<PAGE>

                       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

                         COMMISSION FILE NUMBER 0-49647

                             GRAPHCO HOLDINGS CORP.
                            F/K/A RCM INTERESTS, INC.
                ------------------------------------------------
             (Exact name of registrant as specified in its charter)

         DELAWARE                                               75-2926438
---------------------------------                       -----------------------
(State or Other Jurisdiction                            (I.R.S.Employer or
Incorporation of Organization)                            Identification No.)

                               41 UNIVERSITY DRIVE
                           NEWTON, PENNSYLVANIA, 18940
                                 (215) 497-9170
             ------------------------------------------------------
                  (Address and telephone number, including area
                code, of registrant's principal executive office)

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

Securities  registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.001
PAR VALUE

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                YES [ ] NO [X]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not 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.
                                 YES [ ] NO [X]

         State issuer's revenues for its most recent fiscal year: $ 413,667


<PAGE>

         The aggregate market value of stock held by non-affiliates as of May
19, 2003 was approximately $ 21,116,113.20(based upon the closing sales price of
those shares reported on the National Association of Securities Dealers Bulletin
Board for that day).



      ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS

         Indicate by check mark whether the Issuer has filed documents and
reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a court.

                                YES [ ] NO [ X ]


         As of December 31, 2002, there were 18,511,793 shares of the Issuer's
common stock, par value $0.001, issued and outstanding of which 17,351,553
shares are in the name of our operating subsidiary, Graphco Technologies, Inc.
and are intended to be distributed pro rata to the former shareholders of
Graphco Technologies, Inc.






                                       3
<PAGE>




                                   FORM 10-KSB
                             GRAPHCO HOLDINGS CORP.
                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                    PAGE
PART I

<S>                                                                                  <C>
Item 1.   Description of Business....................................................4


Item 2.   Description of Properties..................................................7

Item 3.   Legal Proceedings..........................................................7

Item 4.   Submission of Matters to a Vote of Security Holders........................8

PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters......8

Item 6.   Management's Discussion and Analysis or Plan of Operations.................9

Item 7.   Financial Statements.......................................................13


Item 8.   Changes in and Disagreements With Accountants on
         Accounting and Financial Disclosure.........................................14


PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act....................................15


Item 10.   Executive Compensation....................................................18


Item 11.   Security Ownership of Certain Beneficial Owners and Management............18

Item 12.   Certain Relationships and Related Transactions............................20

Item 13.  Exhibits and Reports on Form 8-K...........................................21

Item 14. Controls and Procedures  . . . . . . . . . . . . . . . . . . . . . .  .. . .21

Signatures

* Page F-1 follows the signature page.

</TABLE>

                                       3
<PAGE>



                                     PART I

         All statements contained herein that are not historical facts,
including, but not limited to, statements regarding anticipated growth in
revenue, gross margins and earnings, statements with respect to our current
business strategy, our projected sources and uses of cash, and our expectations,
are forward-looking statements in nature and involve a number of risks and
uncertainties. Actual results may differ materially. Among the factors that
could cause results to differ materially are the following:

         o        the  unavailability  of  sufficient  capital  to  finance  our
                  business  plans  on  terms  satisfactory  to  our  competitive
                  factors;
         o        competitive factors;
         o        changes in labor,  equipment  and  capital  costs;  changes in
                  regulations affecting our business;
         o        general business and economic conditions;  and o other factors
                  described  from  time to time in our  reports  filed  with the
                  Securities and Exchange Commission.


            We wish to caution readers not to place undue reliance on any
forward-looking statements. These statements are made pursuant to the Private
Litigation Reform Act of 1995 and, as such, speak only as of the date made.



ITEM 1.  DESCRIPTION OF BUSINESS



OVERVIEW

         Our business is to produce state-of-the-art biometric security
solutions for government, industry and home automation along with advanced
information exchange and data management systems for government, law enforcement
and corporate security. We have developed biometric software products for secure
access, surveillance, and authentication, and an information exchange and data
management software application, MODS, (Multi Organization Data Sharing)
specifically designed for the law enforcement community and the corporate
security industry.

         Biometrics, one of the most advanced tools available to security
professionals, measures unique physical characteristics of individuals for
authentication purposes. We believe that speaker recognition and facial
recognition, our current offerings, are the most user friendly, cost effective
and widely accepted biometrics available today. Our two biometric software
products are VOICEPASS(R), speaker recognition, and FRA(TM), Facial Recognition

                                       4
<PAGE>

Application. We believe biometric software applications represent the new and
next generation security products.

         Founded in September 1995, Graphco Technologies, Inc.("Graphco"), the
predecessor of our operating subsidiary, initially provided engineering and
consulting services to the semiconductor industry. Graphco developed an expert
system, a knowledge management and training system, specifically for the
semiconductor industry. In 1996, Graphco began development of speaker
recognition biometric for secure access. In January 1998, Graphco focused on
becoming a technology company continuing to develop its existing knowledge
management system and voice biometric technology.

         During 1999 and 2000, our operating subsidiary Graphco continued
technology and product development, and established product branding and markets
for our technologies. Beginning in 2000, Graphco focused solely on developing
and marketing biometric software products as well as law enforcement and
corporate security data management software applications. During this period
Graphco suspended development of our expert system technology.

         In 1999, Graphco licensed its expert system to OneCare, Inc., a
software company that produces product support applications for manufacturing,
in exchange for a 37 % equity interest. A partial list of OneCare's customers
for its online SmartManuals(TM) is Electric Mobility, Corbin Motors,
Caterpillar(R), Zapp World, Toro and Braun Lift.

         In 2000, Graphco acquired a 40% equity interest in Advanced Logic
Systems, Inc., (advancedlogicsys.com), an Internet technology developer
presently providing services to companies such as; Easter Seals NY, Sprint,
Freddy Mac. In 2001, Advanced Logic Systems was part of a joint venture with
Verizon and Lucent Technologies, among others, which was awarded a $1.4 Billion
GSA contract for the implementation of a complex business exchange in Washington
DC.

         In 2000, Graphco acquired our first facial biometric technology and
first law enforcement data management software application from GTE. In
addition, Graphco acquired from NASA's Jet Propulsion Laboratory and California
Institute of Technology a unique technology called DIGITAL PERSONNEL a
technology for synthesizing realistic video sequences of a person speaking,
which makes it possible to create photo-realistic animated humans for e-commerce
and e-support applications, and other applications. In 2002 Graphco licensed the
technology to NGM Tec, Inc. (ngmtec.com), for $2,000,000 plus 3% royalty and
$250,000 to complete development with JPL. Although, NGM Tec, Inc. paid $350,000
to us in 2002, it has failed to make all its payments and is in default of its
obligations pursuant to such Agreement.


MERGER


                                       5
<PAGE>

         On November 21, 2002, we entered into a Merger Agreement with Graphco
Technologies, Inc. and our wholly owned subsidiary RCM Interests, Inc.
Acquisition Corp. The Merger Agreement can be accessed at www.sec.gov. as an
attachment to our December 11, 2002 8-K filing.

         Upon the closing of the Merger on December 13, 2002, Graphco
Technologies, Inc. merged with and into RCM Interests, Inc. Acquisition Corp.,
pursuant to the terms of the Merger Agreement. On January 15, 2003, RCM
Interest, Inc. Acquisition Corp. filed an Amendment to its Certificate of
Incorporation changing its name to Graphco Technologies, Inc. Upon the
closing, all of the outstanding shares of Common Stock of Graphco issued and
outstanding on the closing date, by virtue of the Merger and without any action
on the part of the holders thereof, were automatically converted into 17,351,553
shares of our Common Stock of the which were issued to Graphco, which intends to
distribute said shares to its Stockholders.

         In connection with the Merger Transaction, Graphco entered into a
redemption transaction with Ronald C. Morgan, wherein Ronald C. Morgan
cancelled, at the Closing, 9,562,269 shares of the RCMN's common stock which he
owned. In consideration for his cancellation of these shares Graphco, agreed to
pay to Ronald C. Morgan the sum of $150,000 of which $75,000 was paid at the
closing and an additional $75,000 will be paid pursuant to a promissory note.

         On May 15, 2003, RCM Interest, Inc. changed its name to Graphco
Holdings Corp.

         Ronald C. Morgan, our sole officer and director prior to the closing,
resigned and was replaced by the officers and directors of Graphco.


INTELLECTUAL PROPERTY

         G-TEC(R)is our registered trademark.

         We are pursuing patent registration for VOICEPASS(R). We have two
software copyrights in relation to EXPERTNET(TM) and one software copyright on
VOICEPASS(R) . In addition, EXPERTNET(TM) and VOICEPASS(R) are registered
trademarks owned by us.

         We hold a license to one pending patent on THE BASTILLE(R) security
model from Verizon Corporation (successor to GTE Corp.). In addition, The
BASTILLE(R), INTRAPOL(TM) and FACETRAC(TM) are registered trademarks owned by
our company.

         We retain from NGM-Tec a limited license on two patents on the DIGITAL
PERSONNEL algorithm.


                                       6
<PAGE>

         We also have technologies and know-how that are protected as trade
secrets, rather than as patents or copyrights. These technologies are utilized
in connection with FRA(TM) and MODS.


EMPLOYEES

         As of the date of this Report, we employed a total of six employees.
Five of our employees work at our Newton, PA office and one employee works from
his home office.

         As of the date of this Report, we have only partially paid certain of
our employees, since September 1, 2001. We do not maintain "key man" insurance
on the life of any of our employees.



PUBLIC INFORMATION

         We electronically file with the Securities and Exchange Commission (the
"SEC") all of our reports, including, but not limited to, our annual and
quarterly reports. The SEC maintains an Internet site which contains all such
reports and other information with respect to us on it's web site,
http://www.sec.gov. Additional information on us may be obtained by contacting
us at our executive offices.



ITEM 2. PROPERTIES

         Our principal office is located at 41 University Drive, Suite 205,
Newtown, Pennsylvania 18940 where we lease approximately 6,800 sq. ft. Our lease
expires in July 2004. We believe our current space is adequate for the
foreseeable future. The Newtown office consists of development, operating,
marketing and administration staff. We currently sublet approximately 935 sq. ft
of our office space to NGM Tec, Inc.



ITEM 3. LEGAL PROCEEDINGS

      Set forth below is a description of material pending litigation to which
we are a party:

         Angela Chen Sabella, one of our stockholders, has obtained a judgment
against Graphco Technologies, Inc. in the Supreme Court of the State of New
York, County of New York in the sum of $1,376,434.33, plus any applicable
interest since the date of the Judgment. Ms. Sabella has not taken any recent
actions to enforce this Judgment. We are currently negotiating an agreement with
Ms. Sabella to forebear from levying upon our assets.


                                       7
<PAGE>

         There are several other lawsuits against us that may have a material
impact on our consolidated results of operations or financial condition.



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


         Certain of our stockholders owning more than fifty percent (50%) of our
total voting shares, have given their written consent to amend the Certificate
of Incorporation to change the name our from RCM Interests, Inc. to Graphco
Holdings Corp. or a similar name approved by the Board of Directors. The
Amendment to our Certificate of Incorporation, changing our name to Graphco
Holdings Corp., was filed with the Department of State of Delaware and became
effective on May 15, 2003.

         No other matters were submitted to a vote of our stockholders as of the
date hereof.




                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         (a) Market Information

         Our common stock, par value $.001 per share (the "Common Stock"), is
traded in the over-the-counter market. The Common Stock is available for
quotation on the NASD Over the Counter Bulletin Board. Our Common Stock
commenced quotation on the NASD Over the Counter Bulletin Board in the fourth
quarter of the fiscal year ended December 31, 2002. Our trading symbol is
GHCPE.OB. The following table sets forth the high and low bid quotation (as
reported by the OTC Bulletin Board) for the Common Stock for the fourth quarter
of the fiscal year ended December 31, 2002:

                                                     High      Low
         Fiscal Year Ended December 31, 2002

                  Fourth Quarter                     $3.15     $.05


                                       8
<PAGE>


         (b) Holders

         As of May 19, 2003 there were approximately 700 holders of record of
our common stock. The number of holders does not include stockholders who are
holding our Common Stock through nominees or in street name.


          (c) Dividends

         We have not paid any cash dividends on our Common Stock. We presently
intend to retain future earnings, if any, to finance future investments and do
not anticipate that any cash dividends will be paid in the foreseeable future.
Future dividend policy will depend on our earnings, capital requirements,
investment plans, financial condition and other relevant factors.


         (d) Recent Sales of Unregistered Securities

         In 2002, we commenced an offering of up to 5,000,000 shares of Series B
Convertible Preferred Stock of Graphco Technologies, Inc. at a price of $2.00
per Share. On January 1, 2003, the price per share was reduced to $1.00. The
investors in the offering shall have the right to convert their shares at a rate
of one (1) share of common stock for every Share of Series B Convertible
Preferred Stock converted. As of the date hereof we have sold an aggregate of
$534,500.



ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS OVERVIEW

         The following discussion and analysis should be read in conjunction
with our financial statements and the notes related thereto. The discussion of
results, causes and trends should not be construed to infer conclusions that
such results, causes or trends necessarily will continue in the future.


         Overview



SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Use of Estimates:
       The preparation of the consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from
those estimates.



Years ended December 31, 2002 as compared to December 31, 2001 and from the
period January 1, 1998 ( date of inception) to December 31, 2002.

The Company generated revenues of approximately $414,000, $746,000 and
$1,532,000 for the years ended December 31, 2002, 2001 and from the period
January 1, 1998 ( date of inception to December 31, 2002, respectively.

Selling general and administrative expenses for the years ended December 31,
2002, 2001  and the period from January 1, 1998  ( date of inception) to
December 31, 2002   were approximately $4,116,000 $4,085,000 and $13,504,000
respectively. Selling general and administrative expenses consists of the
following; (i) salaries, (ii) professional fees, (iii) depreciation and
amortization of property and equipment and (iv) rent expense.

Research and development expenses for the years ended December 31, 2002, 2001
and the period from January 1, 1998 ( date of inception)  to December 31, 2002
were approximately $394,000, $841,000 and $4,735,000, respectively.  Research
and development expenses primarily consists of payroll.

Net loss from operations for  the years ended December 31, 2002, 2001 and the
period from January 1, 1998 ( date of inception)  to December 31, 2002 were
approximately $4,106,000, $4,707,000 and $17,419,000, respectively


Interest expense  for the years ended December 31, 2002 and 2001 and from the
period from January 1, 1998 ( date of inception) to December 31, 2002,  was
approximately $1,888,000, $1,603,000 and $3,491,000, respectively. Interest
expense primarily consists of amortization relating to debt, which is a non-cash
charge.





Net loss for the years ended December 31, 2002 and 2001 and the period from
January 1, 1998 ( date of inception) to December 31, 2002, was approximately
$5,972,000, $6,293,000 and $21,653,000, respectively. The reason for the net
losses is explained above.

Liquidity and Capital Resources:

Graphco Holdings Corp. consolidated financial statements have been prepared
assuming that the Company will continue  as a going concern. The Company has not
generated any revenue from its products and is in its development stage. As
shown in the consolidated financial statements the Company has incurred a
cumulative loss of approximately $22,522,000 through December 31, 2002 and had
a working capital deficiency of approximately $6,175,000 and a stockholders
deficiency of $6,003,000. It also had convertible notes payable with principal
balances of approximately $2,574,000 that were in default. These matters raise
substantial doubt about the Company's ability to continue as a going concern.

Management  believes that the Company will continue to incur net losses and
negative cash flows from operating activities through at least the year ending
December 31, 2003. In the absence of operating profits and cash flows,
management believes the Company will need to limit its expenditures , obtain
additional debt or equity financing, obtain agreements with creditors and note
holders for the conversion of outstanding obligations into preferred or common
stock and/or obtain agreements with creditors for the forbearance with respect
to past due obligations. Management plans to continue to negotiate the extension
of the due dates for or the conversion of the Company's obligations and seek
additional debt or equity financing through private placements or by other
means. It will also continue to seek strategic partners for the Company  that
can provide it with working capital.  However, management cannot assure that the
Company will be able to obtain the additional capital resources that will enable
the Company to sustain its operations and planned development activities through
at lease December 31, 2003. If the Company cannot generate sufficient revenues
and/or obtain sufficient additional financing, if necessary, by that date, the
Company may be forced thereafter to restructure its operations merge or sell,
file for reorganization or entirely cease its operations.

During 2001, the Company sold 120,000 shares of common stock through a private
placement and received proceeds of $300,000.

During 2001, the Company sold convertible notes and warrants to purchase 939,166
shares of common stock through a private placement and received gross proceeds
of $2,620,000.  The Company recorded discounts for the fair value of the
warrants and beneficial conversions rights issued with these notes totaling
approximately $2,338,000 of which approximately $611,000 and $725,000 were
amortized to interest expense in 2002 and 2001, respectively.  The notes bear
interest at annual rates ranging from 8% to 12%. At December 31, 2002, the
principal balance and the interest on the notes had been scheduled to be paid,
based on the original provisions in the related loan agreements at various dates
through September 30, 2002.

During 2002, the Company sold 469,000 shares of  Series B preferred stock
through a private placement and received net proceeds of $382,760.
..

FOR  THE YEARS ENDED DECEMBER 31, 2002 AND 2001:

Year ended December 31, 2002

For the year ended December 31, 2002, we utilized cash from operations of
approximately $634,000. This was attributable to the following; (1) a net loss
of approximately $5,972,000, which was offset by, (2) depreciation and
amortization expense of approximately $546,000,(3) write-off of impaired
property and equipment of approximately $151,000, (4) note payable issued for
services $129,000, (5) common stock issued for services of approximately
$250,000, (6) charges relating to options and warrants issued to employees and
directors totaling $886,000, (7) amortization of unearned compensation totaling
$465,000, (8) amortization of deferred loan costs and debt discount totaling
$1,369,000 and (9) increase in accounts payable and accrued expenses totaling
$1,472,000.

We generated cash from investing activities of approximately $223,000. This was
attributable to the  repayments of advances from stockholders.

We generated cash from financing activities of approximately $335,000. This was
attributable to the following; (1) net proceeds received from the sale of Series
B preferred stock totaling $383,000, (2) exercise of warrants for $28,000 and
(3) a $75,000 payment to a former stockholder relating to the reverse
acquisition.


YEAR ENDED DECEMBER 31, 2001

For the year ended December 31, 2001, we utilized cash from operations of
approximately $2,911,000. This was attributable to the following; (1) a net loss
of approximately $6,293,000, which was offset by, (2) depreciation and
amortization expense of approximately $565,000,(3) write-off of impaired
property and equipment of approximately $64,000, (4) charges relating to options
and warrants issued to employees and directors totaling $171,000, (5)
amortization of unearned compensation totaling $183,000, (6) amortization of
deferred loan costs totaling $1,198,000 and (7) increase in accounts payable and
accrued expenses totaling $914,000.

We generated cash from investing activities of approximately $34,000. This was
attributable to the following; (1) proceeds from maturities of marketable
securities of $55,000 and (2) payments for purchases of property and equipment
of $21,000.

We generated cash from financing activities of approximately $2,567,000. This
was attributable to the following; (1) net proceeds received from the sale of
common stock totaling $300,000, (2) proceeds from the sales of convertible notes
and warrants totaling $2,620,000, (3) repayment of convertible notes payable
totaling $120,000 and (4) payments for  and warrants issued  relating to the
issuance of the convertible notes totaling $212,000.



                                       9
<PAGE>


DESCRIPTION OF BUSINESS

         We were incorporated under the laws of Delaware in October 2000. The
following discussion and disclosure represents our intended business plan and
our intent with respect to the future operations of our business.


PROPOSED BUSINESS

         In order to be a leader in biometric authentication, access control,
surveillance, and secure information management technologies and solutions, we
are committed to deploying human and capital resources to research and
development.

         We intend to continue to maintain a robust and focused research and
development pipeline capable of generating products and technologies that
enhance our product portfolio. In addition, to satisfy short-term or non-core
development needs as they arise, we maintain a network of capable outsourcing
providers.

         We intend to enhance our core technologies and revenue through an
aggressive acquisitions program which will allow Graphco to increase market
position, minimize the need for licensing of various tools, provide customer
support through already establish channels and become a self sustaining turn key
solution provider. We plan to continue to maintain relationships with leading
academic research centers or national laboratories for technology licensing and

                                       10
<PAGE>

research outsourcing, as well as with technology transfer companies. U-TEK, for
example, was the technology transfer intermediary for the DIGITAL PERSONNEL
acquisition. We are limited by available funds and may not be able to raise
enough capital to fund our operations.

         We will continue to foster relationships with companies possessing
complementary technologies and competencies, such as Raytheon for IT development
and deployment, Level (3) Communications for high-speed communications, Aether
Systems and Packet Video for mobile (wireless) application integration. We
intend to continue to maintain strategic partnerships with core facial
recognition engine developers such as Visionics, Viisage, and AcSys Biometrics.

         We are developing, or outsourcing to our strategic partners the
development of post-sale support tools such as user documentation, training
packages for end-users and channel partners, installation manuals and
maintenance tools.

         It is our intention to provide technology and software applications to
our customers rather than act as integrator or a manufacturer of security
devices. We intend to generate revenue though software licenses (presently on an
average of $106,000 per month from existing contracts) and royalties, and
realize recurring revenue through annual licensing, software support and
maintenance agreements.

         We intend to continue to launch our products to their targeted markets.
We focused VOICEPASS(R) and FRA(TM) introduction to the industrial security,
government and luxury real estate markets, and have begun to build a backlog of
orders. In the year 2001 and 2002 we received revenues from our VOICEPASS(R) and
FRA(TM) product liNES installed at West Valley Utah Police Dept, Penn's Grant,
Level (3), Federated Stores, ADT, TEVA, PF Labs, Dominion Power and Italian DoD.

         We plan to begin deploying our MODS product to customers in the third
quarter of 2003. We intend to be the first to market a product like MODS, a full
featured, secured, collaborative case management system for local, state,
national, and international law enforcement agencies.

         Our plan is to utilize strategic partners to distribute, install and
provide life cycle support for our products. We believe that an aggressive
strategy to grow our revenue is to augment growth with strategic partners to
distribute our technology and software applications to end-users. Strategic
partners are OEM's, integrators, distributors, value added re-sellers (VARS),
and security product manufacturers.

         We intend to expand our strategic partnerships in order to provide
distribution in existing and new markets. Our current strategic partners include
ADT, Raytheon Corporation, Level (3) Communications Inc., Informix Software Ltd.
(IBM-UK), EDS Ltd. (UK), Phambili LLC(South Africa), Chun Shin Electronics,
Inc., NGM Tec, Inc., Advanced Technology Corporation (ATC), Advanced
Communication Technologies (ACT) and PSComm. We have and will continue to

                                       11
<PAGE>

establish relationships with government agencies, corporate leaders and law
enforcement.



PROPOSED TARGETED CUSTOMER BASE


         Our product can be applied in various customer markets for two primary
applications: controlled access and surveillance. We have chosen to concentrate
our controlled access product development and marketing in two major markets:
real estate (both commercial and consumer) and corporate security, and for
surveillance three major markets: real estate, retail and commercial/public
large venue. Both the surveillance and controlled access applications are
pertinent to an entirely new venue, airports.

         In the wake of the devastating terrorist attacks in New York City and
Washington, D.C. on September 11, 2001, we believe that the demand for biometric
identification and surveillance products from law enforcement agencies
throughout the United States will significantly increase. This increased
potential demand is enhanced due to the spread and increased risks of terrorism,
organized crime, drug trafficking, traditional crime as well as white-collar and
"net-based" crime such as e-commerce fraud.

         The Tampa Police Department, FBI and other various governmental
agencies deployed our facial recognition technology at the 2001 National
Football League Championship football game held at Raymond James Stadium in
Tampa, Fl. In 2002, the West Valley, UT police department deployed our facial
recognition technology at the West Valley E-Center, the site of the Olympic ice
hockey games. These high, visibility pilot projects have generated significant
interest from managers of large venue complexes across the country and have
offered us a means of rapidly expanding our market penetration.




SALES AND MARKETING STRATEGY

         We currently sell directly to end-users. In order to grow revenue more
aggressively, our emphasis will be on selling directly to OEMs, system
integrators and companies with whom we have a strategic business relationship.
Additionally, we intend to develop relationships with strategic partners who can
provide access to customers in specific market segments.


                                       12
<PAGE>

Direct Sales

         Our direct sales person is responsible for developing business
opportunities in particular markets, which have substantial and immediate uses
for our solutions and is responsible for new business development, account
retention and growth, and developing and managing relations with strategic
partners and companies.

Indirect Sales

         We plan to rely upon channel partners to reach a greater number of
potential customers than utilizing a direct sales and marketing approach. We
plan to strengthen our market reach with a solid commitment to these
relationships and with investment in the appropriate in-house channel and
alliance management personnel. Central to our sales strategy is leveraging and
expanding our relationships with companies, which provide us with indirect sales
opportunities. Currently, our channel partners include Chun Shin (Korea),
Informix/IBM (UK, EU, ME, and South Africa), Veltek International, EDS, and
NGM-TEC, Inc.

Marketing

         Our marketing strategy emphasizes focus. As a small company addressing
large segments and customers, we must focus on specific products for specific
market segments. More specifically, we must identify and partner with companies
who have established credibility in our target segments and who can integrate
and deliver "whole products" or solutions to the end user.

