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



                                  Form 10-KSB/A-2



Annual report pursuant to Section 13 or 15(d) of the Securities  Exchange Act of
1934, as amended For the fiscal year ended September 30, 2001

                         Commission File Number 0-27842

                                  Colmena Corp.
               (Name of Small Business Registrant in its charter)

    Delaware: (State or other jurisdiction of incorporation or organization)

               54-1778587: (I.R.S. Employer Identification Number)

        2500 North Military Trail, Suite 225-C; Boca Raton, Florida 33431
           (Address of principal executive offices including zip code)

                 (561) 998-2031 (Registrant's telephone number)

                 Not Applicable (Former address of our Company)

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

    Title of each class: None Name of each exchange on which registered: None

 Securities Registered under Section 12(g) of the Act: Common Stock, $0.01 par
                             value (Title of Class)

Check  whether  the  Registrant  (1) filed all  reports  required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934, as amended,  during
the past  twelve  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: All reports prior to report date  (September
30, 2001) have been filed. Yes [X] No []

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

State Registrant's revenues for its most recent fiscal year: $ 0 (for year ended
September 30, 2001)


State the  aggregate  market  value of the voting  stock held by  non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked  prices of such stock,  as of a specified  date within the past 60
days:  $330,241.92 based on a last transaction price  of  $0.03 as  of March 25,
2001, there being  11,008,064  shares of common stock held by persons other than
officers, directors or control persons of the Registrant on such date.

State the number of shares  outstanding of each of the  Registrant's  classes of
equity, as of the latest practicable date: 20,000,000 shares of common stock, as
of March 25, 2002.



<PAGE>



                             Available Information.

     The public  may read and copy any  materials  filed by  Colmena  Corp.("our
Company") with the Securities and Exchange  Commission (the "Commission") at the
Commission's Public Reference Room at 450 Fifth Street,  Northwest,  Washington,
D.C.  20549.  The public may obtain  information  on the operation of the Public
Reference  Room by calling the  Commission  at  1-800-SEC-0330.  The  Commission
maintains  an  Internet  site  that  contains  reports,  proxy  and  information
statements,  and other information  regarding our Company and other issuers that
file reports electronically with the Commission, at http://www.sec.gov.



                 Caveat Pertaining to Forward Looking Statements

     The  Private  Securities  Litigation  Reform  Act of 1995  provides a "safe
harbor" for  forward-looking  statements.  Certain of the  statements  contained
herein,  which are not historical  facts,  are  forward-looking  statements with
respect to events,  the  occurrence of which  involve  risks and  uncertainties.
These  forward-looking   statements  may  be  affected,   either  positively  or
negatively,  by various factors.  Information  concerning potential factors that
could affect our Company is detailed from time to time in our Company's  reports
filed with the  Commission.  This  report  contains  forward-looking  statements
relating to our  Company's  current  expectations  and  beliefs.  These  include
statements   concerning   operations,   performance,   financial  condition  and
anticipated  growth.  For this purpose,  any  statements  contained in this Form
10-KSB  that  are  not  statements  of  historical   fact  are   forward-looking
statements.  Without  limiting the  generality of the  foregoing,  words such as
"may", "will", "expect", "believe", "anticipate", "intend", "could", "estimate",
or  "continue",  or the  negative  or  other  variation  thereof  or  comparable
terminology,   are  intended  to  identify  forward-looking  statements.   These
statements by their nature involve  substantial risks and uncertainties that are
beyond our Company's control. Should one or more of these risks or uncertainties
materialize  or should our Company's  underlying  assumptions  prove  incorrect,
actual outcomes and results could differ  materially from those indicated in the
forward-looking statements.



                                      -2-
<PAGE>



                                Table of Contents


Part    Item   Page
Number  Number Number Caption

I       1      3     Description of Business
        2      9     Description of Property
        3      10    Legal Proceedings
        4      11    Submission of Matters to a Vote of Security Holders

II      5      12    Market for Common Equity and Related Stockholder Matters
        6      22    Management's Discussion and Analysis and Plan of Operation
        7      26    Financial Statements
        8      43    Changes  In   and    Disagreements   With   Accountants  on
                       Accounting  and  Financial Disclosure

III     9      44    Directors,  Executive  Officers,  Promoters   and   Control
                       Persons;Compliance With Section 16(a) of the Exchange Act
        10     47    Executive Compensation
        11     51    Security  Ownership   of  Certain   Beneficial  Owners  and
                       Management
        12     55    Certain Relationships and Related Transactions
        13     56    Exhibits and Reports on Form 8-K

Signatures     57

Additional
  Information  58

Exhibits       59 - 73

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

Organization

Colmena Corp., a Delaware corporation,  was originally  incorporated on July 11,
1994,   in  the   State  of   Virginia   under  the  name   Sports-Guard,   Inc.
("Sports-Guard"). Its corporate domicile was changed to the state of Delaware on
July 26,  1995.  On  November  10,  1997,  our  Company  changed  its name  from
Sports-Guard to Colmena Corp.

On November 10, 1997,  our Company  became  engaged in the business of marketing
and  distributing  long-distance  telephone  service  calling  cards  and in the
manufacture and distribution of premium hand-rolled cigars, in each case through
wholly-owned  subsidiaries.  In September 1998, the company  responsible for the
billing  and  collection  of our  Company's  long-distance  telephone  services,
International  Telemedia  Associates,  Inc.  ("ITA"),  defaulted  in its payment
obligations and  subsequently  entered into Chapter 7 bankruptcy.  At that time,
ITA owed our Company approximately $5.6 million, which represented approximately
95% of our Company's  accounts  receivable.  As a result of ITA's  default,  our
Company and its  subsidiaries  were forced to  discontinue  day-to-day  business
operations.

In March 1999, our Company's  board of directors  determined  that it was in the
best  interests  of  our  Company  to  divest  itself  of all  ownership  in its
subsidiaries  in order to position it to undertake new business  endeavors or to
become a more attractive acquisition  candidate.  On March 25, 1999, our Company
entered  into a  reorganization  agreement  with  Richard C.  Peplin,  Jr. ("Mr.
Peplin"),  the  principal  stockholder  and  former  president  of our  Company,
pursuant to which all the  subsidiaries  then-owned by our Company were conveyed
to Mr.  Peplin  in  exchange  for his  agreement  to file  for  protection  from
creditors  pursuant  to  Chapter 7 of the United  States  Bankruptcy  Code.  Any
proceeds  remaining after  completion of such bankruptcy  proceedings were to be
used to discharge  obligations of the  subsidiaries or our Company,  and the net
proceeds  remaining  after such  payments  (considered  at the time an  unlikely
event)  were  to be paid to our  Company.  However,  any  assets  of the  former
subsidiaries   were  assigned  by  Mr.  Peplin  to  regulatory   authorities  in
conjunction   with  the  settlement  of   administrative   actions  against  the
subsidiaries  and Mr.  Peplin,  and our Company never received any proceeds from
this divestiture  transaction.  A copy of the reorganization agreement was filed
as an exhibit to our  Company's  Form  10-KSB for the year ended  September  30,
1998. On July 6, 2001, our Company entered into a  clarification  agreement with
Mr.  Peplin,  to  include  the  name  of Tio  Mariano  Cigar  Corp.,  which  had
inadvertently  not been listed in the original  March 25,  1999,  reorganization
agreement. A copy of the clarification  agreement was filed as an exhibit to our
Company's Form 10-KSB for the year ended September 30, 1999.

Our Company has not been involved in any  bankruptcy,  receivership,  or similar
proceeding.


                                      -3-
<Page>



Business

As a result  of the  reorganization  described  above,  our  Company's  business
operations since then have consisted of (1) a strategic consulting  relationship
with The Yankees Companies, Inc. ("Yankees"), (2) a telecommunications agreement
with BellSouth, and (3) recently initiated consulting activities.

1.   Consulting  Relationship  & Material  Agreements  Between  Our  Company and
     Yankees

During  January  of  1999,  our  Company  retained  Yankees  to  assist  in  the
development and  implementation  of new strategic plans. A consulting  agreement
was  established  for a term of 730 days from the effective  date, to be renewed
automatically  on a continuing  annual  basis,  unless  terminated by one of the
parties 30 days prior to the expiration of the then-current  term. A copy of the
agreement  was filed as an exhibit  to our  Company's  Form  10-KSB for the year
ended September 30, 1998. The services provided by Yankees were agreed to be the
services, on a reasonable,  as required,  basis,  consistent with Yankees' other
business  activities.  Yankees'  areas of  expertise  are  mainly  comprised  of
corporate structure, organization, and reorganization, mergers, acquisitions and
divestitures,  strategic corporate  development,  corporate financial and equity
analysis,  and  other  corporate  matters.  Furthermore,  Yankees  agreed  to be
responsible for  administering  the  expenditure of the proceeds  derived by our
Company  from the  exercise of options that were given to Yankees as part of its
compensation  for the services  rendered  (see below) in order to implement  the
strategic  plans  developed by Yankees and to settle and discharge the corporate
obligations of our Company.

As  consideration  for the  first  200 hours of  services  provided  (in lieu of
document license fees and required cash payments valued at $20,000), our Company
agreed  to issue to  Yankees  options  (designated  as the Class A  Options)  to
purchase shares of our Company's common stock at an aggregate  exercise price of
$40,000.  The  amount  of  underlying  shares  were  to be  equal  to 51% of our
Company's common stock at such time as exercise is completed. At the date of the
consulting agreement, 8,066,326 shares of common stock would have been issuable,
had the Class A Options  been  exercised  in full on such date.  Any increase or
decrease in the  outstanding or reserved  shares would result in a corresponding
adjustment of the options'  quantity and exercise  price per share.  The options
were originally  exercisable from the 10th day until the 365th day following the
effective date of the consulting agreement.  The term of the Class A Options was
amended  on  January  2, 2000 to extend  the term for  exercise  to the later of
December  31,  2002 or the  100th  day after  our  Company  registers  the stock
underlying any unexercised warrants.

For additional services provided, during the initial term, our Company agreed to
pay the following consideration:

     (a)  If  Yankees  arranges  or  provides  funding  for our  Company on more
          beneficial  terms  than  those  reflected  in  our  Company's  current
          principal  financing  agreements,  Yankees  will be  entitled,  at its
          election, to either:

          (i)       a fee of 25% of the savings achieved, on a continuing basis;
                    or

          (ii)      if  equity  funding  is  provided  through  Yankees  or  its
                    affiliates,  a  discount  of 10% from the bid  price for the
                    subject  equity  securities,  if  issuable  as free  trading
                    securities,  or a discount of 50% from the bid price for the
                    subject  equity   securities,   if  issuable  as  restricted
                    securities (the "Discounts"); or

          (iii)     an introduction fee of 5% of the aggregate proceeds obtained
                    if funding is  provided  by any  persons  introduced  to our
                    Company by Yankees (the "Introduction Fee");

     (b)  If Yankees generates business for our Company,  Yankees is entitled to
          a  commission  of 10% of  the  gross  income  derived  by our  Company
          therefrom on a continuing basis;

     (c)  If Yankees  arranges for an  acquisition  by our  Company,  Yankees is
          entitled to 10% of the consideration paid for such acquisition.


                                      -4-
<Page>



In  addition,  our  Company  is  responsible  for the  payment  of all costs and
disbursements  associated with Yankees' services subject to certain  limitations
and/or approvals, as stipulated in the Agreement.

On January 2, 2000, the consulting agreement was amended to: modify the required
payments to Yankees  based on Yankees'  standard  hourly  rates,  by  permitting
Yankees to accept payment in capital stock at the conversion  rate of 50% of the
fair market value of such stock; increase Yankees' ownership after full exercise
of its warrants to 75% from 51% and the aggregate exercise price to $80,000 from
$40,000; and to clarify Yankees' preferential rights to subscribe for additional
securities.  A copy of the  agreement  was filed as an exhibit to our  Company's
Form 10-KSB for the year ended September 30, 1998.

On January 4, 2001, a further  amendment  changed the  consulting fee to $10,000
per  month,  eliminating  hourly  and  document  licensing  fees (a  substantial
reduction of historical fees accrued on a hourly basis).  It also eliminated the
5% Introduction Fee, and changed the Discounts in (a) (ii) above as follows:  if
equity funding is provided through Yankees or its affiliates,  a discount of 10%
from the lowest price at which such  securities  are offered to any other person
for the subject equity securities,  if issuable as free trading securities, or a
discount of 50% from the lowest  price at which such  securities  are offered to
any other person for the subject  equity  securities,  if issuable as restricted
securities.  A copy of the  agreement  was filed as an exhibit to our  Company's
Form 10-QSB for the quarter ended December 31, 1998.

As a material  subsequent event, on December 31, 2001 (the "Exchange Date"), our
Company  issued a Class A Bond to Yankees in exchange for the warrant  discussed
above and a series of matured and past-due promissory notes held by Yankees. The
exchange was an exempt transaction pursuant to Section 3(a)(9) of the Securities
Act of 1933, as amended  ("Securities  Act"),  and essentially  consolidated the
warrant and  promissory  notes into the Class A Bond. The Class A Bond is in the
principal amount of $80,000 plus interest accrued as of December 31, 2001 (total
face value $86,664.18),  and has a term of one-year,  with interest payable upon
maturity at the  annualized  rate of 2% over the prime rate  charged  during the
Class A Bond's  term by  Citibank,  N.A.  (New York  City).  The Class A Bond is
secured by all of our  Company's  assets,  and may be  subdivided,  at  Yankees'
option,  into two or more separate  obligations  in the  principal  amount of at
least $10,000 each. The Class A Bond is convertible,  at Yankees'  option,  into
shares of the Company's  securities  such that,  upon complete  conversion,  the
number  of  shares  owned by  Yankees  shall  be  equal to 75% of the  Company's
outstanding  and reserved  capital  stock at the time  conversion  is completed,
subject to anti-dilutive  rights for three months thereafter.  Conversion may be
effected  in whole or in part,  and to date  Yankees  has  converted  $40,000 in
principal of the Class A Bond into  approximately  40% of the  Company's  common
stock. At the Exchange Date, the fair market value of the conversion  feature of
the  Bond was  equal to the fair  market  value of the  warrants  cancelled  and
therefore,  there was no charge or credit to  operations  for the  exchange.  In
substance,  anti-dilutive  changes in the conversion  ratio will be considered a
consulting expense pursuant to the consulting agreement on which the issuance of
the prior  warrants was based. A copy of the Bond was filed as an exhibit to our
Company's Form 10-QSB for the quater ended December 31, 2001.


As of the date of this report, 10,274,970 shares of common stock are issuable to
Yankees.  At the report date,  Yankees was also owed consulting  compensation of
$90,000. As a material subsequent event,  as of March 25, 2002,  Yankees is owed
consulting  compensation of $140,000.  The current  percentage  ownership in our
Company of Yankees and its members is  approximately  40% (see Part III, Item 11
below).


After its initial  evaluation of our Company's needs,  Yankees  recommended that
our Company's  top priority be the  preparation  and filing of all  then-overdue
reports to the Commission required under the Securities Exchange Act of 1943, as
amended  (the  "Exchange  Act"),  and  that our  Company  first  concentrate  on
completing  the audit of its  financial  statements  for the  fiscal  year ended
September 30, 1998 (the "1998  Audit").  The 1998 Audit was not completed  until
June of 2000 due to difficulties in reconstructing  poorly documented  corporate
transactions and locating records from  discontinued  operations.  Until Yankees
was  retained,  our  Company  lacked  funds to pay  either for such audit or for
corporate personnel to assist the auditors.  Immediately following completion of
the 1998 Audit,  our Company  started  preparation  of the  quarterly  unaudited
financial  statements required in order to complete and file its overdue reports
on Commission  Form 10-QSB for the calendar  quarters  ended  December 31, 1998,
March 31, 1999 and June 30, 1999, the audit for our Company's  fiscal year ended
September  30, 1999  (during  which there was  virtually no  activity);  and our
Company's delinquent reports on Commission Form 10-QSB for the calendar quarters
ended  December 31, 1999,  March 31,  2000,  and June 30, 2000,  Form 10-KSB for
fiscal year ended  September 30, 2000 and Form 10-QSB for the calendar  quarters
ended  December 31, 2000,  March 31, 2001, and June 30, 2001. Our Company is now
current in all such filings with the Commission.

                                      -5-

<Page>



Concurrently with activities  pertaining to the 1998 Audit, Yankees assisted our
Company in  identifying  persons  with claims or  potential  claims  against our
Company and in negotiating  amicable  resolutions of such claims.  The following
claims have been successfully settled:

                           Basis for  Amount
Claimant                   Claim      of Claim   Agreed to

Madhu & Ila Sethi             (1)    $ 18,153.   250,000 shares of common stock
Jack Levine                   (2)    $  2,550.    34,000 shares of common stock
Oppenheimer, Wolff & Donnelly (3)    $ 50,782.   677,087 shares of common stock
Lawrence R. Van Etten         (4)    $ 18,153.   136,147 shares of common stock
Wiseman Family Trust          (5)    $ 51,000.   533,333 shares of common stock
Patrick V. Graham             (6)    $ 40,000    100,000 shares of common stock
SBV Holdings                  (7)    $138,333. 1,844,444 shares of common stock
Strategica Group              (8)     (8)       (8)
----------

(1)  Terms of  settlement  for unpaid  wages  totaling  $24,069 for Mr.  Sethi's
     services as president of our  Company's  technology  division from February
     18, 1998 to December 21, 1998.

(2)  Terms of settlement for unpaid invoices  totaling $2,550 for legal services
     provided to our Company in 1998.

(3)  Terms of settlement for unpaid invoices totaling $50,782 for legal services
     provided to our Company from May 29, 1998 to November 11, 1998.

(4)  Terms of settlement for unpaid wages and  out-of-pocket  expenses  totaling
     $18,153 for  services  during  1998 as  president  of one of our  Company's
     former subsidiaries.

(5)  Terms of  settlement  for balance due  ($51,000) on a defaulted  promissory
     note by one of our Company's former subsidiaries.

(6)  Issued  pursuant to the settlement  agreement  approved by the court in the
     case of Patrick  Graham vs. Five Star  Cigar,  Inc.  and others,  including
     Colmena  Corp.,  case no.  99-121194,  Circuit  Court for  Broward  County,
     Florida, involving a defaulted promissory note in the amount of $40,000.

(7)  Terms of  settlement  for a  defaulted  promissory  note in the  amount  of
     $100,000  plus accrued  interest of $38,333.

(8)  As a material  subsequent  event, on December 31, 2001, our Company entered
     into a settlement  agreement  with  Strategica  Services  Corporation  (the
     "Settlement  Agreement"  and  "Strategica,"  respectively).  The Settlement
     Agreement  was filed as an  exhibit to our  Company's  Form 8-K filed on or
     about  January 15, 2002.  In exchange for the  cancellation  of any and all
     prior agreements  between the parties and their  affiliates,  including but
     not limited to an  "Investment  Banking and  Advisory  Services  Agreement"
     dated May 7, 1998 (the  "1998  Services  Agreement,"  discussed  more fully
     below,  attached to the  Settlement  Agreement as exhibit 1 and  previously
     filed as an  exhibit  to our  Company's  Form  10-KSB  for the  year  ended
     September  30,  1998),  and subject to the  effectiveness  of a  sufficient
     increase in capitalization by our Company's stockholders,  our Company will
     issue  Strategica  1,030,495  shares of common stock,  which will represent
     4.9% of the common stock outstanding  immediately after such issuance based
     on the  20,000,000  shares  outstanding  as of the  date of the  Settlement
     Agreement (the "Strategica  Shares").  The Strategica Shares will also have
     anti-dilution  rights tied  proportionately only to the class A convertible
     bond held by Yankees (the "Convertible  Bond") upon complete  conversion of
     the Bond. The Convertible Bond gives Yankees the right to acquire up to 75%
     of our  Company's  authorized  and  reserved  common  stock  (the  "Yankees
     Shares"),  and the Strategica Shares will be reduced below 4.9% only to the
     extent the Yankees  Shares are reduced below 75%, and in direct  proportion
     thereto.  The Settlement  Agreement's  anti-dilution  terms further provide
     that upon complete  conversion of the  Convertible  Bond and the payment of
     specified  liabilities  of our  Company  (as set forth in  exhibit 2 to the
     Settlement  Agreement),the Strategica Shares will not be diluted below 2.5%
     of our Company's  then-outstanding  common stock but that  Strategica  will
     have  no  further  anti-dilutive  rights  thereafter.  The  purpose  of the
     Settlement  Agreement  was, in part,  to nullify any rights or  obligations
     under the 1998 Services Agreement.  The 1998 Services Agreement was entered
     into with  Strategica  and a related  company called  Strategica  Financial
     Corp. ("Financial Corp.") for a term ending on April 30, 2003. The services

                                      -6-
<Page>


     to have been  provided by Services  Corp.  or, at its option,  by Financial
     Corp.  primarily  consisted  of: (i)  providing  advice to our  Company and
     assisting with contract negotiations, business strategies, and any required
     regulatory  filings;  (ii)  providing  our Company with advice  relating to
     financing  options;  (iii)  advising  our Company with respect to potential
     public offerings and private placements of equity or debt securities;  (iv)
     assisting our Company in preparing  any required  offering  documents;  (v)
     assisting  our  Company  in  identifying   potential   equity  and/or  debt
     investors;  (vi) providing  advice to our Company with respect to potential
     marketing  strategies,   mergers,   other  acquisitions,   reorganizations,
     recapitalizations  or sales of assets;  and (vii)  providing  advice on all
     business  strategies and agreements.  As consideration  for the services to
     have  been  provided,  our  Company  agreed  to  pay a  non-refundable  due
     diligence  review fee of $100,000 and a monthly fee to Strategica of $5,000
     for the month of May 1998,  $10,000 from June 1998 to May 1999,  and $5,000
     until April 30, 2003. In addition,  our Company  agreed to pay to Financial
     Corp.  5% and 3%,  respectively,  of the gross  proceeds  committed  to our
     Company for equity sold and debt issued, respectively, and to Strategica 5%
     of the  gross  purchase  price  received  in the  event  of the sale of our
     Company,  its subsidiaries,  or affiliates and a debt  restructuring fee of
     10%  of  all  debt   restructured,   converted  to  equity,   or  extended.
     Furthermore, our Company agreed to reimburse Strategica and Financial Corp.
     for  reasonable  expenses  incurred.  Our  Company  also  agreed to provide
     Strategica  and Financial  Corp.  with warrants for 25% of our common stock
     with full anti-dilution and registration  rights. In March 1999,  Financial
     Corp.  transferred  all of its shares to a Mr.  Laurence  Isaacson  and was
     renamed  Thornhill  Group,  Inc. As part of this transfer,  Financial Corp.
     gave up any  rights  it may have had in the 1998  Services  Agreement  (see
     exhibit 3 to the Settlement  Agreement).  The Settlement Agreement has been
     entered into to avoid costly and protracted  litigation between the parties
     and to resolve any  remaining  claims over what  services  were or were not
     provided,  what fees are or are not due, and the enforceability of the 1998
     Services Agreement.

