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

                                   Form 10-KSB
              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, 2002

                         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, 2002) 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: [X]

     State Registrant's  revenues for its most recent fiscal year: $ 0 (for year
ended September 30, 2002)

     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:  $428,835  based on a last  transaction  price of $0.03 as of December 30,
2002, there being  14,294,502  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:  104,931,558  shares of common
stock, as of December 30, 2002.

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                             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.



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                                Table of Contents

Part        Item       Page
Number      Number     Number     Caption

I            1          3         Description of Business
             2          8         Description of Property
             3          8         Legal Proceedings
             4          8         Submission of Matters to a Vote of Security
                                  Holders

II           5          9         Market for Common Equity and Related
                                  Stockholder Matters
             6          19         Management's Discussion and Analysis or Plan
                                  of Operations
             7          23        Financial Statements
             8          46        Changes In and Disagreements With Accountants
                                  on Accounting and Financial Disclosure

III          9          46        Directors, Executive Officers, Promoters and
                                  Control Persons; Compliance With Section 16(a)
                                  of the Exchange Act
             10         50        Executive Compensation
             11         54        Security Ownership of Certain Beneficial
                                  Owners and Management and Related Stockholder
                                  Matters
             12         56        Certain Relationships and Related Transactions
             13         57        Exhibits and Reports on Form 8-K

Signatures              59

Certifications

Additional Information   60

Exhibits                  61

                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS

     Pursuant to Rule 12b-23 and General  Instruction  E.2.(a),  the information
called for by Item 1 is incorporated by reference from the corresponding Item in
our Company's  annual report to security  holders on Form 10-KSB/A-2  filed with
the  Commission  on March  27,  2002,  which is filed as an  exhibit  hereto  as
required by Item 601(b)(13)of Regulation S-B, and is supplemented as follows:

     The  consulting  agreement  with Yankees was  terminated as of December 31,
2001.  Accrued  consulting  fees  amounted  to  $120,000,  for which there was a
promissory  note.  The note was assigned by Yankees in equal parts to the Tucker
Family  Spendthrift  Trust (the "TFST") and the Calvo Family  Spendthrift  Trust
(the "CFST") for moneys owed by Yankees to the trusts. As a material  subsequent
event, the debt owed by our Company has been converted. See below "Conversion of
Debt."

     The Class A Bonds  were  assigned  by  Yankees  to the TFST and the CFST in
equal parts, entitling each trust to acquire up to an equivalent of 37.5% of the
common stock of our Company.  As a material subsequent event, the Bonds have now
been converted. See below "Conversion of Debt."

     On March 6, 2002, our Company settled the claim of Arent,  Fox, et. al. The
claim was for  $27,844  in past due legal  fees and was  settled  for  $2,750 in
exchange for a general release of all claims.

     On May 1, 2002,  the  Company  entered  into a  settlement  agreement  with
Deutsche Financial Services Corporation  ("Deutsche").  Deutsche's claim was for

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$331,000  plus interest at the per annum rate of prime plus 6.5% since August 1,
1998,  and was based on a guaranty by the Company of a promissory  note executed
by one of our  divested  subsidiaries.  In  exchange  for the  parties'  general
release of all claims and obligations up to the date of the agreement,  Deutsche
received an initial  payment of $20,000 and is  receiving an  additional  $2,500
(plus  interest  at the per annum  rate of U.S.  prime)  per month for 32 months
beginning  June 15, 2002 and ending  January 15, 2005 (an  aggregate  additional
amount of $80,000 plus  interest).  Deutsche also received  2,500,000  shares of
restricted  common  stock.  Our Company is currently in arrears in the amount of
$3,750 (one and  one-half  months),  but  expects to be current in its  payments
within the next 90 days.

     On May 13,  2002,  our Company  also  settled the claims  asserted by Prime
Source Leasing Inc. ("Prime Source") and General Electric Capital Corp.  ("GE").
Prime Source had sued GE for,  among other  things,  $80,000 on a stop-  payment
check,  and GE has asserted a contingent  third-party  claim against our Company
for that amount.  In addition,  Prime Source had asserted a direct claim against
our  Company,  alleging  goods  sold and  failure to pay a  promissory  note for
$85,605.07,  plus interest since November 30, 1998 and  attorney's  fees.  Prime
Source and GE settled their primary  claim,  and so the  contingent  third-party
claim against our Company was dismissed.  In addition,  our Company  settled its
direct dispute with Prime Source. In exchange for a general release, our Company
issued Prime Source 1,000,000 shares of restricted  common stock (held in escrow
pending  receipt of the signed  release),  and the parties  dismissed all claims
against each other with prejudice, each party to bear its own costs and fees.