         We focus on the kind of product quality that produces superior
reference accounts that can generate additional sales. We must always have a
relatively heavy support component to our market segments because these
referrals and "word-of-mouth" testimonials are critical to our continued
success.

         We have deployed our products to high profile venues, including the
2001 National Football League championship game at Raymond James Stadium in
Tampa, FL and the E-center in Salt Lake City, Utah, the hockey arena for the
Olympic Games,





ITEM 7.  FINANCIAL STATEMENTS AND INDEX TO FINANCIAL DATA


                                       13
<PAGE>

         Set forth is a list of our consolidated financial statements being
furnished in this Annual Report on Form 10-KSB pursuant to the instructions to
Item 7. The financial statements as of and for the periods ending December 31,
2002 and 2001 are included following the signature pages of this report.




                          INDEX TO FINANCIAL STATEMENTS

Financial Statement                                          Location*

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)




                                    I N D E X

<TABLE>
<CAPTION>

                                                                                          PAGE

ITEM 7.  FINANCIAL STATEMENTS:

<S>                                                                                         <C>
               REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                    F-2

               CONSOLIDATED BALANCE SHEETS
                    DECEMBER 31, 2002 AND 2001                                             F-3

               CONSOLIDATED STATEMENTS OF OPERATIONS
                    YEARS ENDED DECEMBER 31, 2002 AND 2001 AND
                    PERIOD FROM JANUARY 1, 1998 (DATE OF INCEPTION)
                    TO DECEMBER 31, 2002                                                   F-4

               CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
               DEFICIENCY
                    YEARS ENDED DECEMBER 31, 2002 AND 2001 AND
                    PERIOD FROM JANUARY 1, 1998 (DATE OF INCEPTION)
                    TO DECEMBER 31, 2002                                                F-5 - F-7

               CONSOLIDATED STATEMENTS OF CASH FLOWS
                    YEARS ENDED DECEMBER 31, 2002 AND 2001 AND
                    PERIOD FROM JANUARY 1, 1998 (DATE OF INCEPTION)
                    TO DECEMBER 31, 2002                                                F-8 - F-9

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                              F-10 - F-24

</TABLE>
                                      * * *


* Page F-1 follows the signature page to this Annual Report on Form 10-K.


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

         On March 10, 2003, we engaged J.H. Cohn, LLP ("J.H. Cohn") as our new
independent accountants replacing our former principal accountants, S.W.
Hatfield, CPA, ("S. W. Hatfield").

          S. W. Hatfield's report on the Registrant's financial statements for
the past two years contained no adverse opinion or disclaimer of opinion, and
was not qualified or modified as to uncertainty, audit scope or accounting
principles except that S. W. Hatfield's Independent Auditor's Report dated
February 6, 2002, concluded that substantial doubts were raised about the
Registrant's ability to continue as a going concern as a result of certain
conditions with respect to the Registrant's having no viable operations or
significant assets and that it may become dependent upon significant
stockholders to provide sufficient working capital to maintain the integrity of
the corporate entity.

         During our two most recent fiscal years (ended December 31, 2001 and
2000) and from December 31, 2001 to the date of this Report, we had no
disagreement with S. W. Hatfield on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.


                                       14
<PAGE>

         There were no reportable events, as described in Item 304(a)(1)(v) of
Regulation S-K, during our two most recent fiscal years (ended December 31, 2001
and 2000) and from December 31, 2001 to the date of this Report.

         During the Registrant's two most recent fiscal years and the interim
period prior to its agreement to engage J.H. Cohn as the Registrant's principal
accountants, neither the Registrant nor anyone on its behalf has consulted with
J.H. Cohn on either (i) the application of accounting principles to any
transaction (completed or proposed) or (ii) the type of audit report that might
be rendered on the Registrant's financial statements or (iii) any matter that
was either the subject of a disagreement, as such term is defined in Item
304(a)(1)(iv) of Regulation S-K, or a reportable event as such term is defined
in Item 304(a)(1)(v)of Regulation S-K.




                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE WITH
         SECTION 16(A) OF THE EXCHANGE ACT


         The following table and biographical outline sets forth our directors
and executive officers and a brief account of the business experience of such
director/executive officer for the past five years.

Name                               Age             Position

Cristian Ivanescu                   48             President, CEO, Chairman &
                                                   Director

Edward Kramer                       52             Secretary & Director

Ronald Stone                        67             Director

Ross Glatzer                        56             Director

Ulf Lindgren                        48             Director

Rodger Wichterman                   62             Chief Financial Officer


                                       15
<PAGE>

CRISTIAN IVANESCU, age 48, serves as our Chairman, President, CEO and a
Director. Mr. Ivanescu is the Founder of the predecessor of our operating
subsidiary, and has served as its Chairman and Director since inception. Mr.
Ivanescu has over 16 years of hands-on professional and managerial experience in
the semiconductor industry and international trade with companies such as
Thermco Systems, Inc. and Silicon Systems, Inc. Mr. Ivanescu holds a BSEE Degree
in High Frequency Design and a BSME Degree from the UCMMB and Polytechnic
Institute of Bucharest. He has earned credits in International Law and Trade
Legislation as well as numerous software and technical certifications. Mr.
Ivanescu has earned Intel's Best Ten Vendors award, the President's Award at
Silicon Systems (6 patents within 6 months), and the Best Customer Support Award
at Thermco. He holds a number of technical patents.

EDWARD C. KRAMER, age 52, serves as Secretary and Director commencing in and has
been a Director since December 2002. Mr. Kramer previously served in the same
capacities to Grapcho Technologies, our operating subsidiary. Mr. Kramer
practices law in New York City. He received his law degree from the Columbia
University School of Law (J.D. 1976), and his undergraduate degree from the
University of Pennsylvania, earning an Honors Major in Russian History (B.A. cum
laude, 1973). Mr. Kramer began his legal career as an associate of the firm of
Werner, Kennedy & French and its successor, Cabell, Kennedy & French. Mr. Kramer
is admitted to the following Bars: New York State, United States District Court
for the Eastern District of New York, United States District Court for the
Southern District of New York, United States Court of Appeals - Second Circuit
and the United States Supreme Court. He has served as a Member of the Panel of
Commercial Arbitrators of the American Arbitration Association, and has
represented public corporations, multi-nationals, and private enterprises, with
emphasis in the electronics, communications and technical fields.

RONALD STONE, age 67, serves as a Director commencing in December 2002. Until
September 2002, Mr. Stone served as the President and Chief Operating Officer of
our operating subsidiary, Graphco Technologies, Inc. at which time he retired.
Mr. Stone's renders consulting services OneCare, Inc. Mr. Stone is the President
of Ronald Stone & Associates; President of Data Equipment and Systems Division
Corporation, a subsidiary of ITT Corporation (wire and wireless communications);
President and Chief Executive Officer of Ring Group, Scanvest-Ring, Norway; and
President, and Chief Executive Officer of Executone Canada. Mr. Stone served on
the Board of Directors of ITT SRT (Sweden), ITT-DESD (US), Scanvest Ring
(Norway) and Daterace (US).

ROSS GLATZER, age 56, serves as a Director commencing in December 2002. Mr.
Glatzer has served as a Director of our operating subsidiary, Graphco
Technologies, Inc. since May 1998. Mr. Glatzer was President and CEO of Prodigy
Services Company the industry's first web browser and led Prodigy to
profitability. Following his successful tenure at Prodigy, Mr. Glatzer was named
President and Chief Executive Officer of International Commerce Exchange Systems
("ICES"), a start-up venture in technology-based, business-to-business, and
electronic commerce services. Mr. Glatzer helped establish ICES as a global
competitor in the field of electronic commerce. Mr. Glatzer is Chairman, CEO,
and co-founder of OneCare, Inc., a software and services web-based

                                       16
<PAGE>

product-support company. Mr. Glatzer has also served on the Board of Directors
of Prodigy, ICES and NetLive.

ULF LINDGREN, age 48, serves as a Director commencing in December 2002. Mr.
Lindgren served as a Director of our operating subsidiary, Graphco Technologies,
Inc. since March 1999. Mr. Lindgren founded the consulting firm Nordic
Management; established and managed the Bain & Company, International, Inc.
("Bain") Scandinavian operations as Director; and is currently a strategic
advisor to multinational companies concerning cross-boarder mergers and
acquisitions transactions, growth strategies, and company/industry
restructuring. Involved in the launching of a number of venture capital and new
industrial business initiatives, Mr. Lindgren is co-founder and serves as
Chairman and Chief Executive Officer of Net Insight AB, a networking equipment
group; ReachIn Technologies, a multi-sensory interactive software provider; and
other companies that focus on advertising and imaging technology. Mr. Lindgren
has been a visiting lecturer at INSEAD, the Centre des Etudes Industrielles
(CEI) in Switzerland, and IFL in Scandinavia/Belgium. Mr. Lindgren received his
Ph.D. in International Management from the Stockholm School of Economics and a
Masters of Law from the University of Stockholm.

RODGER C. WICHTERMAN, age 62, serves as our Chief Financial Officer commencing
in December 2002. Mr. Wichterman served in the same capacity to our operating
subsidiary, Graphco Technologies, Inc. since September 2002. Mr. Wichterman is a
graduate of Lehigh University with a BS degree in Accounting, began his career
with Price Waterhouse (now PricewaterhouseCoopers) as a CPA with eight years on
the audit staff. He then joined a one of his PW clients, a high-tech, venture
capital funded electronics company as Controller. In the 1970s and `80s he
worked at IU International, a multi-billion dollar NYSE conglomerate. Initially,
Rodger was on the IU Corporate staff in a variety of financial positions, and
later, for 12 years, served as CFO and Treasurer of two of their technology
start-up ventures. While at IU and the operating companies, Rodger was deeply
involved in all phases of corporate development, acquisitions, contract
negotiations, SEC reporting and treasury functions, in addition to operational
and strategic planning. Twice while CFO attempts were made to spin-off the
subsidiaries and take them public, including complete SEC Registrations,
however, market conditions prevented these from being completed. Rodger has also
been the CFO of a venture funded truck rental and leasing company and, most
recently, has run his own corporate consulting business.


INVOLVEMENT IN LEGAL PROCEEDINGS

         We are not aware that any of our officers and directors were or have
been involved in any legal proceedings.

                                       17

<PAGE>

COMPLIANCE WITH 16(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934

         To our knowledge, based solely on a review of such materials as are
available from the SEC, no officer, director, or beneficial holder of more than
ten (10%) percent of our issued and outstanding shares of common stock failed to
timely file with the SEC any form or report required to be so filed pursuant to
Section 16(a) of the Securities Exchange Act of 1934 during the fiscal year
ended September 30, 2001.


ITEM 10.  EXECUTIVE COMPENSATION

         The following table sets forth the compensation of the named executive
officers for each of the registrant's last three fiscal years:

<TABLE>
<CAPTION>

                  Annual Compensation                                        Long Term Compensation

Name and Principal                                          Other annual      Securities            All other
Position                      Year        Salary   Bonus    compensation      Underlying options
Compensation


<S>                        <C>              <C>     <C>         <C>                <C>                 <C>
Cristian Ivanescu          2001-2003         --     ---         ---               ----                ----
Chairman, President,
Chief Executive Officer

</TABLE>



         The annual compensation of our Chairman, President and Chief Executive
Officer, Cristian Ivanescu for the year 2003 is $183,600. However, to date Mr.
Ivanescu has not received any of the foregoing compensation.







ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information known to us as of
the date of this Statement, with respect to beneficial ownership of: (i) each
person who is known by us to be the beneficial owner of more than five (5%)
percent of our outstanding Common Stock; (ii) each of our directors and
executive officers; and (iii) all officers and directors as a group. Except as
otherwise indicated, we believe that the beneficial owners of the Common Stock
listed below, based on information furnished by such owners, have sole

                                       18
<PAGE>

investment and voting power with respect to such shares, subject to community
property laws, where applicable.


<TABLE>
<CAPTION>
--------------------------------------- -------------------------------------------- ------------------------------


                                                         Amount of                               Percentage
                                                        Beneficial                              of Beneficial
               Name(1) Ownership Ownership (2)
--------------------------------------- -------------------------------------------- ------------------------------
<S>                                                    <C>                                      <C>
Cristian Ivanescu                                      4,715,977(3)                             21.464%
--------------------------------------- -------------------------------------------- ------------------------------
Ruth Ivanescu (4)                                        1,500,000                              6.827%
--------------------------------------- -------------------------------------------- ------------------------------
The Chloe Ivanescu Trust                                 1,416,573                              6.447%
--------------------------------------- -------------------------------------------- ------------------------------
CRCI Solebury LP(5)                                      1,000,000                              4.551%
--------------------------------------- -------------------------------------------- ------------------------------
Edward Kramer                                           743,114(6)                              3.382%
--------------------------------------- -------------------------------------------- ------------------------------
Ross Glatzer                                            370,000(7)                              1.684%
--------------------------------------- -------------------------------------------- ------------------------------
Ronald Stone                                          1,625,000(8)                              7.396%
--------------------------------------- -------------------------------------------- ------------------------------
Ulf Lindgren                                            938,737(9)                              4.272%
--------------------------------------- -------------------------------------------- ------------------------------
Rodger Wichterman                                       256,500(10)                             1.167%
--------------------------------------- -------------------------------------------- ------------------------------
All directors and executive officers
as a group                                         2,575,901
(6 persons)                                                                                  57.239%
--------------------------------------- -------------------------------------------- ------------------------------
</TABLE>

(1)      Unless otherwise stated, the address of our directors and executive
         officers is c/o Graphco Holdings Corp, Inc. 41 University Drive,
         Newton, PA 18940.