Yankees is currently  conducting  negotiations  with other claimants.  While our
Company's  management  believes  that  there  is a  reasonable  likelihood  that
settlement  discussions will be successful,  no assurances to that effect can be
provided. The total amount of unresolved claims against our Company is $465,435,
and settlement offers are as follows:


                                    Basis for         Amount        Compromise
Claimant                            Claim            of Claim       Offered
--------                            -----            --------       -------
Diners Club                         (1)            $  14,206.        (1)
Federal Express                     (2)            $   7,299.        (2)
Arent Fox, et. al.                  (3)            $  27,323.        (3)
Deutsche Financial Services Corp.   (4)            $ 331,000.        (4)
Prime Source Leasing Inc.           (5)            $  85,607.        (5)


(1)  On March 14, 2001, the circuit court for Palm Beach County, Florida entered
     a final judgement in favor of Citicorp Diners Club in the amount of $14,206
     for expenses incurred by Madhu Sethi, a former officer of our Company.  Our
     Company has offered  $1,400 to settle this claim.

(2)  On October  23,  2000,  the County  Court for Palm Beach  County,  Florida,
     entered  judgment  in favor of Federal  Express in the amount of $7,299 for
     overnight  shipping services provided in 1998. Our Company has offered $750
     to settle this claim.

(3)  Legal  fees for  services  on behalf of our  Company  during  1998-99.  The
     parties have agreed to settle this claim for $2,750, pending execution of a
     settlement  agreement.

(4)  Based on a guaranty by our Company of a promissory  note executed by one of
     our  divested  subsidiaries.  The  compromise  being  discussed is $100,000
     ($20,000 down and the remainder paid in 32 monthly  installments of $2,500)
     plus  2,500,000  shares of common stock The  arbitration  award in favor of
     Deutsche Financial is discussed more fully in Part 1, Item 3 below. Yankees
     has also suggested to our Company that if the Deutsche  Financial  claim is
     not  resolved,  our  Company  should  consider  filing  for  reorganization
     pursuant  to  Chapter  11  of  the  United  States   Bankruptcy  Code,  and
     aggressively  pursue any and all claims and counterclaims  available to our
     Company in such forum.

(5)  An allegedly  defaulted  promissory note. Our Company is actively  pursuing
     settlement  discussions  with  Prime  Source  Leasing,  but  no  definitive
     settlement  offer has been  made.  There is also a  contingent  third-party
     claim  for  $80,000  by  General  Electric  against  our  Company  in  this
     litigation,  but  management is still  assessing the legal validity of this
     claim and no settlement offer has been made.

                                      -7-
<Page>



     The  following   creditors   have  thus  far  declined  to  participate  in
     negotiations:

                                   Basis for         Amount
Claimant                           Claim             of Claim
--------                           -----             --------
Seymour Brown                       (1)              $     250.
American Arbitration Association    (2)              $     800.


(1)  Accounting fees.
(2)  Arbitration fee in the Deutsche  Financial  matter  referenced  immediately
     above in footnote 4.



Yankees  has  indicated  that it will  assist our  Company  in either  obtaining
capital  required  to  resume  business  operations  pursuant  to the  BellSouth
agreement  (discussed  below),  or  in  acquiring  complementary  businesses  in
exchange  for  shares of our  Company's  common  stock and a  commitment  by our
Company,  with the assistance of Yankees, to provide required expansion capital.
No  assurances  can be  provided,  however,  that  such  business  plans  can be
attained.

Loan Agreement Between Our Company and Yankees

Yankees has been a major source of capital for our Company since January 1999 by
making  loans as needed for  operating  expenses.  At September  30,  2001,  our
Company's  loan  balance  and  related  accrued  interest  due  to  Yankees  was
$109,200.64.  Additional  funding will be required for any  acquisitions and for
funding of our Company's future operations.  Accordingly, on September 25, 2001,
our Company  entered into a revolving loan  agreement  with Yankees  whereby our
Company  agreed to pledge all of its assets as collateral  and Yankees agreed to
loan our Company up to $150,000 (which includes the current  outstanding balance
of  $109,200.64),  on a revolving basis at an interest rate of 2% over the prime
rate of Citibank,  N.A. A copy of the loan  agreement was filed as an exhibit to
our Company's Form 10-KSB for the year ended September 30, 2001.

As a material  subsequent  event, on January 2, 2002, our Company entered into a
new $150,000 revolving credit agreement with a new entity, The Yankee Companies,
LLC("Yankees LLC."), an affiliate of Yankees. Under this agreement,  the Company
may borrow up to a total of  $150,000  between  this  agreement  and its earlier
agreement with Yankees.  The earlier  agreement  remains open until repayment of
the  existing  promissory  notes  relating  to  that  agreement;   however,  any
additional advances will be made only under the new agreement. As of January 31,
2002, there was an outstanding  balance due under the new Yankees LLC. agreement
of  $24,000.  A copy of the  loan  agreement  was  filed  as an  exhibit  to the
Company's  report on Form 10-QSB for the quarter  ended  December 31,  2001.

2.  BellSouth Agreement

Our  Company  currently  maintains  a  resale  agreement  for  the  purchase  of
telecommunications    services   from   BellSouth    Telecommunications,    Inc.
("BellSouth")  for resale to end users.  The  agreement was executed on November
22,  1999 for a term of two  years,  continuing  thereafter  on a month to month
basis,  and  pertains to Sections 251 and 252 of the  Telecommunications  Act of
1996, as amended. The agreement permits our Company to provide competitive local
telephone  exchange  services to  residential  and business  subscribers  in the
States of Alabama, Florida, Georgia,  Kentucky,  Louisiana,  Mississippi,  North
Carolina,  South Carolina and  Tennessee,  provided our Company also obtains the
necessary  regulatory  permits to operate in each of those  states.  Our Company
currently  has no  customers,  has not obtained  any of the required  regulatory
licenses, and is not conducting any business under the agreement with BellSouth.
Now that our  Company  has become  current in its filing  obligations  under the
Exchange Act, it hopes to obtain the capital required to implement such business
operations  pursuant  to the  BellSouth  agreement  and has begun the process of
renewing the  BellSouth  agreement  and applying  for the  necessary  regulatory
permits including our Company's application for a Florida CLEC license, which is
scheduled  for final  approval in March 2002.  No  assurances  can be  provided,
however, that such business plans can be attained.


                                      -8-
<Page>



3.   Our Company's Recent Consulting Activities

During August 2001, in response to Yankees' suggestions,  our Company's board of
directors authorized our Company's officers to negotiate  consulting  agreements
with third parties that desire to avail  themselves of our Company's  experience
as a reporting  company under the Exchange  Act. Such  assistance is expected to
involve  the  recruitment  and  supervision  of  professional  advisors  such as
attorneys, auditors, investment bankers, transfer agents, officers and directors
who have the desired  experience in operating  public  companies,  and access to
procedures  and policies that Yankees has made  available for use by our Company
in complying with federal and state  securities and corporate  laws. Our Company
expects, in exchange for such services, that the consulting client will register
a percentage of its common stock for issuance to our Company's stockholders,  as
of an agreed-upon date following the execution of the consulting agreement.  The
amount of such common stock will vary depending upon the  circumstances  of each
transaction.  The  issuance  of shares  to our  Company's  stockholders  will be
conditioned  on prior  registration  with the  Commission,  and the  failure  to
conclude such registration would void the agreement.

Registration  of shares  directly to our Company's  stockholders is necessary in
order for our Company to avoid inadvertently becoming an investment company, and
provides a major benefit to consulting  clients in that they obtain a large base
of stockholders, including all of our Company's market makers. The major benefit
of the consulting services to our Company is that it will be continually exposed
to emerging companies,  some of which should prove to be attractive  acquisition
candidates or candidates for strategic operating alliances (cooperative business
activities  not  involving  shares of equity  ownership)  that fit our Company's
strategic  objectives.  Our Company  does not yet have any  consulting  clients,
although it is curently  discussing such  possibility  with several  candidates.
Employees

Our Company  currently has Edward C. Dmytryk serving as our Company's  president
and chief  executive  officer;  Vanessa  H.  Lindsey  serving  as our  Company's
vice-president,  secretary,  and  chief  administrative  officer;  and  Kevin W.
Dornan, Esquire, serving as our Company's general counsel.

ITEM 2.  DESCRIPTION OF PROPERTY.

All of our Company's office facilities,  equipment and clerical personnel at the
following  addresses  (all  located  in the  State of  Florida)  have  been made
available to our Company by Yankees on a resource-sharing, cost basis:

Administrative-Ocala:      5185 Southeast 20th Street, Suite 800; Ocala, Florida
                           34471

Corporate-Boca Raton:      Crystal Corporate Center;  2500 North Military Trail,
                           Suite 225-C; Boca Raton, Florida 33431.

Our Company  anticipates  that these  facilities  will be adequate for its needs
unless it resumes business  operations under the BellSouth  Agreement,  at which
point  required  facilities  would be  obtained,  or it  engages  in a  material
acquisition,  in which case it is anticipated that adequate  facilities would be
included as a component of such acquisition or would otherwise be obtained.


                                      -9-
<Page>

ITEM 3.  LEGAL PROCEEDINGS.

In the matter of Deutsche  Financial Services  Corporation  ("DFS") vs. Business
Technologies Systems, Inc. ("BTS"), Richard C. Peplin ("Mr. Peplin") and Colmena
Corp.(collectively,  the  "Respondents"),  on October 6, 1998,  DFS commenced an
arbitration  proceeding before the American  Arbitration  Association in Dallas,
Texas,  seeking to enforce a guaranty that had been executed by our Company, Mr.
Peplin  personally,  and Madhu and Ila Sethi  personally  ("Mr. and Mrs. Sethi")
(collectively,  the  "Guarantors")  on a loan  to  BTS,  one  of  our  Company's
now-divested subsidiaries,  which was in default. Subsequent to the default, BTS
had  entered  into  a  loan  extension   agreement  with  DFS  (the   "extension
agreement"),  a condition of which was that all of the  Guarantors  executed the
extension agreement and entered into a "consent  arbitration award" in the event
of further  default by BTS. Mr.  Peplin and our Company  executed the  extension
agreement and consent  arbitration  award, but when Mr. and Mrs. Sethi failed to
do so as agreed,  our Company and Mr. Peplin  repudiated  their  guarantees  and
consents.  As of December 31, 1998,  BTS defaulted on the remaining loan balance
of approximately  $331,000. On or about June 1, 1999, unknown to our Company and
pursuant to an  undisclosed  settlement  agreement  with DFS, Mr. and Mrs. Sethi
executed the extension  agreement and arbitration consent award that had already
been  repudiated by our Company.  On October 8, 1999,  the American  Arbitration
Association  then  entered  a  "Consent  Arbitration  Award" in favor of DFS and
against all  Respondents,  including  our Company.  Our Company has not paid any
portion of the award and is not aware of any  proceedings  to enforce it. Should
such proceeding be commenced, our Company will seek to have the award vacated on
the grounds  that our Company  repudiated  its guaranty and consent to the award
such that the  arbitrators  were without  jurisdiction to enter it. In the event
the award were reduced to a judgment,  moreover, our Company anticipates that it
would avail itself of protection  under Chapter 11 of the U.S.  Bankruptcy  Code
and seek to litigate  the entire  matter.  Nonetheless,  our Company is actively
pursuing settlement negotiations to avoid the uncertainly of further litigation.
No  assurance  can  be  provided,   however,  that  such  negotiations  will  be
successful.

In the matter of Prime Source Leasing, Inc. (Prime Source") vs. General Electric
Capital Corp.  ("GE") vs.  Colmena Corp.,  et al.  (Circuit Court for Palm Beach
County,  Florida, filed March 9, 2000), plaintiff Prime Source sued defendant GE
under  various  causes of  action.  GE then  sued our  Company  as a  contingent
third-party under an indemnification claim, alleging that if (and only if) GE is
found  liable  to Prime  Source  for a  stopped-payment  check in the  amount of
$80,000,  then our Company is liable to GE. GE has asserted  various defenses to
the claim by Prime Source, including that GE had the legal right to stop payment
on the check;  if this  position  prevails,  the claim against our Company would
fail as well The case  was  originally  set for  trial  in  August  2001 but was
stricken from the calendar when Prime Source's counsel  withdrew.  On October 7,
2001,  Prime Source amended its complaint to assert an additional  claim against
our  Company,  alleging  goods  sold and  failure to pay a  promissory  note for
$85,605.07,  together with interest since November 30, 1998 and attorney's fees.
Our Company has filed an answer and various  affirmative  defenses  and plans to
vigorously contest this action. No trial date has yet been re-set.  Nonetheless,
our Company is actively  pursuing  settlement  negotiations with Prime Source to
avoid the  uncertainly  of further  litigation.  No  assurance  can be provided,
however, that such negotiations will be successful.

In the matter of Federal Express Corporation vs. Colmena Corp. (County Court for
Palm Beach County,  Florida, filed April 17, 2000), seeking payment of overnight
delivery  costs,  a final  judgment  was  entered in favor of the  plaintiff  on
October 30, 2000, for $7,298.99  together with 10% interest  through the date of
the  judgment.  Collection  efforts  have  been  pursued  by the  plaintiff  and
settlement  discussions  are  taking  place.  As of the  filing of this  report,
however,  the  judgment  has not  been  satisfied  and the  matter  has not been
settled. No assurance can be provided that such settlement  negotiations will be
successful.


                                      -10-
<Page>


In the matter of Citicorp Diners Club, Inc. vs. Colmena Corp. (Circuit Court for
Palm Beach County,  Florida, filed November 28, 2000), plaintiff sought recovery
for expenses  charged by Mahdu Sethi, a former officer of our Company.  On March
14,  2001,  the court  entered  final  judgment for  $14,206.00  in favor of the
plaintiff.  Collection efforts have been pursued by the plaintiff and settlement
discussions  are taking  place.  As of the filing of this report,  however,  the
judgment  has not  been  satisfied  and the  matter  has not  been  settled.  No
assurance can be provided that such settlement negotiations will be successful.

In the matter of the FTC vs. T2U Co. (a former  subsidiary of our  Company),  on
December 9, 1998, the FTC commenced an administrative proceeding to determine if
T2U had engaged in unfair or deceptive trade practices in violation of 15 U.S.C.
ss. 45 or the FTC's rules on telephone disclosure,  16 C.F.R. part 308, relating
to recurring  charges for prepaid  telephone cards that the FTC alleged appeared
on consumers' telephone bills. T2U entered into a consent decree with the FTC on
November  23,  1999,  and it was  approved  by the FTC and  filed  with the U.S.
District Court for the Northern District of Ohio (Eastern  Division) on April 4,
2001.  The Court entered final  judgment on May 9, 2001,  concluding the matter.
Our  Company  was  not a party  to that  proceeding  and,  consequently,  is not
expected to be affected by the proceeding or its disposition.

In the  matter  of the  People  of the  State  of  Illinois  vs.  RCP (a  former
subsidiary of our  Company),  on March 19, 1998,  the State of Illinois  filed a
complaint  for  injunctive  relief and damages in the Circuit Court for Sangamon
County, Illinois,  alleging that RCP had engaged in deceptive business practices
in violation of Illinois law by billing Illinois  consumers for enhanced prepaid
calling card  services that the consumers  never  received.  The court entered a
consent decree in January 2000 and the case has been closed. Our Company was not
a party to that proceeding and, consequently,  is not expected to be affected by
the proceeding or its disposition.

In the matter of the Louisiana  Public Service  Commission  ("LPSC") vs. RCP and
T2U  (former  subsidiaries  of our  Company),  the LPSC began an  administrative
proceeding  on January 7, 1999,  to  determine  if RCP and T2U had sold  prepaid
calling cards services in Louisiana  without the requisite  regulatory  permits.
The LPSC formally  abandoned the  proceedings as of August 23,  2001,because  no
action was ever taken during the  applicable  time limit.  Our Company was not a
party to that  proceeding and,  consequently,  is not expected to be affected by
the proceeding or its disposition.


ITEM 4.  SUBMISSION OF MATTERS TO SECURITY HOLDERS.


Our Company did not submit any matter to a vote of security  holders  during its
fiscal year ended  September  30, 2001.  Our  Company's  next annual  meeting of
stockholders  is scheduled for May 17, 2002,  and  no proxies  will be requested
by our Company's management.




                                      -11-
<Page>


                                    PART II

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

Market Information.

During  the  report  period,  our  Company's  common  stock  was  traded  in the
over-the-counter  market and quoted in what are  commonly  referred to as on the
"Electronic  Pink  Sheets,"  which  report  quotations  by brokers or dealers in
particular  securities,  and on the  over-the-counter  electronic bulletin board
operated by NASD (the "OTC Bulletin Board").  Bid, offer and transaction  report
prices for our Company's  common stock were  available  through the OTC Bulletin
Board under the symbol CLME until the fiscal  calendar  quarter  that started on
October 1, 1999. On October 29, 1999,  due to the failure of our Company to file
periodic  reports with the  Commission  on a timely  basis,  the NASD  precluded
brokers or dealers in  securities  from using the OTC Bulletin  Board to publish
quotes for our  Company's  securities.  Now that our Company is again current in
its filing obligations with the Commission, our Company has filed an application
with NASD to resume trading on the OTC Bulletin Board.

Because of the lack of readily  available  quotations  and the  limited  trading
volume  frequently  associated  with  over-the-counter  securities,  there  is a
greater risk of market  volatility of such securities than for securities traded
on  national  exchanges.  The  following  over-the-counter   quotations  reflect
inter-dealer prices, without retail mark-up, mark-down, or commissions,  and may
not necessarily  represent actual  transactions.  The range of the reported high
and low bid quotations have been derived  primarily from  information  quoted on
the OTC Bulletin Board and the Electronic Pink Sheets.  The following table sets
forth the  quarterly  high and low bid  prices  (to the  nearest  $0.125) of our
Company's  common stock for the years ended September 30, 2000 and September 30,
2001.

Year Ended  September 30, 2000
------------------------------
                                                   High             Low
                                                   Transaction      Transaction
                            High       Low         Price            Price
                            ----       ---         -----------      -----------
First Quarter              $0.09      $0.01        $0.09            $0.01
Second Quarter             $0.09      $0.02        $0.09            $0.015
Third Quarter              $0.08      $0.03        $0.08            $0.03
Fourth Quarter             $0.31      $0.02        $0.31            $0.02


Year Ended September 30, 2001
-----------------------------                      Transaction      Transaction
                           High       Low          Price            Price
                           ----       ---          -----------      -----------
First Quarter             $0.24       $0.03        $0.24            $0.03
Second Quarter            $0.10       $0.03        $0.10            $0.05
Third Quarter             $0.12       $0.03        $0.12            $0.035
Fourth Quarter            $0.20       $0.05        $0.12            $0.06

As of February 15, 2002,  six NASD member firms were listed as market  makers in
our Company's common stock:: Schwab Capital Markets LP.; Hill, Thompson Magid, &
Co.; M.H.  Meyerson & Co.; Herzog,  Heine,  Geduld,  Inc.;  Noble  International
Investments,  Inc. and Paragon Capital Markets,  Inc. The transfer agent for our
Company's  common stock is American Stock  Transfer & Trust  Company,  59 Maiden
Lane; New York, New York 10007.



                                      -12-
<Page>



Penny Stock Rules

Our  Company's  securities  are,  as of the  date of  this  report,  subject  to
regulation  as  "Penny  Stocks."  While  our  Company  hopes  that  its  planned
acquisition  program and funds from the sale of its  securities  will remove its
shares from such  category,  it can provide no assurances  that its efforts will
prove successful.

Exchange Act Section 15(g) requires brokers and dealers to make risk disclosures
to  customers  before  effecting  any  transactions  in "penny  stocks." It also
directs the  Commission to adopt rules setting  forth  additional  standards for
disclosure of information concerning transactions in penny stocks.

Penny  stocks  are  low-priced,  over-the-counter  securities  that are prone to
manipulation  because of their price and a lack of reliable  market  information
regarding  them.  Under  Section  3(a)(51)(A)  of the  Exchange  Act, any equity
security is considered to be a "penny stock," unless that security is:

          (i)       registered  and  traded on a  national  securities  exchange
                    meeting specified Commission criteria:

          (ii)      authorized  for  quotation  on the National  Association  of
                    Securities Dealers,  Inc.'s ("NASD") automated  inter-dealer
                    quotation system ("NASDAQ"):

          (iii)     issued by a registered investment company:

          (iv)      excluded, on the basis of price or the issuer's net tangible
                    assets,  from the  definition of the term by Securities  and
                    Exchange Commission rule: or

          (v)       excluded from the  definition by the Securities and Exchange
                    Commission.

Pursuant  to  Section  3(a)(51)(B),   securities  that  normally  would  not  be
considered penny stocks because they are registered on an exchange or authorized
for quotation on NASDAQ may be designated as penny stocks by the  Securities and
Exchange  Commission  if the  securities  are  traded  off  the  exchange  or if
transactions  in the  securities  are  effected  by market  makers  that are not
entering quotations in NASDAQ.

Rule  3a51-1 was  adopted by the  Securities  and  Exchange  Commission  for the
purpose of  implementing  the  provisions  of  Section  3(a)(51).  Like  Section
3(a)(51),  it defines penny stocks by what they are not. Thus, the rule excludes
from the definition of penny stock any equity security that is:

        (A)    a "reported" security:

        (B)    issued by an investment company registered under the 1940 Act:

        (C)    a put or call option issued by the Options Clearing Corporation:

        (D)    priced at five dollars or more:

        (E)    subject to last sale reporting: or

        (F)    whose issuer has assets above a specified amount.