     On April 8, 2002, the Florida Public Service  Commission (the "PSC") issued
our Company  Certificate No. 8047,  authorizing us to provide  Alternative Local
Exchange  Telecommunications  ("ALEC")  services in the State of Florida.  Under
Florida law,  the basic local  telecommunications  services  provided by an ALEC
must include access to operator services, "911" services, and relay services for
the hearing impaired. The PSC issued a final consummating order on May 6, 2002.

     On May 10,  2002,  our  Company  signed a  renewal  of our  agreement  with
BellSouth Telecommunications, Inc. ("BellSouth"). The agreement is for a term of
three (3) years (with any renewal  thereof to be negotiated at least six to nine
months in advance of expiration), and authorizes our Company to resell BellSouth
retail telecommunications  services and products in Florida, as well as in eight
other states provided we receive the necessary  regulatory  permits and licenses
to operate in those states (Alabama, Georgia, Kentucky, Louisiana,  Mississippi,
North Carolina, South Carolina and Tennessee). BellSouth's services will be made
available  to our Company,  according to a schedule of discounts  that vary from
state to state as set forth in the  agreement,  for resale by our Company to end
users. The BellSouth services available to our Company for resale include all of
the  telecommunications  services  BellSouth  makes  available  pursuant  to its
"General  Subscriber Services Tariff" and "Private Line Services Tariff," unless
any  exclusions  apply in a given state,  and include  business and  residential
service as well as mobile services (where not excluded).

         As material subsequent events:

CONVERSION OF DEBT

     On December 18, 2002, at the request of our Company, the TFST and the CFST,
the  holders of all of our  Company's  Class A Bonds,  converted  the bonds into
shares of our Company's common stock (which the CFST immediately  converted into
shares of non-voting  preferred stock pursuant to a conversion agreement between
our Company and the CFST),  and on December  23,  2002,  converted  all of their
unrelated  loans made to our Company into shares of its common  stock,  at $0.01
per share.  The  request  was made in light of the  proposed  Bernstein  Project
described  below,  in order to drastically  reduce the number of shares that the
Class A bondholders would have received, had they waited to exercise their bonds
until after they  converted  their loans to the  Company  into common  stock and
shares of common stock were issued for the Bernstein Project. As a result of the
sequence  and timing of such  conversion,  our Company  converted  the Bonds and
issued approximately 104,039,954 shares of its common stock (of which 52,019,977
shares were immediately  converted by the CFST into 520,200 shares of non-voting
preferred stock), a substantially  smaller number of shares than would otherwise
have been  required,  and issued  19,381,549  shares of common stock and 193,815
shares of preferred  stock for loans and accrued  consulting fees of $387,630.98
(based  on  a  contemporaneous   market  price  of  $0.01  per  share),  thereby
eliminating  a majority  of its debts.  See also Part II,  Item 5 "Recent  Sales
Unregistered Securities."


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     In  consideration  for the TFST's and CFST's agreement to effect their debt
conversion in the manner requested by the Company, the Company granted them best
price  and  anti-dilutive  rights,  which  would be  triggered  in the event the
Company issued shares at less than $0.01 per share within the next 24 months.

PRIVATE PLACEMENT

     In order to fund short term capital  requirements,  on or about  January 7,
2003,  our Company  concluded a private  placement  of  2,750,000  shares of its
common stock to directors of our company,  their families and friends,  at $0.01
per  share,  which  provided  up to  $27,500 in  working  capital.  The  private
placement was effected without registration under the Securities Act in reliance
upon the  exemption  provided  by Section  4(2)  thereof.  Because  the  private
placement  concluded as this report was due to be filed, the final  calculations
cannot be included in this report and none of the shares included in this report
issued are included in the total number of outstanding shares.

THE BERNSTEIN PROJECT

     Our Company is negotiating with Paul Bernstein and Sandra P. Bernstein, his
wife (the  "Bernsteins"),  for the  acquisition  and  development  on a turn-key
basis,  of a  publishing,  television  and website  business.  While  definitive
agreements have not been executed, the Company has taken a number of preliminary
steps in anticipation of the transaction, including organization of a new wholly
owned subsidiary,  Fitness & Longevity USA, Inc., a Florida corporation ("F&L"),
entry into  agreements  with its Class A  Bondholders  and major  creditors  for
conversion  of  all  such  debt  to  equity  (see  disclosure  above);  and  the
preparation of an equity  compensation  plan for use by F&L to be filed with the
Commission on Form S-8 in the event the proposed transaction with the Bernsteins
is effected.