(2)      Unless otherwise indicated, we believe that all persons named in the
         table have sole voting and investment power with respect to all shares
         of Common Stock beneficially owned by them. A person is deemed to be
         the beneficial owner of securities that may be acquired by such person
         within 60 days from the date on which beneficial ownership is to be
         determined, upon the exercise of options, warrants or convertible
         securities. Each beneficial owner's percentage ownership is determined
         by assuming that options, warrants and convertible securities that are
         held by such person (but not those held by any other person) and which
         are exercisable within such 60-day period, have been exercised.

(3)      Includes 400,000 warrants which expire on December 7, 2010 and are
         exercisable at a price of $2.50.

(4)      Ms. Ruth Ivanescu and Mr. Cristian Ivanescu are husband and wife. Mr.
         Ivanescu does not claim beneficial ownership of any shares held by Ms.
         Ivanescu.

(5)      Mr. Cristian Ivanescu is the General Partner of CRCI Solebury LP. His
         wife, Ms. Ruth Ivanescu, holds 99.98% of the limited partnership's
         interest as custodian for the benefit of their daughter pursuant to the
         Uniform Gifts to Minors Act. Mr. Ivanescu and Ms. Ivanescu each hold
         .01% individually.

(6)      Includes stocks and various warrants, including 25,000 warrants which
         expire on December 1, 2004 and are exercisable at a price of $1.33; and
         250,000 options which expire on December 31, 2007 and are exercisable
         at a price of $.001.


                                       19
<PAGE>

(7)      Represents 50,000 warrants which expire on December 1, 2004 and are
         exercisable at a price of $1.33.

(8)      Represents 150,000 warrants which expire on December 1, 2004 and are
         exercisable at a price of $1.33.

(9)      Represents 25,000 warrants which expire on December 1, 2004 and are
         exercisable at a price of $1.33.

(10)     Represents 31,000 warrants which expire on December 1, 2007 and are
         exercisable at a price of $.60.




ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


         Graphco Technologies has entered into an Agreement dated June 7, 2002
with NGM Tec, Inc. and Graphco -DPI Holding Company, pursuant to which
Graphco-DPI Holding Company, sold the rights acquired to the Digital Personnel
technology, by its sole Shareholder, Graphco Technologies, Inc., pursuant to a
certain license to the Digital Personnel Technology which it acquired pursuant
to a certain license agreement by and between California Institute of Technology
and Digital Personnel, Inc. Pursuant to the terms of said agreement, NGM Tec,
Inc. is in default. Cristian Ivanescu, our President, CEO and Chairman, and
Edward T. Kramer, our Secretary and a Director are also Directors of NGM Tec,
Inc., but abstain from voting on any matters involving NGM-Tec, Inc.



ITEM 13.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following financial statements and supplementary financial information
are filed as part of this Annual Report on Form 10-K:

      There are no financial statement schedules either applicable or required
to be filed by us in this Annual Report on Form 10-K pursuant to the
instructions to Item 14 of Form 10-K.


(b) The following Reports on Form 8-K have been filed since our last 10-Q:

         (i) March 17, 2003 - with respect to the engagement of  JM Cohn LLP
as our new Independent Accountants and The replacement of S.W. Hatfield,
CPA as our Independent Accountants.


                                       20
<PAGE>

         (ii) December 30, 2002- with respect to the closing pursuant to the
Merger Agreement with Graphco Technologies, Inc. and our wholly owned subsidiary
RCM Interests, Inc. Acquisition Corp.
         (iii) December 11, 2002 - with respect to entering into the Merger
Agreement with Graphco Technologies, Inc. and our wholly owned subsidiary RCM
Interests, Inc. Acquisition Corp.

(c) The following list sets forth the applicable exhibits (numbered in
accordance with Item 601 of Regulation S-K) required to be filed with this
Annual Report on Form 10-K:

         Exhibit Number             Description
         --------------             -----------
         Exhibit 2.1                Merger Agreement by and among RCM Interests,
                                    Inc., RCM Interests, Inc. Acquisition Corp.,
                                    and Graphco Technologies, Inc. (Schedules
                                    and exhibits omitted) incorporated by
                                    reference to Form 8-K (previously filed with
                                    the Commission on December 11, 2002.

ITEM 14.  CONTROLS AND PROCEDURES
- ---------------------------------

The management of the company has evaluated the effectiveness of the issuer's
disclosure controls and procedures as of a date within 90 days prior to the
filing date of the report (evaluation date) and have concluded that the
disclosure controls and procedures are adequate and effective based upon their
evaluation as of the evaluation date.

There were no significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of the most
recent evaluation of such, including any corrective actions with regard to
significant deficiencies and material weaknesses.




                                       21
<PAGE>



                                   SIGNATURES

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

Date:  May 21, 2003
                                                 Graphco Holdings Corp.

                                                 By: /s/ Cristian Ivanescu
                                                    ---------------------------
                                                          Cristian Ivanescu
                                                          President, Chief
                                                          Executive Officer &
                                                          Chairman

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.



  Name                          Title                              Date
  ----                          -----                              ----



/s/                        President, Chief Executive         May 21, 2003
-------------------
Cristian Ivanescu          Officer, Chairman & Director


/s/                        Secretary & Director               May 21, 2003
----------------------
Edward Kramer

/s/                        Director                           May 21, 2003
----------------------
Ross Glatzer


/s/                        Director                           May 21, 2003
----------------------
Ronald Stone


/s/                        Director                           May 21, 2003
----------------------
Ulf Lindgren




                                       22
<PAGE>

 Statement Under Oath Regarding Facts and Circumstances Relating to Exchange Act
                                     Filings

         I,  Cristian Ivanescu,  certify  that:

1. I have reviewed this annual report on Form 10-KSB of Graphco Holdings Corp.

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 l3a-14 and 15d-l4) 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 data 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


                                       23
<PAGE>

         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 weakness.


                                               /s/ Christian Ivanescu
                                               ------------------------
                                               Cristian Ivanescu

Date:  May 21, 2003



Sworn to  before  me  this
1st  day  of  May  2003


/s/ Loraine Bruno
-----------------------------------
Notary  Public



<PAGE>

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)




                                    I N D E X

<TABLE>
<CAPTION>

                                                                                          PAGE

ITEM 7.  FINANCIAL STATEMENTS:

<S>                                                                                         <C>
               REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                    F-2

               CONSOLIDATED BALANCE SHEETS
                    DECEMBER 31, 2002 AND 2001                                             F-3

               CONSOLIDATED STATEMENTS OF OPERATIONS
                    YEARS ENDED DECEMBER 31, 2002 AND 2001 AND
                    PERIOD FROM JANUARY 1, 1998 (DATE OF INCEPTION)
                    TO DECEMBER 31, 2002                                                   F-4

               CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
               DEFICIENCY
                    YEARS ENDED DECEMBER 31, 2002 AND 2001 AND
                    PERIOD FROM JANUARY 1, 1998 (DATE OF INCEPTION)
                    TO DECEMBER 31, 2002                                                F-5 - F-7

               CONSOLIDATED STATEMENTS OF CASH FLOWS
                    YEARS ENDED DECEMBER 31, 2002 AND 2001 AND
                    PERIOD FROM JANUARY 1, 1998 (DATE OF INCEPTION)
                    TO DECEMBER 31, 2002                                                F-8 - F-9

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                              F-10 - F-24

</TABLE>


                                      * * *


                                       F-1
<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders
Graphco Holdings Corp.


We have audited the accompanying consolidated balance sheets of GRAPHCO HOLDINGS
CORP.  (formerly RCM Interests,  Inc.) AND  SUBSIDIARIES  (A  Development  Stage
Company)  as of  December  31,  2002  and  2001,  and the  related  consolidated
statements of operations, changes in stockholders' deficiency and cash flows for
the years then ended and for the period  from  January 1, 2001 to  December  31,
2002 with  respect to the  cumulative  amounts  presented  for the  period  from
January 1, 1998 (date of  inception)  to December 31, 2002.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Graphco Holdings
Corp.  and  Subsidiaries  as of December 31, 2002 and 2001, and their results of
operations  and cash  flows for the years  then  ended and for the  period  from
January 1, 2001 to December  31,  2002 with  respect to the  cumulative  amounts
presented  for the period from January 1, 1998 (date of  inception)  to December
31, 2002, in conformity with  accounting  principles  generally  accepted in the
United States of America.

The  consolidated  financial  statements  referred  to above have been  prepared
assuming that the Company will continue as a going concern. As further discussed
in Note 2 to the consolidated  financial  statements,  the Company's  operations
have generated  recurring  losses,  and it had working capital and stockholders'
deficiencies as of December 31, 2002. In addition,  the Company had defaulted on
the  repayment of all of its  convertible  notes as of December  31, 2002.  Such
matters raise  substantial  doubt about the  Company's  ability to continue as a
going concern. Management's plans concerning these matters are also described in
Note 2. The accompanying  consolidated  financial  statements do not include any
adjustments that might result from the outcome of these uncertainties.

                                                                J.H. Cohn LLP
Roseland, New Jersey
January 31, 2003


                                       F-2
<PAGE>


                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2002 AND 2001
<TABLE>
<CAPTION>

                                       ASSETS                                                   2002               2001
                                       ------                                              -------------       ------------
<S>                                                                                        <C>                 <C>
Current assets:
     Cash                                                                                  $         955       $     76,299
     Accounts receivable                                                                           1,808             41,000
     Prepaid expenses                                                                             65,708             83,029
                                                                                           -------------       ------------
                  Total current assets                                                            68,471            200,328
Property and equipment, net of accumulated depreciation
     and amortization of $247,820 and $947,154                                                   149,101            846,173
Investments, at equity                                                                                 -                  -
Advances to stockholder                                                                                -            223,864
Deferred loan costs, net of accumulated amortization of $178,639
     in 2001                                                                                           -            229,816
Other assets                                                                                      22,432             51,860
                                                                                           -------------       ------------

                  Totals                                                                   $     240,004       $  1,552,041
                                                                                           =============       ============

                        LIABILITIES AND STOCKHOLDERS' DEFICIENCY
                        ----------------------------------------

Current liabilities:
     Convertible notes payable, net of debt discount of
         $1,140,693 in 2001                                                                 $  2,574,908       $  1,434,215
     Accounts payable and other accrued expenses                                               3,465,059          1,988,246
     Other notes payable                                                                         204,000
                                                                                            ------------       ------------
                  Total liabilities                                                            6,243,967          3,422,461
                                                                                            ------------       ------------

Commitments and contingencies

Stockholders' deficiency:
     Preferred stock, no par value; 5,000,000 shares authorized:
         Series A convertible preferred stock; 333,333 shares
              authorized; 225,029 shares issued and outstanding
              (aggregate liquidation preference - $3,495,563)                                  3,265,383          3,265,383
         Series B convertible preferred stock, no par value;
              4,500,000 shares authorized; 469,000 shares issued
              and outstanding (aggregate liquidation preference
              $938,000)                                                                          415,760
         Subscription receivable for 53,000 shares of Series B
              convertible preferred stock                                                        (53,000)
     Common stock, par value $.001 per share; 40,000,000
         shares authorized; 18,511,793 and 17,323,553 shares
         issued and outstanding                                                                   18,512             17,323
     Additional paid-in capital                                                               13,200,637         12,985,021
     Unearned compensation                                                                      (328,891)        (1,587,887)
     Accumulated deficit, including $21,702,232 and $15,730,128
         accumulated in the development stage                                                (22,522,364)       (16,550,260)
                                                                                            ------------       ------------
                  Total stockholders' deficiency                                              (6,003,963)        (1,870,420)
                                                                                            ------------       ------------

                  Totals                                                                   $     240,004       $  1,552,041
                                                                                           =============       ============

</TABLE>
                See Notes to Consolidated Financial Statements.