Rule 3a51-1(a)  excludes from the definition of penny stock any equity  security
that is a "reported security" as defined in Rule 11Aa3-1(a). A reported security
is any  exchange-listed  or NASDAQ  security for which  transaction  reports are
required to be made on a real-time  basis  pursuant to an effective  transaction
reporting plan.  Securities  listed on the New York Stock Exchange (the "NYSE"),
certain regional exchange-listed securities that meet NYSE or Amex criteria, and
NASDAQ  National  Market System  ("NMS")  securities  are not  considered  penny
stocks. (Release No. 30608, Part III.A.1).  Generally,  securities listed on the
American Stock Exchange (the "Amex")  pursuant to the Amex's original and junior
tier or its "Emerging Company Marketplace" listing criteria,  are not considered
penny stocks.  Securities listed on the Amex pursuant to its Emerging  Companies
Market ("ECM") criteria,  however, are considered to be "penny stock" solely for
purposes of Exchange Act 15(b)(6).


                                      -13-
<Page>



Rule  3a51-1(d)  excludes  securities  that are priced at five  dollars or more.
Price, in most cases, will be the price at which a security is purchased or sold
in  a  particular  transaction,  excluding  any  broker  commission,  commission
equivalent,  mark-up, or mark-down.  In the absence of a particular transaction,
the five dollar price may be based on the inside bid  quotation for the security
as displayed on a Qualifying  Electronic  Quotation  System [i.e.,  an automated
inter-dealer  quotation system as set forth in Exchange Act Section  17B(b)(2)].
"Inside bid  quotation" is the highest bid quotation for the security  displayed
by a market  maker in the  security on such a system.  If there is no inside bid
quotation,  the average of at least three inter-dealer bid quotations  displayed
by three  or more  market  makers  in the  security  must  meet the five  dollar
requirement.  Broker-dealers  may not rely on  quotations  if they know that the
quotations  have been  entered for the  purpose of  circumventing  the rule.  An
inter-dealer  quotation system is defined in Rule  15c2-7(c)(1) as any system of
general   circulation  to  brokers  and  dealers  that  regularly   disseminates
quotations of identified brokers or dealers.

In the case of a unit composed of one or more  securities,  the price divided by
the number of shares of the unit that are not warrants,  options, or rights must
be five dollars or more. Furthermore, the exercise price of any warrant, option,
or right, or of the conversion  price of any convertible  security,  included in
the unit must meet the five dollar requirement.  For example: a unit composed of
five shares of common stock and five warrants would satisfy the  requirements of
the rule only if the unit price was twenty-five dollars or more, and the warrant
exercise  price was five dollars or more.  Once the components of the unit begin
trading separately on the secondary market,  they must each be separately priced
at five dollars or more.

Securities  that are  registered,  or approved for  registration  upon notice of
issuance,  on  a  national  securities  exchange  are  also  excluded  from  the
definition of penny stock [Rule  3a51-1(e)].  The exchange must make transaction
reports  available  pursuant to Rule  11Aa3-1  for the  exclusion  to work.  The
exclusion is further  conditioned  on the current  price and volume  information
with respect to  transactions  in that security  being reported on a current and
continuing  basis  and made  available  to  vendors  of market  information.  In
addition,  the exclusion is limited to exchange-listed  securities that actually
are purchased or sold through the  facilities  of the exchange,  or as part of a
distribution.  Exchange-listed  securities satisfying Rule 3a51-1(e),  but which
are not otherwise excluded under Rule 3a51-1(a)-(d), continue to be deemed penny
stocks for purposes of Exchange Act Section 15(b)(6).

Securities  that are  registered,  or approved for  registration  upon notice of
issuance,  on NASDAQ are  excluded  from the  definition  of penny  stock  [Rule
3a51-1(f)].  Similar to the exchange-registered exclusion of Rule 3a51-1(e), the
NASDAQ exclusion is conditioned on the current price and volume information with
respect  to  transactions  in that  security  being  reported  on a current  and
continuing basis and made available to vendors of market information pursuant to
the rules of NASD.  NASDAQ securities  satisfying Rule 3a51-1(e),  but which are
not otherwise  excluded  under Rule  3a51-1(a)-(d),  continue to be deemed penny
stocks for purposes of Exchange Act Section 15(b)(6).

An  exclusion  is  available  for the  securities  of issuers  that meet certain
financial standards. This exclusion pertains to:

          (i)       issuers that have been in continuous  operation for at least
                    three  years  having  net  tangible  assets  in excess of $2
                    million [Rule 3a51-1(g)(1)]:

          (ii)      issuers that have been in continuous operation for less than
                    three  years  having  net  tangible  assets  in excess of $5
                    million [Rule 3a51-1(g)(1)]:

          (iii)     issuers that have an average  revenue of at least $6 million
                    for the last three years [Rule 3a51-1(g)(2)].

To satisfy  this  requirement,  an issuer  must have had total  revenues  of $18
million by the end of a three-year  period.  For domestic issuers,  net tangible
assets or revenues must be demonstrated  by financial  statements that are dated
no less than fifteen  months prior to the date of the related  transaction.  The
statements  must have been audited and reported on by an independent  accountant
in accordance with Regulation  S-X. For foreign  private  issuers,  net tangible
assets or revenues must be demonstrated  by financial  statements that are dated
no less than fifteen  months prior to the date of the related  transaction.  The
statements must be filed with the Securities and Exchange Commission pursuant to
Rule  12g3-2(b).  If the  issuer  has not been  required  to  furnish  financial
statements  during the previous  fifteen months,  the statements may be prepared
and audited in compliance with generally accepted  accounting  principles of the
country of incorporation.


                                      -14-
<Page>



Whether the issuer is domestic or foreign,  in all cases a broker or dealer must
review the financial  statements and have a reasonable  basis for believing that
they were  accurate as of the date they were made (Rule  3a51-1[g][3]).  In most
cases a broker-dealer need not inquire about or independently verify information
contained  in the  statements.  Brokers  and  dealers  must  keep  copies of the
domestic  or foreign  issuer's  financial  statements  for at least  three years
following the date of the related transaction.

Our Company's Common Stock

The  authorized  capital stock of our Company  currently  consists of 20,000,000
shares of common stock, $.01 par value. As of the close of business on September
30, 2001, our Company had 19,975,212 shares of common stock outstanding and held
of record by approximately 854 persons. Of those,  approximately 40 were holding
such securities  pursuant to depository  arrangements with the actual beneficial
owners  (e.g.,  securities  held in street name for their  clients by securities
brokers and dealers),  and our Company has been advised that  approximately  333
persons were beneficial owners under such arrangements.  Consequently, the total
number  of  beneficial  owners  of  more  than 5% of our  Company's  outstanding
securities is four. As a material  subsequent event, as of the close of business
on  November  15,  2001,  our  Company  had  20,000,000  shares of common  stock
outstanding

Each holder of shares of our Company's  common stock is entitled to one vote for
each share held on all matters to be voted upon by the  stockholders  generally.
The shares do not have  cumulative  voting  rights,  which means that holders of
more  than 50% of the  shares  of our  Company's  common  stock  voting  for the
election of directors can elect all the directors, and that in such an event the
holders of the  remaining  shares would not be able to elect a single  director.
The approval of proposals  submitted to stockholders  at a meeting  requires the
favorable vote of a majority of the shares voting, except in the case of certain
fundamental matters where Delaware law requires the favorable vote of at least a
majority of all outstanding shares.

Shareholders are entitled to receive such dividends as may be declared from time
to time by the board of directors out of funds legally available  therefor,  and
in the event of  liquidation,  dissolution or winding up of our Company to share
ratably in all assets  remaining  after payment of  liabilities.  The holders of
shares  of  our  Company's  common  stock  have  no  preemptive,  conversion  or
subscription rights.

Our Company has not  declared  any  dividends  on its common  stock and does not
expect to do so at any time in the  foreseeable  future.  There are currently no
restrictions on our Company's ability to declare dividends in the future,  other
than restrictions  applicable to all Delaware corporations  involving the source
of funds for payment of dividends and their  effects on our Company's  solvency.
In the  future,  our  Company  expects  that a  portion  of  its  expansion  and
development capital may be in the form of loans from financial institutions,  in
which case it is likely that such institutions would require restrictions on the
payment of dividends based on traditional  financial  ratios designed to predict
our Company's ability to repay such loans.  However, no specific  predictions as
to any such restrictions can be made at this time.

Pursuant to anticipated  consulting services that may be rendered by our Company
to third  parties  (see "Part I, Item 1"),  it is  possible  that  shares of the
capital stock of our Company's  clients will be registered  with the  Commission
and issued  directly to our Company's  stockholders,  as a "defacto  third party
stock  dividend";   however,  no  assurances  can  be  provided  that  any  such
distribution  will ever take place, or as to the actual economic benefits of any
such distribution.

Amounts of Common Equity Subject to Outstanding Options or Warrants to Purchase,
or Securities Convertible Into Common Equity of our Company


                                      -15-
<Page>



Common Stock Purchase Warrants

Since January 1, 1999, our Company has issued common stock purchase  warrants to
Yankees  and  to  our  Company's  officers  and  directors,   in  lieu  of  cash
compensation  for their services.  Current details  concerning such warrants are
provided  below.  As of September  30, 2001,  3,877,212  shares of our Company's
common  stock were  reserved  for  issuance  pursuant to  existing  obligations,
including  common stock purchase  warrants held by its officers and directors in
lieu of cash  compensation for their services,  but excluding shares issuable to
Yankees.  Yankees  recognizes that the total number of authorized  shares is not
sufficient  to allow for  reservation  of the shares  subject to its  warrant or
issuable  pursuant  to  anti  dilutive  rights  associated  with  prior  warrant
exercise;  however,  Yankees believes that it can obtain sufficient director and
stockholder  votes to increase the authorized  capital stock of our Company,  as
required to permit exercise of its warrant and assurance of additional shares to
which it is entitled pursuant to the warrants' anti dilutive provisions, at such
time as stockholder action can be taken in compliance with applicable securities
laws. Consequently, Yankees has consented to the issuance and reservation of our
Company's  common stock in favor of other  persons,  which would  otherwise have
been subject to Yankees'  warrant.  As a material  subsequent event, on December
31,  2001,  Yankees  exchanged  its warrant  for a Class A bond with  materially
similar terms, as discussed more fully above in Part 1, Item 1, at page

Stock Options

On February 27, 1998,  our Company's  board of directors  adopted a stock option
plan (the "1998 Plan") to provide added incentive for high levels of performance
to its officers, directors, employees, consultants, and independent contractors.
Options  granted  under the 1998 Plan were  designed  either as incentive  stock
options or as non-qualified stock options.  The 1998 Plan terminates on February
27, 2008, unless previously terminated.  The 1998 Plan authorizes our Company to
grant options to purchase up to an aggregate of 600,000  shares of our Company's
common stock. Through the date of this report no stock options have been granted
pursuant  to the  1998  Plan.  The  1998  Plan  was  filed  as an  exhibit  to a
registration statement on Form S-8, filed March 16, 1998.

At Yankees' recommendation, on January 3, 2000, our Company's board of directors
adopted a Non-qualified Stock Option & Stock Incentive Plan (the "2000 Plan") to
compensate  its directors  based on set quantities of options for service on the
board of directors and for services on committees of the board of directors, for
services  chairing the board of directors and its  committees;  with  forfeiture
provisions  in the  event of  non-participation.  The 2000 Plan  authorizes  our
Company to grant  options to purchase up to an aggregate of 1,000,000  shares of
our  Company's  common  stock.  Through the date of this report no stock options
have  been  granted  pursuant  to the 2000  Plan.  The 2000 Plan was filed as an
exhibit to our Company's  report on Form 10-KSB for the year ended September 30,
1998.

Because the plans were not  ratified by the  stockholders  within one year after
their  adoption,  no incentive stock options may be issued  thereunder,  and the
plans are  currently  limited to issuance of  non-qualified  stock  options,  as
determined under the Internal Revenue Code. As a material  subsequent  event, on
November  14,  2001,  both plans  were  terminated,  and the board of  directors
approved a plan for 2002,  subject to approval by the  stockholders  at the next
annual  meeting  of  stockholders.  A copy of the plan is filed as an exhibit to
this  report,  see "Part  III,  Item 13 (a),  Exhibits  Required  by Item 601 of
Regulation SB."

Tabular Information

As of September  30, 2001,  our Company had 3,877,212  shares of its  authorized
common  stock  reserved  for  issuance  (excluding  the  number  of shares to be
reserved for Yankees  warrants and  anti-dilutive  rights) in  conjunction  with
current  obligations to issue  additional  shares or in the event that currently
outstanding  options or warrants are  exercised.  The following  table  provides
summary data concerning such options and warrants:

Designation             Nature of          Exercise or          Number of Shares
or Holder               The Security       Conversion Price     To Be Reserved
-----------             -------------      ----------------     ----------------
Yankees                 Warrant (1)        $80,000 in total     (1)
(2)                     Warrant            $45,140 in total      1,102,000
(3)                     (3)                (3)                   1,000,000
(4)                     (4)                (4)                   1,600,000
Anthony Q. Joffe        (5)                (5)                     175,212



                                      -16-
<PAGE>





(1)  As a material subsequent event, on December 31, 2001, Yankees exchanged its
     warrant for a Class A Bond with materially similar terms, as discussed more
     fully  above in Part 1, Item 1, at page 5. The  number of shares  cannot be
     calculated  precisely for purposes of this table;  rather,  Yankees has the
     right to convert its Class A Bond into shares of our Company's common stock
     equal to 75% of our  Company's  outstanding  and reserved  shares of common
     stock, measured immediately after exercise is completed. The actual formula
     for determining the total number of Yankees' shares issuable is: [the total
     shares  outstanding at the time the final option  exercise  payment is made
     less the number of shares  issued under the bond + the shares then reserved
     other than for the Yankees'  bond]  multiplied  by 3 and rounded up or down
     based on proximity to the next whole number.

(2)  Represents  the  shares  issuable  to  members  of our  Company's  board of
     directors.

(3)  Represents  shares  reserved for issuance in the event offers of settlement
     by our Company are accepted by certain current  creditors,  as disclosed at
     Part I, Item 1 above.

(4)  Represents  the shares  authorized  pursuant to our Company's 1998 and 2000
     stock option plans, as disclosed above. Because the plans were not ratified
     by the  stockholders  within one year after their  adoption,  no  incentive
     stock  options  may be  issued  thereunder  and the plans  are  limited  to
     issuance of non-qualified  stock options,  as determined under the Internal
     Revenue  Code.  As a material  subsequent  event,  our  Company's  board of
     directors  formally  terminated  the 1998 and 2000 plans as of November 14,
     2001.

(5)  Represents  the  shares  issuable  to Mr.  Joffe  as  compensation  for his
     services as our Company's  president,  as disclosed below in Part III, Item
     10, Executive Compensation;  (24,788 shares of the 200,000 shares which are
     due to Mr. Joffe have been issued).

Amounts  of Common  Equity  That  Could Be Sold  Pursuant  to Rule 144 under the
Securities Act

Reporting Period

As of September 30, 2001,  19,975,212  shares of our Company's common stock were
outstanding, of which:

    *     3,097,593 are recognized as free trading by our Company;

    *     16,877,619 have been issued over the years pursuant to exemptions from
          registration  and are thus  restricted  securities,  some of which are
          eligible for resale under Commission Rule 144 ("Rule 144").

Of the shares that our Company has  instructed  its  transfer  agent to treat as
restricted:

    *     9,870,575 were issued prior to September 30, 2000,  and  consequently,
          may  currently  be sold under Rule 144,  subject to Rule 144's  volume
          limitations, notice, public information and manner of sale conditions.
          The volume limitations restrict quantities sold over 90 day periods to
          the  greater  of 1% of the  total  outstanding  common  stock,  or the
          average weekly trading  volume during the four-week  period  preceding
          the sale;

    *     7,901,692  were issued to persons that do not appear to be  affiliates
          of our Company prior to September 30, 1999,  and  consequently  may be
          sold by holders  that have not been  affiliates  of our  Company for a
          period of at least 90 days, under the more liberal  provisions of Rule
          144(k), which dispense with the volume,  public information and manner
          of sale conditions.

                                      -17-

<Page>


Rule 144

Pursuant to the  provisions  of Rule  144(e),  permissible  sales of  securities
thereunder are determined as follows:

Sales by affiliates:

If  restricted or other  securities  are sold for the account of an affiliate of
our Company (officers,  directors, other control persons or their affiliates and
persons who have been  affiliates  within the preceding 90 days),  the amount of
securities  sold,  together with all sales of restricted and other securities of
the same class for the account of such person within the preceding three months,
shall not exceed the greater of:

        *      one percent of the shares or other units of the class outstanding
               as shown by the most recent report or statement  published by our
               Company, or

        *      the average weekly  reported volume of trading in such securities
               on all national  securities  exchanges and / or reported  through
               the  automated  quotation  system  of  a  registered   securities
               association  during the four calendar weeks  preceding the filing
               of  notice  required  by Rule 144 (h),  or if no such  notice  is
               required  the  date  of  receipt  of the  order  to  execute  the
               transaction  by  the  broker  or the  date  of  execution  of the
               transaction directly with a market maker, or

        *      the average weekly volume of trading in such securities  reported
               through   the   consolidated    transaction    reporting   system
               contemplated by Rule 11Aa3-1 under the Securities Exchange Act of
               1934 during the four-week period specified above.

Sales by non-affiliates:

The amount of  restricted  securities  sold for the account of any person  other
than an affiliate of our Company,  together  with all other sales of  restricted
securities of the same class for the account of such person within the preceding
three  months,  shall not exceed the amount  specified in  paragraphs  above for
affiliates, unless the conditions in Rule 144(k) are satisfied (two, rather than
a one year holding period).

Determination of Amount:

For the purpose of  determining  the amount of securities  specified  above (the
"Permitted Volume"), the following provisions apply:

        *      Where both  convertible  securities  and  securities of the class
               into  which  they  are   convertible  are  sold,  the  amount  of
               convertible  securities  sold  is  deemed  to be  the  amount  of
               securities of the class into which they are  convertible  for the
               purpose of determining the aggregate amount of securities of both
               classes sold;

        *      The  amount  of  securities  sold for the  account  of a  pledgee
               thereof,  or for  the  account  of a  purchaser  of  the  pledged
               securities,  during  any period of three  months  within one year
               after a default in the obligation  secured by the pledge, and the
               amount of securities sold during the same three-month  period for
               the account of the pledgor may not exceed, in the aggregate,  the
               Permitted Volume.

        *      The amount of securities  sold for the account of a donee thereof
               during  any  period of three  months  within  one year  after the
               donation,  and the  amount of  securities  sold  during  the same
               three-month  period  for the  account  of the  donor,  shall  not
               exceed, in the aggregate,the Permitted Volume.

        *      Where securities were acquired by a trust from the settlor of the
               trust,  the amount of such securities sold for the account of the
               trust during any period of three months within one year after the
               acquisition  of the  securities  by the trust,  and the amount of
               securities  sold  during  the  same  three-month  period  for the
               account of the settlor,  shall not exceed, in the aggregate,  the
               Permitted Volume.

                                      -18-
<Page>



        *      The amount of securities  sold for the account of the estate of a
               deceased  person,  or for the  account of a  beneficiary  of such
               estate,  during  any  period of three  months  and the  amount of
               securities  sold  during the same  period for the  accountof  the
               deceased  person  prior to his  death  shall not  exceed,  in the
               aggregate,  the Permitted Volume; provided, that no limitation on
               amount shall apply if the estate or beneficiary thereof is not an
               affiliate of our Company;

        *      When  two or more  affiliates  or other  persons  agree to act in
               concert for the purpose of selling  securities  of a  Registrant,
               all securities of the same class sold for the account of all such
               persons during any period of three months shall be aggregated for
               the  purpose  of  determining  the  limitation  on the  amount of
               securities sold;

Securities excluded:

The following sales of securities need not be included in determining the amount
of securities sold in reliance upon this section:

        *      Securities sold pursuant to an effective  registration  statement
               under the Securities Act;

        *      Securities sold pursuant to an exemption provided by Regulation A
               under the Securities Act; and

        *      Securities sold in a transaction  exempt pursuant to Section 4 of
               the Securities Act and not involving any public offering.

Because a major theoretical  component of securities pricing involves supply and
demand, sales in reliance on Rule 144 will increase the supply and, unless there
is a  corresponding  increase  in  demand,  can be  expected  to result in lower
prices.

Amount of Common  Equity  That Our  Company  Has  Agreed to  Register  Under the
Securities Act for Sale by Security Holders.

Our  Company  has not  agreed to  register  any of its common  stock,  except in
conjunction  with the 2002 stock option plan (if  approved by the  shareholders)
and its  obligations  to include  the common  stock  purchase  warrants  for its
officers  and  directors,  the  Yankees  Shares,  and the  Strategica  Shares in
registration  statements  that it may otherwise  file  (commonly  referred to as
"piggyback" rights).

Amounts of Common Equity That Our Company Is  Considering  Publicly  Offering or
Privately  Placing  Other  than  Shares to Be Issued  (Pursuant  to an  Employee
Benefit Plan or Dividend  Reinvestment Plan), the Offering of Which Could Have a
Material Effect on the Market Price of Our Company's Common Equity.

During the Year Following the Reporting Period


During the year  following the report  period,  our Company will be  considering
material private placements in order to (1) engage in acquisitions,  (2) acquire
additional funding for operations,  and (3) settle any remaining creditor claims
against our Company. In addition, should Yankees fully convert its Class A Bond,
our Company would be obligated to issue approximately 36,549,939 such shares. No
additional  shares  are  currently  authorized  by  our  Company's  articles  of
incorporation,  which may be  amended  at the  Annual  Meeting  of  Stockholders
scheduled  for May 17, 2002,  to  authorize  an  increase in  capitalization  in
order to carry out our Company's strategic plans. No assurances can be provided,
however, that such business plans can be attained.



