UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB





[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 For the fiscal year ended December 31, 2002
                                          -----------------

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934  For the transition period from           to
                                                        -----------  -----------

Commission File Number: 000-50228

                            The Coffee Exchange, Inc.
                            -------------------------
             (Exact name of registrant as specified in its charter)

Delaware                                                              33-0967974
--------                                                              ----------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

23 Corporate Plaza, Suite 180, Newport Beach, California 92660            92660
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)

                                  949.720.7230
                                  ------------
              (Registrant's Telephone Number, Including Area Code)



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


Title of each class registered:       Name of each exchange on which registered:
-------------------------------       ------------------------------------------

           None                                        None
           ----                                        ----

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

                  Common Stock, Par Value $.001
                  -----------------------------
                         (Title of Class)

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. [X] Yes [ ] No

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]


State issuer's revenues for its most recent fiscal year. $0.

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.) As of April 14, 2003, approximately $51,050.

As of April 14, 2003, there were 6,671,000 shares of the issuer's $.001 par
value common stock issued and outstanding.

Documents incorporated by reference. There are no annual reports to security
holders, proxy information statements, or any prospectus filed pursuant to Rule
424 of the Securities Act of 1933 incorporated herein by reference.

Transitional Small Business Disclosure format (check one):

                      [ ]   Yes        [X]   No



                                       1
<PAGE>



                                     PART I

Item 1. Description of Business.

Our Background. We were incorporated in Delaware on March 5, 2001.

Our Business. We plan to develop Internet cafes in Orange County, California,
and surrounding areas, featuring Internet and e-mail availability for patrons,
along with coffee, pastries and related items. Our objective is to develop cafes
that will provide a unique forum for communication and entertainment using the
current popularity of the Internet coupled with the widespread popularity of
coffee and related products. We intend to meet what we believe is an increasing
demand for access to the Internet at an affordable price in a social and casual
cafe-like atmosphere. Our primary objectives are:

     o    to provide our clientele with a unique, upscale, innovative
          environment which we hope will differentiate our establishment from
          local cafes;
     o    educate our patrons on what the Internet has to offer;
     o    the formation of an environment that will bring people with diverse
          interests and backgrounds together in a common forum where they can
          enjoy the Internet while enjoying coffee and pastries;
     o    offer good coffee and bakery items at reasonable prices; and,
     o    provide affordable access and high-speed service to the Internet and
          other online services.

The retail coffee industry in Orange County, California, and its surrounding
areas experienced growth at the beginning of the decade and is now moving into
the mature stage of its life cycle. We believe that many factors contribute to
the demand for good quality coffee in Orange County, California, including, but
not limited to, the ocean climate is extremely conducive to coffee consumption,
the fast pace of life in Orange County, and current trends reflecting the
popularity of fresh, strong, quality coffee and specialty drinks.

We believe that the popularity of the Internet is growing. We hope to provide an
environment where those familiar with the Internet as well as those who have not
yet experienced the Internet can access the Internet in a convenient, relaxed
atmosphere where they can feel comfortable learning about and utilizing current
technology. We seek to provide our customers with affordable Internet access in
an innovative and supportive environment where they will be able to enjoy a cup
of coffee and pastry while surfing the Internet.

Due to intense competition, we believe that it is no longer good enough just to
open a cafe. We believe that cafe owners must look for ways to differentiate
their cafe from others in order to achieve and maintain a competitive advantage.
We recognize this need for differentiation and strongly believe that combining a
cafe with complete Internet service is a recipe for success. The fact that there
are no cyber-cafes currently established in Newport Beach, California, presents
us with an opportunity to enter into a profitable niche in the cafe market.

Our Services. We will strive to provide our customers with full access to the
Internet. We also anticipate installing popular software on our computers as
well as providing our customers with various services, including:

     o    access to external e-mail accounts;
     o    an option to sign up for a Coffee Exchange e-mail account which will
          be managed by our servers and will be accessible from outside computer
          systems;
     o    access to popular Internet utilities;
     o    access to Netscape or Internet Explorer browser;
     o    access to laser and color printing; and
     o    access to popular software applications like Adobe Photoshop and
          Microsoft Word.

We hope to provide our customers with access to introductory Internet and e-mail
classes. We anticipate that such classes will be held in the afternoon and late
in the evening. By providing these classes, we hope to build a client base
familiar with our services while providing community education to customers that
may not otherwise have access to the Internet. Coupled with high-quality coffee,



                                       2
<PAGE>




specialty drinks, soup and bakery goods, we hope to provide our customers with a
comfortable environment: a home away from home and a place where our customers
can enjoy the benefits of computer access in a comfortable, inviting
environment.

Our Business Strategy. If the popularity of the Internet continues to grow, we
believe that easy and affordable access will become more and more important. We
will seek to provide Orange County, California, and its surrounding communities
with the ability to access the Internet, enjoy a cup of coffee, and share
Internet experiences in a comfortable environment. We believe that people of all
ages and backgrounds will come to enjoy the unique, upscale, educational, and
innovative environment we plan to provide to our customers.

We believe that because of intense competition, cafe owners must constantly look
for ways to differentiate their place of business from others if cafe owners
hope to achieve and maintain a competitive advantage. We realize the need to
differentiate ourselves from existing coffee shops in the Orange County area and
believe that combining a cafe with complete Internet service is the key to
success. We believe that there are currently no cyber-cafes in Orange County,
California; as such, we believe that Orange County, California presents an
exciting business opportunity for our planned Internet cafes.

Our Target Markets and Marketing Strategy. We believe that our primary target
market will consist of individuals and businesses in Orange County, California.
We anticipate that we will market and promote our cafes locally as we will
strive to establish a "community" atmosphere. We anticipate that our marketing
initiatives will include:

     o    utilizing direct response print advertisements placed primarily in
          local print mediums such as magazines and newspapers;
     o    advertising by television on local cable channels, radio, banners,
          affiliated marketing and direct mail in the Orange County, California
          area; and,
     o    word of mouth advertising which we believe will grow as we create
          customer loyalty.

Growth Strategy. We plan to open our initial Internet cafe in the Orange County,
California area. However, our ultimate goal is to expand our efforts in areas
outside Orange County, California. We believe that we will be able to generate
the necessary revenue to expand only if we are able to provide high quality
customer service coupled with high-speed and inexpensive Internet access. We
will promote ourselves as a fun, friendly and comfortable way to enjoy a cup of
coffee while visiting the Internet. We intend to stimulate our growth in the
Orange County community through forming alliances with leading local vendors. We
also hope to establish long-term customers. If we are successful in Orange
County, California, then we will expand into other markets. However, in order to
expand into other markets, we will need to raise additional funds either through
equity financings or loans. There is no guaranty that we will be able to arrange
for such financings or obtain loans with favorable terms. If we are unable to
raise additional funds either through equity financings, loans or revenue
production, we will likely be unable to expand our operations beyond the Orange
County area.