     As currently contemplated, our Company and F&L would enter into a series of
agreements with the Bernsteins for the development and operation,  on a turn-key
basis, of a publishing,  television and website business,  including a series of
independent  contracts  with them and other  persons  they  require  in order to
complete the projects  described below; and an asset purchase agreement pursuant
to which F&L would  acquire from the  Bernsteins  all rights to ALIVE  Fitness &
Anti-Aging  Digest,  a proposed  quarterly  compendium of information on health,
fitness,  and anti-aging  medicine for the age groups  popularly  referred to as
"Boomers" and "Seniors";  all materials pertaining to  www.alivedigest.com,  the
Internet presence of the magazine including e-commerce;  and the Fit & Famous TV
Talk Show, an interview show to be hosted by Mr. Bernstein,  whose trade name is
Mr. Physical Fitness, USA(TM), and by his wife Sandra.

     As currently  contemplated,  the acquisition  would be effected in exchange
for 200,000,000  shares of our Company's common stock (the "Bernstein  Shares"),
subject to  forfeiture  if the  Bernstein's  fail to raise  $500,000  in capital
through a private  placement  of Colmena  common  stock  during the three months
following the closing on the asset  purchase  agreement,  most of which would be
used by F&L; and, in the event that projections for the project were not met, as
follows:

     Within  30 days of the end of the  first  calendar  quarter  following  the
     closing on the asset purchase agreement,  our Company would have the right,
     in its sole and  unfettered  discretion,  to declare the  Bernstein  Shares
     forfeited  in  full,  if it  deemed  that  the  Bernsteins  had  failed  to
     demonstrate  the  viability  of the F&L project to our  Company's  full and
     complete satisfaction.

     At the end of fifteen (15) months (the first  calendar  quarter  referenced
     immediately  above  plus one  year)  following  the  closing  on the  asset
     purchase  agreement,  our  Company  would have the  right,  in its sole and
     unfettered discretion, to declare the Bernstein Shares completely forfeited
     if the F&L project has not  attained any of the  projected  $2.5 million in
     revenues,  with $1 million in net,  pre-tax  profits  (as  certified  by an
     independent  audit  performed  in  accordance  with GAAP);  otherwise,  the
     Bernstein  Shares  would be  forfeited  in part,  in an amount equal to the
     percentage  by which the F&L  project  failed to attain  such net,  pre-tax
     profits anticipated in the F&L projections for that period.

     In  the  event  that  all of  the  Bernstein  Shares  were  forfeited,  the
Bernsteins would have the right to acquire the F&L project from our Company at a
price  equal to the  aggregate  of all sums  invested  by our Company in the F&L
project  (including but not limited to amounts  expended  under any  independent
contractor  agreements) plus 10% interest per annum,  payment of the re-purchase
price to be  effected  25% in cash at the  time of  exercise  of the  repurchase


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right, and the balance in twelve equal monthly installments payable on or before
the end of each month  following the exercise of the  repurchase  rights.  Until
expiration of the forfeiture provisions applicable to the Bernstein Shares, they
would be held in escrow by our Company's counsel.

     In  addition,  it is  anticipated  that our Company  would agree to pay the
Bernsteins and the group of independent  contractors  they assembled  $30,000 in
shares of our  Company's  common stock  registered  on  Commission  Form S-8 and
issued  under  the plan  described  above for their  services  during  the first
calendar quarter following execution of the asset purchase agreement  pertaining
to the F&L project.

     No  assurances  can be  provided  that  the  proposed  transaction  will be
effected or, if effected,  that the actual terms will not vary  materially  from
those described above. If the transaction is effected,  the Company will provide
detailed information in a report on Commission Form 8-K.

F&L

     Assuming  conclusion  of the proposed  transaction  with the  Bernsteins as
currently contemplated, F&L would:

*    Publish ALIVE Fitness & Anti-Aging  Digest to be distributed on a quarterly
     basis throughout the United States and Canada;  would create and maintain a
     website with e-commerce  capabilities called  "alivedigest.com";  and would
     produce a weekly television talk show called "Fit & Famous". Mr. Bernstein,
     who registered the trade name Mr. Physical  Fitness,  USA(TM),  created and
     developed the concepts  which he and his wife would assign to F&L and which
     they would agree to operate for F&L on an independent  contractor basis for
     a period of at least five years.  The first issue of the  quarterly  digest
     has already been completed and is essentially  ready to go to press at this
     time.  A second  issue,  including  the cover,  is in the  process of being
     completed.  Each issue  contains  an  informative  compendium  of  articles
     available on health and fitness  issues,  scientific  research  reports and
     medical briefs on the latest  techniques,  innovations and breakthroughs to
     combat  the  effects  of aging,  and the most  recent  developments  in the
     cosmetic  industry  to make both men and women look and feel more  youthful
     longer.  Each issue will also contain an editorial  page written by ALIVE's
     publisher,  Paul  Bernstein,  Mr.  Physical  Fitness,  USA(TM),  as well as
     articles  written by other  experts  in the  fields of diet and  nutrition,
     fashion, alternative medicine, and lifestyle issues. The magazines are high
     gloss,  with "diamond bright" pages,  contemporary in look and appeal,  and
     express the bold, creative direction the magazine will be taking as the new
     century  unfolds.  Quality art content is the constant  goal. The magazines
     are  designed  to be  entertaining,  newsworthy,  thought-  provoking,  and
     appealing  to the  ever-growing  number of health,  fitness and  anti-aging
     enthusiasts,  age 35 and  above,  because  today  more and more  people are
     becoming  aware  of the fact  that  aging  combined  with  ill  health  and
     exorbitant medical expenses do not have to go hand in hand.