                                      -19-
Page


<Page>


Recent Sales of Unregistered Securities

During The Three Year Period Preceding Reporting Date

During the three year period ended  September 30, 2001,  our Company  issued the
securities listed in the tables below without  registration under the Securities
Act in reliance on the exemption from registration requirements cited. Footnotes
for all tables follow the last table.



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

Common Stock:
                Amount of                               Total                       Registration
                Securities                              Offering        Total       Exemption
Date            Sold         Subscriber                 Consideration   Discounts   Relied on
----            ----------   ----------                 -------------   ---------   ------------
1999:
February 22     2,000,000    The Yankee Companies          (3)           (3)         (2)
April 14        2,000,000    The Yankee Companies          (3)           (3)         (2)
June 23           250,000    Madhu & Ila Sethi             (4)           None        (1)
October 6       2,000,000    The Yankee Companies          (3)           (3)         (2)

2000:
----
January 14         34,000    Jack Levine                   (5)            None       (1)
March 17          677,087    Oppenheimer Wolff & Donnelly  (6)            None       (1)
May 11            136,147    Larry Van Etten               (7)            None       (1)

May 31            533,333    Troy D. Wiseman               (8)            None       (1)
September 7       200,000    Bell Entertainment            (9)            None       (1)
September 19    2,000,000    The Yankee Companies          (3)            (3)        (2)
November 8        100,000    Patrick V. Graham             (10)           None       (1)

2001:
----
May 31          1,844,444    SBV Holdings, Inc.            (11)           None       (2)
June 30            21,055    Edward C. Dmytryk             (12)           None       (2)
June 30            56,818    Kevin W. Dornan               (13)           None       (2)
June 30            21,018    Vanessa H. Lindsey            (14)           None       (2)

July 31            70,000    Edward C. Dmytryk             (12)           None       (2)
July 31            31,250    Kevin W. Dornan               (13)           None       (2)
July 31            58,360    Vanessa H. Lindsey            (14)           None       (2)


</Table>


As a material  subsequent  event,  as of the date of this  report,  our  Company
issued the following shares:


<Table>
<S>                <C>          <C>                   <C>               <C>           <C>
Common Stock:
                Amount of                            Total                          Registration
                Securities                           Offering           Total       Exemption
Date            Sold          Subscriber             Consideration      Discounts   Relied on
----            ----------    ----------             -------------      ---------   -------------
2001:
November 15     24,788        Anthony Q. Joffe           (15)             None        (2)


</Table>


(1)  Section  4(2) of the  Securities  Act.  In each case,  the  subscriber  was
     required  to  represent  that the  shares  were  purchased  for  investment
     purposes,  the  certificates  were legended to prevent  transfer  except in
     compliance with applicable  laws, and the transfer agent was instructed not
     to permit transfers unless directed to do so by our Company, after approval
     by its legal counsel.  In addition,  each subscriber was directed to review
     our Company's  filings with the  Commission  under the Exchange Act and was
     provided  with  access  to our  Company's  officers,  directors,  books and
     records, in order to obtain required information.


                                      -20-
<Page>



(2)  Section  4(6) of the  Securities  Act.  In each case,  the  subscriber  was
     required  to  represent  that the  shares  were  purchased  for  investment
     purposes,  the  certificates  were legended to prevent  transfer  except in
     compliance  with  applicable laws and the transfer agent was instructed not
     to permit transfers unless directed to do so by our Company, after approval
     by its legal counsel.  Each subscriber was directed to review our Company's
     filings with the  Commission  under the Exchange Act and was provided  with
     access to our Company's officers, directors, books and records, in order to
     obtain  required  information;  and, a Form D reporting the transaction was
     filed with the Commission.

(3)  Issued  pursuant  to Yankees'  right to acquire up to 75% of our  Company's
     outstanding  and  reserved  common  stock  measured  immediately  following
     exercise,  in consideration for an aggregate price of $80,000,  such shares
     of stock being a portion of the consideration  granted to Yankees under its
     consulting agreement with our Company in exchange for Yankees' agreement to
     forego hourly and document licensing fees for a period of approximately two
     years;  see  below  "Part  III:  Item 11,  Security  Ownership  of  Certain
     Beneficial  Owners  and  Management;"  and,  "Part  III,  Item 12,  Certain
     Relationships and Related Transactions."

(4)  Terms of  settlement  for unpaid  wages  totaling  $24,069 for Mr.  Sethi's
     services as president of our  Company's  technology  division from February
     18, 1998 to December 21, 1998.

(5)  Terms of settlement for unpaid invoices  totaling $2,550 for legal services
     provided to our Company in 1998.

(6)  Terms of settlement for unpaid invoices totaling $50,782 for legal services
     provided to our Company from May 29, 1998 to November 11, 1998.

(7)  Terms of settlement for unpaid wages and  out-of-pocket  expenses  totaling
     $18,153 for  services  during  1998 as  president  of one of our  Company's
     former subsidiaries.

(8)  Terms of  settlement  for balance due  ($51,000) on a defaulted  promissory
     note by one of our Company's former subsidiaries.

(9)  Compensation  to Bell  Entertainment  for its  services  in  assisting  our
     Company to prepare its report on Form 10-KSB for year ended  September  30,
     1998.

(10) Issued  pursuant to the settlement  agreement  approved by the court in the
     case of Patrick  Graham vs. Five Star  Cigar,  Inc.  and others,  including
     Colmena  Corp.,  case no.  99-121194,  Circuit  Court for  Broward  County,
     Florida, involving a defaulted promissory note in the amount of $40,000.

(11) On May 31, 2001, our Company entered into a settlement  agreement with SBV.
     Our Company issued  1,844,444 shares of its common stock to SBV to settle a
     defaulted  promissory note in the amount of $100,000 plus accrued  interest
     of $38,333.

(12) Shares issued for his services as president and chief executive  officer of
     our Company, pursuant to the terms of his employment agreement as discussed
     below at Part III, Item 10, Executive Compensation.

(13) Shares issued for his services as general counsel of our Company,  pursuant
     to the terms of his  employment  agreement as discussed  below at Part III,
     Item 10, Executive Compensation.

(14) Shares  issued for her  services as vice  president  and  secretary  of our
     Company,  pursuant to the terms of her  employment  agreement  as discussed
     below at Part III, Item 10, Executive Compensation.

(15) Shares  issued  (24,788  shares of the 200,000  common  shares due) for his
     services as president of our Company from May 2000 to May 2001, pursuant to
     the terms of his employment  agreement as discussed below at Part III, Item
     10, Executive Compensation.



                                      -21-
<Page>



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

OVERVIEW

The  following  discussion  should  be read in  conjunction  with our  Company's
audited financial statements included in Item 7 below. During November 1997, our
Company   became   engaged  in  the  business  of  marketing  and   distributing
long-distance  telephone  service  calling  cards  and  in the  manufacture  and
distribution of premium  hand-rolled  cigars,  in each case through wholly owned
subsidiaries.  In  September  1998,  following a default in payment  obligations
totaling  approximately $5.6 million by the company that handled the billing and
collection for our Company's  long-distance  telephone services, our Company and
its  subsidiaries  were forced to discontinue  day-to-day  business  operations.
During March 1999, our Company's  board of directors  concluded  negotiations to
divest our Company of all of its wholly owned  subsidiaries  ,  positioning  our
Company to  undertake  new  business  endeavors  or to become a more  attractive
acquisition candidate.  In January 1999, our Company's board of directors signed
a consulting agreement with Yankees,  calling for Yankees to provide our Company
with working  capital and assistance in development  and  implementation  of new
strategic  plans.  Yankees  has been  concentrating  on  meeting  our  Company's
obligation to file periodic reports under the Exchange Act, including completing
the audit of our financial  statements  for the fiscal year ended  September 30,
2001.  Additionally,  Yankees  assisted our Company in identifying  persons with
claims and potential  claims against our Company and in negotiating with them to
amicably resolve such claims.

PLAN OF OPERATIONS


As  discussed  above in Item 1,  "Description  of  Business," a number of claims
against our Company or our Company's divested subsidiaries identified by Yankees
and amounting to approximately  $234,000 have been amicably resolved through the
issuance of  approximately  3,575,011  shares of common stock through  September
2001,  with the notable  exception of the arbitral  award in Deutsche  Financial
Services  Corporation  in the principal  amount of $331,000 plus interest in the
per annum rate of prime plus 6.5% from  August 1, 1998,  which,  unless  current
settlement negotiations are successful,  our Company will either contest or seek
relief under chapter 11 of the U.S.  Bankruptcy  Code (see Item 3 above,  "Legal
Proceedings").  Yankees,  on  behalf of our  Company,  is  currently  conducting
negotiations  with our Company's five certain  remaining  claimants and has made
offers of settlement for four of these claims (totaling $379,828) as follows:


                                  Basis for      Amount               Compromise
Claimant                          Claim          of Claim             Offered
--------                          ---------      --------             ----------
Diners Club                         (1)          $  14,206.              (1)
Federal Express                     (2)          $   7,299.              (2)
Arent Fox, et. al.                  (3)          $  27,323.              (3)
Deutsche Financial Services Corp.   (4)          $ 331,000.              (4)
Prime Source Leasing Inc.           (5)          $  85,607.              (5)



                                      -22-
<PAGE>


(1)  On March 14, 2001, the circuit court for Palm Beach County, Florida entered
     a final judgement in favor of Citicorp Diners Club in the amount of $14,206
     for expenses incurred by Madhu Sethi, a former officer of our Company.  Our
     Company has offered  $1,400 to settle this claim.

(2)  Overnight  shipping costs incurred in 1998. Our Company has offered $750 to
     settle  this  claim.

(3)  Legal  fees for  services  on behalf of our  Company  during  1998-99.  The
     parties have agreed to settle this claim for $2,750, pending execution of a
     settlement  agreement.

(4)  Based on a guaranty by our Company on a promissory  note executed by one of
     our  divested  subsidiaries.  The  compromise  being  discussed is $100,000
     ($20,000 down and the remainder paid in 32 monthly  installments of $2,500)
     plus  2,500,000  shares of common stock The  arbitration  award in favor of
     Deutsche Financial is discussed more fully in Part 1, Item 3 above. Yankees
     has also suggested to our Company that if the Deutsche  Financial  claim is
     not  resolved,  our  Company  should  consider  filing  for  reorganization
     pursuant  to  Chapter  11  of  the  United  States   Bankruptcy  Code,  and
     aggressively  pursue any and all claims and counterclaims  available to our
     Company in such forum.

(5)  An allegedly  defaulted  promissory note. Our Company is actively  pursuing
     settlement  discussions,  but no definitive settlement offer has been made.
     There  is also a  contingent  third-party  claim  for  $80,000  by  General
     Electric  against our Company in this  litigation,  but management is still
     assessing the legal validity of this claim and no settlement offer has been
     made.

While  management  believes  that  there is a  reasonable  likelihood  that such
settlement  discussions will be successful,  no assurances to that effect can be
provided.

Except for recently initiated consulting  activities,  our Company currently has
no day-to-day business operations other than those pertaining to the maintenance
of our corporate existence and the filing of reports required by the Commission.

Consulting Activities

During August 2001, in response to Yankees' suggestions,  our Company's board of
directors authorized our Company's officers to negotiate  consulting  agreements
with third parties that desire to avail  themselves of our Company's  experience
as a reporting  company under the Exchange  Act. Such  assistance is expected to
involve  the  recruitment  and  supervision  of  professional  advisors  such as
attorneys, auditors, investment bankers, transfer agents, officers and directors
who have the desired  experience in operating  public  companies,  and access to
procedures  and policies that Yankees has made  available for use by our Company
in complying with federal and state securities and corporate laws.

Our Company expects,  in exchange for such services,  that the consulting client
will  register a percentage  of its common  stock for issuance to our  Company's
stockholders,  as  of  an  agreed-upon  date  following  the  execution  of  the
consulting  agreement.  The amount of such common stock will vary depending upon
the circumstances of each  transaction.  The issuance of shares to our Company's
stockholders will be conditioned on prior registration with the Commission,  and
the failure to conclude such registration would void the agreement.

Registration  of shares  directly to our Company's  stockholders is necessary in
order for our Company to avoid inadvertently becoming an investment company, and
provides a major benefit to consulting  clients in that they obtain a large base
of stockholders, including all of our Company's market makers. The major benefit
of the consulting services to our Company is that it will be continually exposed
to emerging companies,  some of which should prove to be attractive  acquisition
candidates or candidates for strategic operating alliances (cooperative business
activities  not  involving  shares of equity  ownership)  that fit our Company's
strategic  objectives.  Our Company  does not yet have any  consulting  clients,
although it is discussing such possibility with several candidates.

The foregoing plan of operation  contains  forward-looking  statements  that are
subject to risks and  uncertainties,  which could cause actual results to differ
materially  from those  discussed  in the  forward-looking  statements  and from
historical results of operations. Among the risks and uncertainties, which could
cause such a difference,  are those  relating to our Company's  dependence  upon
certain key personnel,  our ability to manage our growth,  our Company's success
in implementing our business strategy,  our success in arranging financing where
required,  and the risk of economic and market factors  affecting our Company or
our  customers.  Many of such risk factors are beyond the control of our Company
and its management.

                                      -23-
<Page>




YEAR ENDED SEPTEMBER 30, 2001 COMPARED TO YEAR ENDED SEPTEMBER 30, 2000

Our Company reported net losses from operations for the year ended September 30,
2001 of $(912,917) and net loss from operations for the year ended September 30,
2000 of $(601,676).  This translates to a per-share loss of $(0.03) for the year
ended  September  30,  2001 and a per share loss of  $(0.03)  for the year ended
September 30, 2000.

Our  Company  had no revenues  for the year ended  September  30, 2001 and 2000,
respectively.  Operating  expenses  increased  to  $833,062  for the year  ended
September  30, 2001 as compared to  $480,019  for the year ended  September  30,
2000. The increase was due to the increased  consulting  fees resulting from the
issuance of common stock  warrants  and the accrual of  consulting  fees,  which
aggregated $614,142 and $436,125 for the year ended September 30, 2001 and 2000,
respectively.  Additionally,  professional  fees were $48,235 for the year ended
September 30, 2001 as compared to $28,689 for the year ended September 30, 2000.
Additionally,  compensation  expense  increased  to  $73,056  for the year ended
September 30, 2001 as compared $7,323 for the year ended September 30, 2000. The
increase was due to increased  director  and officer  activities  related to the
restructuring  of the  Company.  Selling,  general and  administrative  expenses
consisted of bank charges, office expenses,  rent, and other miscellaneous items
as summarized below:

                                  Fiscal 2001                Fiscal 2000
                                  -----------                -----------
Bank charges                      $    759                   $     49
Contingency accrual (1)             85,606                          0
Office expenses                      1,253                      4,270
Rent                                 4,485                        708
Miscellaneous                        5,526                      2,855
                                  ------------               ------------
Total                             $ 97,629                   $  7,882
                                  ============               ============

(1)  Relates to the contingency  accrual from current  litigation  relating to a
     promissory note for $85,606  allegedly  executed by a former officer of the
     Company.


The increase was primarily  attributable to increased costs  associated with the
completion  of our SEC  filings.  For the year ended  September  30,  2001,  our
Company accrued $85,606 pertaining to a potential  contingent  liability related
to a lawsuit,  which has been  included in selling,  general and  administrative
expenses.

No additional  meaningful  comparisons  can be made for the year ended September
30, 2001 as compared to the year ended September 30, 2000.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2001, our Company had no material cash and cash  equivalents
on hand to  meet  our  obligations.  Our  Company  has  financed  our  operating
activities through loans and advances from Yankees.

At  September  30,  2001,  our  Company  had  a   stockholders'   deficiency  of
approximately $930,936. Our Company's future operations and growth are dependent
on our ability,  with the assistance of Yankees,  to raise capital for expansion
and to  implement  our  strategic  plan.  Our Company  anticipates  that it will
require  approximately  $135,000 in capital during the next twelve  months,  and
will likely need to borrow those funds from Yankees in accordance  with the loan
agreement  between our Company and Yankees,  since our Company  currently has no
cash or cash  equivalents.  If our Company is not successful in raising  capital
and in resolving the remaining claims of certain  claimants,  or if the arbitral
award in Deutsche Financial Services Corporation were not to be settled and were
successfully  reduced to a judgment,  our  Company  may file for  reorganization
pursuant to Chapter 11 of the United States Bankruptcy Code.

Net cash used in operations was $(76,782) for the year ended  September 30, 2001
as compared to $(36,568) for the year ended  September 30, 2000.  The difference
is due to the increase in  professional  fees and other  expenses in  connection
with our Commission filings.


                                      -24-
<Page>

Net cash provided by financing  activities for the year ended September 30, 2001
was $74,726 as compared to net cash provided by financing  activities of $36,620
for the year ended  September 30, 2000. The difference was  attributable  to the
increase in amounts due to a related party.

We currently have no material commitments for capital  expenditures.  Other than
advances  received  by  Yankees,  we  have no  external  sources  of  liquidity.
Accordingly,   we  may  not  have   sufficient  cash  flow  from  operations  to
sufficiently  meet all of our cash  requirements  for the  next 12  months.  Our
Company's  future  operations  and growth are  dependent on our ability to raise
capital for expansion,  and to seek additional  revenue sources.  If our Company
decides   to  pursue   any   acquisition   opportunities   or  other   expansion
opportunities, we may need to raise additional capital, although there can be no
assurance such capital-raising activities would be successful.

The financial  statements that accompany this report (see Part II, Item 7 below)
have been  prepared  assuming  that the our  Company  will  continue  as a going
concern. Our accountants have indicated,  however,  that our Company's financial
condition raises  substantial doubt about our Company's ability to continue as a
going  concern.  Our  Company is taking  steps to address  this  situation.  Our
Company  maintains an agreement as a telephone  service reseller with BellSouth,
our  application  for a CLEC license in Florida should receive final approval in
March  2002,  and  management  looks to expand on such  operations,  or locate a
merger/acquisition  candidate. In the meantime, management will continue to rely
on loans from Yankees to fund  operations  until other income is derived from an
acquisition,  consulting activities,  or our telecommunications  resale licenses
and agreements.  No assurances can be provided,  however,  that such alternative
sources  will ever  generate  income or that  Yankees  will  continue to provide
loans.

RECENT ACCOUNTING PRONOUNCEMENTS

The  Financial  Accounting  Standards  Board has  recently  issued  several  new
accounting pronouncements that may apply to our Company.

Statement  No. 133, as amended by  Statement  No. 137 and 138,  "Accounting  for
Derivative  Instruments  and Hedging  Activities,"  establishes  accounting  and
reporting standards for derivative instruments and related contracts and hedging
activities. This statement is effective for all fiscal quarters and fiscal years
beginning after June 15, 2000. The adoption of this pronouncement did not have a
material effect on our Company's  financial  position,  results of operations or
liquidity.

Statement  No. 141  "Business  Combinations"  ("SFAS 141")  establishes  revised
standards for accounting for business combinations.  Specifically, the statement
eliminates the pooling method,  provides new guidance for recognizing intangible
assets  arising  in  a  business  combination,   and  calls  for  disclosure  of
considerably  more information about a business  combination.  This statement is
effective  for business  combinations  initiated  on or after July 1, 2001.  The
adoption of this pronouncement on July 1, 2001 did not have a material effect on
our Company's financial position, results of operations or liquidity.

Statement No. 142 "Goodwill and Other  Intangible  Assets" ("SFAS 142") provides
new guidance  concerning  the accounting  for the  acquisition  of  intangibles,
except those acquired in a business  combination,  which is subject to SFAS 141,
and the  manner in which  intangibles  and  goodwill  should be  accounting  for
subsequent  to their  initial  recognition.  Generally,  intangible  assets with
indefinite  lives, and goodwill,  are no longer  amortized;  they are carried at
lower of cost or market and subject to annual impairment evaluation,  or interim
impairment  evaluation if an interim  triggering event occurs,  using a new fair
market value  method.  Intangible  assets with finite lives are  amortized  over
those lives,  with no stipulated  maximum,  and an impairment  test is performed
only when a triggering event occurs.  This statement is effective for all fiscal
years  beginning  after December 15, 2001. The Company  believes that the future
implementation of SFAS 142 on January 1, 2002 will not have a material effect on
our Company's financial position, results of operations or liquidity.

Statement  No. 144  "Accounting  for the  Impairment  or Disposal of  Long-Lived
Assets" ("SFAS 144") supercedes Statement No. 121 "Accounting for the Impairment
of Long-Lived  Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121").
Although it retains the basic requirements of SFAS 121 regarding when and how to
measure  an  impairment  loss,  SFAS  144  provides  additional   implementation
guidance.  SFAS 144 excludes  goodwill and intangibles not being amortized among
other exclusions.  SFAS 144 also supercedes the provisions of APB 30, "Reporting
the Results of  Operations,"  pertaining to  discontinued  operations.  Separate
reporting of a discontinued  operation is still  required,  but SFAS 144 expands
the  presentation  to include a component of an entity,  rather than  strictly a
business  segment as  defined in SFAS 131,  "Disclosures  about  Segments  of an
Enterprise  and  Related  Information."  SFAS 144 also  eliminates  the  current
exemption  to  consolidation  when  control  over a  subsidiary  is likely to be
temporary.  This  statement is effective  for all fiscal years  beginning  after
December 15,  2001.  We believe  that the future  implementation  of SFAS 144 on
January  1, 2002 will not have a  material  effect  on our  Company's  financial
position, results of operations or liquidity.


                                      -25-
<Page>


Audit Committee Report

Our Company's  Audit  Committee  (the  "Committee")  has certified  that (1) the
Committee  has reviewed and  discussed  with  management  the audited  financial
statements  for the  year  ended  September  30,  2001;  (2) the  Committee  has
discussed with the independent  auditors the matters required to be discussed by
SAS 61, as may be modified or  supplemented;  (3) the Committee has received the
written disclosures and the letter from the independent  accountants required by
Independence Standards Board Standard No. 1 (Independent  Discussions with Audit
Committees),  as may be modified or  supplemented,  and has  discussed  with the
independent accountants the independent accountant's independence; and (4) based
on the review and  discussion  referred to in paragraphs  (1) through (3) above,
the  Committee has  recommended  to our  Company's  board of directors  that the
audited financial  statements for the year ended September 30, 2001, be included
in this report.  The members of the Committee are Charles J.  Champion,  Jr. and
Robert  S.  Gigliotti.  A copy of the  Audit  Committee  letter  was filed as an
exhibit to our Company's Form 10-KSB for the year ended September 30, 2001.