                                       F-3
<PAGE>


                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   YEARS ENDED DECEMBER 31, 2002 AND 2001 AND
                 PERIOD FROM JANUARY 1, 1998 (DATE OF INCEPTION)
                              TO DECEMBER 31, 2002

<TABLE>
<CAPTION>

                                                       2002            2001         Cumulative
                                                   ------------    ------------    ------------

<S>                                                <C>             <C>             <C>
Revenues                                           $    413,667    $    746,367    $  1,532,975
Cost of revenues                                          9,065         527,216         713,002
                                                   ------------    ------------    ------------

Gross profit                                            404,602         219,151         819,973
                                                   ------------    ------------    ------------

Operating expenses:
     Selling, general and administrative              4,116,541       4,085,015      13,503,875
     Research and development                           393,834         841,379       4,735,213
                                                   ------------    ------------    ------------
              Totals                                  4,510,375       4,926,394      18,239,088
                                                   ------------    ------------    ------------

Loss from operations                                 (4,105,773)     (4,707,243)    (17,419,115)
                                                   ------------    ------------    ------------

Other income (expense):
     Interest income                                                     17,712         184,354
     Interest expense, including amortization of
         deferred loan fees and debt discount of
         $1,370,509, $1,436,775 and $2,807,284       (1,888,208)     (1,603,092)     (3,491,300)
     Loss from equity investees                                                        (949,420)
     Other                                               21,877                          21,877
                                                   ------------    ------------    ------------
              Totals                                 (1,866,331)     (1,585,380)     (4,234,489)
                                                   ------------    ------------    ------------

Net loss                                             (5,972,104)     (6,292,623)    (21,653,604)

Dividends declared on Series A convertible
     preferred stock                                                     48,628          48,628
                                                   ------------    ------------    ------------

Loss attributable to common stockholders           $ (5,972,104)   $ (6,341,251)   $(21,702,232)
                                                   ============    ============    ============


Basic loss per common share                        $       (.34)   $       (.37)
                                                   ============    ============


Basic weighted average number of common
     shares outstanding                              17,426,590      17,283,772
                                                   ============    ============

</TABLE>

                See Notes to Consolidated Financial Statements.

                                       F-4
<PAGE>


                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

         CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
     YEARS ENDED DECEMBER 31, 2002 AND 2001 AND PERIOD FROM JANUARY 1, 1998
                    (DATE OF INCEPTION) TO DECEMBER 31, 2002

<TABLE>
<CAPTION>
                                         Series A Convertible
                                          Preferred Stock         Common Stock
                                      ---------------------- ----------------------
                                                                                     Additional
                                        Number of            Number of                Paid-in     Accumulated
                                         Shares      Amount    Shares      Amount      Capital       Deficit        Total
                                      ------------  -------- ----------- ---------- -------------- ------------ --------------
<S>                                     <C>                   <C>        <C>          <C>          <C>           <C>
Balance, January 1, 1998                1,000,000             3,721,695  $   3,722    $ 418,750    $ (820,132)   $  (397,660)

2.68975-for-1 stock split                                     6,282,378      6,282       (6,282)

Stock issued for services                                       360,000        360         (360)

Detachable warrants issued in
   connection with bridge financing                                                      86,064                       86,064

Retirement of preferred shares         (1,000,000)

Net loss                                                                                             (742,295)      (742,295)
                                      ------------           ----------- ---------- -------------- ------------ --------------

Balance, December 31, 1998                      -            10,364,073     10,364      498,172    (1,562,427)    (1,053,891)

Stock issued in connection with
   private placement                                          5,881,054      5,881    6,389,287                    6,395,168

Stock issued in connection with
   acquisition                                                   23,810         24       31,644                       31,668

Stock exchanged for the retirement of
   bridge notes                                                 474,506        474      564,618                      565,092

Net loss                                                                                            (1,489,397)   (1,489,397)
                                      ------------           ----------- ---------- -------------- ------------ --------------

Balance, December 31, 1999                      -            16,743,443     16,743    7,483,721     (3,051,824)    4,448,640

Stock issued in connection with
   private placement                      225,029  $3,265,383                                                      3,265,383

Stock warrants exercised                                        246,659        247      327,809                      328,056

Stock issued in connection with
 acquisition                                                    143,999        144      191,375                      191,519
Stock issued for services                                        50,000         50       66,450                       66,500

Warrants issued for services                                                             31,280                       31,280

Net loss                                                                                            (7,157,185)   (7,157,185)
                                      ------------  -------- ----------- ---------- -------------- ------------ --------------

Balance, December 31, 2000                225,029  3,265,383 17,184,101     17,184    8,100,635    (10,209,009)    1,174,193

</TABLE>

                                       F-5
<PAGE>


                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

         CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
     YEARS ENDED DECEMBER 31, 2002 AND 2001 AND PERIOD FROM JANUARY 1, 1998
                    (DATE OF INCEPTION) TO DECEMBER 31, 2002

<TABLE>
<CAPTION>
                                         Series A Convertible
                                          Preferred Stock         Common Stock
                                      ---------------------- --------------------
                                                                                   Additional
                                        Number of            Number of              Paid-in     Unearned    Accumulated
                                         Shares      Amount    Shares      Amount    Capital   Compensation   Deficit       Total
                                      ------------  -------- ----------- -------- ------------ ------------ -----------  ----------
<S>                                     <C>         <C>          <C>        <C>          <C>          <C>           <C>  <C>
Sales of common stock through
   private placement                                            120,000  $   120  $   299,880                            $  300,000
Compensatory stock options and
   warrants issued to employees
   and directors                                                                    1,922,305  $(1,771,040)                 151,265
Amortization of unearned compen-
   sation                                                                                          183,153                  183,153
Warrants issued for payment of
   accrued interest                                                                    19,053                                19,053
Issuance of beneficial conversion
   rights in connection with private
   placement of convertible notes
   payable                                                                          1,336,054                             1,336,054
Sale of warrants as part of private
   placement of convertible notes
   payable                                                                          1,002,775                             1,002,775
Warrants issued for payment of fees
   in connection with private placement
   applicable to convertible notes payable                                            299,004                               299,004
Expenses in connection with private
   placement applicable to sale of
   warrants                                                                           (43,294)                              (43,294)
Dividends accrued on Series A
   convertible preferred stock                                                                                $  (48,628)   (48,628)
Common stock issued as payment
   of accrued dividends                                           19,452      19       48,609                                48,628
Net loss                                                                                                      (6,292,623)(6,292,623)
                                      ------------  -------- ----------- -------- ------------ ------------ -----------  ----------
Balance, December 31, 2001                225,029  3,265,383  17,323,553  17,323   12,985,021    (1,587,887) (16,550,260)(1,870,420)
</TABLE>

                                       F-6
<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

         CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
     YEARS ENDED DECEMBER 31, 2002 AND 2001 AND PERIOD FROM JANUARY 1, 1998
                    (DATE OF INCEPTION) TO DECEMBER 31, 2002




<TABLE>
<CAPTION>


                                          Series A Convertible
                                              Preferred Stock       Series B Convertible Preferred Stock    Common Stock
                                           Number of    Number of                          Subscription     Number of
                                             Shares      Amount       Shares      Amount    Receivable        Shares      Amount
                                         ------------ ----------  -----------  ---------- -------------- ------------ -----------

<S>                                           <C>     <C>             <C>      <C>        <C>              <C>        <C>
Exercise of warrants

Cancellation of compensatory stock options
   issued to employees and directors

Compensatory stock options issued to
   employees

Amortization of unearned compensation

Warrants issued for payment of interest

Effects of reverse acquisition                                                                                938,240 $       939

Sale of Series B preferred stock, net
   of expenses of $65,740                                             469,000  $   415,760 $    (53,000)

Common stock issued for a finder's fee                                                          250,000          250      249,750

Compensatory stock options issued for
   services to directors                                                                                                  697,063

Net loss
                                         ------------ ----------  -----------  ---------- -------------- ------------ -----------
Balance, December 31, 2002                    225,029 $3,265,383      469,000  $  415,760 $     (53,000)   18,511,793 $    18,512
                                        ============= ==========  ===========  ========== ============== ============ ===========

</TABLE>


<TABLE>
<CAPTION>

                                             Additional     Unearned
                                              Paid-in       Compen-   Accumulated
                                              Capital       sation       Deficit      Total
                                           ------------  ----------- ------------  -------------

<S>                                       <C>           <C>         <C>           <C>
Exercise of warrants                       $     28,000                            $     28,000

Cancellation of compensatory stock options
   issued to employees and directors           (923,455) $   923,455

Compensatory stock options issued to
   employees                                    130,000     (130,000)

Amortization of unearned compensation                        465,541                    465,541

Warrants issued for payment of interest         189,193                                 189,193

Effects of reverse acquisition                 (154,935)                               (153,996)

Sale of Series B preferred stock, net
   of expenses of $65,740                                                               362,760

Common stock issued for a finder's fee                                                  250,000

Compensatory stock options issued for
   services to directors                                                                697,063

Net loss                                                             $ (5,972,104)   (5,972,104)
                                           ------------  ----------- ------------  -------------
Balance, December 31, 2002                 $ 13,200,637  $ (328,891) $(22,522,364) $ (6,003,963)
                                           ============  =========== ============  =============

</TABLE>


See Notes to Consolidated Financial Statements.

                                      F-7
<PAGE>


                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   YEARS ENDED DECEMBER 31, 2002 AND 2001 AND
                 PERIOD FROM JANUARY 1, 1998 (DATE OF INCEPTION)
                              TO DECEMBER 31, 2002



<TABLE>
<CAPTION>

                                                                          2002               2001            Cumulative
                                                                    ---------------    ---------------     ----------------

<S>                                                                        <C>                 <C>                  <C>
Operating activities:
     Net loss     $(5,972,104)                                         $(6,292,623)      $(21,653,604)
     Adjustments to reconcile net loss to net
         cash used in operating activities:
         Depreciation and amortization of
              property and equipment                                       545,596            564,899             1,660,143
         Write-off of impaired property and equipment                      151,474             64,032               377,004
         Note payable issued for services                                  129,000                                  129,000
         Common stock issued for services                                  250,000                                  316,500
         Warrants issued for payment of interest                           189,193                                  189,193
         Compensatory options and warrants issued
              to employees and directors                                   697,063            170,318               963,445
         Amortization of unearned compensation                             465,541            183,153               648,694
         Charges to interest expense for amortization of:
              Deferred loan costs                                          229,816            238,639               468,455
              Debt discount                                              1,140,693          1,198,136             2,338,829
         Equity in net loss of equity investee                                                                      949,420
         Acquired research and development
              expenses                                                                                              200,000
         Gain on sale of marketable securities                                                                      (40,949)
         Unrealized loss on marketable securities                                                                   108,249
         Changes in operating assets and liabilities:
              Accounts receivable                                           39,192            (21,562)                2,041
              Prepaid expenses                                              17,322             56,013               (79,388)
              Other assets                                                   9,430             12,733                22,163
              Accounts payable and other accrued
                  expenses                                               1,472,817            914,728             3,250,618
                                                                       -----------      -------------       ---------------
                      Net cash used in operating activities               (634,967)        (2,911,534)          (10,150,187)
                                                                      ------------       ------------         -------------

Investing activities:
     Purchases of marketable securities                                                                            (540,210)
     Proceeds from maturities of marketable securities                                         55,535               473,716
     Purchases of property and equipment                                                      (21,280)           (1,813,319)
     Loan to related party                                                                                         (150,000)
     Acquisition of interest in equity investee                                                                    (750,000)
     Acquisition of technology license                                                                              (23,776)
     Repayments of advances by stockholders                                223,863
                                                                      ------------       ------------         -------------
                      Net cash provided by (used in)
                         investing activities                              223,863             34,255            (2,803,589)
                                                                      ------------    ---------------        --------------
</TABLE>


                                      F-8
<PAGE>


                  GRAPHCO HOLDINGS CORP. INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   YEARS ENDED DECEMBER 31, 2002 AND 2001 AND
                 PERIOD FROM JANUARY 1, 1998 (DATE OF INCEPTION)
                              TO DECEMBER 31, 2002




<TABLE>
<CAPTION>

                                                                  2002          2001         Cumulative
                                                              -----------    -----------    -----------

<S>                                                               <C>          <C>           <C>
Financing activities:
     Payment for shares in connection with reverse
         acquisition                                          $   (75,000)                  $   (75,000)
     Proceeds from long-term debt                                                             1,160,000
     Repayments of long-term debt                                                            (1,096,891)
     Costs of sales of convertible notes and warrants
         allocable to sales of:
         Convertible notes                                                    $  (169,451)     (169,451)
         Warrants                                                                 (43,294)      (43,294)
     Repayment of convertible notes payable                                      (120,000)     (120,000)
     Proceeds from sales of convertible notes and
         warrants                                                               2,620,000     2,620,000
     Proceeds from exercise of warrants                            28,000                        28,000
     Proceeds from private placements of preferred
         stock, net of expenses                                   382,760                     3,648,143
     Proceeds from private placements of common
         stock, net of expenses                                                  300,000      7,023,224
     Other                                                                       (20,000)       (20,000)
                                                              -----------    -----------    -----------
                  Net cash provided by financing activities       335,760      2,567,255     12,954,731
                                                              -----------    -----------    -----------

Net increase (decrease) in cash                                   (75,344)      (310,024)           955

Cash, beginning of period                                          76,299        386,323              -
                                                              -----------    -----------    -----------

Cash, end of period                                           $       955    $    76,299    $       955
                                                              ===========    ===========    ===========


Supplemental disclosure of cash flow data:
     Interest paid$                                                75,070    $    14,866    $   141,113
                                                              ===========    ===========    ===========

</TABLE>


                                      F-9
See Notes to Consolidated Financial Statements.



