 3.1            Articles of  Incorporation  (incorporated  by  reference  from
                Registration  Statement  on Form 10-SB filed with the
                Securities and Exchange Commission on June 25, 1999).

3.2             Bylaws  (incorporated by reference from Registration  Statement
                on Form 10-SB filed with the Securities and Exchange
                Commission on June 25, 2000).

27              Financial Data Schedule

       (b) No reports  on Form 8-K were filed by the  Company  during  the  year
ended December 31, 1999.




                                       12
<PAGE>



SIGNATURES

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

Dated: December 15, 2000

                                          SOUTHERN GROUP INTERNATIONAL, INC.



                                          By:      s/s Konrad C. Kim
                                             -----------------------------------
                                             Konrad C. Kim, President, Director



                                          By:      s/s Seema Wasil
                                             -----------------------------------
                                             Seema Wasil, Secretary, Director

                                          By:      s/s Rahul Rametra
                                             -----------------------------------
                                             Rahul Rametra, Director












                                       13
<PAGE>




                       SOUTHERN GROUP INTERNATIONAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

                              FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
               AND FOR THE PERIOD AUGUST 10, 1995 (INCEPTION) TO
                               DECEMBER 31, 1999



















<PAGE>

                               TABLE OF CONTENTS








                                                                        Page No.
                                                                        --------
AUDITOR'S REPORT....................................................       F-1

FINANCIAL STATEMENTS

     Balance sheets.................................................       F-2

     Statements of Operations.......................................       F-3

     Statements of Changes in Stockholders' Equity..................       F-4

     Statements of Cash Flows.......................................       F-5

     Notes to Financial Statements..................................       F-6





















<PAGE>


                              STEWART H. BENJAMIN
                       CERTIFIED PUBLIC ACCOUNTANT, P.C.
                              27 SHELTER HILL ROAD
                              PLAINVIEW, NY 11803
                                    -------
                           TELEPHONE: (516) 933-9781
                           FACSIMILE: (516) 827-1203


                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors and Stockholders
Southern Group International, Inc.
Hauppauge, New York

I have audited the accompanying  balance sheets of Southern Group International,
Inc. (a  development  stage  company) as of December 31, 1999 and 1998,  and the
related  statements of operations,  stockholders'  equity and cash flows for the
years  then ended and for the  period  from  August  10,  1995  (inception),  to
December 31, 1999.  These  financial  statements are the  responsibility  of the
Company's  management.  My  responsibility  is to  express  an  opinion on these
financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Southern Group International,  Inc.
as of December  31, 1999 and 1998,  and the results of its  operations  and cash
flows for the years then ended and from August 10, 1995 (inception), to December
31, 1999, in conformity with generally accepted accounting principles.

/s/ Stewart H. Benjamin
---------------------------
Stewart H. Benjamin
Certified Public Accountant, P.C.


Plainview, New York
February 4, 2000
(except for Note 3, as to
which date is July 26, 2000)





                                      F-1


<PAGE>

                       SOUTHERN GROUP INTERNATIONAL, INC.
                          (A Development Stage Company)
                                 Balance Sheets

                                     ASSETS
<TABLE>
<CAPTION>

                                                                                              December 31,
                                                                                       1999                  1998
                                                                                   --------------        --------------

<S>                                                                               <C>                   <C>
Current assets


    Cash                                                                          $         1,976       $         2,396
    Securities available-for-sale  (Notes 1 & 2)                                           29,531                    --
    Loan receivable, related party (Note 3)                                                    --                51,634
                                                                                   --------------        --------------

                                                                                  $        31,507       $        54,030
                                                                                   ==============        ==============




                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities

    Loan payable (Note 4)                                                         $         2,831       $        54,419
    Loans payable, related parties (Note 5)                                                15,039                    --
    Accrued expenses                                                                           --                   200
                                                                                   --------------        --------------

Total liabilities                                                                          17,870                54,619
                                                                                   --------------        --------------


Stockholders' equity (deficit)
    Preferred stock, $.0001 par value, 10,000,000 shares
        authorized and zero shares issued and outstanding                                      --                    --
    Common stock, $.0001 par value, 80,000,000 shares
        authorized and 1,245,800 shares issued and outstanding
        in 1999 and 645,800 in 1998                                                           125                    65
    Additional paid-in capital                                                             62,939                 2,999
    Deficit accumulated during the development stage                                      (72,083)               (3,653)
    Unrealized gain on marketable securities                                               22,656                    --
                                                                                   --------------        --------------

Total stockholders' equity (deficit)                                                       13,637                  (589)
                                                                                   --------------        --------------

                                                                                  $        31,507       $        54,030
                                                                                   ==============        ==============


</TABLE>






The  accompanying  notes  are  an  integral  part  of the financial statements.