ITEM 7.  FINANCIAL STATEMENTS.

Index to Financial Statements and Financial Statement Schedules.

The auditor's report and audited balance sheet of our Company for the year ended
September 30, 2001, and related statements of operations,  stockholder's equity,
cash  flows  for the  years  ended  September  30,  2001 and  2000 and  notes to
financial  statements  for such years,  including  indexes  therefor,  follow in
sequentially numbered pages numbered F27 through F42.




                                      -26-
<PAGE>

                                  COLMENA CORP.

                              FINANCIAL STATEMENTS

                           SEPTEMBER 30, 2001 AND 2000




                                    Contents


                                                                       Page(s)
                                                                   -------------


Balance Sheet                                                             F29

Statements of Operations                                                  F30

Statements of Changes in Stockholders' Deficiency                         F31

Statements of Cash Flows                                                  F32

Notes to Financial Statements                                         F33-F42





                                       F27
<PAGE>



                          Independent Auditors' Report


To the Board of Directors of:
Colmena Corp.

We have audited the accompanying  balance sheet of Colmena Corp. as of September
30, 2001 and the related  statements  of  operations,  changes in  stockholders'
deficiency and cash flows for the years ended September 30, 2001 and 2000. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position of Colmena Corp. as of September
30,  2001 and the  results  of its  operations  and its cash flows for the years
ended  September  30, 2001 and 2000 in  conformity  with  accounting  principles
generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in Note 10 to the
financial statements,  except for recently initiated consulting activities,  the
Company has no active business operations and has a stockholders' deficiency and
working capital  deficiency that raises  substantial  doubt about its ability to
continue as a going concern.  Management's plans in regards to these matters are
also  described  in  Note  10.  The  financial  statements  do not  include  any
adjustments that might result from the outcome of this uncertainty.



SALBERG & COMPANY, P.A.
Boca Raton, FL
October 24, 2001


                                       F28
<PAGE>



                                  Colmena Corp.
                                  Balance Sheet
                               September 30, 2001



                                     Assets


Assets
Cash                                                             $           22
                                                                ----------------

Total Current Assets                                             $           22
                                                                ================



                    Liabilities and Stockholders' Deficiency

Liabilities
Accrued expenses                                                 $      400,757
Guaranteed loan                                                         331,000
Loan and fees payable to related party                                  199,201
                                                                ----------------
Total Current Liabilities                                               930,958
                                                                ----------------

Stockholders' Deficiency
Common stock, $0.01 par value; 20,000,000 shares authorized,            199,752
   19,975,204 shares issued and outstanding
Common stock issuable, $0.01 par value (10,474,970 shares)              104,749
Additional paid-in capital                                           17,182,541
Accumulated deficit                                                 (18,417,978)
                                                                ----------------
Total Stockholders' Deficiency                                         (930,936)
                                                                ----------------

Total Liabilities and Stockholders' Deficiency                   $           22
                                                                ================

                 See accompanying notes to financial statements


                                       F29
<PAGE>



                                  Colmena Corp.
                            Statements of Operations
                     Years Ended September 30, 2001 and 2000


                                                   2001                2000
                                               -------------       -------------

Compensation expense                           $     73,056        $      7,323
Consulting                                          614,142             436,125
Professional and legal fees                          48,235              28,689
Selling, general and administrative                  97,629               7,882
                                               -------------       -------------
Total Operating Expenses                            833,062             480,019
                                               -------------       -------------
Loss from Operations                               (833,062)           (480,019)
                                               -------------       -------------

Other Expenses
Settlement expense                                  (15,000)            (55,678)
Interest expense                                    (64,855)            (65,998)
                                               -------------       -------------
Total Other Expenses                                (79,855)           (121,676)
                                               -------------       -------------

Net Loss                                       $   (912,917)       $   (601,695)
                                               =============       =============

Net Loss Per Common Share -
  Basic and Diluted                            $      (0.03)       $      (0.03)
                                               =============       =============

Weighted Common Shares Outstanding -
  Basic and Diluted                              26,505,535          20,480,684
                                               =============       =============



                 See accompanying notes to financial statements


                                       F30
<PAGE>



                                  Colmena Corp.
                Statements of Changes in Stockholders' Deficiency
                     Years Ended September 30, 2001 and 2000

  <Table>

                                                      <S>       <C>         <C>       <C>         <C>          <C>           <C>
                                                                                               Additional
                                                       Common Stock    Common Stock Issuable   Paid-In      Accumulated
                                                    Shares     Amount      Shares   Amount     Capital      Deficit         Total
                                                  ---------   ---------  --------   --------   ----------   -----------    ---------

Balance, September 30, 1999                    13,991,692  $  139,917           -   $     -   $16,128,629   $(16,903,366) $ 634,820)

Common stock issued as settlement               1,380,567      13,806           -         -        41,873              -     55,679

Common stock issued as consulting fee             200,000       2,000           -         -         2,000              -      4,000

Common stock issued to employee                   200,000       2,000           -         -         4,000              -      6,000

Common stock options issued to directors                -           -           -         -         5,490              -      5,490

Common stock warrants issued under
   consulting agreement                                 -           -           -         -       432,125              -    432,125

Common stock issuable pursuant to anti-dilutive
   rights of consultant warrants                        -           -   8,670,552    86,705       (75,505)             -     11,200


Net loss, 2000                                          -           -           -         -             -      (601,695)   (601,695)
                                                ---------    --------   ---------  ---------    -------------- --------    ---------

Balance, September 30, 2000                    15,772,259     157,723   8,670,552    86,705    16,538,612   (17,505,061)   (722,021)

Common stock issued as settlement                 100,000       1,000           -         -        14,000             -      15,000

Common stock issuable as compensation                   -           -     200,000     2,000        13,000             -      15,000

Common stock issued as settlement               1,844,444      18,444           -         -       119,889             -     138,333

Common stock options issued to directors                -           -           -         -         2,881             -       2,881

Physical issuance of common stock to consultant 2,000,000      20,000  (2,000,000)  (20,000)            -             -           -

Common stock warrants issued under
   consulting agreement                                 -           -           -         -       509,142             -     509,142

Common stock issued in exchange for
   accrued compensation                           258,501       2,585           -         -        21,061             -      23,646

Common stock issuable pursuant to anti-dilution
   rights of consultant warrants                        -           -   3,604,418    36,044       (36,044)            -           -


Net loss, 2001                                          -           -           -         -             -      (912,917)   (912,917)
                                                ---------  ----------  ----------  ----------  -----------  -----------    ---------

Balance, September 30, 2001                    19,975,204 $   199,752  10,474,970 $ 104,749   $  17,182,541 $(18,417,978) $(930,936)
                                                ========= ===========  ==========  =========  ============== ===========   =========

</Table>


                 See accompanying notes to financial statements

                                       F31
<PAGE>



                                  Colmena Corp.
                            Statements of Cash Flows
                     Years Ended September 30, 2001 and 2000



                                                    2001                2000
                                               --------------     --------------

Cash Flows From Operating Activities:
Net loss                                      $    (912,917)      $    (601,695)
Adjustments to reconcile net loss to
   net cash used in operating activities:
Stock and options issued to consultants
   and employees                                    550,669             443,448
Stock based settlement expense                       15,000              55,679
Changes in operating assets and liabilities:
Increase (decrease) in:
Accounts payable and accrued expenses               172,611              66,000
Due to related party                                 97,855                   -
                                               --------------     --------------
Total Adjustments                                   750,529             565,127
                                               --------------     --------------
Net Cash Used in Operating Activities               (76,782)            (36,568)
                                               --------------     --------------

Cash Flows from Financing Activities:
Borrowings from related party                       74,726               25,420
Proceeds from issuance of common stock
  from warrant exercise                                  -               11,200
                                               -------------      --------------
Net Cash Provided By Financing Activities           74,726               36,620
                                               -------------      --------------

Net Increase (Decrease) in Cash                     (2,056)                  52

 Cash - Beginning of Year                            2,078                2,026
                                               -------------      --------------

 Cash - End of Year                            $        22        $       2,078
                                               =============      ==============

 Non-Cash Investing and Financing Activities:

In May 2001, the Company issued 1,844,444 common shares to settle a note payable
of $100,000 and related accrued interest of $38,333.

In  August  2001,   the  Company   issued  258,501  common  shares  for  accrued
compensation of $23,646.



                 See accompanying notes to financial statements


                                       F32
<PAGE>



                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 2001 and 2000




Note 1    Nature of Operations and Summary of Significant Accounting Policies

(A) Nature of Operations

Colmena Corp. (the "Company"), a Delaware corporation,  was formerly involved in
the   telecommunications   industry  and  other  industries   through  operating
subsidiaries  which were sold in fiscal 1999 (see Note 2). The Company currently
seeks to renew  suspended  activities  as a reseller  in the  telecommunications
industry, and to serve as a consultant to developing public companies.

(B) Use of Estimates

In preparing the financial  statements in conformity with accounting  principles
generally  accepted  in the  United  States,  management  is  required  to  make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities and the disclosure of contingent  assets and liabilities at the date
of the  financial  statements  and  revenues  and  expenses  during the reported
period. Actual results could differ from those estimates.

(C) Cash and Cash Equivalents

For purpose of the cash flow statements, the Company considers all highly liquid
investments with original maturities of three months or less at time of purchase
to be cash equivalents.

(D) Stock Options

In accordance with Statement of Financial  Accounting  Standards Number 123, the
Company  has  elected  to  account  for stock  options  and  warrants  issued to
employees  under  Accounting  Principles  Board  Opinion  Number 25 and  related
interpretations.  The Company  accounts for stock options and warrants issued to
consultants and other  non-employees under the fair value method of Statement of
Financial Accounting Standards 123.

(E) Income Taxes

The Company accounts for income taxes under the Financial  Accounting  Standards
Board Statement of Financial  Accounting  Standards Number 109,  "Accounting for
Income Taxes" ("Statement No.109"). Under Statement No. 109, deferred tax assets
and liabilities are recognized for the future tax  consequences  attributable to
differences  between the financial statement carrying amounts of existing assets
and  liabilities  and their  respective  tax  basis.  Deferred  tax  assets  and
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  assets or  liabilities  are  expected to be
recovered or settled. Under Statement 109, the effect on deferred tax assets and
liabilities  of a change in tax rates is recognized in income in the period that
includes the enactment date.

(F) Loss per Share

Net income  (loss) per common share for the years ended  September  30, 2001 and
2000 is based upon the weighted  average common shares and dilutive common stock
equivalents  outstanding  during the year as defined by  Statement  of Financial
Accounting  Standards,  Number 128 "Earnings Per Share." The assumed exercise of
common stock  equivalents was not utilized in 2001 and 2000 since the effect was
anti-dilutive.  At September  30, 2001,  there were  1,102,000  shares of common
stock  underlying  outstanding  options and  18,274,969  shares of common  stock
underlying warrants outstanding,  which could potentially dilute future earnings
per share.


                                       F33
<Page>



Note 2    Reorganization Agreement and Sale of Subsidiaries

On March 16, 1999, the Company sold all of its  subsidiaries but retained 10% of
Techtel Communications, Inc., a telecommunications company.

In November 1999,  the interest of all  stockholders  in TechTel,  including the
Company,  was acquired by FON Digital  Network,  Inc.  ("FON"),  an OTC Bulletin
Board company.  FON issued 50,000 shares to various  parties  including 5,000 to
the Company in exchange  for TechTel  shares.  The shares were  recorded at zero
cost due to the de minimis value.

Note 3   Property and Equipment

On  October  1,  1999,  the  Company  received  a notice of  proposal  to retain
collateral  pursuant  to a security  agreement  dated  August  14,  1998 in full
satisfaction  of the  obligation  secured  by the  security  agreement  totaling
$275,000 at September  30, 1999.  Equipment,  which had been  recorded at a book
value of $275,000, was repossessed.

Note 4   Note Settlement

On May 30,  2001, a $100,000  promissory  note and related  accrued  interest of
$38,333  from an  unrelated  party  was  settled  for  1,844,444  shares  of the
Company's common stock (see Note 7(A)).

Note 5    Guaranteed Loan and Accrued Expenses

(A) Guaranteed Loan

On or about February 26, 1997 (the "Effective Date"), an agreement,  as amended,
for wholesale financing (the "Loan Agreement") was entered into between Deutsche
Financial  Services   Corporation,   Business  Technology  Systems,   Inc.  (the
"Borrower"),  and Colmena Corp. and certain individuals (the "Guarantors").  The
Loan Agreement provided for inventory financing for the Borrower. The loans made
under the Loan  Agreement  were secured by a first  priority  perfected lien and
security  interest in all of Borrower's  assets,  rights,  and proceeds thereof,
owned at the Effective Date or thereafter acquired by the Borrower.

On August 19, 1998,  an extension  agreement  (the  "Extension  Agreement")  was
entered into between the Borrower and the Guarantors.

In 1999,  Deutsche  Financial Services  Corporation filed a consent  arbitration
award  based upon  alleged  breach of the  extension  agreement.  Due to matters
relating  to the  execution  of  the  consent  arbitration  award,  the  Company
repudiated  its signing of the  extension  agreement  and has taken the position
that the consent  arbitration award entered pursuant to the extension  agreement
is not legally binding (see Note 9(B)).

Based on the contingency to the Company relating to the initial  guarantee,  the
Company has recorded the liability of $331,000 plus accrued interest of $156,000
on its records as of September 30, 2001.

(B) Accrued Expenses

The Company is subject to current  litigation  relating to an alleged promissory
note for $85,606  allegedly  executed by a former  officer of the  Company.  The
$85,606 has been  included in general and  administrative  expenses for 2001 and
accrued expenses at September 30, 2001 (see Note 9).

Other litigation  related amounts totaling $101,300 are also included in accrued
expenses at September 30, 2001 (see Note 9).

                                       F34
<Page>



Note 6    Commitments and Contingencies

(A) Consulting Agreement with Related Party

Under a consulting  agreement with a principal  stockholder (the  "Consultant"),
who  became a  principal  stockholder  by  virtue of the  consulting  agreements
discussed  herein, as consideration for the first 200 hours of services provided
(in lieu of document license fees and required cash payments valued at $20,000),
the  Company  agreed to issue  within the first 365 days of the  agreement  (the
"Initial Term") to the Consultant, options designated as Class A options (in the
consulting  agreement,  amendments  to  the  agreement,  hereinafter  and in the
accompanying   financial  statements  generically  referred  to  as  "consultant
warrants")  to purchase  shares of the  Company's  common  stock at an aggregate
exercise  price of $40,000,  in an amount equal to 51% of the  Company's  common
stock at the time exercise was completed.

At the date of the consulting agreement,  8,066,326 shares of common stock would
have been issuable,  had the consultant  warrants been exercised in full on such
date.  Any  increase or decrease in the  outstanding  or reserved  shares  would
result in a corresponding  adjustment of the consultant  warrants'  quantity and
exercise price per share. The consultant warrants were exercisable from the 10th
day until the 365th day following the effective date.

For additional services provided, during the initial term, the Company agreed to
pay the following consideration:

          (a)  If the Consultant arranges or provides funding for the Company on
               more  beneficial  terms than  those  reflected  in the  Company's
               current principal financing  agreements,  the Consultant shall be
               entitled, at its election, to either

               (i)  a fee of 25% of the savings achieved, on a continuing basis,
                    or

              (ii)  if equity  funding is  provided  through  Consultant  or its
                    affiliates,  a  discount  of 10% from the bid  price for the
                    subject  equity  securities  if  issuable  as  free  trading
                    securities,  or a discount of 50% if issuable as  restricted
                    securities, or

             (iii)  an introduction fee of 5% of the aggregate proceeds obtained
                    if funding is  provided  by any  persons  introduced  to the
                    Company by the Consultant;

          (b)  If  the  Consultant  generates  business  for  the  Company,  the
               Consultant  shall be entitled to a commission of 10% of the gross
               income derived by the Company therefrom on a continuing basis;

          (c)  If the Consultant arranges for an acquisition by the Company, the
               Consultant shall be entitled to 10% of the compensation  paid for
               such  acquisition.  In addition,  the Company will be responsible
               for the payment of all costs and  disbursements  associated  with
               the Consultant's  services subject to certain  limitations and/or
               approvals, as stipulated in the Agreement.

On January 2, 2000, the Agreement was amended to modify the required payments to
the Consultant  based on the  Consultant's  standard hourly rates, by permitting
the Consultant to accept payment in capital stock at the conversion  rate of 50%
of the fair market  value of such stock;  increase  the  Consultant's  ownership
after  exercise of the  consultant  warrants  to 75% from 51% and the  aggregate
exercise  price  to  $80,000  from  $40,000,  and to  clarify  the  Consultant's
preferential  rights to subscribe for additional  securities at a purchase price
of 50% of the  fair  market  value.  The  term of the  consultant  warrants  was
extended  to the later of  December  31, 2002 or the 100th day after the Company
registers the stock underlying any unexercised consultant warrants.

On January 4, 2001,  an  additional  amendment  changed  the  consulting  fee to
$10,000 per month,  eliminating  hourly and document licensing fees, and changed
the  discounts  as noted in item (a) (ii)  above to a  discount  of 10% from the
lowest  price at which  such  securities  are  offered to any other  person,  if
issuable  as free  trading  securities,  or a  discount  of 50% if  issuable  as
restricted securities, and it eliminated the 5% introduction fee. All provisions
from prior agreements  regarding issuance of consultant  warrants remain intact.
At September  30,  2001,  $90,000 was accrued and included in the due to related
party balance (see Note 11).

See Note 7 for consultant warrant grants and exercise under these agreements.


                                       F35
<Page>



(B) Employment Agreements

The Company entered into an employment  agreement on May 4, 1999 expiring May 3,
2000 and  automatically  renewing  unless  terminated,  to employ its President.
Compensation is 200,000 common shares of the Company each year payable only upon
the 365th day of service (the "vesting date"),  and certain  commissions or fees
based on stipulated  criteria.  Based on this  contingency the Company  recorded
compensation  expense over the one-year  service  period based on the  estimated
fair market  value on the vesting  date  resulting  in the expense of $15,000 in
2001 and $1,833 in 2000. The 200,000  shares  issuable for 2001 are based on the
service period ending in May 2001. The agreement terminated in May 2001.

The Company entered into an employment agreement on January 12, 2000 with a term
through the later of December  31, 2000 or the election of a new  Secretary,  to
employ its corporate secretary (the "Secretary").  Compensation is 24,000 common
stock  options  pro rata each year  exercisable  at $0.02 per  share,  beginning
January 1, 2001 through  December 31, 2001.  In addition,  the  Secretary  shall
receive certain commissions or fees based on stipulated criteria. On January 29,
1999,  the  Secretary  was  granted  20,000  options;  on January  3, 2000,  the
Secretary  was granted  24,000  options and in January  2001,  the Secretary was
granted 24,000 options at an increase exercise price of $0.05. The stock options
vest  immediately  and are  recorded as  compensation  expense  over the service
period under the  intrinsic  value method of APB 25, at the trading price of the
underlying common stock on the vesting date, resulting in no expense in 2001 and
$655 in 2000.

Effective June 14, 2001, the Company  entered into an employment  agreement with
an individual (the "President") pursuant to which he is engaged as the Company's
president and chief executive officer.  The agreement is for a term of one year,
with  renewal  thereafter  from year to year  unless  either the  Company or the
President  gives at least 60 days  notice  prior to the end of the then  current
term  of  an  intention  not  to  renew,   and  contains   confidentiality   and
non-competition  clauses.  As consideration  for the President's  services,  the
Company has agreed to  compensate  him at the rate of $50.00 per hour of service
to the Company,  plus reimbursement for all reasonable expenses related thereto.
This  compensation  is paid at the end of each month in shares of the  Company's
common stock  calculated by using the average closing  transaction  price of the
stock for the month then ended.

Effective June 14, 2001, the Company  entered into an employment  agreement with
an  individual  (the  "Secretary")  pursuant  to  which  she is  engaged  as the
Company's vice president and secretary. The agreement is for a term of one year,
with  renewal  thereafter  from year to year  unless  either the  Company or the
Secretary  gives at least 60 days  notice  prior to the end of the then  current
term  of  an  intention  not  to  renew,   and  contains   confidentiality   and
non-competition  clauses.  As consideration  for the Secretary's  services,  the
Company has agreed to  compensate  her according to the Company's pro rata share
(assuming  a 40 hour work week) of a base  salary of $5,000 per month,  for time
actually  devoted to her duties on behalf of the Company.  This  compensation is
paid at the end of each  month,  and is paid  partly  in cash and  partly  in an
amount of the Company's  common stock  calculated  by using the average  closing
transaction price of the stock for the month then ended.

Effective  June 18,  2001,  the  Company  engaged an  individual  as its general
counsel. As consideration for his services, the Company has agreed to compensate
him  according to the  Company's pro rata share (based on the number of Yankees'
clients for whom he is providing  legal services) of (1) his current base salary
of $40,000 per year and (2) $2,500 per month in common stock.  The stock portion
is paid at the end of each  month,  and is paid by an  equivalent  amount of the
Company's common stock calculated by using the average closing transaction price
of the stock for the month then ended.

                                      F36
<Page>



(C) BellSouth Agreement

In November 1999, the Company  entered into a two-year  agreement with BellSouth
Telecommunications,    Inc.   to   become   an   alternative    local   exchange
telecommunications  company ("CLEC") in stipulated  states.  The Company has not
activated  its service and has no  obligation  under the  agreement  until usage
begins. The Company also currently does not have any of the required  regulatory
licenses to offer such services.  The agreement's initial term ends November 22,
2001 and then continues from month to month unless terminated. The Company is in
the process of renewing the  BellSouth  agreement and applying for the requisite
regulatory permits.