<PAGE>

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1 - Organization and business:
               Graphco  Holdings Corp.,  Inc.  ("GHC") is a holding company that
               was  formerly  known as RCM  Interests,  Inc.  GHC  emerged  from
               Chapter  11 of Title  11 of the  United  States  Code on July 31,
               2000.  GHC was a  publicly-held  company that had no  significant
               assets,  liabilities or operating activities from the date of its
               emergence  from  bankruptcy  until December 13, 2002, the date of
               the merger described  below, and as of December 31, 2002.  During
               that  period,  it was  seeking  a  suitable  reverse  acquisition
               candidate  through   acquisition,   merger  or  another  suitable
               business   combination   method  and,   accordingly,   it  was  a
               "development stage enterprise" for financial accounting purposes.

               Graphco  Technologies,  Inc. is a New Jersey  corporation that is
               referred to herein  together  with its  subsidiaries  as "G-TEC."
               G-TEC has been developing  advanced technology and systems since,
               effectively,  January 1, 1998, which include software,  that have
               been  designed  to provide  secure data  management,  information
               sharing and  biometric  tools to government  and law  enforcement
               agencies  and other users in private  industry.  G-TEC's  primary
               products  will provide  users with secure  access to  information
               systems  and  physical   locations  through  the  integration  of
               biometrics  and  secure  database   applications.   This  layered
               approach  facilitates  multi-agency  information  sharing  in the
               public  sector and  enterprise  access  management in the private
               sector.  G-TEC expects that it will generate  revenues  primarily
               through  licenses or other  contracts for the use of its products
               over specified periods.

               G-TEC had conducted and discontinued certain unrelated operations
               prior to the  commencement  of the development  stage  activities
               described  above on  January 1, 1998.  G-TEC  generated  revenues
               primarily  from a  terminated  license  agreement  and a  limited
               number of sales of the products it has developed  during 2002. It
               generated  revenues  primarily  from  a  contract  that  used  an
               application  of its  technologies  during  2001.  G-TEC  had  not
               generated any significant revenues from contracts for the sale or
               use  of  its  primary   products   on  a  recurring   basis  and,
               accordingly,  it  also  remained  in the  development  stage  for
               financial  accounting  purposes as of December 13, 2002, the date
               of the merger described below, and as of December 31, 2002.


                                       F-10
<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1 - Organization and business (concluded):
               As of December  13,  2002,  GHC had  10,500,500  shares of common
               stock outstanding and G-TEC had 17,351,553 shares of common stock
               outstanding.  On that date, GHC, RCM Interests,  Inc. Acquisition
               Corp.  ("Acquisition Sub"), a wholly-owned subsidiary of GHC, and
               G-TEC  consummated  a merger  whereby  G-TEC merged with and into
               Acquisition  Sub and all of the  shares of G-TEC's  common  stock
               then  outstanding  were  automatically  converted  into an  equal
               number of shares of common stock of GHC. In addition, pursuant to
               the  merger  agreement,  a  stockholder  of GHC  agreed to cancel
               9,562,269  shares of his GHC common  stock.  G-TEC  agreed to pay
               total  consideration of $150,000 for such cancellation,  of which
               $75,000  was paid in December  2002 and $75,000 was paid  through
               the  issuance  of a 10% note that is due on June 12,  2003 and is
               secured by  approximately  1,416,000 shares of GHC's common stock
               owned by one of its stockholders.

               Upon  consummation  of the merger,  GHC had 18,289,793  shares of
               common stock  outstanding of which 17,351,553  shares (95% of the
               shares  then  outstanding)  were held by former  stockholders  of
               G-TEC and 938,240 shares (5% of the shares then outstanding) were
               held by pre-merger stockholders of GHC. Accordingly, the business
               combination  has  been  accounted  for  a  reverse   acquisition,
               whereby,  for  accounting  purposes,   G-TEC  is  the  accounting
               acquirer  and GHC is the  accounting  acquiree.  The  cost of the
               acquisition  approximated the fair value of the net assets of GHC
               that were acquired and,  accordingly,  the assets and liabilities
               of GHC  were  initially  recorded  at their  historical  carrying
               values.  Accordingly,  the  accompanying  consolidated  financial
               statements  reflect the  accounts  of G-TEC and its  subsidiaries
               prior to December 13, 2002. Since GHC is an inactive company, its
               results  of  operations  before  and  after the  merger  were not
               material in relation to those of G-TEC and its subsidiaries.

               As used herein,  the Company refers to G-TEC and its subsidiaries
               prior to the merger and GHC,  G-TEC and GHC's other  subsidiaries
               subsequent to the merger.


Note           2 - Summary of  significant  accounting  policies:
               Principles of consolidation:
                  The accompanying consolidated financial statements include the
                  accounts of the Company and its wholly-owned subsidiaries. All
                  significant  intercompany  accounts and transactions have been
                  eliminated in consolidation.


                                      F-11
<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note           2 - Summary of significant accounting policies (continued):
               Basis of presentation (concluded):
                  The accompanying  consolidated  financial statements have been
                  prepared  assuming  that the Company will  continue as a going
                  concern.  However,  as shown in the accompanying  consolidated
                  financial statements, as of December 31, 2002, the Company had
                  a working capital  deficit of  approximately  $6,175,000,  had
                  incurred  cumulative  net  losses  of  $22,522,000  and  had a
                  stockholders'   deficiency   of   $6,004,000.   It  also   had
                  convertible   notes  payable  with  a  principal   balance  of
                  $2,574,908  that were in default (see Note 5).  These  matters
                  raise   substantial  doubt  about  the  Company's  ability  to
                  continue as a going concern.

                  Management  believes  that the Company will  continue to incur
                  net losses and negative cash flows from  operating  activities
                  through at least the year ending  December  31,  2003.  In the
                  absence  of  operating  profits  and  cash  flows,  management
                  believes  the  Company  will need to limit  its  expenditures,
                  obtain additional debt or equity financing,  obtain agreements
                  with creditors for the  conversion of outstanding  obligations
                  into preferred or common stock and/or obtain  agreements  with
                  creditors  for  their  forbearance  with  respect  to past due
                  obligations.  Management  plans to continue to  negotiate  the
                  extension  of the  due  dates  for or  the  conversion  of the
                  Company's  obligations  and  seek  additional  debt or  equity
                  financing  through  private  placements or by other means.  It
                  will also continue to seek strategic  partners for the Company
                  that can  provide it with  working  capital.  Management  also
                  plans  to   continue  to  limit  the   Company's   development
                  activities where necessary.  However, management cannot assure
                  that the Company will be able to obtain the additional capital
                  resources   that  will  enable  the  Company  to  sustain  its
                  operations and planned development activities through at least
                  December 31, 2003. If the Company cannot  generate  sufficient
                  revenues and/or obtain  sufficient  additional  financing,  if
                  necessary,  by that date, the Company may be forced thereafter
                  to restructure  its  operations,  merge,  sell its operations,
                  file for  bankruptcy  reorganization  or  entirely  cease  its
                  operations.

                  The  accompanying  consolidated  financial  statements  do not
                  include  any  adjustments  related to the  recoverability  and
                  classifications  of assets or the amounts and  classifications
                  of liabilities  that might be necessary  should the Company be
                  unable to continue as a going concern.

               Revenue recognition:
                  The Company recognizes  revenues when products are shipped and
                  collection is probable. Revenues from contracts for the use of
                  the  Company's   primary  products  are  recognized  over  the
                  estimated  period  during  which  the  products  will  be used
                  provided  that  the  fees  are  fixed  and   determinable  and
                  collection is probable.  The Company also recognized  revenues
                  of $378,000 in 2002 based on cash  collected  when a licensing
                  agreement that has been terminated.


                                      F-12
<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note           2 -  Summary  of  significant  accounting  policies  (continued):
               Revenue recognition (concluded):
                  The Company  recognized  all of its  revenues in 2001 from its
                  fixed-price,   long-term  contract  using  the  percentage  of
                  completion  method  based on the total labor hours  worked and
                  subcontract  expenses  incurred  to  the  total  costs  to  be
                  incurred.

               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   certain   reported   amounts  and
                  disclosures.  Accordingly,  actual  results  could differ from
                  those estimates.

               Property and equipment:
                  Property  and  equipment  are stated at cost less  accumulated
                  depreciation and amortization.  Depreciation is computed using
                  straight-line  and  accelerated  methods  over  the  estimated
                  useful  lives  of  the  assets.   Amortization   of  leasehold
                  improvements  is computed based on the lesser of the estimated
                  useful life of the asset or the term of the lease.

               Long-lived assets:
                  Long-lived  assets,  such  as  property  and  equipment,   are
                  reviewed  for  impairment   whenever   events  or  changes  in
                  circumstances  indicate  that the carrying  amount of an asset
                  may not be recoverable.  Impairment losses are recognized when
                  events  or  changes  in   circumstances   indicate   that  the
                  undiscounted  cash flows  estimated  to be  generated  by such
                  assets are less than their  carrying  value and,  accordingly,
                  all  or  a  portion  of  such   carrying   value  may  not  be
                  recoverable.  Impairment losses are then measured by comparing
                  the  fair  value of  assets  to their  carrying  amounts.  The
                  Company recorded  charges for impaired  property and equipment
                  (which is included in general and administrative  expenses) of
                  $151,474  and  $64,032  in 2002  and  2001,  respectively,  in
                  connection  with  the  abandonment  of  office  space  and the
                  disposal of related property and equipment.

               Debt issuance costs and debt discount:
                  Loan fees and other  debt  issuance  costs  are  deferred  and
                  amortized  to  interest  expense  over the term of the related
                  loan on a straight-line basis. Debt discount is offset against
                  the principal  balance of the related loan and amortized using
                  the interest method over the term of the related loan.


                                      F-13
<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note           2 -  Summary  of  significant  accounting  policies  (continued):
               Investments, at equity:
                  Noncontrolling  interests  in  companies  of less than 50% are
                  accounted for by the equity method where the Company exercises
                  significant  influence  over the  investee.  Under the  equity
                  method,  the  Company's  proportionate  share of net income or
                  loss of such an investee is reflected in the Company's results
                  of operations.  Although the Company owned  interests in other
                  companies  that it accounts for pursuant to the equity method,
                  it did not have an investment in those entities as of December
                  31,  2002 and 2001 or any equity in the  earnings or losses of
                  those  investees  during the years ended December 31, 2002 and
                  2001 because its  proportionate  share of the losses sustained
                  by the investees prior to 2001 had substantially  exceeded its
                  investments.

               Research and development costs:
                  Research and development costs have been expensed as incurred.

               Software development costs:
                  Pursuant to Statement of Financial  Accounting  Standards  No.
                  86, "Accounting for the Costs of Computer Software to be Sold,
                  Leased or  Otherwise  Marketed,"  the  Company is  required to
                  charge the costs of  creating a computer  software  product to
                  research  and  development   expense  as  incurred  until  the
                  technological feasibility of the product has been established;
                  thereafter,  all related  software  development and production
                  costs are required to be capitalized.

                  Commencing upon the initial release of a product,  capitalized
                  software  development costs and any costs of related purchased
                  software  are  generally  required  to be  amortized  over the
                  estimated economic life of the product or based on current and
                  estimated future revenues.  Thereafter,  capitalized  software
                  development costs and costs of purchased software are reported
                  at the lower of  unamortized  cost or estimated net realizable
                  value.  Due  to  the  inherent  technological  changes  in the
                  software development industry, estimated net realizable values
                  or  economic   lives  may  decline   and,   accordingly,   the
                  amortization period may have to be accelerated.

                  Due to the  uncertainties  related to the Company's ability to
                  generate  revenues from its products on a recurring basis, the
                  Company  had  not   capitalized  any  software  costs  through
                  December 31, 2002.


                                      F-14
<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note           2 -  Summary  of  significant  accounting  policies  (continued):
               Income taxes:
                  The Company  accounts for income  taxes  pursuant to the asset
                  and liability method which requires deferred income tax assets
                  and   liabilities  to  be  computed   annually  for  temporary
                  differences  between the financial  statement and tax bases of
                  assets  and  liabilities   that  will  result  in  taxable  or
                  deductible amounts in the future based on enacted tax laws and
                  rates  applicable to the periods in which the  differences are
                  expected to affect taxable  income.  Valuation  allowances are
                  established  when  necessary to reduce  deferred tax assets to
                  the amount  expected to be realized.  The income tax provision
                  or credit is the tax payable or refundable for the period plus
                  or minus the change  during the period in deferred  tax assets
                  and liabilities.