Our Intellectual Property. We do not presently own any patents, trademarks,
licenses, concessions or royalties. Our success may depend in part upon our
ability to preserve our trade secrets, obtain and maintain patent protection for
our technologies, products and processes, and operate without infringing the
proprietary rights of other parties. However, we may rely on certain proprietary
technologies, trade secrets, and know-how that are not patentable. Although we
may take action to protect our unpatented trade secrets and our proprietary
information, in part, by the use of confidentiality agreements with our
employees, consultants and certain of our contractors, we cannot guaranty that:

     o    these agreements will not be breached;
     o    we would have adequate remedies for any breach; or
     o    our proprietary trade secrets and know-how will not otherwise become
          known or be independently developed or discovered by competitors.

We cannot guaranty that our actions will be sufficient to prevent imitation or
duplication of either our products and services by others or prevent others from
claiming violations of their trade secrets and proprietary rights.




                                       3
<PAGE>





We do not own any Internet domain names. Under current domain name registration
practices, no one can obtain a domain name identical to a previously registered
domain name, but someone might obtain a similar name, or the identical name with
a different suffix, such as ".org", or with a country designation. The
regulation of domain names in the United States and in foreign countries is
subject to change, and we could be unable to prevent third parties from
acquiring domain names that infringe or otherwise decrease the value of our
domain names.

Government Regulation. Each food service location we establish will be subject
to licensing and reporting requirements by numerous governmental authorities.
These governmental authorities include federal, state and local health,
environmental, labor relations, sanitation, building, zoning, fire and safety
departments. Difficulties in obtaining or failure to obtain the necessary
licenses or approvals could delay or prevent the development or operation of a
given retail location. Any problems that we may encounter in renewing such
licenses in one jurisdiction, may adversely affect our licensing status on a
federal, state or local level in other relevant jurisdictions.

Additionally, online commerce is new and rapidly changing, and federal and state
regulations relating to the Internet and online commerce are relatively new and
evolving. Due to the increasing popularity of the Internet, it is possible that
laws and regulations may be enacted to address issues such as user privacy,
pricing, content, copyrights, distribution, antitrust matters and the quality of
products and services. The adoption of these laws or regulations could reduce
the rate of growth of the Internet, which could potentially decrease the usage
of the Internet access aspect of our business. In addition, the applicability to
the Internet of existing laws governing issues such as property ownership,
copyrights and other intellectual property issues, libel, obscenity and personal
privacy is uncertain. Most of these laws were adopted prior to the advent of the
Internet and do not contemplate or address the unique issues of the Internet.
New laws applicable to the Internet may impose substantial burdens on companies
conducting online commerce. In addition, the growth and development of online
commerce may prompt calls for more stringent consumer protection laws in the
United States and abroad.

Our Research and Development. We are not currently conducting any research and
development activities and do not anticipate conducting such activities in the
near future.

Employees. As of April 14, 2003, we had two employees. We do not currently
anticipate that we will hire any employees in the next six months, unless we
complete our business development and earn sufficient revenues. From
time-to-time, we anticipate that we will use the services of independent
contractors and consultants to support our business development. We believe our
future success depends in large part upon the continued service of our key
technical and senior management personnel and our ability to attract and retain
highly qualified technical and managerial personnel.

Facilities. Our executive, administrative and operating offices are located at
23 Corporate Plaza, Suite 180, Newport Beach, California 92660.

Item 2.  Description of Property.
---------------------------------

Property held by us. As of the date specified in the following table, we held
the following property:

       ================================== =========================
                   Property                  December 31, 2002
       ---------------------------------- -------------------------
                     Cash                          $9,401
       ================================== =========================

Our facilities. Our executive, administrative and operating offices are located
at 23 Corporate Plaza, Suite 180, Newport Beach, California 92660. Robert
Younker, one of our shareholders, provides our facilities at no charge and Mr.
Younker does not expect to be paid or reimbursed for providing office
facilities. We believe that our current offices are sufficient to meet our
current and future needs.

Item 3.  Legal Proceedings.
---------------------------

There are no legal actions pending against us nor are any legal actions
contemplated by us at this time.




                                       4
<PAGE>




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

Not applicable.

                                     PART II

Item 5.  Market Price for Common Equity and Related Stockholder Matters.
------------------------------------------------------------------------

Reports to Security Holders. We are a reporting company with the Securities and
Exchange Commission, or SEC. The public may read and copy any materials filed
with the SEC at the SEC's Public Reference Room at 450 Fifth Street N.W.,
Washington, D.C. 20549. The public may also obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC. The address of that site is http://www.sec.gov.

We participate in the Pink Sheets, an electronic quotation medium for securities
traded outside the Nasdaq Stock Market and the Over the Counter Bulletin Board,
under the trading symbol CFXG. Shares of our stock have not traded on this
market. This market is extremely limited and the prices quoted are not a
reliable indication of the value of our common stock.

In March 2002, our registration statement on Form SB-2 to register 1,346,000
shares of common stock held by our shareholders was declared effective by the
SEC. The approximate number of holders of record of shares of our common stock
is thirty seven. There are no outstanding options or warrants to purchase, or
securities convertible into, shares of our common stock. There are 67,710 shares
that can be sold pursuant to Rule 144 promulgated pursuant to the Securities Act
of 1933.

There have been no cash dividends declared on our common stock. Dividends are
declared at the sole discretion of our Board of Directors.

Penny Stock Regulation. Shares of our common stock are subject to rules adopted
by the Securities and Exchange Commission that regulate broker-dealer practices
in connection with transactions in "penny stocks". Penny stocks are generally
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in those securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, deliver a standardized risk
disclosure document prepared by the Securities and Exchange Commission, which
contains the following:

     o    a description of the nature and level of risk in the market for penny
          stocks in both public offerings and secondary trading;
     o    a description of the broker's or dealer's duties to the customer and
          of the rights and remedies available to the customer with respect to
          violation to such duties or other requirements of securities' laws;
     o    a brief, clear, narrative description of a dealer market, including
          "bid" and "ask" prices for penny stocks and the significance of the
          spread between the "bid" and "ask" price;
     o    a toll-free telephone number for inquiries on disciplinary actions;
     o    definitions of significant terms in the disclosure document or in the
          conduct of trading in penny stocks; and
     o    such other information and is in such form (including language, type,
          size and format), as the Securities and Exchange Commission shall
          require by rule or regulation.

Prior to effecting any transaction in penny stock, the broker-dealer also must
provide the customer the following:

     o    the bid and offer quotations for the penny stock;
     o    the compensation of the broker-dealer and its salesperson in the
          transaction;
     o    the number of shares to which such bid and ask prices apply, or other
          comparable information relating to the depth and liquidity of the
          market for such stock; and
     o    monthly account statements showing the market value of each penny
          stock held in the customer's account.




                                       5
<PAGE>




In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
Holders of shares of our common stock may have difficulty selling those shares
because our common stock will probably be subject to the penny stock rules.

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

This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "will", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.

The assumptions used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry, and
other circumstances. As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among reasonable alternatives require the exercise of judgment. To the
extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those forward-looking statements. No assurance can be
given that any of the assumptions relating to the forward-looking statements
specified in the following information are accurate, and we assume no obligation
to update any such forward-looking statements.

Critical Accounting Policy and Estimates. Our Management's Discussion and
Analysis of Financial Condition and Results of Operations section discusses our
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, management evaluates
its estimates and judgments, including those related to revenue recognition,
accrued expenses, financing operations, and contingencies and litigation.
Management bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The most significant accounting estimates inherent in
the preparation of our financial statements include estimates as to the
appropriate carrying value of certain assets and liabilities which are not
readily apparent from other sources. These accounting policies are described at
relevant sections in this discussion and analysis and in the notes to them
consolidated financial statements included in our Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2002.