Note 7    Stockholders' Deficiency

(A) Stock Issuances

On January  14,  2000 (the  "Settlement  Date"),  the  Company  settled  various
disputes  with an  individual  who was owed legal fees from one of the Company's
divested  subsidiaries  by issuing  34,000  shares of its common  stock.  A $510
expense was recorded on the  Settlement  Date based on the trading  price of the
common stock.  The expense  represents the write-off of the amount due from that
subsidiary to settle its obligation.

On March 17, 2000 (the "Settlement  Date"), a vendor who provided legal services
to a subsidiary of the Company was issued  677,087  restricted  shares of common
stock of the Company.  The Company recognized an expense of $27,083 based on the
trading price of the common stock on the Settlement Date. The expense represents
a write-off of the amount due from the subsidiary to settle its obligation.

On May 4, 2000, 200,000 common shares were issued under an employment  agreement
(see Note 6).

On May 11, 2000 (the  "Settlement  Date"),  the Company settled various disputes
with an individual by issuing 136,147 of its common shares. The Company recorded
an  expense of $4,086  based on the  trading  price of the common  shares on the
Settlement Date.

On May 31, 2000 (the "Settlement  Date"),  the Company entered into a settlement
with a creditor of one of its divested subsidiaries.  The Company issued 533,333
shares of its common stock.  An expense of $24,000 was  recognized  based on the
trading  price  of  the  common  shares  on the  Settlement  Date.  The  expense
represents  the  write-off of the amount due from that  subsidiary to settle its
obligation.

In  September  2000,  200,000  common  shares  were  issued  under a  consulting
agreement.  An  expense of $4,000 was  recognized  in 2000 based on the  trading
price on the vesting date.

On November 8, 2000 (the  "Settlement  Date"),  the Company became  obligated to
issue 100,000 of its common shares under a court-ordered settlement stipulation.
The  certificate  for the  shares  was  issued  in  February  2001 to  settle an
obligation of Tio Mariano Cigar Corp., a divested subsidiary of the Company, and
any other unknown  obligations  of the Company.  The Company  recorded a $15,000
settlement  expense  based  on the  trading  price  of the  common  stock at the
Settlement  Date.  The expense  represents  the write-off of the amount due from
that subsidiary to settle its obligation.

On May 30, 2001 (the "Settlement  Date"),  the Company settled a note payable of
$100,000 plus accrued interest of $38,333 by issuing  1,844,444 of the Company's
common  stock to the  creditor  who was also a  consultant.  Based on the $0.075
trading  price of the common stock on the  Settlement  Date,  the Company had no
gain or  loss on  settlement.  The  settlement  also  terminated  all  potential
obligations under the consulting agreement. (See Note 4)

As of May 2001,  the Company is obligated to issue  200,000  common  shares to a
former  president  and  current  Chairman  of the  Board  under  his  employment
agreement,  which has terminated (see Note 6). The shares are included in common
stock issuable.


                                      F37
<Page>


In July 2001, 2,000,000 of the 8,670,552 common shares issuable at September 30,
2000 under the consultant warrants were issued.

In August  2001,  258,501  common  shares were  issued in  exchange  for accrued
officer  compensation  of $23,646 based on an average fair market value of stock
as  stipulated in the related  employment  agreements.  The  effective  dates of
election by the employees to convert the accrued compensation were June 30, 2001
for 98,891 shares and July 31, 2001 for 159,610 shares.

During 2001 and 2000,  7,208,835 and  21,014,574  common  shares,  respectively,
became subject to the consultant  warrants.  Of the total  36,549,939  shares of
common  stock  underlying  the  warrants  with an  aggregate  exercise  price of
$80,000,  18,274,970  are  considered as having been issuable based on a $40,000
payment for exercise made through  September  30, 2001,  8,000,000 of which have
been issued,  leaving 10,274,970  issuable as of September 30, 2001. The Company
cannot  issue such shares  until its  articles of  incorporation  are amended to
increase  the  authorized  common  shares,  which is  scheduled  for the  annual
stockholders' meeting in December 2001 (see Notes 6 and 7(C)).

(B) Stock Option Plan

On February  27, 1998,  the Board of  Directors of the Company  adopted the 1998
Stock Option Plan (the  "Plan") to provide  added  incentive  for high levels of
performance to officers,  directors,  employees,  consultants,  and  independent
contractors of the Company.  Options  granted under the plan are designed either
as incentive  stock options or as  non-qualified  stock  options.  The plan will
terminate on February 27, 2008, unless earlier terminated.

The Stock Option Plan authorizes  options for the purchase of up to an aggregate
of  600,000   shares  of  the  Company's   common  stock.   The  Company  grants
non-qualified and incentive stock options.  Non-qualified options may be granted
to officers,  employees,  directors,  consultants,  independent contractors,  or
other service  providers of the Company at an exercise  price  determined by the
Stock  Option  Plan   Committee  of  the  Company's   Board  of  Directors  (the
"Committee")  which shall be at least  equal to 85% of the fair market  value of
the common stock at the date of the grant.  Incentive  stock options may only be
granted to officers,  employees,  and  directors,  who are also employees of the
Company at an exercise  price  determined by the  Committee,  which shall not be
less than 100% of the fair market value of the common stock at the date of grant
and may not be less than 110% of the fair  market  value of the common  stock at
the date of grant if granted to an  individual  owning  more than ten percent of
the total combined voting power.

Options are  exercisable at dates and conditions  determined by the Committee at
the time of grant.  However, an option may not be exercised after the expiration
of 10 years from the date it is granted. In the case of incentive stock options,
the term may not exceed  five years if granted to an option  holder  owning more
than ten percent of the total  combined  voting  power.  Through the date of the
accompanying  audit  report,  no stock options have been granted under the plan.
The plan was terminated in November 2001.

(C) Warrants and Options

The  Company  granted  options to  purchase  296,000  shares of common  stock to
directors  and officers in January 2000 at an exercise  price of $0.02  expiring
December 31, 2002. A compensation expense of $4,440 was recognized in 2000 under
the intrinsic value method of APB 25.

The Company  granted  options to purchase 70,000 shares of common stock in March
2000 to a director at an exercise  price of $0.05  expiring  January 12, 2002. A
compensation expense of $1,050 was recognized in 2000 under APB 25.

The  Company  granted  options to  purchase  400,000  shares of common  stock to
directors and officers in January 2001, at an exercise price of $0.05 per share,
for  services.  These  warrants  expire on December  31, 2002.  No  compensation
expense was  recognized  since the exercise price exceeded the fair market value
of the stock on the grant date.

The Company  granted  options to purchase  36,000  shares of common stock to two
directors in July 2001 at an exercise  price of $0.02 for services  performed in
year 2000.  These  options  expire  December 31, 2002.  An expense of $2,881 was
recognized immediately based in the intrinsic value method under APB 25.


                                      F38
<Page>


A summary of the options  issued to officers and  directors as of September  30,
2001 is presented below:

                                                Number of       Weighted Average
                                                Options         Exercise Price
                                               ------------    -----------------
         Stock Options
         Balance at beginning of year             666,000       $          .036
         Granted                                  436,000       $          .048
         Exercised                                      -       $             -
         Forfeited                                      -       $             -
                                               ------------     ----------------

         Balance at end of year                 1,102,000       $          .040
                                               ============     ================

         Options exercisable at end of year     1,102,000       $          .040

         Weighted average fair value of options
           granted during  the year                             $          .034

                                                                ================

          The  following  table  summarizes   information   about  officers  and
          directors stock options at September 30, 2001:


<Table>

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

                                    Options Outstanding                                       Options Exercisable
          -------------------------------------------------------------------------    -----------------------------------

                 Range of            Number             Weighted        Weighted             Number            Weighted
                 Exercise        Outstanding at         Average          Average         Exercisable at         Average
                   Price          September 31,        Remaining        Exercise       September 31, 2001      Exercise
                                      2001            Contractual         Price                                  Price
                                                          Life
                ------------    ------------------    -------------    ------------    -------------------    ------------
             $         0.02           332,000          0.77 Years      $    0.02          332,000            $     0.02
             $         0.05           770,000          1.25 Years      $    0.05          770,000            $     0.05

</Table>


The  Company  issued   consultant   warrants  for  the  purchase  of  8,326,530,
21,014,574, and 7,208,835 shares of common stock to a consultant in fiscal years
1999,  2000,  and 2001,  respectively  (see  Note 6). A  consulting  expense  of
$1,501,378,  $432,125,  and $509,142 was  recognized  in 1999,  2000,  and 2001,
respectively,  based on the current intrinsic value of the award at each balance
sheet date pursuant to SFAS 123 since the fair market value was not determinable
at the grant date due to the variable quantity and exercise price per share (see
Notes 7(A) and 6).


(D) Pro Forma Disclosures

In accordance with Statement of Financial  Accounting Standards 123, for options
issued to employees, the Company has elected to apply the intrinsic value method
of Accounting  Principles  Board Opinion Number 25 and related  interpretations.
Accordingly,  $2,881 and $7,323  were  charged to  compensation  during 2001 and
2000,  respectively,  since the fair market value of the common stock based upon
the  trading  price  at  the  grant  date  exceeded  the  exercise  price.   Had
compensation  cost been recognized based on the fair market value of the options
on the grant date  consistent with Statement of Financial  Accounting  Standards
123, the Company's change in net loss for the years ended September 30, 2001 and
2000 would not have been material.

The effect of applying  Statement of Financial  Accounting  Standards 123 is not
likely to be  representative  of the effects on reported  net income  (loss) for
future years due to, among other things, the effects of vesting.

                                      F39
<Page>



Note 8    Income Taxes

There was no current income tax provision for the years ended September 30, 2001
and 2000 due to the Company's net loss.

The Company's tax expense  differs from the "expected" tax expense for the years
ended  September 30, 2001 and 2000  (computed by applying the Federal  Corporate
tax rate of 34 percent to loss before taxes), as follows:




                                                   2001                2000
                                               -----------       ---------------
Computed "expected" tax expense (benefit)     $  (310,391)      $      (204,576)
Non-deductible stock based compensation           187,227               150,772
Effect of net operating loss carry forwards       123,164                53,804
                                               -----------      ---------------
                                              $         -       $             -
                                               ===========       ===============

The tax effects of temporary  differences that give rise to significant portions
of deferred tax assets and  liabilities  at  September  30, 2001 and 2000 are as
follows:

                                                   2001                2000
                                               -----------       ---------------
Deferred tax assets:
Net operating loss carryforward               $ 1,162,694       $     1,076,879
Stock based compensation                        5,099,419             4,912,192
                                               -----------       ---------------
Total gross deferred tax assets                 6,262,113             5,989,089
Less valuation allowance                       (6,262,113)           (5,989,089)
                                               -----------       ---------------
Net deferred tax assets                       $         -       $             -
                                              ============       ===============

The valuation allowance at September 30, 2000 was 5,989,089. The increase during
2001 was $273,024.

At September  30, 2001,  the Company had net  operating  loss carry  forwards of
approximately  $3,419,688  for income tax  purposes,  available to offset future
taxable  income  expiring  on  various  dates  through  2021.  Usage  of the net
operating  losses may be limited if the Company  undergoes a change in ownership
or change in business.

In assessing the realizability of the deferred tax assets,  management considers
whether it is more likely than not,  that some  portions or all of the  deferred
tax assets will not be realized. The ultimate realization of deferred tax assets
is  dependent  upon the  generation  of  future  taxable  income or  changes  in
ownership  or  business  during the periods in which the  temporary  differences
become  deductible.  Due to the  Company's  reorganization  (see Note 2) and the
ceasing of all operations,  except for consulting activities,  it is more likely
than not that; the deferred tax assets will not be realized.

Note 9    Legal Matters

(A) The Company versus ITA

In September  1998,  ITA defaulted in its payments to T2U Co., doing business as
RCP, for services  rendered to third parties,  payment of which was collected by
ITA. Thereafter, RCP and two other corporations, Psychic Discovery Network, Inc.
("PDN"),  a Delaware  corporation  affiliated  with the Company  through  common
ownership by the principal shareholder of PDN's parent,  Viatech  Communications
Group, Inc. and BLJ Communications,  Inc., a Florida corporation,  all creditors
of ITA,  filed a petition  seeking  ITA'S  involuntary  bankruptcy  pursuant  to
Chapter 7 of the United States  Bankruptcy  Code. It is  management's  assertion
that a favorable outcome for the Company is not likely.

                                      F40
<Page>




(B)  Filing of Litigation:   Deutsche  Financial  Services  Corporation   versus
     BTS, Mr. Peplin, and the Company

Subsequent  to the balance sheet date,  on October 8, 1999,  Deutsche  Financial
Services  Corporation  caused  a  Consent  Arbitration  Award in the  amount  of
$348,858  plus  interest at the per annum rate of prime plus 6.5% from August 1,
1998 less any sums  received  pursuant to the  Extension  Agreement  referred to
below,  to be entered  against  the Company  and others  based on the  Company's
purportedly having consented to such award. The Company signed the Consent Award
after having signed a loan extension  agreement (the  "Extension  Agreement") in
August of 1998, along with the Company's former President (Mr. Peplin).  Because
the Company agreed to the terms of the Extension Agreement, and the accompanying
Consent  Arbitration Award, on the express condition that two additional parties
(Mr. and Mrs.  Sethi) would sign them both and be similarly  bound by them,  and
because  these  additional  parties  did not sign  the  Extension  Agreement  by
September  15,  1998,  the time that the payment of  $348,858  was due under the
Extension  Agreement,  the Company  repudiated its signing of both the Extension
Agreement and the Consent Arbitration Award. Accordingly,  the Company has taken
the position that the Consent Arbitration Award exceeded the jurisdiction of the
arbitration and  consequently,  is not binding and enforceable.  (See Note 5 for
contingent  liability  accrued  as  of  September  30,  2001.)  Nonetheless,  to
eliminate  the  uncertainty  of  on-going  litigation,  the  Company is activity
engaged in settlement  discussions  concerning this matter, the outcome of which
the Company cannot predict.

(C) Ziff Davis, Inc. vs. BTS

On February  12,  1999,  Ziff-Davis  filed an action for damages  against BTS. A
material  judgment was entered  against BTS on July 26, 1999 for  $133,348  plus
interest  at 10%  through  December  31,  1999  and at the  Florida  legal  rate
thereafter.  At the time of the judgment,  BTS was no longer a subsidiary of the
Company.  Management  of the  Company and its  counsel  believe  that absent the
ability to "pierce the corporate veil" no liabilities attributable to BTS should
affect the Company.

(D) Various Creditor Claims

The  Company has  judgments  and claims  against it  aggregating  $186,906.  The
$101,300  was  expensed  in 1999 and  $85,606 in 2001 and the total of  $186,906
remains accrued by the Company as of September 30, 2001 (see Note 5(B)).

Note 10   Going Concern

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  Except  for  recently  initiated
consulting activities,  the Company has no other active business operations, has
recurring  losses,  had cash used in  operations  of  $76,782  in 2001 and had a
working capital deficiency of $930,936 and an accumulated deficit of $18,417,978
at September  30,  2001.  These  conditions  raise  substantial  doubt about the
Company's ability to continue as a going concern.

The  Company  maintains  an  agreement  as a  telephone  service  reseller  with
BellSouth  and  management  looks to  expand  on such  operations,  or  locate a
merger/acquisition candidate.

                                      F41
<Page>



Note 11   Related Parties

During  2001,  the  Company  accrued  $90,000 in  consulting  fees  payable to a
principal stockholder under a consulting agreement (see Note 6(A)).

The Company owes its principal  stockholder $199,201 at September 30, 2001. That
balance consists of $101,346 principle and $7,855 accrued interest pursuant to a
promissory  note expiring  September  2002  (interest at prime plus 2%, 8.28% at
September 20, 2001) and $90,000 of accrued consulting fees (see Note 6(A)).

The  Company  is  employing  its  corporate  counsel  under a shared  employment
agreement with the Company's  principal  stockholder  and consultant  (see Notes
6(A) and 6(B)).  In the event of any conflict of interest,  under the agreement,
the corporate counsel represents the principal stockholder only.

The  Company's  vice-president,  corporate  secretary,  and  director is also an
officer of the consultant and principal stockholder (see Note 6(A)).

Note 12   Subsequent Events

In November  2001,  24,788 of the shares  issuable at September  30, 2001,  were
issued.



                                      F42
<PAGE>





ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

On June  17,  2001,  our  Company  changed  its  auditors  when  the  individual
supervising  our Company's  account left his prior  employer and founded his own
firm,  Salberg &  Company,  P.A.  Such  change  was based  solely on a desire to
maintain  continuity  with the person  most  familiar  with our  Company and its
financial  statements  who left his former  firm and  formed  Salbery & Company,
P.A.. Our Company has not had any disagreements with any accountants  concerning
required financial disclosure.

1.        (i)       The  decision  to change  accountants  was  approved  by our
                    Company's board of directors; and

                    (A) There were no disagreements with  the former accountant,
                        whether or  not resolved, on  any  matter of  accounting
                        principles or practices,financial statement  disclosure,
                        or auditing  scope or procedure,  which, if not resolved
                        to  the former  accountant's   satisfaction,  would have
                        caused it to make reference to the subject matter of the
                        disagreement(s)in connection with its report; or

                    (B) The former accountant did not advise our Company that:

                        1.    internal  controls  necessary  to develop reliable
                              financial statements did not exist; or

                        2.    information  had come  to  the  attention  of  the
                              former   accountant  which   made  the  accountant
                              unwilling to rely on management's representations,
                              or unwilling to be associated  with  the financial
                              statements prepared by management; or

                        3.    that  the  scope of  an  audit  should be expanded
                              significantly, or that information had come to the
                              accountant's  attention  that  the  accountant had
                              concluded would, or if further investigated might,
                              materially impact the fairness or reliability of a
                              previously issued  audit report or  the underlying
                              financial statements, or the financial  statements
                              issued   or   to  be   issued  covering the fiscal
                              period(s)subsequent to the date of the most recent
                              audited financial statements(including information
                              that might preclude the issuance of an unqualified
                              audit report),  and  the issue was not resolved to
                              the   accountant's   satisfaction   prior   to our
                              Company's decision to change auditors.

(2)  Our Company provided our former auditors,  Weinberg & Company, P.A., with a
     copy of the report on Form 10-KSB for the year ended September 30, 1999 and
     requested that they furnish a letter  addressed to the  Commission  stating
     whether they agreed with the  statements  made herein and, if not,  stating
     the  respects  in which  they do not agree.  Such  letter  from  Weinberg &
     Company,  P.A.  was filed as an exhibit to our  Company's  Form 8-KSB filed
     with the Commission on June 25, 2001.



                                      -43-
<Page>


                                    PART III

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

Directors and Executive Officers

As of  September  30,  2001,  the  following  persons  served  as our  Company's
directors and executive officers:

Name                       Age (1)  Term (2)   Positions
----                       -------  --------   ---------
Anthony Q. Joffe            59       (3)       Director, chairman of  the  board
                                               of directors
Charles J. Champion, Jr.    34       (4)       Director,chairperson of the audit
                                               committee
Vanessa H. Lindsey          30       (5)       Vice-President,   Secretary   and
                                               Director
Lawrence R. Van Etten       64       (6)       Director
Robert S. Gigliotti         53       (7)       Director, member  of  the   audit
                                               committee
Kevin W. Dornan             49       (8)       General Counsel
Edward C. Dmytryk           55       (9)       President,Chief Executive Officer
                                               and Director
----------

    (1)   As of September 30, 2001.
    (2)   All  directors  were  elected for a term ending at such time as his or
          her  successor is elected at the next annual  meeting of our Company's
          stockholders and is qualified in office, and all officers serve at the
          pleasure of the board of directors,  subject to any contractual rights
          to compensation that may survive their termination.
    (3)   Mr. Joffe was elected as a member of our Company's  board of directors
          on  January  12,  1999,  as the  chairman  of our  Company's  board of
          directors  in March 1999,  and as our  Company's  president  on May 4,
          1999. He resigned as President and Chief Executive  Officer on May 14,
          2001, but remains as its Chairman and a director.
    (4)   Mr.  Champion  was  elected  as a  member  of our  Company's  board of
          directors  on January 12, 1999,  and as the chairman of our  Company's
          audit  committee on November 4, 1999.
    (5)   Mrs.  Lindsey was elected as our  Company's  secretary  on January 12,
          1999,  as a  member  of our  Company's  board of  directors  effective
          February  1, 2000,  and as our  Company's  Vice-President  on June 14,
          2001.
    (6)   Mr.  Van  Etten was  elected  as a member  of our  Company's  board of
          directors on May 31, 2000.
    (7)   Mr.  Gigliotti  was  elected  as a member  of our  Company's  board of
          directors on December 11, 1997, and a member of the audit committee on
          October 27, 2000.
    (8)   Mr. Dornan was elected as our Company's general counsel effective June
          18,  2001.
    (9)   Mr.  Dmytryk  was  elected  as a  member  of our  Company's  board  of
          directors and as its President and Chief Executive  Officer on May 14,
          2001.


As a material  subsequent  event,  Adam  Wasserman  was elected as our Company's
chief financial officer and controller on March 26, 2002.


Biographies of Directors and Executive Officers

Anthony Q. Joffe,  Director and Chairman,  Former  President and Chief Executive
Officer.


Anthony  Q.  Joffe,  age 59, has  served as a member of our  Company's  board of
directors  since  January  12,  1999.  In March 1999,  Mr.  Joffe was elected as
chairman  of the board of  directors  and in May  1999,  he was  elected  as our
Company's president. He resigned as president and chief executive officer on May
14, 2001, but remains as chairman of the board and a director. Mr. Joffe holds a
degree in Aeronautical  Engineering  Management from Boston University,  Boston,
Massachusetts. During the past five years, he has served as Managing Director of
NorthStar  Capital,  an  investment  banking  firm  with  offices  in  Stamford,
Connecticut  and Boca Raton,  Florida that  specializes  in  assisting  small to
mid-size  private and publicly  traded  companies  with  business and  financial
planning,  acquisition and  divestiture,  financial  public relations and market
position  advice,  and treasury  services.  He has also founded a boat financing
company,  currently  known as USA  Boating.  Mr. Joffe served as a member of the
Board of Directors of AmeriNet Group.com,  Inc. (currently Fields  Technologies,
Inc.), a publicly held Delaware corporation from November 1998 to June 2001.