*    Operate ALIVE  e-Commerce  Graphic Web Site,  ALIVE's  interactive  3-D web
     site, designed in-house by Linda Seabourne,  webmaster, and Kevin Courtney,
     graphic  artist,   which  is  already   available  and  may  be  viewed  at
     www.alivedigest.com.  This web site  incorporates the "interactive  product
     placement"  method of advertising,  an idea borrowed from the practice used
     in movies and television for years, making advertising multiple products on
     a web site possible by placing them directly into an animated 3-dimensional
     environment.  At the web site,  readers will find pertinent  information on
     the  latest  techniques  to combat  the  effects  of  aging.  They will see
     animated ads that better  represent  products and that actively involve the
     readers and  increase  brand  awareness,  purchase  likelihood  and message
     recall,  all of  which  increase  readers'  desire  to buy  the  advertised
     products featured by international  companies in the health,  fitness,  and
     anti- aging industry (i.e., vitamins and nutritional supplements,  clothing
     and sports equipment,  cosmetics,  books,  etc.). The web site is now being
     tracked by Intermedia,  a web host serving  company that provides a program
     for tracking sales and  click-throughs by way of monitoring  traffic on the
     site, visits to other reciprocal sites, and sales made through  interactive
     product placement  advertising.  Reports can be downloaded and printed on a
     daily basis if necessary.

*    Produce  and  syndicate  the "Fit &  Famous"  television  show,  a one hour
     anti-aging,  fitness,  beauty,  and health television program hosted by Mr.
     and Mrs. Bernstein. It will feature an in-depth visit with a physically fit
     personality,  a prominent  physician  with an anti-aging  specialty,  and a
     cosmetic  section,  as well as the  latest  breakthroughs  in the  field of
     anti-aging medicine. Guests will include doctors and research scientists in
     all the newest medical research fields.  Cosmetics have come a long way and
     are now a science unto themselves.  Mrs.  Bernstein will discuss the latest
     and best  information in the art of maintaining a more youthful  appearance
     by

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     introducing the best in cosmetics and some of the top cosmetic surgeons and
     their newest procedures.  There will also be on- location visits to some of
     the top anti-aging  resorts and spas. Three of the anti-aging  resorts/spas
     that have already  expressed an interest in the television show are The Spa
     at the Venetian  Hotel and Casino in Las Vegas,  ReJuvenage in London,  and
     the Grande  Hotel in Monte  Carlo.  Diet and exercise are still the primary
     ways of looking  younger  longer.  Well-known fit and famous  personalities
     will be asked to  demonstrate  their  secrets  for  staying fit and looking
     good, which may include introducing their own dietitian,  personal trainer,
     or any other person who helps them to stay fit.

     In addition to the initial three business segments discussed above, Mr. and
Mrs.  Bernstein  intend  to  assist  F&L to  develop  a line  of  private  label
nutritional  supplements  under its  trademark,  as well as to market  clothing,
cosmetics and other retail items using licenses and other intellectual  property
rights acquired or developed by F&L.

Biographical Data

     Assuming  conclusion  of  the  proposed   transaction  with  Mr.  and  Mrs.
Bernstein,  as  currently  contemplated,  the  following  persons  would  become
involved with F&L, in the capacities indicated:

Paul Bernstein - F&L's President and Chairman of its board of directors:

     Mr.  Bernstein began his career in health and fitness in New York City. For
more than 42 years,  he has been Mr.  Physical  Fitness,  USA(TM).  In 1957,  he
opened his first health club,  World Wide Health Spas, in Beaumont,  Texas,  the
flagship of one of the largest  health  club chains in the  country.  During his
long career,  which spans almost 5 decades, Mr. Bernstein has conducted seminars
on health and fitness,  written advice columns for TV magazine, and has appeared
on TV talk shows about anti-aging  medicine,  and has had his own TV show in the
early  60s.  In the 90s he was  invited to serve on the  President's  Council of
Fitness and Sports.  Because of his experience and title, he was invited to be a
Charter Member of the American  Academy of Anti-Aging  Medicine at its inception
almost 12 years ago. Mr. Bernstein has been interviewed by 48 Hours, Prime Time,
Texans  and  TNN  2000,  and is  accomplished  in  both  publishing  and  direct
marketing.