For the year ended  December 31, 2002.
--------------------------------------

Liquidity and Capital Resources. Our total assets were approximately $9,401 as
of December 31, 2002, which consisted entirely of cash.




                                       6
<PAGE>




Our current liabilities were $6,245 as of December 31, 2002, all of which was
represented by accounts payable. We had no other liabilities and no long term
commitments or contingencies as of December 31, 2002.

On March 27, 2003, we entered into an agreement with Laguna Capital Group, LLC,
a California limited liability company, ("Laguna") to provide us with funds
which will assist us in realizing our business objectives. We issued a
convertible debenture to Laguna for $100,000 at 8% annual interest. That amount
can be converted into shares of our common stock at the market price if a market
for our stock develops and if the principal remains unpaid on March 27, 2004,
the maturity date of the convertible debenture.

Results of Operations.

Revenue. We have not yet realized any revenues from our operations. We will not
begin earning revenues until and unless we establish our first Internet cafe. We
are currently looking for a suitable location in Orange County, California.

Operating Expenses. For the year ending December 31, 2002, our total operating
expenses were $25,026, which were represented solely by general and
administrative expenses. Therefore, for the year ending December 31, 2002, we
experienced a net loss of $25,026. This is in comparison to the period from our
inception on March 5, 2001 through December 31, 2001, where our total operating
expenses were $18,518, and our net loss was also $18,518. The increase in our
operating expenses was due to the fact that we experienced a complete fiscal
year as of December 31,2002, whereas for the period ending December 31, 2001, we
had existed only since our inception of March 5, 2001. As of December 31, 2002,
our net losses since inception were $43,544.

Our Plan of Operation for the Next Twelve Months. We have not generated any
revenues from our operations. To effectuate our business plan during the next
twelve months, we must locate a suitable location for our planned Internet cafe,
market our products and services and develop our brand image. We believe that we
will begin to be able to generate revenues by the latter part of the year 2003.
Any revenues we earn will be infused back into the company and used for working
capital. If we are able to earn sufficient revenue, we intend to continue to
develop and expand into other markets.

We are in the process of locating a suitable location for our initial Internet
cafe. We anticipate that we will need to renovate and remodel the location to
suit our needs. Our initial retail location will be designed to provide full
access to e-mail, the Internet, FTP, Usenet and other Internet applications such
as Telnet and Gopher. We intend to install computer terminals. We also plan to
install coffee brewing equipment, including an espresso machine and an automatic
coffee grinder, and other additional related equipment. We will also attempt to
enter into arrangements which will allow us to offer pastries and other related
products. It is likely that we will need to raise additional capital within the
next 6 months to partially finance our initial Internet cafe. However, we do
believe that we have sufficient cash resources to fund most of our initial
development plans. There is no guaranty that we will be able to arrange for
financing. We may raise the necessary funds through equity financings or through
loans from banks or other lending institutions. We may not be able to arrange
for loans on favorable terms. As soon as we are able to secure a location for
our first Internet cafe, we will begin interviewing staff. We anticipate we will
hire a location manager as well as sufficient employees to serve coffee and
service the customers. We also anticipate we will hire an individual to set up
and maintain our planned computer systems. We anticipate that we will use third
parties to complete the development of our initial retail location.

Our plan of operation is materially dependent on our ability to raise additional
working capital. Our operations to date have been focused on developing our
brand name and attempting to establish strategic relationships with providers of
gourmet coffees, teas, pastries and bakery items. We have not yet developed any
strategic relationships with third parties. For the next twelve months, we
anticipate that our day-to-day expenses will be approximately $1,000 per month
until and unless we secure our first location. On March 27, 2003, we entered
into an agreement with Laguna Capital Group, LLC, a California limited liability
company, ("Laguna") to provide us with funds which will assist us in realizing
our business objectives. We issued a convertible debenture to Laguna for
$100,000 at 8% annual interest. That amount can be converted into shares of our
common stock at the market price if a market for our stock develops and if the
principal remains unpaid on March 27, 2004, the maturity date of the convertible
debenture. Additionally, we believe that our expenses will significantly
increase once we begin renovating and developing our first location. We believe
that our expenses will significantly increase once we begin renovating and
developing our first location.

We expect to secure the location of our initial cafe by the end of the fourth
quarter of 2003. We anticipate that we will need to renovate the location to
suit our planned operations. We anticipate that it will take approximately 3
months to complete renovation depending on the condition of the location.
However, it is difficult to predict the exact renovation timetable as the degree
of renovations depends on the condition of the property. As such, we believe
that our first cafe will be operational by the end of the second quarter of 2004
barring any unforeseen difficulties and assuming we can arrange for sufficient
financing. Our forecast for the period within which we will be successful in
establishing our initial cafe location involves risks and uncertainties and
actual results could fail as a result of a number of factors, both foreseen and
unforeseen. In establishing our initial cafe, we expect to incur the following
expenses:




                                       7
<PAGE>




         o Renovation and remodeling including the cost of purchasing and
installing coffee brewing and related equipment--Expenses for renovation and
remodeling will depend primarily on the condition of the location. However, we
anticipate that we will be required to expend approximately $75,000 to renovate
and remodel our initial site, including the purchase and installation of coffee
brewing and related equipment.

         o Cost of computers--At this time, we do not plan to purchase printers,
scanners or related equipment. We initially plan to only offer computer
terminals for Internet access. We anticipate that we will initially purchase 6
computers at a cost of $900 for a total cost of $5,400.

         o Cost of six months working capital--We anticipate that our
approximate working capital for the six months following the establishment of
our first cafe will consist of the following: $30,205 for direct cost of sales,
including purchasing coffee, baked items, email membership and Internet fees;
$42,000 for payroll costs, which includes 6 part time employees and one manager;
and $22,500 for rent on a 1,500 square foot location at $2.50 per square foot.

Item 7.  Financial Statements
-----------------------------

The financial statements required by Item 7 are presented in the following
order:



                                       8
<PAGE>







                            THE COFFEE EXCHANGE, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                              FINANCIAL STATEMENTS

                      YEAR ENDED DECEMBER 31, 2002 AND THE
                     PERIODS FROM MARCH 5, 2001 (INCEPTION)
                          TO DECEMBER 31, 2002 AND 2001








                                       9
<PAGE>




                                    CONTENTS

                                                                         Page
                                                                         ----
Independent Auditors' Report                                               11

Financial Statements:
  Balance Sheets                                                           12
  Statements of Operations                                                 13
  Statement of Stockholders' Equity                                        14
  Statements of Cash Flows                                                 15
  Notes to Financial Statements                                          16-22








                                       10
<PAGE>





                          INDEPENDENT AUDITORS' REPORT


Board of Directors
The Coffee Exchange, Inc.
Newport Beach, California


We have audited the accompanying balance sheets of The Coffee Exchange, Inc. (a
development stage company) as of December 31, 2002 and 2001 and the related
statements of operations, stockholders' equity and cash flows for the year ended
December 31, 2002 and the periods from March 5, 2001 (inception) to December 31,
2002 and 2001. These financials statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Coffee Exchange, Inc. as of
December 31, 2002 and 2001 and the results of its operations and cash flows for
the year ended December 31, 2002 and the periods from March 5, 2001 to December
31, 2002 and 2001 in conformity with accounting principles generally accepted in
the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
accompanying financial statements, the Company has no established source of
revenue, which raises substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are discussed in Note 2.
These financial statements do not include any adjustments that might result from
the outcome of this uncertainty.