                                       F-2


<PAGE>

                       SOUTHERN GROUP INTERNATIONAL, INC.

                          (A Development Stage Company)

                            Statements of Operations


<TABLE>
<CAPTION>
                                                                                                    Aug. 10, 1995
                                                   Year Ended               Year Ended             (inception) to
                                                December 31,             December 31,               December 31,
                                                      1999                     1998                     1999
                                                ------------------       ------------------       -----------------

<S>                                            <C>                      <C>                      <C>
Costs and expenses
    General and administrative:

        Bank charges                           $               675      $               957      $             1,632
        Filing fees                                            250                      350                      600
        Edgar filing service fees                              740                       --                      740
        Legal fees                                          10,000                      500                   10,500
        Accounting fees                                      1,725                      375                    2,100
        Transfer agent fees                                    750                    1,610                    2,360
        Miscellaneous                                           --                       --                       64
                                                ------------------       ------------------       ------------------

Total costs and expenses                                    14,140                    3,792                   17,996
                                                ------------------       ------------------       ------------------


Other income (expenses)
    Impairment of investment in related party              (50,000)                      --                  (50,000)
    Interest income                                             --                      833                       --
    Interest expense                                        (3,457)                    (630)                  (4,087)
                                                ------------------       ------------------       ------------------

Total other income (expenses)                              (53,457)                     203                  (54,087)
                                                ------------------       ------------------       ------------------

Net loss                                       $           (67,597)     $            (3,589)     $           (72,083)
                                                ==================       ==================       ==================

Loss per common share                          $             (.065)     $             (.006)
                                                ==================       ==================


Weighted average common shares outstanding               1,041,964                  644,386
                                                ==================       ==================

</TABLE>

















The accompanying notes are an integral part of the financial statements.


                                      F-3


<PAGE>

                       SOUTHERN GROUP INTERNATIONAL, INC.
                          (A Development Stage Company)
                  Statements of Changes in Stockholders' Equity

      Period from August 10, 1995 (Date of Inception), to December 31, 1999
<TABLE>
<CAPTION>
                                                                                                    Deficit           Unrealized
                                                       Common stock             Additional        Accumulated          Gain on
                                          ---------------------------------      Paid-in             From            Marketable
                                              Shares            Amount            Capital          Inception          Securities
                                          ---------------   ---------------    --------------    ---------------    ---------------

<S>                                       <C>              <C>                <C>               <C>                <C>

Balances, August 10, 1995                              --  $             --   $            --   $             --   $             --
    Issuance of common stock                      642,800                64                --                 --                 --
    Net loss for the period                                                                                  (64)
                                          ---------------   ---------------    --------------    ---------------    ---------------
Balances, December 31, 1995                       642,800                64                --                (64)                --
The Company was inactive
  during 1996                                          --                --                --                 --                 --
                                          ---------------   ---------------    --------------    ---------------    ---------------
Balances, December 31, 1996                       642,800                64                --                (64)                --
The Company was inactive
  during 1997                                          --                --                --                 --                 --
                                          ---------------   ---------------    --------------    ---------------    ---------------
Balances, December 31, 1997                       642,800                64                --                (64)                --
    Issuance of common stock                        3,000                 1             2,999                 --                 --
    Net loss                                                                                              (3,589)
                                          ---------------   ---------------    --------------    ---------------    ---------------
Balances, December 31, 1998                       645,800                65             2,999             (3,653)                --
    Prior period adjustment                            --                --                --               (833)                --
    Sale of common stock                          297,500                30            29,720                 --                 --
    Shareholders loans converted to stock         233,750                23            23,352                 --                 --
    Common stock issued for marketable
       securities, valued at $.10 per share        68,750                 7             6,868                 --                 --
    Change in unrealized gain on
       marketable securities                           --                --                --                 --             22,656
    Net loss                                                                                             (67,597)
                                          ---------------   ---------------    --------------    ---------------    ---------------
Balances, December 31, 1999                     1,245,800  $            125   $        62,939   $        (72,083)  $         22,656
                                          ===============   ===============    ==============    ===============    ===============


</TABLE>







The accompanying  notes are an integral part of the financial statements.