               Stock-based compensation:
                  In accordance  with the  provisions  of Accounting  Principles
                  Board  Opinion  No.  25,   "Accounting  for  Stock  Issued  to
                  Employees" ("APB 25"), the Company will recognize compensation
                  costs  as a  result  of the  issuance  of  stock  options  and
                  warrants to employees  and directors  based on the excess,  if
                  any, of the fair value of the underlying  stock at the date of
                  grant or award (or at an  appropriate  subsequent  measurement
                  date) over the amount the employees and directors  must pay to
                  acquire the stock.  However,  the Company will not be required
                  to recognize compensation expense as a result of any grants to
                  employees  at an  exercise  price  that is equal to or greater
                  than  fair  value.  The  Company  will  also  make  pro  forma
                  disclosures,  as required by Statement of Financial Accounting
                  Standards No. 123,  "Accounting for Stock-Based  Compensation"
                  ("SFAS  123"),  of net income or loss as if a fair value based
                  method of accounting for stock options and warrants  issued at
                  exercise  prices  equal to or greater than fair value had been
                  applied if such amounts differ  materially from the historical
                  amounts.

                  In  accordance  with the  provisions  of SFAS  123,  all other
                  issuances  of common  stock,  stock  options  or other  equity
                  instruments to employees and nonemployees as the consideration
                  for goods or services  received  by the Company are  accounted
                  for based on the fair value of the equity  instruments  issued
                  (unless the fair value of the  consideration  received  can be
                  more  reliably  measured).  The fair  value of any  options or
                  similar equity  instruments  issued will be estimated based on
                  the  minimum  value  option-pricing  model,  which  meets  the
                  criteria set forth in SFAS 123, and the assumption that all of
                  the options or other equity  instruments will ultimately vest.
                  Such fair value is measured as of an appropriate date pursuant
                  to the  guidance  in the  consensus  for EITF Issue No.  96-18
                  (generally,  the earlier of the date the other  party  becomes
                  committed to provide goods or services or the date performance
                  by the other party is complete) and capitalized or expensed as
                  if the Company had paid cash for the goods or services.


                                      F-15
<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note           2 -  Summary  of  significant  accounting  policies  (concluded):
               Stock-based compensation (concluded):
                  The Company  accounts for the  intrinsic  value of  beneficial
                  conversion  rights  arising from the  issuance of  convertible
                  debt instruments with  nondetachable  conversion  options that
                  are  in-the-money  at  the  commitment  date  pursuant  to the
                  consensuses  for EITF Issue No. 98-5 and EITF Issue No. 00-27.
                  Such value is allocated to additional  paid-in capital and the
                  resulting debt discount is amortized to interest expense using
                  the effective  yield method over the period to the maturity of
                  the debt  instrument.  Such value is  determined  after  first
                  allocating an appropriate  portion of the proceeds received to
                  any other detachable instruments included in the exchange.

               Earnings (loss) per share:
                  The Company  presents "basic" earnings (loss) per common share
                  and,  if  applicable,  "diluted"  earnings  per  common  share
                  pursuant  to  the   provisions   of   Statement  of  Financial
                  Accounting  Standards  No. 128,  "Earnings  per Share."  Basic
                  earnings (loss) per common share is calculated by dividing net
                  income  or loss  applicable  to common  stock by the  weighted
                  average  number  of  common  shares  outstanding  during  each
                  period.  The calculation of diluted  earnings per common share
                  is similar to that of basic earnings per common share,  except
                  that the  denominator  is  increased  to include the number of
                  additional  common shares that would have been  outstanding if
                  all potentially dilutive common shares, such as those issuable
                  upon  the  exercise  of stock  options  and  warrants  and the
                  conversion  of  convertible  notes,  were  issued  during  the
                  period,  the  treasury  stock  method had been  applied to the
                  proceeds from the exercise of the options and warrants and the
                  interest costs applicable to the convertible notes payable had
                  been added back to the numerator.

                  Diluted  per  share  amounts  have not been  presented  in the
                  accompanying  consolidated statement of operations because the
                  Company  had net  losses  in 2002  and  2001  and the  assumed
                  effects of the exercise of all of the Company's  stock options
                  and warrants that were outstanding during all or part of those
                  years and the conversion of the convertible notes payable that
                  had been outstanding during all or part of 2002 and 2001 would
                  have been anti-dilutive.  At December 31, 2002 and 2001, there
                  were 7,898,192 and 6,969,032 shares issuable upon the exercise
                  of the  Company's  outstanding  options and  warrants  and the
                  conversion of its outstanding notes payable that were excluded
                  from the  computation of diluted loss per common share in 2002
                  and 2001 because they were anti-dilutive.


                                      F-16
<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 3 - Property and equipment:
               At December 31, 2002 and 2001, property and equipment consists of
the following:

<TABLE>
<CAPTION>
                                                                                              2002             2001
                                                                                          -----------      ------------

<S>                                                                                          <C>            <C>
                  Computer equipment and software                                         $   256,401      $    982,401
                  Furniture, fixtures and office equipment                                    119,142           242,140
                  Leasehold improvements                                                       21,378           568,786
                                                                                          -----------      ------------
                                                                                              396,921         1,793,327
                  Less accumulated depreciation and amortization                              247,820           947,154
                                                                                          -----------      ------------

                      Totals                                                              $   149,101      $    846,173
                                                                                          ===========      ============
</TABLE>


Note 4 - Advances to stockholder:
               As of December  31,  2001,  the  Company  had made  advances to a
               stockholder  totaling $223,864 which were noninterest bearing and
               without specific repayment terms.  During 2002, the advances were
               repaid.  The Company had an obligation to the  stockholder  as of
               December   31,   2002  and  2001  for  the   payment  of  accrued
               compensation totaling approximately $115,000.


Note 5 - Convertible notes payable:
               During 2001, the Company sold  convertible  notes and warrants to
               purchase  939,166  shares  of  common  stock  through  a  private
               placement and received gross proceeds of $2,620,000 which equaled
               the aggregate  principal  balance of the convertible  notes.  The
               Company recorded discounts for the fair value of the warrants and
               beneficial  conversion  rights issued with the convertible  notes
               totaling  $2,338,829 of which $610,962 and $725,088 was amortized
               to interest expense in 2002 and 2001, respectively. It also added
               $74,908 of interest to principal  in 2002 and repaid  convertible
               notes in the principal  amount of $120,000 in 2001.  Accordingly,
               at December 31, 2002 and 2001,  the  convertible  notes had a net
               carrying value of $2,574,908  and  $1,434,215,  respectively.  At
               December 31, 2002,  convertible  notes in the principal amount of
               $1,000,000   were  secured  by  certain   intellectual   property
               developed  by the Company  that had no  carrying  value and is no
               longer used. The remainder of the notes were unsecured. The notes
               bear interest at annual rates ranging from 8% to 12%. At December
               31, 2002, the principal balance and the interest on the notes had
               been  scheduled to be paid,  based on the original  provisions in
               the related loan agreements,  at various dates through  September
               30, 2002. In addition,  at December 31, 2002 and 2001,  the notes
               were convertible into a total of 1,954,605 shares of common stock
               at conversion rates ranging from $1.50 to $5.00 per share.

                                      F-17
<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 5 - Convertible notes payable (continued):
               The  warrants to  purchase  939,166  shares of common  stock sold
               through the private  placement  expire on various  dates  through
               September  2006.  Warrants for 400,000 shares are  exercisable at
               $2.00 per share;  warrants for 535,416 shares are  exercisable at
               $2.50 per share; and warrants for 3,750 shares are exercisable at
               $5.00  per  share.  Based  on the  relative  fair  values  of the
               convertible  notes and the  warrants at the  respective  dates of
               issuance,  proceeds from the private placement of $1,002,775 were
               allocable to the fair value of the warrants  which was determined
               using the  minimum  value  option-pricing  model  pursuant to the
               provisions  of  SFAS  123.  Accordingly,  the  Company  initially
               increased  additional  paid-in capital by $1,002,775 for the fair
               value of the  warrants  and  reduced  the  carrying  value of the
               convertible  notes  for the same  amount  for the  debt  discount
               attributable  to the fair value of the warrants.  Amortization of
               the debt discount  attributable to the warrants  totaled $414,701
               and $588,074 in 2002 and 2001, respectively.

               In  October  2001,  the  holder  of  convertible  notes  with  an
               aggregate  principal balance of $700,000 that was past due agreed
               to  extend  the due dates  for the  payment  of the notes and the
               accrued  interest  thereon of $74,908 to September 30, 2002.  The
               Company  issued  warrants  to  purchase  200,000  shares  of  the
               Company's  common  stock at $1.50 per share to the  holder of the
               convertible notes as consideration for the extension. The Company
               valued  the  warrants  at  $211,171  based on the  minimum  value
               option-pricing  model and initially increased deferred loan costs
               and additional  paid-in capital for that amount.  The issuance of
               the warrants was a noncash  transaction and,  accordingly,  it is
               not reflected in the accompanying  consolidated statement of cash
               flows.

               In 2001, the Company issued  warrants to purchase  202,014 shares
               of the Company's  common stock with exercise  prices of $1.33 and
               $2.50 expiring through October 2006 as consideration for services
               rendered  in  connection  with  the  private   placement  of  the
               convertible  notes. The Company valued these warrants at $120,886
               based on the minimum value option  pricing model of which $87,833
               was allocable to the sale of the convertible notes.  Accordingly,
               the Company  initially  increased  deferred loan costs by $87,833
               and additional paid-in capital for the same amount. The issuances
               of these  warrants were noncash  transactions  and,  accordingly,
               they are not reflected in the accompanying consolidated statement
               of cash flows.  In addition,  the Company made cash  payments for
               legal  and  other  services   rendered  in  connection  with  the
               issuances of the  convertible  notes  totaling  $152,745 of which
               $109,451 was allocable to the sale of the convertible  notes and,
               accordingly, also included in deferred loan costs and $43,294 was
               allocable to the sale of the  warrants and charged to  additional
               paid-in capital.  Amortization of the deferred loan costs totaled
               $279,804 and $238,639 in 2002 and 2001.


                                      F-18
<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 5 - Convertible notes payable (concluded):
               As of  December  31,  2002,  the  Company  had  defaulted  on the
               repayment of all of its convertible  notes as explained above. As
               a result  of the  defaults,  the  range  of  interest  rates  had
               increased to 13.5% to 18%.  The Company also became  obligated to
               issue  a   specified   number  of  warrants  to  certain  of  the
               noteholders  every 30 days until principal and interest are paid.
               During 2002,  the Company issued  warrants to certain  holders of
               past due notes to purchase 468,000 shares of the Company's common
               stock at  exercise  prices of $2.50.  The  Company  valued  these
               warrants at $189,193  based on the minimum  value option  pricing
               model which was charged to interest expense in 2002.


Note 6 - Other notes payable:
               On December  12, 2002,  the Company  issued a 10% note payable in
               the principal  amount of $129,000 which matures on June 12, 2003.
               The  note  was  issued  for  services   related  to  the  reverse
               acquisition (see Note 1).

               On December 12, 2002,  the Company issued a 10% note payable to a
               former  stockholder  of RCM in the  principal  amount of  $75,000
               which matures on June 12, 2003 for  consideration for agreeing to
               the reverse acquisition.  The $75,000 was recorded as a reduction
               to additional  paid-in capital.  The issuing of this note payable
               was a noncash transaction and,  accordingly,  it is not reflected
               in the accompanying 2002 consolidated statement of cash flows.


Note 7 - Income taxes:
               As of December  31,  2002,  the Company  had net  operating  loss
               carryforwards  of approximately  $16,900,000  available to reduce
               future Federal and state taxable income expiring through 2022.

               As of December  31, 2002 and 2001,  the  Company's  deferred  tax
               assets   consisted  of  the  effects  of  temporary   differences
               attributable to the following:
<TABLE>
<CAPTION>

                                                                                                2002              2001
                                                                                           ---------------   --------------

<S>                                                                                        <C>               <C>
                  Accrued compensation                                                     $       546,000   $      167,000
                  Other accrued expenses                                                            73,000           71,000
                  Investments in equity investees                                                  369,000          369,000
                  Issuances of common stock options and warrants                                 1,623,000        1,643,000
                  Net operating loss carryforwards                                               6,700,000        5,360,000
                  Depreciation                                                                      40,000           50,000
                                                                                           ---------------   --------------
                                                                                                 9,351,000        7,660,000
                  Less valuation allowance                                                      (9,351,000)      (7,660,000)
                                                                                           ---------------   --------------

                      Totals                                                               $             -   $            -
                                                                                           ===============   ==============
</TABLE>


                                      F-19
<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7 - Income taxes (concluded):
               Due to the  uncertainties  related to,  among other  things,  the
               changes in the ownership of the Company,  which could subject its
               net  operating   loss   carryforwards   to   substantial   annual
               limitations,  and the extent  and  timing of its  future  taxable
               income,  the  Company  offset  its  deferred  tax  assets  by  an
               equivalent  valuation allowance as of December 31, 2002 and 2001.
               The  Company  had also  offset the  potential  benefits  from its
               deferred tax assets by an  equivalent  valuation  allowance as of
               December  31, 2000.  As a result of an increase in the  valuation
               allowance of approximately  $1,691,000 and $3,527,000 in 2002 and
               2001, respectively, there is no credit for income taxes reflected
               in the  accompanying  consolidated  statements  of  operations to
               offset the Company's pre-tax loss.