CERTIFIED PUBLIC ACCOUNTANTS

Santa Monica, California
April 10, 2003



                                       11
<PAGE>





                             THE COFFEE EXCHANGE, INC.
                           (A DEVELOPMENT STAGE COMPANY)

                                   BALANCE SHEETS



                                       ASSETS
<TABLE>
<CAPTION>
<S>                                                                           <C>                 <C>
                                                                         December 31,         December 31,
                                                                             2002                 2001
                                                                      ------------------  -------------------
Current assets -
    cash and cash equivalents                                         $           9,401   $           36,050
                                                                      ==================  ===================


                        LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities -
    accounts payable and accrued expenses                             $           6,245   $            7,868
                                                                      ------------------  -------------------

Stockholders' equity:
    Preferred stock, $0.001 par value, 5,000,000 shares authorized,
       no shares issued or outstanding, respectively                                  -                    -
    Common stock, $0.001 par value, 50,000,000 shares authorized,
       6,671,000 issued and outstanding                                           6,671                6,671
    Additional paid-in capital                                                   40,029               40,029
    Deficit accumulated during development stage                                (43,544)             (18,518)
                                                                      ------------------  -------------------

          Total stockholders' equity                                              3,156               28,182
                                                                      ------------------  -------------------

                                                                      $           9,401   $           36,050
                                                                      ==================  ===================
</TABLE>






The accompanying notes are an integtral part of these financial statements.

                                       12
<PAGE>


                            THE COFFEE EXCHANGE, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
<S>                                                 <C>                          <C>                        <C>
                                                                              For the                     For the
                                                                            period from                 period from
                                                  For the                  March 5, 2001               March 5, 2001
                                                 year ended               (inception) to              (inception) to
                                             December 31, 2002           December 31, 2001           December 31, 2002
                                         --------------------------  --------------------------  --------------------------

Net revenue                              $                       -   $                       -   $                       -

Cost of revenue                                                  -                           -                           -
                                         --------------------------  --------------------------  --------------------------

Gross Profit                                                     -                           -                           -

General and administrative expenses                         25,026                      18,518                      43,544
                                         --------------------------  --------------------------  --------------------------

Loss from operations before provision
     for income taxes                                      (25,026)                    (18,518)                    (43,544)

Provision for income taxes                                       -                           -                           -
                                         --------------------------  --------------------------  --------------------------

Net loss                                 $                 (25,026)  $                 (18,518)  $                 (43,544)
                                         ==========================  ==========================  ==========================

Net loss per share, basic and diluted    $                   (0.00)  $                   (0.00)
                                         ==========================  ==========================

Weighted average number of shares                        6,671,000                   5,339,040
                                         ==========================  ==========================
     outstanding, basic and diluted
</TABLE>



  The accompanying notes are an integtral part of these financial statements.

                                       13
<PAGE>




                            THE COFFEE EXCHANGE, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                        STATEMENT OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
<S>                                               <C>             <C>              <C>              <C>                 <C>
                                                                                                  Deficit
                                                      Common stock              Additional      accumulated             Total
                                           --------------------------------      paid-in           during           stockholders'
                                                Shares           Amount          capital       development stage       equity
                                           ---------------  ---------------   ---------------  ------------------  ---------------

Balance at March 5, 2001, (inception)                    -   $            -  $              -  $                -  $             -

Issuance of Founders Shares for services
  in  March, 2001 at $.001 per share             2,325,000            2,325                                                  2,325

Issuance of stock for services from a
  director in May 2001 at $.001 per share        3,325,000            3,325                                                  3,325

Issuance of stock for cash at $0.05 per
  share during June through December 2001,
  net of costs                                   1,021,000            1,021            40,029                               41,050

Net loss for the period from inception on
  March 5, 2001 to December 31, 2001                                                                      (18,518)         (18,518)
                                           ---------------  ---------------   ---------------  ------------------  ---------------

Balance at December 31, 2001                     6,671,000            6,671            40,029             (18,518)          28,182

Net loss for the year ended December 31,
  2002                                                   -                -                 -             (25,026)         (25,026)
                                           ---------------  ---------------   ---------------  ------------------  ---------------

Balance at December 31, 2002                     6,671,000  $         6,671   $        40,029  $         (43,544)  $         3,156
                                           ===============  ===============   ===============  ==================  ===============
</TABLE>




The accompanying notes are an integtral part of these financial statements

                                       14
<PAGE>



                    THE COFFEE EXCHANGE, INC.
                  (A DEVELOPMENT STAGE COMPANY)

                    STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
<S>                                                            <C>                     <C>                     <C>
                                                                                     For the                 For the
                                                                                   period from             period from
                                                             For the              March 5, 2001           March 5, 2001
                                                            year ended           (inception) to          (inception) to
                                                        December 31, 2002       December 31, 2001       December 31, 2002
                                                       ---------------------  ---------------------   ---------------------

Cash flows used for operating activities:
    Net loss                                           $            (25,026)  $            (18,518)   $            (43,544)
                                                       ---------------------  ---------------------   ---------------------

    Adjustments to reconcile net loss to net cash
      used for operating activities:
         issuance of common stock in exchange
            for services                                                  -                  5,650                   5,650

    Changes in assets and liabilities -
      Increase (decrease) in liabilities -
         accounts payable                                            (1,623)                 7,868                   6,245
                                                       ---------------------  ---------------------   ---------------------

            Total adjustments                                        (1,623)                13,518                  11,895
                                                       ---------------------  ---------------------   ---------------------

             Net cash used for operating activities                 (26,649)                (5,000)                (31,649)
                                                       ---------------------  ---------------------   ---------------------

Cash flows provided by financing activities -
    Net proceeds from issuance of common stock                            -                 41,050                  41,050
    Proceeds from note payable, stockholder                               -                 10,000                  10,000
    Payment of note payable, stockholder                                  -                (10,000)                (10,000)
                                                       ---------------------  ---------------------   ---------------------

             Net cash provided by operating activities                    -                 41,050                  41,050
                                                       ---------------------  ---------------------   ---------------------

Net increase (decrease) in cash and
    cash equivalents                                                (26,649)                36,050                   9,401
Cash and cash equivalents, beginning of period                       36,050                      -                       -
                                                       ---------------------  ---------------------   ---------------------

Cash and cash equivalents, end of period               $              9,401   $             36,050    $              9,401
                                                       =====================  =====================   =====================
</TABLE>
Supplemental disclosure of cash flow information -
    no amounts were paid for taxes or interest

Supplemental disclosure of non-cash financing activities  -
    In March 2001, the Company issued 2,325,000 shares of common stock with a
    fair market value of $2,325 for services.

    In May 2001, the Company issued 3,325,000 shares of common stock with a
    fair market value of $3,325 for services.