                                       F-4

<PAGE>

                       SOUTHERN GROUP INTERNATIONAL, INC.
                          (A Development Stage Company)
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                                   Aug. 10, 1995
                                                                  Year Ended               Year Ended             (inception) to
                                                                 December 31,             December 31,             December 31,
                                                                     1999                     1998                     1999
                                                               ------------------       ------------------       ------------------
<S>                                                            <C>                      <C>                      <C>

CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                                   $          (67,597)      $           (3,589)      $          (71,250)
    Adjustments to reconcile net loss to net
         cash used in operating activities
         Impairment loss on related party receivable                       50,000                      --                    50,000
         Changes in assets and liabilities
            Increase (decrease) in accrued expenses                          (200)                     200                       --
                                                               ------------------       ------------------       ------------------

   NET CASH USED IN OPERATING ACTIVITIES                                  (17,797)                  (3,389)                 (21,250)
                                                               ------------------       ------------------       ------------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Increase in loans receivable, related party                                --                  (51,633)                 (51,633)
    Decrease in loans receivable, related party                               800                       --                      800
                                                               ------------------       ------------------       ------------------

   NET CASH USED IN INVESTING ACTIVITIES                                      800                  (51,633)                 (50,833)
                                                               ------------------       ------------------       ------------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from short-term debt                                          38,860                   58,654                   99,082
    Repayment of short-term debt                                          (52,033)                  (4,236)                 (57,837)
    Proceeds from issuance of common stock                                 29,750                    3,000                   32,814
                                                               ------------------       ------------------       ------------------

   NET CASH PROVIDED BY FINANCING ACTIVITIES                               16,577                   57,418                   74,059
                                                               ------------------       ------------------       ------------------

NET INCREASE (DECREASE) IN CASH                                              (420)                   2,396                    1,976

CASH - BEGINNING OF YEAR                                                    2,396                       --                       --
                                                               ------------------       ------------------       ------------------

CASH - END OF YEAR                                            $             1,976      $             2,396      $             1,976
                                                               ==================       ==================       ==================


SUPPLEMENTAL DISCLOSURES:
    Cash paid during the year for interest                    $             2,493      $               630      $             3,123
                                                                =================       ==================       ==================
    Cash paid during the year for income taxes                $                --      $                --      $                --
                                                                =================       ==================       ==================
    Change in unrealized gain on marketable securities        $            22,656      $                --      $            22,656
                                                                =================       ==================       ==================
    Common stock issued for marketable securities             $             6,875      $                --      $             6,875
                                                                =================       ==================       ==================
    Conversion of shareholders loans to capital stock         $           (23,375)     $                --      $           (23,375)
                                                                =================       ==================       ==================


</TABLE>








The accompanying notes are an integral part of the financial statements.


                                       F-5


<PAGE>

                       SOUTHERN GROUP INTERNATIONAL, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements

Note 1 - Summary of Significant Accounting Policies

Nature of Operations

The financial  statements  presented are those of Southern Group  International,
Inc., a development stage company (the "Company").  The Company was incorporated
under the laws of the  state of  Florida  on  August  10,  1995.  The  Company's
activities,  to date,  have been  primarily  directed  towards  the  raising  of
capital.


As shown in the financial  statements,  as of December 31, 1999, the Company has
incurred an accumulated deficit of $72,083. The Company's continued existence is
dependent  on  its  ability  to  generate  sufficient  cash  flow  to  meet  its
obligations  on a timely basis.  Accordingly,  the  financial  statements do not
include any adjustments  that might be necessary should the Company be unable to
continue  in  existence.  The  Company  has been  exploring  sources  to  obtain
additional  equity  or debt  financing.  The  Company  has  also  indicated  its
intention to participate in one or more as yet unidentified  business  ventures,
which  management  will select after  reviewing the business  opportunities  for
their profit or growth potential.