                                      -44-
<Page>



Edward C. Dmytryk, Director, President and Chief Executive Officer.

Mr. Dmytryk,  age 55, serves as a member of our Company's board of directors and
as the  president and chief  executive  officer since May 14, 2001. He graduated
summa cum laude from The Citadel,  The Military  College of South  Carolina,  in
1968 with a bachelor  of science  degree in business  administration.  From 1968
until 1973,  Mr.  Dmytryk served in the United States Air Force as a fighter and
instructor  pilot,  attaining  the rank of captain  (regular  United  States Air
Force).  During the past five years,  he has been the owner and chief  executive
officer  of   Benchmark   Industries,   Inc.,  a  metal   fabrications   company
headquartered in Fort Worth,  Texas. Since September 1999, he has also served as
the president of GNR Health  Systems,  Inc., a physical  therapy  products sales
company located in Ocala, Florida. In addition, he currently serves as president
and chief  financial  officer of Sohn,  Inc.,  located in  Roswell,  Georgia,  a
company specializing in marketing, sales, and installing fitness products in the
hospitality  and  apartment  market  (fitness  centers  in  hotels,  condominium
complexes,  and apartments  throughout the United States). From December 2000 to
June 2001,  he served as  president  and chief  executive  officer  of  AmeriNet
Group.com, Inc. (currently Fields Technologies,  Inc.), a publicly held Delaware
corporation, and as a member of its board of directors from 1999 to the present.

Charles J. Champion, Jr., Director, audit committee chair.

Charles J. Champion,  Jr., age 34, has served as a member of our Company's board
of directors  since January 12, 1999,  and as the  chairperson  of our Company's
audit  committee  since March 2000.  Mr.  Champion  graduated from Florida State
University  in 1988 with a  bachelor's  degree in political  science.  Following
graduation, he joined the Champion Group of Companies, a family owned enterprise
involved in the  insurance  and  financial  industries.  In 1996,  Mr.  Champion
purchased  Sunshine  Securities   Corporation,   a  licensed  broker  dealer  in
securities and a member of the National Association of Securities Dealers, Inc.,
at which time it became one of the Champion  Group of Companies.  He then became
Sunshine Securities  Corporation's president, and its business capabilities were
expanded  to include  practice  as a  registered  investment  advisor.  Sunshine
Securities  Corporation's name was changed to Champion Capital Corporation on or
about February 5, 2000. Mr.  Champion holds a number of insurance and securities
licenses,  including  series 7 and series 24 securities  licenses.  Mr. Champion
served  as a member  of the  board of  directors  of  AmeriNet  Group.com,  Inc.
(currently  Fields  Technologies,  Inc.), a publicly held Delaware  corporation,
from December 2000 to June 2001.

Vanessa H. Lindsey, Vice-President, secretary and director.

Vanessa H. Lindsey,  age 30, was elected  vice-president  of our Company on June
14, 2001, has served as our Company's secretary and chief administrative officer
since  January  1999 and was  elected  as a  member  of the  board of  directors
effective  February  1, 2000.  From 1995 to 2001 she was  employed  as the chief
administrative  officer of Diversified  Corporate  Consulting  Group,  L.L.C., a
Delaware limited liability company engaged in providing  diversified  consulting
services and in filing  EDGARized  documents  for clients  with the  Commission.
Since 1996 she has been  employed by the  Southeast  Companies,  Inc., a Florida
corporation,  involved in the entertainment  industry, in business and political
consulting  and  as  a  licensed  mortgage  brokerage  company,   as  its  chief
administrative officer and currently serves as its vice president and secretary.
She is also the  secretary  and  chief  administrative  officer  for The  Yankee
Companies  ("Yankees"),  which serves as a strategic  consultant to our Company.
Mrs.  Lindsey held the position of  secretary of the Marion  County  Libertarian
Party  and was the  campaign  treasurer  for the Cyndi  Calvo for State  Senate,
District 8 Campaign from 1998 to 2000.  From November 11, 1999 to June 13, 2001,
she  served  as  secretary  for  AmeriNet   Group.com,   Inc.(currently   Fields
Technologies,  Inc.),  a publicly  held  Delaware  corporation,  and served as a
member of its board of  directors  from  April 6, 2000 to June 13,  2001.  Since
January 2001,  she has also served as the secretary and as a member of the board
of directors for Explorations Group, Inc., a Delaware corporation.


                                      -45-
<Page>
Robert S. Gigliotti, Director, audit committee member.

Robert S. Gigliotti, age 53, served as our Company's secretary from November 10,
1997  until  January  12,  1999,  and has  served  as a member  of our  board of
directors  since  December  11,  1997,  and as a member of our  Company's  audit
committee  since May 30,  2000.  In 1970,  Mr.  Gigliotti  received a bachelor's
degree in business from Alma College, Alma, Michigan, and received his certified
public  accountant  license  in 1972.  Mr.  Gigliotti  currently  serves  as the
managing  tax  partner  of  Perrin,  Fordree & Company  (with  which he has been
associated since 1976). Mr. Gigliotti's specialties include estate and financial
planning, franchising and corporate taxation.

Lawrence R. Van Etten, Director

Mr. Van Etten,  age 64,was elected as member of our Company's board of directors
on  May   31,   2000.   He   graduated   from   New   York   Military   Academy,
Cornwall-On-Hudson,   New  York  in  1954  and  attended   Gettysburg   College,
Gettysburg, Pennsylvania from 1954 to 1956 and Marist College, Poughkeepsie, New
York from 1981 to 1982.  During the past five years, Mr. Van Etten has served as
an  executive  with  several  companies  in the United  States and Canada  (Vice
President,  International Digital Communications  Systems, Inc., Miami, Florida,
Telecommunications  Sales, 1996-1998;  President TechTel  Communications,  Inc.,
Pompano  Beach,  Florida,  CLEC Service  Provider,  1998-1999;  and he owned and
managed his own  consulting  company  LVE &  Associates,  US &  Canada,including
several long-term contracts with Toyada Gosei, Best Glove Canada,  Remtec, Inc.,
Prestige Auto and Strategic  Health  Development  Corporation).  Much of Mr. Van
Etten's  recent work  experience  has dealt with  business  management  systems,
materials  management,  management  development,  personal computer  application
software and the Internet.  From May 22, 2000 until  December 22, 2000,  Mr. Van
Etten served as acting president and chief operating officer, and until June 13,
2001 as a  member  of the  board  of  directors,  of  AmeriNet  Group.com,  Inc.
(currently Fields Technologies, Inc.), a publicly held Delaware corporation.

Kevin W. Dornan, Esquire, General Counsel

Kevin W. Dornan, age 49, was engaged as our Company's general counsel as of June
18, 2001.  He is a graduate of the Johns Hopkins  University  (Bachelor of Arts,
philosophy,  1973);  the  University of North Carolina at Chapel Hill (Master of
Arts,  philosophy,  1975);  the Catholic  University of America (Master of Arts,
religious  studies,  1979);  and the University of Maryland School of Law (Juris
Doctor,  1987),  where he served as  editor-in-chief of the 1986-87 Maryland Law
Review. During law school, he also served as a judicial intern for The Honorable
James R. Miller,  Jr., of the U.S.  District Court for the District of Maryland.
In  1997,   Mr.   Dornan   became  the  general   counsel   for  DWA  Corp.,   a
telecommunications  company in St. Augustine,  Florida.  In June 2001, he became
the general counsel for The Yankee Companies.  He is admitted to practice before
the Court of Appeals of Maryland; the District of Columbia Court of Appeals; the
Supreme  Court of  Florida;  the U.S.  Courts of  Appeals  for the  District  of
Columbia,  Second,  Fourth, and Eleventh Circuits;  and the U.S. District Courts
for the District of Maryland, the Eastern and Western Districts of Arkansas, the
District of Columbia,  and the Middle District of Florida. Mr. Dornan has served
since 1996 as an adjunct professor of business ethics at Saint Leo University in
Saint Leo and St. Augustine,  Florida, and as an adjunct professor of management
and business at Eckerd College in St. Petersburg, Florida. In 1998, he was named
to Who's Who in American Law.


Adam Wasserman, Chief Financial Officer & Controller

     Adam  Wasserman,  age 37, was  elected  as our  Company's  chief  financial
officer and  controller  on March 26, 2002.  Mr.  Wasserman  holds the degree of
Bachelor of  Administration  from the State University of New York at Albany. He
is a  Certified  Public  Accountant  (New  York),  and a member of The  American
Institute of Certified Public Accountants and the Florida Institute of Certified
Public  Accountants.  Mr.  Wasserman  currently  serves as the  chief  executive
officer and  director of CFO Oncall,  Inc.,  a firm  specializing  in  financial
consulting  services  that he  founded  in 1999,  which is  located  in  Weston,
Florida.  From 1991 to 1999, he was an audit  manager at American  Express Tax &
Business in Fort Lauderdale,  Florida,  where he served as an outsourced CFO and
advisor to a  diversified  clientele in the  technology,  medical,  retail,  and
service  industries in both the private and public  sectors.  Mr.  Wasserman has
also served with  Deloitte & Touche,  LLP in New York City,  where he  conducted
audits of public and private companies, tax preparation and planning, management
consulting,  and systems design.  .He currently  serves as the Treasurer of Gold
Coast Venture Capital Club, was a former officer of Toastmasters  International,
and is a member of the Florida  Venture  Forum,  Weston  Chamber of Commerce and
Broward County Chamber of Commerce.



                                       -46-
<Page>



Other Material Personnel

In addition to our Company's  directors and  executive  officers,  since January
1999  William A. Calvo,  III and Leonard M. Tucker have also  provided  material
services  to our  Company  through  Yankees,  in which they serve as members and
executive  officers and which they and their families own.  Because  Yankees has
the right to acquire up to 75% of our  Company's  securities,  it should also be
deemed a control person of our Company.

Family Relationships.

There are no family  relationships  among the current  officers and directors of
our Company.

Involvement in Certain Legal Proceedings.

Based on information provided in response to our Company's legal counsel, except
as otherwise  disclosed in this  report,  during the five year period  ending on
September 30, 2001, no current  director,  person nominated to become a director
or executive officer,  and no promoter or control person of our Company has been
a party to or the subject of:

    (1)   Any bankruptcy petition filed by or against any business of which such
          person was a general  partner or executive  officer either at the time
          of the bankruptcy or within two years prior to that time;

    (2)   Any  conviction  in a  criminal  proceeding  or has been  subject to a
          pending criminal  proceeding  (excluding  traffic violations and other
          minor offenses);

    (3)   Any order, judgment, or decree, not subsequently  reversed,  suspended
          or vacated,  of any court of competent  jurisdiction,  permanently  or
          temporarily enjoining,  barring,  suspending or otherwise limiting his
          or her  involvement  in any type of  business,  securities  or banking
          activities; and

    (4)   Been found by a court of competent  jurisdiction  (in a civil action),
          the  Commission or the Commodity  Futures  Trading  Commission to have
          violated a federal or state  securities  or  commodities  law, and the
          judgment has not been reversed, suspended, or vacated.

Compliance with Section 16(a) of the Exchange Act

Based  solely  upon a review  of any Forms 3, 4 and 5, and  amendments  thereto,
furnished to our Company during and with respect to its most recent fiscal year,
no person who, at any time during the fiscal year, was a director,  officer,  or
beneficial  owner of more than ten percent of our  Company's  common  stock (its
only  class of  equity  securities  registered  pursuant  to  Section  12 of the
Exchange  Act),  failed to file on a timely  basis,  as  disclosed  in the above
Forms, reports required by Section 16(a) of the Exchange Act for the most recent
fiscal year or prior fiscal years.

ITEM 10. EXECUTIVE COMPENSATION.

Summary Compensation Table
--------------------------

<Table>
<S>                  <C>     <C>      <C>       <C>      <C>            <C>            <C>         <C>
                                                   Long Term Compensation
                                                   ----------------------
                Annual Compensation             Awards                     Payouts
                -------------------             ------                     ----------
                                                                    Securities
                                               Other                 Underlying       Long        All
Name &                                         Annual    Restricted  Options  &       Term        Other
Principal                                      Compen    Stock       Stock Apprecia-  Incentive   Compen Principal
Position            Year    Salary    Bonus    sation    Awards      tion Rights      Payouts     sation
---------           ----    ------    -----    ------    ---------   --------------   ---------   ----------------
Mrs. Lindsey (1)    1999    *         *        *         *              20,000         *          *
Mrs. Lindsey (1)    2000    *         *        *         *              24,000         *          *
Mr. Joffe (2)       2000    *         *        *         $ 6,000        *              *          *
Mr. Joffe (2)       2001    *         *        *         $ 1,735        *              *          *
Mr. Dmytryk (3)     2001    *         *        *         $23,875        *              *          *
Mrs. Lindsey (4)    2001    $2,442    *        *         $15,058        *              *          *
Mr. Dornan (5)      2001    $7,692    *        *         $ 8,750        *              *          *

</Table>
                                       -47-
<Page>



(1)  For services as our Company's  secretary,  at an exercise price of $0.05 in
     1999 and $0.02 in 2000, per share of common stock.
(2)  For services as our Company's  president from May 1999 to May 2001 (payable
     at the end of each year of service).
(3)  For services as our Company's  president and chief executive  officer since
     June 2001.
(4)  For services as our Company's vice president and secretary.
(5) For services as our Company's general counsel. * Not Applicable

Options and Stock Appreciation Rights (SAR) Grants Table
--------------------------------------------------------
For Fiscal Year Ended September 30, 2001:

               Quantity of         Percentage of Total
               Securities          Options or Stock
               Underlying          Appreciation         Exercise
               Options & Stock     Rights Granted       or Base
               Appreciation        to Employees         Price Per     Expiration
Name           Rights Granted      In Fiscal Year       Share         Date
----           --------------      --------------       ----------    ----------

None (see  "Compensation of Directors"  below; no executive  officer was granted
such options or SARs)

Aggregated  Option & Stock  Appreciation  Right  Exercises  and Fiscal  Year-End
--------------------------------------------------------------------------------
Options & Stock Appreciation Rights Value Table
-----------------------------------------------
                                            Number of
                                            Securities
                                            Underlying
                                            Options &       Value of
                                            Stock           Unexercised
                                            Appreciation    In-the-Money
                   Shares                   Rights at       Options & Stock
                   Acquired      Value      Fiscal          Appreciation Rights
Name               On Exercise   Realized   Year End        at Fiscal Year End
----               -----------   --------   ------------    -------------------
None


Long Term Incentive Plan Awards Table
-------------------------------------

Long Term Incentive Plans - Awards in Last Fiscal Year

                               Performance
                    Number     or Other
Name                of Units   Period Until
of                  or Other   Maturation
Executive Officer   Rights     or Payout      Threshold      Target     Maximum
-----------------   --------   -----------    ---------      ------     -------
Not Applicable


Compensation of Directors
-------------------------

Standard Arrangements

During the fiscal  year that  started on October 1, 2000 and ended on  September
30,  2001,  the members of our  Company's  board of directors  were  compensated
through the grant of warrants to purchase shares of our Company's  common stock,
as disclosed in the following table:

                              Date of     Expiration     Exercise    Underlying
Name & Category               Option      Date           Price       Shares
---------------               -------     -----------    --------    ----------
Anthony Q. Joffe (1)          (2)         (3)            $0.05          100,000
Charles J. Champion, Jr.(1)   (2)         (3)            $0.05          100,000
Robert S. Gigliotti (1)       (2)         (3)            $0.05          100,000
Vanessa H. Lindsey (1)        (2)         (3)            $0.05          100,000
David K. Cantley              (4)         (3)            $0.02            8,000
Lawrence R. Van Etten         (4)         (3)            $0.02           28,000


                                       -48-
<Page>


(1)  Directors  who have served on the board for one or more years and  received
     additional compensation
(2)  January 11, 2001
(3)  December 31, 2002
(4)  July 27, 2001.

Employment   Contracts,   Termination   of  Employment  and  Change  in  Control
Arrangements.

During the fiscal  year that  started on October 1, 2000 and ended on  September
30, 2001, our Company had no employment contracts,  termination of employment or
change in control arrangements with any of its executive officers, except as set
forth below.

Employment Agreements

Mr. Joffe

On May 4, 1999, our Company's board of directors elected Anthony Q. Joffe as its
president.  The  agreement  was for an initial  term of one year,  with  renewal
thereafter  from year to year unless the  Company or Mr.  Joffe gave at least 60
days notice prior to the end of the  then-current  term of an  intention  not to
renew, and contained  confidentiality & non-competition  clauses. For every year
of service, Mr. Joffe was to be compensated for his services with 200,000 shares
of the Company's common stock, provided he remained employed for 365 consecutive
days,  was not discharged  for cause,  and complied with all of his  obligations
under the  employment  agreement.  Mr. Joffe served for a total of two years and
was issued 224,788 common shares (with 175,212 additional shares still issuable,
pending a sufficient increase in capitalization by our Company's  stockholders).
A copy  of the  Joffe  employment  agreement  was  filed  as an  exhibit  to our
Company's  report on Form  10-KSB for the year ended  September  30,  1998.  The
agreement  terminated as of May 3, 2001,  upon  completion of the second year of
service.

Mrs. Lindsey

On January 12, 1999, our Company's board of directors elected Vanessa H. Lindsey
as its secretary. Our Company agreed to compensate Mrs. Lindsey for her services
as secretary  through  December 31, 1999 by granting her a common stock purchase
warrant to purchase  20,000 shares of our  Company's  common stock at a price of
$0.05 per share,  exercisable  during the period starting on January 1, 2000 and
ending on January 12,  2002.  (On  November  14,  2001,  the board of  directors
extended the exercise  period until January 12,  2003.) On January 3, 2000,  our
Company agreed to compensate Mrs. Lindsey for her services as secretary  through
December  31,  2000 by granting  her a  non_qualified  stock  option to purchase
24,000  shares of our  Company's  common  stock at a price of $0.02  per  share,
exercisable during the period starting on January 1, 2001 and ending on December
31, 2002. A copy of the  agreement to serve as corporate  secretary was filed as
an exhibit to our Company's  report on Form 10-KSB for the year ended  September
30, 1998.

Effective June 14, 2001, our Company  entered into an employment  agreement with
Mrs.  Lindsey  pursuant to which she is engaged as our Company's  vice president
and secretary.  The agreement is for a term of one year, with renewal thereafter
from year to year unless  either our Company or Mrs.  Lindsey  gives at least 60
days' notice prior to the end of the  then-current  term of an intention  not to
renew,   and  contains   confidentiality   and   non-competition   clauses.   As
consideration for Mrs. Lindsey's services,  our Company has agreed to compensate
her according to our Company's pro rata share  (assuming a 40 hour work week) of
a base salary of $5,000.00 per month, for time actually devoted to her duties on
behalf of our Company.  This  compensation is paid at the end of each month, and
is paid  partly in cash and partly in an amount of our  Company's  common  stock
calculated by using the average closing  transaction  price of the stock for the
month then-ended.  A copy of Mrs. Lindsey's employment agreement was filed as an
exhibit to our Company's  report on Form 10-KSB for the year ended September 30,
1999.


                                      -49-
<Page>

Mr. Dmytryk

Effective June 14, 2001, our Company  entered into an employment  agreement with
Mr. Dmytryk pursuant to which he is engaged as our Company's president and chief
executive  officer.  The  agreement  is for a term  of one  year,  with  renewal
thereafter  from year to year unless either our Company or Mr.  Dmytryk gives at
least 60 days' notice prior to the end of the then-current  term of an intention
not to renew,  and contains  confidentiality  and  non-competition  clauses.  As
consideration for Mr. Dmytryk's  services,  our Company has agreed to compensate
him  at the  rate  of  $50.00  per  hour  for  services  to  our  Company,  plus
reimbursement for all reasonable expenses related thereto.  This compensation is
paid at the end of each month, and is currently paid by an equivalent  amount of
our Company's common stock  calculated by using the average closing  transaction
price of the stock for the month then-ended.  A copy of Mr. Dmytryk's employment
agreement was filed as an exhibit to our Company's report on Form 10-KSB for the
year ended September 30, 1999.

Mr. Dornan

Effective June 18, 2001, our Company  engaged Kevin W. Dornan,  Esquire,  as its
general counsel.  As consideration  for his services,  our Company has agreed to
compensate him according to our Company's pro rata share (based on the number of
Yankees'  clients for whom he is  providing  legal  services) of (1) his current
base salary of $40,000.00  per year and (2) $2,500.00 per month in common stock.
The stock portion is paid at the end of each month, and is paid by an equivalent
amount of our Company's  common stock  calculated  by using the average  closing
transaction price of the stock for the month then-ended.  A copy of Mr. Dornan's
engagement  agreement  was filed as an exhibit to our  Company's  report on Form
10-KSB for the year ended September 30, 1999.

Report of Re-Pricing of Options or Stock Appreciation Rights

During the report period,  to the best knowledge of our Company,  the management
did not re-price any options or stock appreciation  rights previously granted to
any of our Company's executive officers,  whether by amendment,  cancellation or
replacement grants, or any other means.

Except as disclosed  below, our Company has not adjusted or amended the exercise
price of stock options or stock appreciation rights previously awarded to any of
the  named  directors  or  executive   officers,   whether  through   amendment,
cancellation  or  replacement  grants,  or any  other  means,  nor are any  such
adjustments or amendments currently  contemplated.  During the period commencing
on January 1, 2001 and ending on the date of this  report,  our Company took the
following actions:

1.   On January 4, 2001,  our Company and Yankees  entered into a new  strategic
     consulting  agreement,  pursuant to which Yankees will bill at its standard
     hourly  rates  for all work as to which a prior  written  arrangement  with
     different  terms has not been entered  into;  however,  no hourly  billable
     services will be provided except at the Client's specific request,  and the
     service of Yankees'  members,  Messrs.  William A. Calvo,  III, and Leonard
     Miles Tucker,  will be provided at the fixed rate of $10,000 per month,  in
     the aggregate,  (a substantial  reduction in historical  fees accrued on an
     hourly basis) payment for which will be deferred and accrued until adequate
     funds  become  available.  The  agreement  also  permits  Yankees to accept
     payment in capital stock at the  conversion  rate of 50% of the fair market
     value of such stock.