                                       15
<PAGE>



                            THE COFFEE EXCHANGE, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS

                      YEAR ENDED DECEMBER 31, 2002 AND THE
                     PERIODS FROM MARCH 5, 2001 (INCEPTION)
                          TO DECEMBER 31, 2002 AND 2001
13




(1)      Organization and Description of Business:

                  The Coffee Exchange, Inc. (the "Company") was incorporated
                  under the laws of Delaware on March 5, 2001. The Company
                  intends to develop Internet cafes in Orange County, California
                  that will feature Internet and electronic mail access along
                  with coffee, pastries and related items.


(2)      Summary of Significant Accounting Policies:

         Basis of Presentation:

                  The accompanying financial statements have been prepared
                  assuming that the Company will continue as a going concern. As
                  shown in the accompanying financial statements, the Company
                  has incurred net losses from operations, and has no
                  established source of revenue, which raises substantial doubt
                  about the Company's ability to continue as a going concern.
                  Accordingly, the Company is dependent upon management and/or
                  significant shareholders to provide sufficient working capital
                  to preserve the integrity of the corporate entity at this
                  time. It is the intent of management and significant
                  shareholders to provide to provide sufficient working capital
                  necessary to support and preserve the Company as a going
                  concern.

                  The financial statements do not include any adjustments
                  relating to the recoverability and classification of recorded
                  asset amounts and classifications of liabilities that might be
                  necessary should the Company be unable to continue its
                  existence.

         Development Stage Enterprise:

                  The Company is a development stage enterprise as defined by
                  the Financial Accounting Standards Board's ("FASB") Statement
                  of Financial Accounting Standards (SFAS) No. 7, "Accounting
                  and Reporting by Development Stage Enterprises." The Company
                  is devoting substantially all of its present efforts to
                  developing Internet cafes. All losses accumulated since
                  inception have been considered as part of the Company's
                  development stage activities.

         Use of Estimates:

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





                                       16
<PAGE>



                            THE COFFEE EXCHANGE, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                      YEAR ENDED DECEMBER 31, 2002 AND THE
                     PERIODS FROM MARCH 5, 2001 (INCEPTION)
                          TO DECEMBER 31, 2002 AND 2001



(2)      Summary of Significant Accounting Policies, Continued:

         Fair Value:

                  The estimated fair values of cash and cash equivalents and
                  accounts payable and accrued expenses, none of which are held
                  for trading purposes, approximate their carrying value because
                  of the short term nature of these instruments.

         Cash and Cash Equivalents:

                  For purposes of the statement of cash flows, cash equivalents
                  include all highly liquid debt instruments with original
                  maturities of three months or less which are not securing any
                  corporate obligations.

         Comprehensive Loss:

                  SFAS No. 130, "Reporting Comprehensive Income," establishes
                  standards for the reporting and display of comprehensive loss
                  and its components in the financial statements. As of December
                  31, 2002 and for the period from March 5, 2001 (inception) to
                  December 31, 2002, the Company has no items that represent
                  other comprehensive loss and, therefore, has not included a
                  Statement of Comprehensive Loss in the financial statements.

         Income Taxes:

                  In accordance with SFAS No. 109, "Accounting for Income
                  Taxes," income taxes are accounted for under the asset and
                  liability method. Deferred tax assets and liabilities are
                  recognized for the future tax consequences attributable to
                  differences between the financial statement carrying amounts
                  of existing assets and liabilities and their respective tax
                  bases and operating loss and tax credit carryforwards.
                  Deferred tax assets and liabilities are measured using enacted
                  tax rates expected to apply to taxable income in the years in
                  which those temporary differences are expected to be recovered
                  or settled. The effect on deferred tax assets and liabilities
                  of a change in tax rates is recognized in income in the period
                  that includes the enactment date.

                  The net deferred tax asset arising from cumulative net
                  operating losses of $43,544 has been offset by a valuation
                  allowance, as in the opinion of management, the realization of
                  this asset cannot be reasonably assured.





                                       17
<PAGE>



                            THE COFFEE EXCHANGE, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                      YEAR ENDED DECEMBER 31, 2002 AND THE
                     PERIODS FROM MARCH 5, 2001 (INCEPTION)
                          TO DECEMBER 31, 2002 AND 2001



(2)      Summary of Significant Accounting Policies, Continued:

         Basic and Diluted Loss Per Share:

                  In accordance with SFAS No. 128, "Earnings Per Share," the
                  basic loss per common share is computed by dividing net loss
                  available to common stockholders less preferred dividends by
                  the weighted average number of common shares outstanding.
                  Diluted loss per common share is computed similar to basic
                  loss per common share except that the denominator is increased
                  to include the number of additional common shares that would
                  have been outstanding if the potential common shares had been
                  issued and if the additional common shares were dilutive. As
                  of December 31, 2002, the Company has no dilutive common stock
                  equivalents such as stock options and warrants.

         Segment Reporting:

                  Based on the Company's integration and management strategies,
                  the Company operated in a single business segment. For the
                  period from March 5, 2001 (inception) to December 31, 2002,
                  all revenues have been derived from domestic operations.

         New Accounting Pronouncements:

                  In July 2001, the FASB issued SFAS No. 141 "Business
                  Combinations." FAS No. 141 supersedes Accounting Principles
                  Board ("APB") No. 16 and requires that any business
                  combinations initiated after June 30, 2001 be accounted for as
                  a purchase; therefore, eliminating the pooling-of-interest
                  method defined in APB 16. The statement is effective for any
                  business combination initiated after June 30, 2001 and shall
                  apply to all business combinations accounted for by the
                  purchase method for which the date of acquisition is July 1,
                  2001 or later. The Company has implemented this pronouncement
                  and has concluded that the adoption has no material impact to
                  the financial statements.

                  In July 2001, the FASB issued SFAS No. 142, "Goodwill and
                  Other Intangible Assets." SFAS No. 142 addresses the initial
                  recognition; measurement and amortization of intangible assets
                  acquired individually or with a group of other assets (but not
                  those acquired in a business combination) and addresses the
                  amortization provisions for excess cost over fair value of net
                  assets acquired or intangibles acquired in a business
                  combination. The statement is effective for fiscal years
                  beginning after December 15, 2001, and is effective July 1,
                  2001 for any intangibles acquired in a business combination
                  initiated after June 30, 2001. The Company has implemented
                  this pronouncement and has concluded that the adoption has no
                  material impact to the financial statements.





                                       18
<PAGE>


                            THE COFFEE EXCHANGE, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                      YEAR ENDED DECEMBER 31, 2002 AND THE
                     PERIODS FROM MARCH 5, 2001 (INCEPTION)
                          TO DECEMBER 31, 2002 AND 2001



(2)      Summary of Significant Accounting Policies, Continued:

         New Accounting Pronouncements, Continued:

                  In October 2001, the FASB recently issued SFAS No. 143,
                  "Accounting for Asset Retirement Obligations," which requires
                  companies to record the fair value of a liability for asset
                  retirement obligations in the period in which they are
                  incurred. The statement applies to a company's legal
                  obligations associated with the retirement of a tangible
                  long-lived asset that results from the acquisition,
                  construction, and development or through the normal operation
                  of a long-lived asset. When a liability is initially recorded,
                  the company would capitalize the cost, thereby increasing the
                  carrying amount of the related asset. The capitalized asset
                  retirement cost is depreciated over the life of the respective
                  asset while the liability is accreted to its present value.
                  Upon settlement of the liability, the obligation is settled at
                  its recorded amount or the company incurs a gain or loss. The
                  statement is effective for fiscal years beginning after June
                  30, 2002. The Company does not expect the adoption to have a
                  material impact to the Company's financial position or results
                  of operations.