The  Company  will  engage  a  consultant,  who  will be  compensated  based  on
performance,  to  effect a merger  once a  candidate  has been  identified.  The
Company has  elected not to  recognize  compensation  expense for its  executive
officers, as they devote an insignificant amount of time to the Company.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the  reporting  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 period.  Actual results
could differ from those estimates.

Securities Available-For-Sale

Securities  available-for-sale  consist  of  marketable  equity  securities  not
classified as trading securities.  Securities  available-for-sale  are stated at
fair value,  and unrealized  holding gains and losses are reported as a separate
component of stockholders' equity.

Dividends  on  marketable  equity  securities  are  recognized  in  income  when
declared.  Realized  gains and losses are  determined on the basis of the actual
cost of the securities sold.


                                       F-6


<PAGE>

                       SOUTHERN GROUP INTERNATIONAL, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements

Loss Per Common Share

Loss per common  share is  computed  by  dividing  the net loss by the  weighted
average shares outstanding during the period.

Note 2 - Securities Available-For-Sale

The amortized cost and fair value of securities  available-for-sale  at December
31, 1999 are as follows:

         Amortized cost                                  $     6,875
         Gross unrealized gain                                22,656
                                                           ---------
         Fair value                                      $    29,531
                                                          ==========


Securities  available-for-sale  consists of 8,750 common shares of Yournet Inc.,
which is traded on the OTC Bulletin Board. The Company sold no securities during
the year ended December 31, 1999.


Note 3 - Loan Receivable, Related Party


On October 27, 1998 the Company made a short-term  loan of $50,000 with proceeds
from a bank line-of-credit to a Hungarian company that is wholly owned by a U.S.
corporation in which certain stockholders of the Company own an equity interest.
The purpose of the loan was to provide working capital to the Hungarian company.
The loan is  uncollateralized,  provides  for interest at a rate of 8% per annum
and is due on June 30,  2000.  The  Company has  received  no payments  from the
related  party loan as of December  31,  1999.  Therefore,  the loan  balance of
$50,000 was charged to operations in 1999 and the accrued interest receivable of
$833 was  deducted  from the  opening  balance  deficit  accumulated  during the
development stage.


Note 4 - Loan Payable

The Company has a bank  line-of-credit  which provides borrowings up to $75,000.
The line-of-credit is guaranteed by a stockholder of the Company,  and principal
and interest on advances are payable monthly at the bank prime rate plus 1%. The
line-of-credit  is due to  expire in  October  2001.  There  was an  outstanding
balance on this line-of-credit of $2,832 at December 31, 1999, which the Company
has  repaid  on  February  25,  2000.  Interest  expense  related  to  the  bank
line-of-credit was $2,493 during the year ended December 31, 1999.


                                       F-7


<PAGE>

                       SOUTHERN GROUP INTERNATIONAL, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements

Note 5 - Loans Payable - Stockholders


Loans of $37,450 were received from certain  stockholders  during the year ended
December  31,  1999,  proceeds of which were used to repay a portion of the bank
line-of-credit. Stockholders' loans totaling $23,375 were converted to equity as
a result of a  resolution  adopted  by the board of  directors  on May 5,  1999,
whereby  600,000 shares of restricted  common stock were issued for an aggregate
consideration of $60,000. The loans provide for interest at a rate of 8% and are
due on January 31, 2000.  Pursuant to a resolution  by the board of directors on
June 29, 2000, the loans and accrued interest totaling $15,640 were converted to
equity. The stockholders received 156,400 shares of common stock, valued at $.10
per share. Interest expense related to the stockholders' loans was $2,153 during
the year ended December 31, 1999.


Note 6 - Common Stock Transactions

Pursuant to a resolution  adopted by the Board of Directors on May 5, 1999,  the
Company issued 600,000 shares of restricted  common stock at a price of $.10 per
share, for an aggregate  consideration of $60,000,  which includes conversion of
stockholders'  loans of $23,375,  cash  contributions  of $29,750 and marketable
securities valued at $6,875. The price of $.10 per share, which exceeds the book
value per share, was determined as the fair value by management, as there was no
public market for the stock on the date of issuance.


                                      F-8