Sandra Bernstein - F&L's vice president:

     Mrs. Bernstein has had more than one career since leaving the University of
Alabama with an advanced  degree in Latin American Area Studies.  She has served
as a translator/interpreter for three international medical congresses,  written
numerous articles in Spanish and English for Las Americas,  National Geographic,
and medical briefs for A4M seminars;  as well as co-authoring a newspaper advice
column.  She has done public  relations  work for two health club chains and has
appeared on television talk shows.  During the 1990s,  Mrs.  Bernstein was twice
chosen as a Who's Who of Houston woman.

Material Personnel

     The following  persons would be retained by F&L at the direction of Mr. and
Mrs.  Bernstein to assist them in  development  of the F&L projects.  Each would
enter into an independent  contractor  agreement with F&L requiring them to bear
all expenses associated with fulfillment of their functions.

Linda Seabourne

     Ms. Seabourne would serve as F&L's webmaster.  She was formerly employed by
Sprint in their web servicing  department.  For most of her professional  career
she has served as an executive  assistant.  She places the  information  that is
provided to her by the artists and the editor-in-chief on the website,  monitors
it for changes,  and checks the  correspondence.  She is also  constructing  the
e-commerce  mall for  anti-aging  products.  This mall is  expected  to generate
income within the first 60 days based on a 20% commission from any product sales
generated by the site. Ms.  Seabourne's  compensation  would initially be $1,750
per month payable in shares of the Company's  common stock,  registered with the
Commission on Form S-8.


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Kevin Delaney Courtney

     Mr. Courtney would serve as F&L's graphics artist/production.  For the past
two and one half years, he has worked for Mr. and Mrs. Bernstein designing their
letterhead,  advertising,  posters  and CD  covers.  He does  photo  retouching,
magazine  lay-outs,  ad  lay-outs,  collages,  packages,  etc. He  attended  the
University  of Houston for 2 years.  Mr. and Mrs.  Bernstein  provided  him with
computer  training related to all their projects.  Mr.  Courtney's  compensation
would  initially be $1,250 per month payable in shares of the  Company's  common
stock, registered with the Commission on Form S-8.

Heidi Rose Powell

     Ms.  Powell  would serve as a  photographer/artist  for F&L.  She  attended
Glasselle School of Art for three years, concentrating in photography.  She also
attended the  University of Houston for two years and St. Thomas  University for
one  year.  Her work has  been  used in Zest  Magazine,  on CD  covers,  theater
posters,  various galleries and art shows, and in the proposed F&L magazine. She
is the staff  photographer  and does product  photography and special photos for
the magazine and web site. Ms. Powell's  compensation  would initially be $1,000
per month payable in shares of the Company's  common stock,  registered with the
Commission on Form S-8.

Joe Loch

     Mr. Loch currently  serves as chief  executive  officer of JVL Graphics and
has more  than 25  years  experience  in the  publishing  industry.  He would be
responsible  for  advertising  sales and  printing  for the  magazines.  He also
secured Kable News as F&L's distributor. Ms. Loch's compensation would initially
be $1,000 per month payable in shares of the Company's common stock,  registered
with the Commission on Form S-8.

     Again, no assurances can be provided that the proposed  transaction will be
effected or, if effected,  that the actual terms will not vary  materially  from
those described above. If the transaction is effected,  the Company will provide
detailed information in a report on Commission Form 8-K.

ITEM 2.           DESCRIPTION OF PROPERTY.

     Pursuant to Rule 12b-23 and General  Instruction  E.2.(a),  the information
called for by Item 2 is incorporated by reference from the corresponding Item in
our Company's  annual report to security  holders on Form 10-KSB/A-2  filed with
the  Commission  on March  27,  2002,  which is filed as an  exhibit  hereto  as
required by Item 601(b)(13)of Regulation S-B.

ITEM 3.           LEGAL PROCEEDINGS.

     Pursuant to Rule 12b-23 and General  Instruction  E.2.(a),  the information
called for by Item 3is incorporated by reference from the corresponding  Item in
our Company's  annual report to security  holders on Form 10-KSB/A-2  filed with
the  Commission  on March  27,  2002,  which is filed as an  exhibit  hereto  as
required by Item 601(b)(13)of Regulation S-B, and is supplemented as follows:

     The legal  proceedings  involving  (1)  Deutsche  and (2) Prime Source were
settled as discussed  above in Part 1, Item 1, which  discussion is incorporated
herein pursuant to Rule 12b-23.


ITEM 4.           SUBMISSION OF MATTERS TO SECURITY HOLDERS.