                  In October 2001, the FASB issued SFAS No. 144, "Accounting for
                  the Impairment or Disposal of Long-Lived Assets". SFAS No. 144
                  addresses the accounting and reporting for the impairment or
                  disposal of long-lived assets. The statement provides a single
                  accounting model for long-lived assets to be disposed of. New
                  criteria must be met to classify the asset as an asset
                  held-for-sale. This statement also focuses on reporting the
                  effects of a disposal of a segment of a business. This
                  statement is effective for fiscal years beginning after
                  December 15, 2001. The Company has implemented this
                  pronouncement and has concluded that the adoption has no
                  material impact to the financial statements.

                  In April 2002, the FASB issued SFAS No. 145, "Rescission of
                  FASB Statements No. 4, 44, and 64, Amendment of FASB
                  Statement No. 13, and Technical Corrections." SFAS No.145
                  rescinds SFAS No. 4, "Reporting Gains and Losses from
                  Extinguishment of Debt", and an amendment of that Statement,
                  SFAS No. 64, "Extinguishments of Debt Made to Satisfy
                  Sinking-Fund Requirements," and SFAS No. 44, "Accounting for
                  Intangible Assets of Motor Carriers". This Statement amends
                  SFAS No. 13, "Accounting for Leases," to eliminate an
                  inconsistency between the required accounting for
                  sale-leaseback transactions and the required accounting for
                  certain lease modifications that have economic effects that
                  are similar to sale-leaseback transactions. The Company does
                  not expect the adoption to have a material impact to the
                  Company's financial position or results of operations.





                                       19
<PAGE>



                            THE COFFEE EXCHANGE, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                      YEAR ENDED DECEMBER 31, 2002 AND THE
                     PERIODS FROM MARCH 5, 2001 (INCEPTION)
                          TO DECEMBER 31, 2002 AND 2001



(2)      Summary of Significant Accounting Policies, Continued:

         New Accounting Pronouncements, Continued:

                  In June 2002, the FASB issued SFAS No. 146, "Accounting for
                  Costs Associated with Exit or Disposal Activities". SFAS No.
                  146 requires companies to recognize costs associated with exit
                  or disposal activities when they are incurred rather than at
                  the date of a commitment to an exit or disposal plan, as
                  previously required under Emerging Issues Task Force ("EITF")
                  Issue 94-3. A fundamental conclusion reached by the FASB in
                  this statement is that an entity's commitment to a plan, by
                  itself, does not create a present obligation to others that
                  meets the definition of a liability. SFAS No. 146 also
                  establishes that fair value is the objective for initial
                  measurement of the liability. The provisions of this statement
                  are effective for exit or disposal activities that are
                  initiated after December 31, 2002. The Company does not expect
                  the adoption to have a material impact to the Company's
                  financial position or results of operations.

                  In October 2002, the FASB issued SFAS No. 147, "Acquisitions
                  of Certain Financial Institutions--an amendment of FASB
                  Statements No. 72 and 144 and FASB Interpretation No. 9",
                  which removes acquisitions of financial institutions from the
                  scope of both SFAS No. 72 and Interpretation 9 and requires
                  that those transactions be accounted for in accordance with
                  SFAS No. 141, "Business Combinations", and SFAS No. 142,
                  "Goodwill and Other Intangible Assets". In addition, this
                  Statement amends SFAS No. 144, "Accounting for the Impairment
                  or Disposal of Long-Lived Assets", to include in its scope
                  long-term customer-relationship intangible assets of financial
                  institutions such as depositor- and borrower-relationship
                  intangible assets and credit cardholder intangible assets. The
                  requirements relating to acquisitions of financial
                  institutions is effective for acquisitions for which the date
                  of acquisition is on or after October 1, 2002. The provisions
                  related to accounting for the impairment or disposal of
                  certain long-term customer-relationship intangible assets are
                  effective on October 1, 2002. The adoption of this Statement
                  did not have a material impact to the Company's financial
                  position or results of operations as the Company has not
                  engaged in either of these activities.






                                       20
<PAGE>




                            THE COFFEE EXCHANGE, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                      YEAR ENDED DECEMBER 31, 2002 AND THE
                     PERIODS FROM MARCH 5, 2001 (INCEPTION)
                          TO DECEMBER 31, 2002 AND 2001




(2)      Summary of Significant Accounting Policies, Continued:

         New Accounting Pronouncements, Continued:

                  In December 2002, the FASB issued SFAS No. 148, "Accounting
                  for Stock-Based Compensation--Transition and Disclosure",
                  which amends SFAS No. 123, "Accounting for Stock-Based
                  Compensation", to provide alternative methods of transition
                  for a voluntary change to the fair value based method of
                  accounting for stock-based employee compensation. In addition,
                  this Statement amends the disclosure requirements of SFAS No.
                  123 to require prominent disclosures in both annual and
                  interim financial statements about the method of accounting
                  for stock-based employee compensation and the effect of the
                  method used on reported results. The transition guidance and
                  annual disclosure provisions of SFAS No. 148 are effective for
                  fiscal years ending after December 15, 2002, with earlier
                  application permitted in certain circumstances. The interim
                  disclosure provisions are effective for financial reports
                  containing financial statements for interim periods beginning
                  after December 15, 2002. The adoption of this statement did
                  not have a material impact on the Company's financial position
                  or results of operations as the Company has not elected to
                  change to the fair value based method of accounting for
                  stock-based employee compensation.

                  In January 2003, the FASB issued Interpretation No. 46,
                  "Consolidation of Variable Interest Entities." Interpretation
                  No. 46 changes the criteria by which one company includes
                  another entity in its consolidated financial statements.
                  Previously, the criteria were based on control through voting
                  interest. Interpretation No. 46 requires a variable interest
                  entity to be consolidated by a company if that company is
                  subject to a majority of the risk of loss from the variable
                  interest entity's activities or entitled to receive a majority
                  of the entity's residual returns or both. A company that
                  consolidates a variable interest entity is called the primary
                  beneficiary of that entity. The consolidation requirements of
                  Interpretation No. 46 apply immediately to variable interest
                  entities created after January 31, 2003. The consolidation
                  requirements apply to older entities in the first fiscal year
                  or interim period beginning after June 15, 2003. Certain of
                  the disclosure requirements apply in all financial statements
                  issued after January 31, 2003, regardless of when the variable
                  interest entity was established. The Company does not expect
                  the adoption to have a material impact to the Company's
                  financial position or results of operations.









                                       21
<PAGE>



                            THE COFFEE EXCHANGE, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                      YEAR ENDED DECEMBER 31, 2002 AND THE
                     PERIODS FROM MARCH 5, 2001 (INCEPTION)
                          TO DECEMBER 31, 2002 AND 2001



(3)      Related Party Transactions:

         The Company neither owns nor leases any real or personal property. The
         officers/directors of the Company provide office space and other
         services without charge. Such costs are immaterial to the financial
         statements and, accordingly, have not been reflected therein. These
         individuals are involved in other business activities and may, in the
         future, become involved in other business opportunities.