Note 8 - Commitments and contingencies:
               Operating leases:
                  The  Company  leases  two  office   facilities   under  leases
                  classified as operating  leases for accounting  purposes which
                  expire in February  2003 and July 2004.  At December 31, 2002,
                  approximate  future minimum lease payments under the operating
                  leases in each of the years  subsequent  to December  31, 2002
                  were as follows:

                        Year Ending
                      DECEMBER 31,                                    AMOUNT

                            2003                                   $  217,000
                            2004                                       98,000
                                                                   ----------

                                Total                              $  315,000
                                                                   ==========

                  Rent expense was  approximately  $456,000 and $458,000 in 2002
                  and 2001, respectively.

               Litigation:
                  The  Company  is  a  party  to  various  claims  and  lawsuits
                  incidental to its business. In the opinion of management,  the
                  resolution of such  contingencies  will not materially  affect
                  the consolidated financial position,  results of operations or
                  cash flows of the Company in subsequent years.


Note 9 - Stock option plans:
               2000 Director Stock Option Plan:
                  During 2000, the Company's Board of Directors adopted the 2000
                  Director  Stock  Option  Plan  (the  "Director   Plan")  which
                  originally   provided   for  grants  of  options  to  eligible
                  directors  for the purchase of up to 600,000  shares of common
                  stock,  which was amended on January 7, 2002 to provide for up
                  to 1,200,000  shares of common stock.  The term of each option
                  and the  manner  of  exercise  is  determined  by the Board of
                  Directors,  but the options cannot be exercisable more than 10
                  years after the date of grant.


                                      F-20
<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9 - Stock option plans (continued):
               2000 Director Stock Option Plan (concluded):
                  In addition,  an additional  annual  increase in the number of
                  shares authorized under the Director Plan of 50,000 shares per
                  nonemployee/nonfounder   director  serving  on  the  Board  of
                  Directors was adopted.  Also, the Board of Directors  approved
                  the  grant of an option to  purchase  10,000  shares of common
                  stock to each eligible director,  as defined,  on December 1st
                  of each year from 2002 through 2009 at an exercise  price that
                  cannot be less than the fair market  value of the common stock
                  at the date of each grant. Such options will vest immediately.

                  A summary of the  status of the  Company's  shares  subject to
                  options  under the  Director  Plan as of December 31, 2002 and
                  the changes  during the years ended 2002 and 2001 is presented
                  below:
<TABLE>
<CAPTION>
                                                                                                               Weighted
                                                                                                               Average
                                                                                               Number          Exercise
                                                                                              OF SHARES          PRICE

<S>                                                        <C>                                   <C>             <C>
                      Outstanding and exercisable, January 1, 2001                               30,000          $1.33
                      Granted                                                                    40,000           1.33
                                                                                           ------------

                      Outstanding and exercisable, December 31, 2001                             70,000           1.33
                      Granted                                                                 1,200,000            .60
                                                                                              ---------

                      Outstanding and exercisable, December 31, 2002                          1,270,000            .62
                                                                                              =========
</TABLE>

                  The estimated fair value of the Company's  common stock at the
                  dates the options  were granted to the  directors  during 2002
                  and 2001 was  $1.00 and $2.50  per  share,  respectively.  The
                  aggregate  estimated  fair value of the  1,200,000  and 40,000
                  options granted to the directors at the date of grants in 2002
                  and 2001, respectively,  exceeded the aggregate exercise price
                  by  $288,148  and  $31,364,  respectively.  Since the  options
                  vested  immediately,  the Company charged $288,148 and $31,364
                  to compensation expense in 2002 and 2001, respectively.

                  The  following  table  summarizes  certain   information  with
                  respect to stock options  outstanding  under the Director Plan
                  at December 31, 2002, all of which were exercisable:

<TABLE>
<CAPTION>
                                                                                                           Weighted
                                                                                                             Average
                                                                                                             Years of
                                                                                                           Remaining
                                                                                          Options         Contractual
                      EXERCISE PRICE                                                   OUTSTANDING            LIFE
                      --------------                                                   -----------       ------------

<S>                        <C>                                                           <C>                 <C>
                           $1.33                                                         30,000              8
                           $1.33                                                         40,000              9
                           $ .60                                                      1,200,000             10
                                                                                      ---------

                               Totals                                                 1,270,000
                                                                                      =========
</TABLE>

                                      F-21
<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9 - Stock option plans (continued):
               2000 Stock Option/Stock Incentive Plan:
                  During 2000, the Company's Board of Directors adopted the 2000
                  Stock Option/Stock Incentive Plan (the "Incentive Plan") which
                  provides  for the grants of options  to  directors,  officers,
                  employees and  consultants  of the Company for the purchase of
                  up to  3,000,000  shares  of  common  stock.  The term of each
                  option and the manner of exercise is  determined  by the Board
                  of Directors,  but the options cannot be exercisable more than
                  10 years after the date of grant.

                  A summary of the  status of the  Company's  shares  subject to
                  options under the  Incentive  Plan as of December 31, 2002 and
                  2001 and the changes  during the years then ended is presented
                  below:
<TABLE>
<CAPTION>

                                                                                                             Weighted-
                                                                            Number           Exercise          Average
                                                                           OF SHARES            PRICES            PRICE
                                                                           ---------         ------------    --------------
<S>                                                                         <C>         <C>   <C>                <C>
                      Outstanding and exercisable,
                           January 1, 2001                                    528,500        $1.33             $1.33
                      Granted                                               1,072,000   .65 - 1.33               .84
                      Cancelled                                              (163,500)        1.33              1.33
                                                                           ----------

                      Outstanding and exercisable,
                           December 31, 2001                                1,437,000

                      Granted                                                 325,000          .60               .60
                      Cancelled                                            (1,067,000)  .65 - 1.33               .99
                                                                           ----------

                      Outstanding and exercisable,
                           December 31, 2002                                   695,000 $.60 - $1.33
                                                                           =========== ============

</TABLE>
                  During 2002,  1,067,000 options that were previously  granted,
                  with  exercise  prices less than the fair market  value of the
                  Company's   common  stock,   under  the  Incentive  Plan  were
                  cancelled.   Accordingly,   the  Company  decreased   unearned
                  compensation  and additional  paid-in  capital by $923,455 for
                  the unamortized balance of the vesting period.

                  The estimated fair value of the Company's  common stock at the
                  dates the options were granted under the Incentive Plan during
                  2002 and 2001 was $1.00 and $2.50  per  share.  The  aggregate
                  estimated  fair value of the  325,000  options  and  1,072,000
                  options  granted  under  the  Incentive  Plan at the  dates of
                  grants in 2002 and 2001 exceeded the aggregate  exercise price
                  by $130,000  and  $1,771,040  in 2002 and 2001,  respectively.
                  These options vest over a three year period. Accordingly,  the
                  Company   initially   increased   unearned   compensation  and
                  additional  paid-in capital by $130,000 and $1,771,040 in 2002
                  and  2001,  respectively,  to  record  that  excess,  of which
                  $465,541 and $183,153 was amortized to compensation expense in
                  2002 and 2001, respectively.


                                      F-22
<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9 - Stock option plans (concluded):
               2000 Stock Option/Stock Incentive Plan (concluded):
                  The  following  table  summarizes  certain   information  with
                  respect to stock options  outstanding under the Incentive Plan
                  at December 31, 2001:

<TABLE>
<CAPTION>
                                                                          OPTIONS OUTSTANDING AND EXERCISABLE
                                                                                                       Weighted
                                                                                                        Average
                                                                                                        Years of
                                                                                                      Remaining
                                                                               Number                Contractual
                      EXERCISE PRICES                                      OUTSTANDING                      LIFE
                      ---------------                                      -----------               -----------------

<S>                      <C>                                                     <C>                         <C>
                         $  .60                                                  325,000                     3
                            .65                                                  260,000                     3
                           1.33                                                  110,000                     3
                                                                                 -------

                                                                                 695,000

</TABLE>

Note 10- Stockholders' deficiency:
               The Company's Articles of Incorporation authorize the issuance of
               up to  5,000,000  shares of  preferred  stock,  of which  333,333
               shares  had been  designated  as Series A  convertible  preferred
               stock ("Series A shares"),  4,500,000 shares designated as Series
               B convertible preferred stock ("Series B shares"), in addition to
               50,000,000  shares of common  stock.  As of December 31, 2002 and
               2001, there were 225,029 Series A shares outstanding. Each Series
               A share is convertible  into three shares of the Company's common
               stock at the  option of the  holder,  is  entitled  to receive an
               annual  dividend  of $.75 per share if and when  declared  by the
               Company's  Board of Directors and is entitled to $15.00 per share
               plus cumulative  dividends in arrears upon the liquidation of the
               Company.  Holders  of  Series  A shares  do not  have any  voting
               rights. During 2001, the Company declared dividends on certain of
               the outstanding  Series A shares totaling $48,628 and the holders
               of those shares agreed to accept  shares of the Company's  common
               stock as payment of the  dividends.  A total of 19,452  shares of
               common  stock were issued to pay the accrued  dividends  in 2001.
               The  issuance  of the common  shares to pay the  dividends  was a
               noncash transaction and, accordingly,  it is not reflected in the
               accompanying 2001 consolidated statement of cash flows.

               During June 2002  through  January 6, 2003,  the  Company  issued
               469,000  shares of Series B shares and  received  net proceeds of
               $415,760.  The Series B share does not provide for any dividends.
               In addition, each Series B share is convertible into one share of
               the  Company's   common  stock  at  the  option  of  the  holder.
               Additionally,  the  Series B shares are  subject to an  automatic
               conversion  into  shares of the  Company's  common  stock upon an
               initial  public  offering  or upon the closing of a merger with a
               publicly-traded  corporation or entity upon  ratification  by its
               stockholders.  Accordingly,  on March 19,  2003,  Series B shares
               were converted into shares of common stock.


                                      F-23
<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 10- Stockholders' deficiency (continued):
               During 2002,  the Company issued  warrants to certain  promissory
               noteholders to purchase  444,752  shares of the Company's  common
               stock at exercise  prices of $2.50.  These  warrants  were issued
               since the  promissory  notes were in  default.  The  Company  has
               valued  these  warrants at  approximately  $189,000.  The Company
               charged  interest expense in the 2002  consolidated  statement of
               operations.

               On November  19,  2002,  the Company  entered into a finders' fee
               agreement with an individual for services  relating to the merger
               of GHC and G-TEC. In consideration for the services provided, the
               Company issued 250,000 shares of its common stock at an estimated
               value of $1.00  per  share.  The  Company  recorded  a charge  to
               professional fees of $250,000 to the 2002 consolidated  statement
               of operations.

               In December 2002, the Company  granted options for legal services
               to  purchase  500,000  shares of the  Company's  common  stock at
               exercise prices of $.001,  expiring in December 2007.  250,000 of
               these options were granted to a law firm whose  principal is also
               on  the  Company's  Board  of  Directors  and an  officer  of the
               Company.  The Company has valued  these  options at $408,975  and
               charged professional services in the 2002 consolidated  statement
               of operations, since the options vest immediately.

               In October  2002,  the  Company  granted  options to its Board of
               Directors to purchase  1,200,000  shares of the Company's  common
               stock at exercise  prices of $.60,  expiring in October 2012. The
               estimated  fair value of the  Company's  common stock at the date
               the options were granted was $1.00. Since the Company's estimated
               fair value of its common stock exceeded the exercise price at the
               date of grant,  the Company has valued these  options at $288,148
               and  charged  professional  services  in  the  2002  consolidated
               statement of operations, since the options vest immediately.


Note 11- Subsequent event:
               On February  10, 2003,  the Company  entered into an agreement to
               issue 350,000 shares of its common stock at various dates through
               November 30, 2003 for consulting  services.  In addition,  to the
               common  stock  that was  issued to the  consultant,  the  Company
               issued warrants to purchase 150,000 shares of its common stock at
               an exercise price of $.50, expiring in February 2008.



                                      * * *

                                      F-24
<PAGE>