     No matter  was  submitted  during the  fourth  quarter  of the fiscal  year
covered by this report to a vote of security  holders,  through the solicitation
of proxies or otherwise.


                                     Page 8


<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, 2001 and September 30,
2002.

<TABLE>
<S>                                                  <C>               <C>              <C>               <C>
Year Ended September 30, 2001                                                           High              Low
-----------------------------
                                                                                        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

Year Ended September 30, 2002                                                           High              Low
-----------------------------                                                           ----              -----
                                                                                        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                                       $0.10             $0.01            $0.10             $0.01

</TABLE>

     As of  September  30,  2002,  seven 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.; Knight Securities LP; Wm. V. Frankel
& Co., Inc.; Equitrade Securities  Corporation 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.

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.


                                     Page 9


<PAGE>



     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).

     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)].

                                     Page 10


<PAGE>



"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.

     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.

                                     Page 11


<PAGE>



     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
650,000,000  shares of common stock, $.01 par value. As of the close of business
on  September  30,  2002,  our Company  had  26,262,533  shares of common  stock
outstanding and 32,299,436  issuable.  As a material subsequent event, as of the
close of business on December 30, 2002,  our Company had  104,931,558  shares of
common stock  outstanding and held of record by  approximately  768 persons.  Of
those,  approximately  237 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).  Consequently,  the
total number of beneficial  owners of more than 5% of our Company's  outstanding
securities is 2.

     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

Common Stock Purchase Warrants

     As of December 30, 2002,  1,293,000  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.

Stock Options

     On November 14, 2001,  the board of directors  approved a stock option plan
for 2002,  which was  approved  by the  stockholders  at the  annual  meeting of
stockholders held on May 10, 2002. A copy of the plan was filed as an exhibit to
our Company's report on Form 10-KSB for year ended September 30, 2001.


                                     Page 12


<PAGE>



         The following table illustrates the plan:

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

Plan Category                       Number of                 Weighted average          Number of securities
                                    securities to be          exercise price of         remaining available for
                                    issued upon exercise of   outstanding options,      future issuance
                                    outstanding options,      warrants and rights
                                    warrants and rights

Equity compensation plans
approved by security holders                0                          0                5,000,000

Equity compensation plans not
approved by security holders                0                          0                0

Total                                       0                          0                5,000,000


</TABLE>

Tabular Information

     As of  December  30,  2002,  our  Company  had  82,187,625  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

(1)              Warrant              $45,140 in total          1,293,000
(2)              (2)                  (2)                       5,000,000
(3)              (3)                  (3)                       74,157,800
(4)              (4)                  (4)                       1,736,874
------

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

(2)  Represents  the shares  authorized  pursuant  to our  Company's  2002 stock
     option plan, as disclosed above.

(3)  On May 14, 2002, our Company entered into an "Exchange  Agreement" with the
     Calvo Family Spendthrift Trust ("CFST"),  whereby the CFST exchanged all of
     its shares of our  Company's  common  stock  which it held in excess of one
     share less than 5% of our Company's  outstanding common stock for shares of
     our  Company's  non-voting  Preferred  Stock.  The exchange was effected in
     reliance on the exemption from registration  provided by Section 3(a)(9) of
     the  Securities  Act and Section  517.061(6) of the Florida  Securities and
     Investor  Protection  Act.  Pursuant to the  Exchange  Agreement,  the CFST
     exchanged  2,756,251  of the  3,756,250  shares of common stock it held for
     27,563 shares of non-voting  Preferred Stock. In addition,  on December 18,
     2002,  upon  conversion of its bond and other debt owed, the CFST exchanged
     71,401,526  shares  of  common  stock  for  714,015  shares  of  non-voting
     Preferred Stock.

(4)  Represents  the  shares  issuable  to  members  of our  Company's  board of
     directors and officers, pursuant to the terms of their agreements.


                                     Page 13


<PAGE>

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

Reporting Period

     As of September 30, 2002,  26,262,533  shares of our Company's common stock
were outstanding and 32,299,436 issuable, of which:

         *        4,038,793 are recognized as free trading by our Company;

         *        22,223,740 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:

         *        20,000,000 were issued prior to September 30, 2001, 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;

         *        9,436,120 were issued to persons that do not appear to be
                  affiliates of our Company prior to September 30, 2000, 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.

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:

                                     Page 14


<PAGE>




     *    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.

     *    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 account of 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.

                                     Page 15


<PAGE>




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 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.

Recent Sales of Unregistered Securities

During The Three Year Period Preceding Reporting Date

     During the three year period ended  September 30, 2002,  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.