2.   On or about January 12, 2001, the expiration date of the options granted to
     the members of our Company's board of directors and its executive  officers
     who  assumed  office on and after  January 12,  1999,  was  extended  until
     January 12, 2002.

                                      -50-
<Page>


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

As of the end of the Report Period


As of September  30, 2001,  our  Company's  only  currently  outstanding  voting
securities  were  19,975,212  shares of common  stock,  $0.01  par  value.  As a
material subsequent event, as of the close of business on November 15, 2001, our
Company had 20,000,000 shares of common stock outstanding.  The following tables
disclose  information  concerning  ownership  of our  Company's  common stock by
officers,  directors and principal  stockholders (holders of more than 5% of our
Company's common stock) as of November 15, 2001.  Because our Company  currently
has no additional shares available for issuance, the following two tables assume
that no person currently has the right to acquire  additional  securities of our
Company within sixty days as specified in Commission Rule 13(d)(1). Nonetheless,
the associated footnotes indicate the number of shares to which such persons may
become entitled in the event our Company's stockholders authorize an increase in
capitalization at the Annual Meeting of Stockholders scheduled for May 17, 2002.


All footnotes to the tables follow the second table.

Security Ownership of Certain Beneficial Owners

As of December 31, 2001,  the  following  persons  (including  any "group") are,
based on information  available to our Company,  beneficial  owners of more than
five  percent  of  our  Company's   common  stock  (its  only  class  of  voting
securities).

                                                          Amount
                                                          and Nature     Percent
                                                          Of Beneficial  of
Name and Address of Beneficial Owner (1)                  Ownership (2)  Class
---------------------------------------                   ------------   -------
The Yankee Companies, LLC. and members (3)(4)(5)          (4)            (4)
2500 North Military Trail, Suite 225;
Boca Raton, Florida 33431.

Tucker Family Spendthrift Trust (3)
2500 North Military Trail, Suite 225;
Boca Raton, Florida 33431
and
Calvo Family Spendthrift Trust (5)                        8,082,500       40.4%
1941 Southeast 51st Terrace;
Ocala, Florida 34471

Richard C. Peplin and affiliates (13)                     2,202,041       11%
25100 Detroit Road,
Westlake, Ohio 44145

SBV Holdings, Inc. (15)                                   1,844,444       9.2%
3350 NW Boca Raton Blvd., Suite B38,
Boca Raton, FL 33431




                                      -51-
<Page>



Security Ownership of Management


As of March 25, 2002,  the following  Table  discloses  our Company's  common
stock (the only  outstanding  class of equity  securities  for our Company,  its
parents or  subsidiaries  held by persons  other  than our  Company)  other than
directors' qualifying shares,  beneficially owned by all directors and nominees,
naming them each; each of the named executive officers as defined in Item 402(a)
of Commission  Regulation  S-B; and all directors and executive  officers of our
Company as a group,  without  naming them.  The table shows in the second column
the total number of shares  currently  owned and in the third column the percent
owned.


Name and Address of                        Amount       Nature of      Percent
Beneficial                                 Of Equity    Beneficial     of
Owner (1)                                  Owned        Ownership      Class
-------------------                        ---------    -----------------------
Robert S. Gigliotti                        90,000       (6)             0.5%
901 Wilshire Drive, Suite 400;
Troy, Michigan 48084

Anthony Q. Joffe                          224,788       (7)             1.1%
101 Southwest 11th Avenue;
Boca Raton, Florida 33486

Edward C. Dmytryk                          91,055       (8)             0.5%
315 Premier Vista Way;
St. Augustine, Florida 32080

Kevin W. Dornan, Esquire                   88,068       (9)             0.5%
5001 Southwest 20th Street;
Ocala, Florida 34474

Vanessa H. Lindsey                        279,378       (10)            1.4%
340 Southeast 55th Avenue;
Ocala, Florida 34471

Charles J. Champion                         (11)        (11)            (11)
Post Office Box 952259;
Lake Mary, Florida 32795

Lawrence R. Van Etten                     136,147       (12)            0.7%
1601 North 15th Terrace;
Hollywood, Florida 33020

All officers and directors as a group     909,436       (2)             4.5%(14)

Footnotes to Tables of Principal  Stockholders and Tables of Executive  Officers
and Directors

The following footnotes apply to the preceding two tables:



                                      -52-
<PAGE>


(1)  This  table  pertains  to  common  stock,   currently  our  Company's  only
     outstanding  equity  securities.
(2)  Beneficial and record.
(3)  The Tucker family is comprised of Leonard Miles  Tucker;  Michelle  Tucker,
     his wife;  Shayna and Montana,  their minor daughters;  and Jerrold Tucker,
     Mr. Tucker's  father.  Mr. Jerrold Tucker holds 470,000 shares in trust for
     Shayna  and  Montana,  his  minor  granddaughters,  and  holds  voting  and
     investment  power over those shares;  100,000  shares are held by Blue Lake
     Capital Corp., a Florida corporation owned by Mrs. Tucker, who holds voting
     and investment  power over those shares;  and 3,756,250  shares are held by
     the Tucker Family  Spendthrift Trust (the "Tucker Trust") for which Leonard
     and  Michelle  tucker  serve as the  trustees  and who each hold voting and
     investment  power  over those  shares.  For  purposes  of this Item 11, the
     Tucker  Trust  and the Calvo  Family  Spendthrift  Trust  (see  footnote  5
     immediately  below)  (the  "Calvo  Trust")  are being  treated as a "group"
     because they acquire  their shares as the two 50% members of Yankees.  Each
     trust, however, holds and disposes of its shares separately, and the shares
     are in no way subject to any shareholders agreement. If treated separately,
     the Tucker trust holds 4,326,250 shares (21.6% of the class), and the Calvo
     Trust holds 3,756,250 (18.8% of the class).
(4)  The Yankee Companies,  LLC., is a Florida limited liability company, 50% of
     which is owned by the  Tucker  Trust and 50% of which is owned by the Calvo
     Trust.  Yankees  currently holds no shares of our Company's  stock,  having
     distributed all shares it has acquired to date to its members. At such time
     as a sufficient  increase in  capitalization is authorized by our Company's
     stockholders,  Yankees would have the right to acquire 28,549,939 shares if
     it fully  converted its Class A Bond.
(5)  The Calvo family is comprised of William A. Calvo,  III;  Cyndi Calvo,  his
     wife; and William,  Alexander and Edward,  their minor sons. All the shares
     are held by the Calvo Trust for which  William and Cyndi Calvo serve as the
     co-trustees  and who jointly  hold voting and  investment  power over those
     shares.
(6)  Mr.  Gigliotti has served as a member of our  Company's  board of directors
     since December 11, 1997, as a member of the audit  committee since November
     4, 1999,  and as its  secretary  from  November 10, 1997 until  January 12,
     1999. Mr.  Gigliotti  currently holds 90,000 shares,  and holds warrants to
     acquire  230,000  shares that would  become  exercisable  if our  Company's
     authorized capital is sufficiently increased.
(7)  Mr. Joffe has served as a member of our Company's  board of directors since
     January 12, 1999, and as its president and chief executive officer from May
     4, 1999 to May 14, 2001. Mr. Joffe currently  holds 224,788 shares,  and if
     our Company's authorized capital is sufficiently  increased,  would receive
     an  additional  175,212  shares for his services  through May 2001. He also
     holds warrants to acquire  242,000 shares that would become  exercisable if
     our Company's authorized capital is sufficiently increased.
(8)  Mr. Dmytryk was elected as a member of our Company's board of directors and
     as its president and chief  executive  officer on May 14, 2001. Mr. Dmytryk
     currently holds 91,055 shares,  and if our Company's  authorized capital is
     sufficiently  increased,  would  receive an additional  630,058  shares for
     services rendered to our Company to date.

                                      -53-
<PAGE>



(9)  Mr. Dornan was elected as our Company's  general counsel effective June 18,
     2001.  Mr.  Dornan  currently  holds 88,068  shares,  and if our  Company's
     authorized capital is sufficiently  increased,  would receive an additional
     230,159  shares for  services  rendered to our  Company to date.
(10) Mrs. Lindsey was elected as our Company's secretary on January 12, 1999, as
     a member of our Company's  board of directors  effective  February 1, 2000,
     and as its  Vice-President  on June 14, 2001. Mrs. Lindsey  currently holds
     279,378  shares,  and if our Company's  authorized  capital is sufficiently
     increased, would receive an additional 401,616 shares for services rendered
     to our Company to date. She also holds  warrants to acquire  204,000 shares
     that  would  become  exercisable  if our  Company's  authorized  capital is
     sufficiently  increased.
(11) Mr.  Champion  has served as a member of our  Company's  board of directors
     since January 12, 1999. Mr.  Champion  currently owns no shares,  but holds
     warrants to acquire  242,000  shares that would become  exercisable  if our
     Company's authorized capital is sufficiently increased.
(12) Mr. Van Etten was elected as a member of our  Company's  board of directors
     on May 31, 2000.  Mr. Van Etten  currently  holds 136,147  shares and holds
     warrants to acquire  28,000  shares that would  become  exercisable  if our
     Company's  authorized  capital is sufficiently  increased.
(13) Mr. Peplin served as our Company's president, chief executive officer, as a
     member of our  Company's  board of directors and as its chair from November
     10, 1997 until May 4, 1999 (except that he resigned as chairman on March 3,
     1999).  Lakewood  Mfg.  Co.  is an entity  controlled  by Mr.  Peplin,  and
     Lakewood Mfg. Co.'s 793,944 shares are therefore  included in Mr.  Peplin's
     total number of shares shown in the table.
(14) Upon a sufficient increase in our Company's capitalization, if all officers
     and  directors  were  issued  the  shares to which  they are  entitled  for
     services  rendered,  and if they  exercised all  warrants,  as a group they
     would own  3,292,481,  which would  represent  approximately  14.7 % of the
     class at that time.
(15) Our  Company is advised  that SBV  Holdings  is owned by Elliott and Shelly
     Loewenstern  (as tenants by the entirety) such that each of them has voting
     and investment power over the shares held by SBV.


Changes in Control

As of the end of the report  period ,  material  changes  in control  have taken
place (see "Part III,  Item 9,  Directors,  Executive  Officers,  Promoters  and
Control Persons ..." for a discussion of how current  management assumed control
of our  Company  starting  in  January  1999).  Based on Yankees  current  stock
ownership  and its option to acquire up to 75% of our  Company's  common  stock,
Yankees and its members should be deemed to currently control our Company and to
have the  capacity  to pass  matters  to be acted on at  stockholders  meetings.
Except for the foregoing, to the best knowledge and belief of our Company, there
are no arrangements,  understandings,  or agreements relative to the disposition
of our Company's  securities,  the operation of which would at a subsequent date
result in a change in control of our Company.



                                      -54-
<PAGE>


Parents of our Company

As defined in Rule 405 of  Commission  Regulation  C, a "parent"  of a specified
person is an affiliate  controlling  such person directly or indirectly  through
one or more intermediaries.  The same rule defines an affiliate as a person that
directly  or  indirectly,  through  one or more  intermediaries,  controls or is
controlled by, or is under common control with, the person specified.


The following  table discloses all persons who were parents of our Company as of
March  25,  2002,  showing  the  basis of  control  and as to each  parent,  the
percentage of voting securities owned or other basis of control by its immediate
parent if any.


                                    Basis for         Percentage of Voting
Name                                Control           Securities Owned
----                                ---------         ---------------------
Yankees and its members              (1)               40.4% (2)

(1)  Stock  ownership,  options and  consulting  agreement.  The  discussion  of
     Yankees association with our Company is discussed in Part I, Item 1 of this
     report. Leonard Miles Tucker, a resident of Boca Raton, Florida,  serves as
     Yankees'  chief  executive  officer and as one of its  members;  William A.
     Calvo, III, serves as Yankees' treasurer and as one of its members; Vanessa
     H. Lindsey (also an officer and director of our Company) serves as Yankees'
     secretary  and chief  administrative  officer.  Kevin W.  Dornan  (also our
     Company's  general counsel) serves as Yankee's general counsel.  Yankees is
     owned in equal  parts by members  of Mr.  Tucker's  family and Mr.  Calvo's
     family.

(2)  This figure includes the current  ownership  interest of Yankees'  members.
     Upon a sufficient increase in our Company's capitalization,  and if Yankees
     were to fully  convert  its Class A Bond at that time,  the  percentage  of
     voting  securities  owned by Yankees and its members would be approximately
     76.6 %. See also footnote 4 to the preceding table.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Materially Adverse Proceedings

Our Company is not aware of any proceedings  involving its executive officers or
directors adverse to our Company's interests.

Certain Business Relationships

During the last two years,  our Company has engaged in a series of  transactions
with Yankees as  discussed  above in Part 1, Item 1,  "Description  of Business"
(see  "Consulting  Relationship  & Material  Agreements  Between Our Company and
Yankees"  at pages 4-5  herein,  and "Loan  Agreement  Between  Our  Company and
Yankees" at page 8 herein),  which  discussions are incorporated by reference as
permitted by Commission Rule 12b-23(a)(2).


                                      -55-
<Page>

ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.
Exhibits Required by Item 601of Regulation S-B

The response to this Item as contained  in our  Company's  report on Form 10-KSB
for the year ended September 30, 1998 and 1999 and 2000, is hereby  incorporated
by reference,  as permitted by Commission Rule 12b-23, except as modified by the
disclosure  contained in our Company's:  reports on Form 10-QSB for the quarters
ended  December 31, 2000 and March 31, 2001 and June 30, 2001;  and, the current
reports  on Form 8-K filed with the  Commission  on June 25,  2001,  and for the
following  additional  exhibits filed  herewith.  The exhibits  listed below and
designated as filed herewith (rather than  incorporated by reference) follow the
signature page in sequential order.

Designation       Page
of Exhibit        Number
as Set Forth      or Source of
in Item 601 of    Incorporation
Regulation S-B    By Reference    Description
--------------    -------------   ------------
(3)  (i)                          Articles of incorporation:
      3.3         (6)             Certificate of Renewal and Revival of Charter,
                                  dated August 13, 2001.
(4)                               Instruments  defining  the  rights of holders,
                                  including indentures:
      4.4         (1)             Our Company's 1998 Stock Option Plan and Forms
                                  of Incentive Stock Option   Agreement and Non-
                                  Qualified Stock Option Agreement.
      4.5         (3)             Yankees Warrant Agreement,effective January 5,
                                  1999
      4.7         (3)             Yankees   Amended  Warrant  Agreement,   dated
                                  December 30, 1999
      4.9         (3)             Our Company's 2000 Non-qualified Stock  Option
                                  & Stock Incentive Plan, dated January 3, 2000.
      4.10        (7)             Class  A,   Series A,  Convertible Bond, dated
                                  December 31, 2001
      4.11        (9)             Our Company's 2002 Non-Qualified Stock Option
                                  & Stock Incentive Plan, dated February 15,
                                  2002.
(10)                              Material Contracts:
      10.1        (3)             Yankee Consulting Agreement, dated January  5,
                                  1999.
      10.23       (3)             Yankees Amended  Consulting  Agreement,  dated
                                  January 2, 2000.
      10.24       (3)             Agreement  to  Serve  as  Corporate  Secretary
                                  between Vanessa Lindsey and our Company, dated
                                  January 3, 2000.
      10.25       (3)             Employment agreement between  Anthony Q. Joffe
                                  and our Company, dated January 3, 2000.
      10.29       (2)             Strategic Consulting  Agreement with  Yankees,
                                  dated January 4, 2001.
      10.31       (5)             Clarification Agreement,  dated  July 6, 2001,
                                  to the Reorganization Agreement with Richard C
                                  Peplin, Jr., signed on March 25, 1999
      10.35       (5)             Employment agreement between Edward C. Dmytryk
                                  and our Company, dated  July 19, 2001.
      10.36       (5)             Employment agreement between Vanessa H.Lindsey
                                  and our Company, dated  July 19, 2001.
      10.37       (5)             Engagement  agreement between  Kevin W. Dornan
                                  and our Company, dated July 19, 2001.
      10.38       (6)             Loan Agreement, Security Agreement, Promissory
                                  Note  between our  Company  and Yankees, dated
                                  September 24, 2001
      10.39       (7)             Settlement Agreement with  Strategica Services
                                  Corporation dated December  31, 2001
      10.40       (8)             Loan Agreement, Security Agreement, Promissory
                                  Note  between  our  Company and Yankees  LLC.,
                                  dated January 2, 2002
(16)                              Letter on change in certifying accountant
      16.3        (4)             Letter  re  Change  in  Certifying  Accountant
                                  Weinberg & Co.
(99)                              Additional Exhibits:
      99.5        (6)             Audit Committee Report


                                      -56-
<Page>



(1)  Filed as an exhibit to our  Company's  registration  statement on Form S-8,
     registration  number  333-47999,  declared  effective by the Securities and
     Exchange  Commission on March 16, 1998, as exhibit 99.1; and,  incorporated
     by reference herein as permitted by Commission Rule 12b-23.

(2)  Filed as an exhibit to our Company's  Report on Form 10-QSB for the quarter
     ended  December  31,  1998,  bearing the exhibit  designation  number shown
     above;  incorporated  by reference  herein as permitted by Commission  Rule
     12b-23.

(3)  Filed as an exhibit to our  Company's  Report on Form 10-KSB for the fiscal
     year ended September 30, 1998, bearing the exhibit designation number shown
     above;  incorporated  by reference  herein as permitted by Commission  Rule
     12b-23.

(4)  Filed as an  exhibit  to our  Company's  Report on Form 8-K dated  June 25,
     2001, bearing the exhibit  designation number shown above;  incorporated by
     reference  herein as permitted by Commission  Rule 12b-23.

(5)  Filed as an exhibit to our  Company's  Report on Form 10-KSB for the fiscal
     year ended September 30, 1999, bearing the exhibit designation number shown
     above;  incorporated  by reference  herein as permitted by Commission  Rule
     12b-23.

(6)  Filed as an exhibit to our  Company's  Report on Form 10-KSB for the fiscal
     year ended September 30, 2001, bearing the exhibit designation number shown
     above;  incorporated  by reference  herein as permitted by Commission  Rule
     12b-23.

(7)  Filed as an exhibit to our  Company's  Report on Form 8-K dated January 15,
     2002, bearing the exhibit  designation number shown above;  incorporated by
     reference herein as permitted by Commission Rule 12b-23.

(8)  Filed as an exhibit to our Company's  Report on Form 10-QSB for the quarter
     ended  December  31,  2001,  bearing the exhibit  designation  number shown
     above;  incorporated  by reference  herein as permitted by Commission  Rule
     12b-23.

(9)  Filed as an exhibit to our Company's Report on Form 10-KSB/A for the fiscal
     year ended September 30, 2001, bearing the exhibit designation number shown
     above;  incorporated  by reference  herein as permitted by Commission  Rule
     12b-23.

Reports on Form 8-K Filed During Quarter Ended September 30, 2000

During the calendar  quarters  ended  September 30, 2001,  our Company filed the
following reports on Form 8-K with the Commission:

                               Financial
Items Reported                 Statements Included               Date Filed
--------------                 -------------------               ----------
4, 5 and 7                     No                                June 25, 2001



                                   Signatures

In  accordance  with  Section 13 or 15(d) of the Exchange  Act, as amended,  our
Company  has  duly  caused  this  report  to be  signed  on  its  behalf  by the
undersigned hereunto duly authorized.


Dated:  March 27, 2002


                                  Colmena Corp.


                          By: /s/ Edward C. Dmytryk /s/
                       President & Chief Executive Officer


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


Signature                       Date      Title
---------                       ----      -----
/s/ Edward C. Dmytryk/s/        3/27/02   President,  Chief  Executive  Officer,
                                          Director
/s/ Vanessa H. Lindsey/s/       3/27/02   Vice  President, Secretary & Director
/s/ Charles J. Champion,Jr./s/  3/27/02   Director &  Audit Committee Chair
/s/ Robert S. Gigliotti/s/      3/27/02   Director & Audit Committee Member
/s/ Anthony Q. Joffe/s/         3/27/02   Director, Chairman of the Board
/s/ Lawrence R. Van Etten/s/    3/27/02   Director
/s/ Adam Wasserman /s/          3/27/02   Chief  Financial  Officer & Controller



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                             Additional Information

                                  Colmena Corp.
                                   Registrant

        Crystal Corporate Center; 2500 North Military Trail, Suite 225-C;
                           Boca Raton, Florida 33431
    Telephone Number: (561) 998-2031; Facsimile Transmission (561) 998-3425;
                      E-mail administration@colmenacorp.com

                             Corporate Headquarters


            Edward C. Dmytryk, President & Chief Executive Officer;
 Vanessa H. Lindsey, Vice President, Secretary & Chief Administrative Officer;
                   Kevin W. Dornan, Esquire, General Counsel
              Adam Wasserman, Chief Financial Officer & Controller


                                    Officers

          Anthony Q. Joffe, Chairman of the Board; Robert S. Gigliotti;
      Charles J. Champion, Jr.; Vanessa H. Lindsey; Lawrence R. Van Etten;

                                Edward C. Dmytryk

                               Board of Directors

      Salberg & Company, P.A. Certified Public Accountants and Consultants
                          20283 State Road 7, Suite 300
                            Boca Raton, Florida 33498
        Telephone (561) 995-8270: Facsimile Transmission (561) 995-1920;
                            E-mail info@salbergco.com

                         Independent Public Accountants

                     American Stock Transfer & Trust Company
                    59 Maiden Lane; New York, New York 10007
        Telephone (212) 936-5100: Facsimile Transmission (718) 921-8326;
                             E-mail info@amstock.com

                                 Transfer Agent

Exhibits to this Form 10-KSB are available on the  Commission's web site located
at  www.sec.gov  in the EDGAR  archives,  on our  Company's  website  located at
www.colmenacorp.com  and will be provided  without charge to stockholders of our
Company upon written request addressed to Vanessa H. Lindsey, Secretary; Colmena
Corp.; 5185 Southeast 20th Street; Ocala, Florida 34471.

The  Commission  has not approved or  disapproved of this Form 10-KSB and Annual
Report to Stockholders nor has it passed upon its accuracy or adequacy.



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