         The Company was obligated to a stockholder pursuant to a note, dated
         June 4, 2001, in the amount of $10,000. These funds were used to pay
         the costs of the sale of common stock described in Note 4. The note did
         not bear interest and was repaid in full on December 3, 2001.


(4)      Stockholders' Equity:

         Preferred Stock
         ---------------

         The Company has not issued any of its authorized shares of preferred
         stock.

         Common Stock
         ------------

         In March 2001, the Company issued 5,650,000 shares of its $.001 par
         value common stock in exchange for services to incorporate the Company.
         The services were valued at $5,650, which was deemed to be the fair
         value at inception. In May 2001, the Board of Directors declared that
         the Company had not received consideration for the issuance of
         3,325,000 shares of the previously issued shares and canceled those
         shares, leaving 2,325,000 shares totaling $2,325. The Company has not
         recognized the issuance of the cancelled shares in the financial
         statements.

         In May 2001, the Company issued 3,325,000 shares of its $.001 par value
         common stock in exchange for services valued at $3,325. These shares
         were issued to a Director and Secretary of the Company and were valued
         using consideration received, which was deemed to be the fair value.

         In June 2001, the Company commenced a private placement of its common
         stock. From June to December 2001, the Company issued 1,021,000 shares
         of its $.001 par value common stock for $51,050 in cash, which was
         deemed to be the fair value. Costs related to the private placement
         amounted to $10,000, which were netted against the proceeds from the
         private placement, resulting in net proceeds of $41,050.


(4)      Subsequent Event:

         In March 2003, the Company issued a $100,000, 8% convertible debenture
         that is due March 27, 2004. All or any portion of the convertible
         debenture can be converted at any time into fully paid and
         nonassessable shares of the Company's $.001 par value common stock. The
         conversion or purchase price of the common stock indebtedness shall be
         the market price of the Company's common stock at the time of
         conversion. The Company is obligated to adjust the conversion price and
         number of shares to be issued under the convertible debenture (i) if
         the Company consolidates with, merges into or sells substantially all
         of its assets to another company, (ii) if the Company changes, by
         subdivision, combination or reclassification of securities, any of the
         securities purchasable under this convertible debenture, or (iii) if
         the Company issues additional shares of its common stock, otherwise
         than as provided in (ii), at a price per share that is less than the
         conversion price in effect at the time of such issuance. Cash proceeds
         from the convertible debenture amounted to $100,000.







                                       22
<PAGE>





Item 8.  Changes in and Disagreements with Accountants.
--------------------------------------------------------

On March 27, 2003, our Board of Directors, voted to replace our independent
accountant, Merdinger, Fruchter, Rosen & Company, P.C., ("MFRC"). Effective as
of March 27, 2003, our new independent accountant is Stonefield Josephson, Inc.,
certified public accountants ("Stonefield Josephson"). We retained the
accounting firm of Stonefield Josephson, Inc. on March 27, 2003, to make an
examination of our financial statements for the 2002 fiscal year. We authorized
MFRC to respond fully to any inquiries from Stonefield Josephson and to make its
work papers available to Stonefield Josephson.

The reports of MFRC from March 5, 2001, the date of our inception, through March
27, 2003, did not contain any adverse opinion, disclaimer of opinion, or
qualification or modification as to the certainty, audit scope or accounting
principles. During March 5, 2001 through March 27, 2003, there were no
disagreements between us and MFRC on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
During our two most recent fiscal years or any subsequent interim period prior
to engaging Stonefield Josephson, we did not consult with Stonefield Josephson
regarding any accounting or auditing concerns stated in Item 304(a)(2) of
Regulation S-B. In addition, during March 5, 2001 through March 27, 2003, there
were no "reportable events" within the meaning of Item 304 of the Securities and
Exchange Commission's Regulation S-K.

The letter from MFRC, certified public accountants, to the Securities and
Exchange Commission is attached as Exhibit 16.1 to our report on Form 8-K filed
on April 3, 2003.

                                    PART III

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

Executive Officers and Directors. We are dependent on the efforts and abilities
of certain of our senior management. The interruption of the services of key
management could disrupt our operations, reduce profits and hinder future
development, if suitable replacements are not promptly obtained. We anticipate
that we will enter into employment agreements with each of our key executives.
We cannot guaranty that each executive will remain with us during or after the
term of his or her employment agreement. In addition, our success depends, in
part, upon our ability to attract and retain other talented personnel. Although
we believe that our relations with our personnel are good and that we will
continue to be successful in attracting and retaining qualified personnel, we
cannot guaranty that we will be able to continue to do so. Our officers and
directors will hold office until their resignations or removal.

Our directors and principal executive officers are as specified on the following
table:



                                       23
<PAGE>




================== ============== ==============================================
Name                    Age       Position
------------------ -------------- ----------------------------------------------
George Sines            45        president, treasurer and a director
------------------ -------------- ----------------------------------------------
Scott Yancey            32        secretary and a director
================== ============== ==============================================

George Sines. Mr. Sines has been our President, Treasurer and one of our
directors since our inception. From 1991 to the present, Mr. Sines has been
working in the real estate title insurance business in public relations for
First American Title insurance. While working for First American Title
Insurance, he has created a network of professional contacts across the country.
Mr. Sines also has experience with construction firms and has rehabilitated run
down apartment complexes while speculating with new home construction. Mr. Sines
received a Bachelors of Science degree in business at the University of
California at Los Angeles. Mr. Sines is not an officer or director of any
reporting company.

Scott Yancey. Mr. Yancey has been our Secretary and one of our directors since
May 2001. From 1993 to the present, Mr. Yancey has been the owner and operator
of Town & Country Real Estate & Development, a real estate brokerage firm in
Utah. Mr. Yancey possesses a real estate broker's license for the state of Utah.
Mr. Yancey is not an officer or director of any reporting company.

There is no family relationship between any of our officers or directors. There
are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining any of our officers or directors from engaging in or continuing any
conduct, practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor involving a
security, or any aspect of the securities business or of theft or of any felony,
nor are any of the officers or directors of any corporation or entity affiliated
with us so enjoined.

Our directors will serve until the next annual meeting of stockholders. Our
executive officers are appointed by our Board of Directors and serve at the
discretion of the Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance. We believe that our
officers, directors, and principal shareholders have not filed all necessary
reports required to be filed on, respectively, a Form 3 (Initial Statement of
Beneficial Ownership of Securities), a Form 4 (Statement of Changes of
Beneficial Ownership of Securities), or a Form 5 (Annual Statement of Beneficial
Ownership of Securities).

Item 10.  Executive Compensation
--------------------------------

Any compensation received by our officers, directors, and management personnel
will be determined from time to time by our Board of Directors. Our officers,
directors, and management personnel will be reimbursed for any out-of-pocket
expenses incurred on our behalf.