Common Stock:

<TABLE>
<S>                <C>          <C>                            <C>               <C>               <C>
                  Amount of                                   Total                          Registration
                  Securities                                Offering          Total          Exemption
Date              Sold       Subscriber                   Consideration     Discounts        Relied on
----              -----      ----------                   -------------     ---------        ---------
2000:
January 14        34,000     Jack Levine                        (4)             None             (1)
March 17          677,087    Oppenheimer Wolff & Donnelly       (5)             None             (1)
May 11            136,147    Larry Van Etten                    (6)             None             (1)

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

2001:
May 31            1,844,444  SBV Holdings, Inc.                 (10)            None             (2)
June 30           21,055     Edward C. Dmytryk                  (11)            None             (2)
June 30           56,818     Kevin W. Dornan                    (12)            None             (2)
June 30           21,018     Vanessa H. Lindsey                 (13)            None             (2)
July 31           70,000     Edward C. Dmytryk                  (11)            None             (2)
July 31           31,250     Kevin W. Dornan                    (12)            None             (2)
July 31           58,360     Vanessa H. Lindsey                 (13)            None             (2)
November 15       24,788     Anthony Q. Joffe                   (14)            None             (2)

2002:
June 13           36,904     Adam Wasserman                     (15)            None             (2)
June 13           991,962    Edward C. Dmytryk                  (11)            None             (2)
June 13           175,212    Anthony Q. Joffe                   (14)            None             (2)

                                     Page 16


<PAGE>



June 13           1,022,978  Vanessa H. Lindsey                 (13)            None             (2)
June 13           873,017    Kevin W. Dornan                    (12)            None             (2)
June 13           2,500,000  Deutsche Financial Services        (16)            None             (2)
June 13           1,000,000  Prime Source Leasing               (17)            None             (2)
June 13           1,039,045  Strategica Services Corp.          (18)            None             (2)
August 6          53,147     Vanessa H. Lindsey                 (13)            None             (2)
August 6          28,571     Kevin W. Dornan                    (12)            None             (2)
August 6          28,906     Adam Wasserman                     (15)            None             (2)
August 6          100,000    Anthony Q. Joffe                   (14)            None             (2)
August 21         52,547     Vanessa H. Lindsey                 (13)            None             (2)
August 21         8,333      Kevin W. Dornan                    (12)            None             (2)
August 21         11,111     Adam Wasserman                     (15)            None             (2)
August 21         50,000     Anthony Q. Joffe                   (14)            None             (2)
August 21         39,500     Lawrence R. Van Etten              (19)            None             (2)
August 21         51,500     Charles J. Champion                (19)            None             (2)
August 21         53,000     G. Richard Chamberlin              (19)            None             (2)
August 21         39,500     Edward C. Dmytryk                  (19)            None             (2)
August 21         47,000     Vanessa H. Lindsey                 (19)            None             (2)
August 21         53,000     Anthony Q. Joffe                   (19)            None             (2)
August 21         54,500     Robert S. Gigliotti                (19)            None             (2)
August 29         70,000     Charles J. Champion                (20)            None             (2)
August 29         55,058     Charles J. Champion                (20)            None             (2)
September 4       74,567     Vanessa H. Lindsey                 (13)            None             (2)
September 4       13,333     Kevin W. Dornan                    (12)            None             (2)
September 4       16,667     Adam Wasserman                     (15)            None             (2)
September 4       50,000     Anthony Q. Joffe                   (14)            None             (2)
September 4       15,500     Vanessa H. Lindsey                 (19)            None             (2)
September 4       17,500     Anthony Q. Joffe                   (19)            None             (2)
September 4       18,000     Robert Gigliotti                   (19)            None             (2)
September 4       13,000     Lawrence R. Van Etten              (19)            None             (2)
September 4       17,000     Charles J. Champion                (19)            None             (2)
September 4       17,500     G. Richard Chamberlin              (19)            None             (2)
September 4       10,500     Edward C. Dmytryk                  (19)            None             (2)

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

Common Stock:

                  Amount of                                   Total                              Registration
                  Securities                                 Offering          Total            Exemption
Date              Sold         Subscriber                  Consideration     Discounts        Relied on
----              -----        ----------                  -------------     ---------        ---------
2002:
October 9         15,500     Lindsey Family Spendthrift Trust   (19)            None             (2)
October 9         17,500     Anthony Q. Joffe                   (19)            None             (2)
October 9         21,500     Robert Gigliotti                   (19)            None             (2)
October 9         13,000     Lawrence R. Van Etten              (19)            None             (2)
October 9         17,500     Charles J. Champion                (19)            None             (2)
October 9         20,000     G. Richard Chamberlin              (19)            None             (2)
October 9         10,500     Edward C. Dmytryk                  (19)            None             (2)
October 9         120,571    Lindsey Family Spendthrift Trust   (13)            None             (2)
October 9         23,143     Kevin W. Dornan                    (12)            None             (2)
October 9         28,571     Adam Wasserman                     (15)            None             (2)
October 9         50,000     Anthony Q. Joffe                   (14)            None             (2)
November 19       15,500     Lindsey Family Spendthrift Trust   (19)            None             (2)
November 19       17,500     Anthony Q. Joffe                   (19)            None             (2)