Summary Compensation Table. The table set forth below summarizes the annual and
long-term compensation for services in all capacities to us payable to our chief
executive officer and our other executive officers during the periods ending
December 31, 2001 and 2002. Our Board of Directors may adopt an incentive stock
option plan for our executive officers which would result in additional
compensation.
<TABLE>
<CAPTION>
<S>                                            <C>        <C>          <C>                <C>                     <C>
============================================ ======= ============= ============= ===================== =========================
Name and Principal Position                   Year      Annual      Bonus ($)        Other Annual       All Other Compensation
                                                      Salary ($)                   Compensation ($)
-------------------------------------------- ------- ------------- ------------- --------------------- -------------------------
George Sines - president, treasurer          2001        None          None              None                    None
-------------------------------------------- ------- ------------- ------------- --------------------- -------------------------
                                             2002        None          None              None                    None
-------------------------------------------- ------- ------------- ------------- --------------------- -------------------------
Scott Yancey - secretary                     2001        None          None              None                    None
-------------------------------------------- ------- ------------- ------------- --------------------- -------------------------
                                             2002        None          None              None                    None
============================================ ======= ============= ============= ===================== =========================
</TABLE>
Compensation of Directors. Our directors who are also our employees receive no
extra compensation for their service on our Board of Directors.




                                       24
<PAGE>




Compensation of Officers. As of April 14, 2003, our officers have received no
compensation for their services provided to us.

Employment Contracts. We anticipate that we will enter into an employment
agreement with George Sines, although the exact nature and terms of the
agreement have not been conclusively negotiated.

Any compensation received by our officers, directors, and management personnel
will be determined from time to time by our board of directors. Our officers,
directors, and management personnel will be reimbursed for any out-of-pocket
expenses incurred on our behalf.

Item 11. Security Ownership of Certain Beneficial Owners and Management.
------------------------------------------------------------------------

The following table sets forth certain information regarding the beneficial
ownership of our common stock as of April 14, 2003 by each person or entity
known by us to be the beneficial owner of more than 5% of the outstanding shares
of common stock, each of our directors and named executive officers, and all of
our directors and executive officers as a group.
<TABLE>
<CAPTION>
<S>                        <C>                             <C>                                    <C>
                        Name and Address of        Amount and Nature of
Title of Class          Beneficial  Owner          Beneficial Owner                      Percent of Class
---------------------   -------------------------  ------------------------------------  ---------------------
                        George Sines                        2,000,000 shares                      29.98%
Common Stock            1 Flaxwood                   President, Treasurer, Director
                        Irvine, CA
                        Scott Yancey                        3,325,000 shares                      49.84%
Common Stock            1680 East Downington               Secretary, Director
                        Ave.
                        Salt Lake City, Utah
                                                            5,325,000 shares                      79.82%
Common Stock                                        All directors and named executive
                                                           officers as a group
</TABLE>

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. In accordance with Securities and Exchange
Commission rules, shares of our common stock which may be acquired upon exercise
of stock options or warrants which are currently exercisable or which become
exercisable within 60 days of the date of the table are deemed beneficially
owned by the optionees. Subject to community property laws, where applicable,
the persons or entities named in the table above have sole voting and investment
power with respect to all shares of our common stock indicated as beneficially
owned by them.

Changes in Control. Our management is not aware of any arrangements which may
result in "changes in control" as that term is defined by the provisions of Item
403(c) of Regulation S-B.

Item 12.  Certain Relationships and Related Transactions.
---------------------------------------------------------

Related Party Transactions. There have been no related party transactions,
except for the following:

Robert Younker, one of our shareholders, currently provides office space to us
at no charge. We do not believe that Mr. Younker expects to be paid or
reimbursed for providing office facilities.

In March 2001, George Sines was issued 2,000,000 shares of our common stock in
exchange for his services as one of our promoters. Specifically, Mr. Sines
assisted us in formulating our business plan and arranging for our
incorporation. The value of the services performed by Mr. Sines was
approximately $2,000. In March 2001, Robert Younker was issued 325,000 shares of
our common stock in exchange for his services as one of our promoters. Mr.
Younker also assisted us in developing our business plan. The value of the
services performed by Mr. Younker was $325. In May 2001, Scott Yancey was issued
3,325,000 shares of our common stock in exchange for services valued at $3,325.
Specifically, Mr. Yancey provided business consulting services to us as well as
advice regarding real estate matters.

On March 27, 2003, we entered into an agreement with Laguna Capital Group, LLC,
a California limited liability company, ("Laguna") to provide us with funds
which will assist us in realizing our business objectives. The managing member
of Laguna is Robert Younker, one of our shareholders. We issued a convertible
debenture to Laguna for $100,000 at 8% annual interest. That amount can be
converted into shares of our common stock at the market price if a market for
our stock develops and if the principal remains unpaid on March 27, 2004, the
maturity date of the convertible debenture.



                                       25
<PAGE>




With regard to any future related party transaction, we plan to fully disclose
any and all related party transactions, including, but not limited to, the
following:

     o    disclosing such transactions in prospectuses where required;
     o    disclosing in any and all filings with the Securities and Exchange
          Commission, where required;
     o    obtaining disinterested directors consent; and
     o    obtaining shareholder consent where required.

Item 13.  Exhibits and Reports on Form 8-K
------------------------------------------

(a) Exhibit No.
---------------

3.1                        Certificate of Incorporation*

3.2                        Bylaws*

* Included in the registration statement on Form SB-2 filed on December 7, 2001.

(b) Reports on Form 8-K
-----------------------

No reports on Form 8-K were filed during the last quarter of the period covered
by this annual report on Form 10-KSB.

Item 14. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures. We maintain controls and
procedures designed to ensure that information required to be disclosed in the
reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission. Based upon
their evaluation of those controls and procedures performed within 90 days of
the filing date of this report, our chief executive officer and the principal
financial officer concluded that our disclosure controls and procedures were
adequate.

(b) Changes in internal controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by the chief
executive officer and principal financial officer.


                                       26
<PAGE>



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned in the City of Newport Beach, California, on April 14, 2003.

                           The Coffee Exchange, Inc.
                           a Delaware corporation


                           By:      /s/  George Sines
                                    ------------------------------------------
                                    George Sines
                           Its:     principal executive and accounting officer
                                    president, treasurer, and a director


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.



By:      /s/  George Sines                                    April 14, 2003
         --------------------------------------------
         George Sines
Its:     principal executive and accounting officer
         president, treasurer and a director


By:      /s/ Scott Yancey                                     April 14, 2003
         --------------------------------------------
         Scott Yancey
Its:     secretary and a director



                                       27
<PAGE>




CERTIFICATIONS
--------------

I, George Sines, certify that:

1. I have reviewed this annual report on Form 10-KSB of The Coffee Exchange,
Inc.;

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

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

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

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

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

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

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

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

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

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

Date: April 14, 2003

/s/ George Sines
-----------------------
George Sines, Chief Executive Officer and
Chief Financial Officer



                                       28
<PAGE>





                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of The Coffee Exchange, Inc. a Delaware
corporation (the "Company") on Form 10-KSB for the year ending December 31,
2002, as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), George Sines, Chief Executive Officer and Chief Financial
Officer of the Company, certifies to the best of his knowledge, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:

         (1)      The Report fully complies with the requirements of Section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

         (2)      The information contained in the Report fairly presents, in
                  all material respects, the financial condition and result of
                  operations of the Company.


/s/ George Sines
--------------------------
George Sines
Chief Executive Officer and
Chief Financial Officer
April 14, 2003





                                       29
<PAGE>