                                     Page 17


<PAGE>



November 19       21,500     Robert Gigliotti                   (19)            None             (2)
November 19       13,000     Lawrence R. Van Etten              (19)            None             (2)
November 19       17,500     Charles J. Champion                (19)            None             (2)
November 19       20,000     G. Richard Chamberlin              (19)            None             (2)
November 19       10,500     Edward C. Dmytryk                  (19)            None             (2)
November 19       226,350    Lindsey Family Spendthrift Trust   (13)            None             (2)
November 19       47,500     Kevin W. Dornan                    (12)            None             (2)
November 19       50,000     Adam Wasserman                     (15)            None             (2)
November 19       50,000     Anthony Q. Joffe                   (14)            None             (2)
December 6        15,500     Lindsey Family Spendthrift Trust   (19)            None             (2)
December 6        17,500     Anthony Q. Joffe                   (19)            None             (2)
December 6        21,500     Robert Gigliotti                   (19)            None             (2)
December 6        13,000     Lawrence R. Van Etten              (19)            None             (2)
December 6        17,000     Charles J. Champion                (19)            None             (2)
December 6        20,000     G. Richard Chamberlin              (19)            None             (2)
December 6        10,500     Edward C. Dmytryk                  (19)            None             (2)
December 6        153,200    Lindsey Family Spendthrift Trust   (13)            None             (2)
December 6        70,000     Kevin W. Dornan                    (12)            None             (2)
December 6        100,000    Adam Wasserman                     (15)            None             (2)
December 6        50,000     Anthony Q. Joffe                   (14)            None             (2)
December 23       52,019,977 Tucker Family Spenthrift Trust     (21)            None             (2)
December 23       6,289,449  Strategica Services Corporation    (22)            None             (2)
December 24       19,381,549 Tucker Family Spendthrift Trust    (23)            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.

(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'  then-current 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 invoices  totaling $2,550 for legal services
     provided to our Company in 1998.

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

(6)  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.


                                     Page 18


<PAGE>



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

(8)  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.

(9)  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.

(10) 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.

(11) Shares issued for his services as president and chief executive  officer of
     our  Company  from  May  2001 to May  2002,  pursuant  to the  terms of his
     employment  agreement as discussed  below at Part III,  Item 10,  Executive
     Compensation.  The shares were  accrued for 10 months  pending  shareholder
     approval in May 2002 of an increase in capitalization.

(12) Shares  issued for his services as counsel of our Company,  pursuant to the
     terms of his employment  agreement as discussed below at Part III, Item 10,
     Executive  Compensation.  The shares  were  accrued  for 10 months  pending
     shareholder approval in May 2002 of an increase in capitalization.

(13) Shares  issued for  Vanessa  H.  Lindsey  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. The shares
     were accrued for 10 months pending  shareholder  approval in May 2002 of an
     increase in capitalization.

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

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

(16) Shares issued to settle a claim  against our Company,  as discussed in Part
     I, Item 1.

(17) Shares issued to settle a claim  against our Company,  as discussed in Part
     I, Item 1.

(18) Shares issued to settle a claim  against our Company,  as discussed in Part
     I, Item 1.

(19) Shares issued for monthly  services as a board member and a board committee
     chair or member.

(20) Shares issued upon exercise of warrants held by Mr. Champion.

(21) Shares issued upon  conversion  of the Class A Bond, as discussed  above in
     Part 1, Item 1.

(22) These shares were issued pursuant to the anti-dilutive provisions contained
     in the December 31, 2001 Settlement  Agreement with  Strategica,  a copy of
     which was filed  with our  Company's  report  on Form  10-KSB  for the year
     ending September 30, 2001.

(23) Shares issued upon  conversion of loans, as discussed above in Part 1, Item
     1.


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

OVERVIEW

     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.

PLAN OF OPERATIONS

     Almost  all  claims  and  potential  claims  against  our  Company  and our
     Company's  divested  subsidiaries  identified  by Yankees and  amounting to
     approximately  $644,000 have been amicably resolved through the issuance of
     approximately  6,475,000 shares of common stock through September 2002. Our
     Company  is  currently  conducting   negotiations  with  certain  remaining
     claimants and has made offers of settlement  for claims.  While  management
     believes  that there is a  reasonable  likelihood  that such offers will be
     accepted,  no assurances to that effect can be provided. As of December 20,
     2002 we have  identified  the  following  claims  on which we have  pending
     offers of settlement:

                                Basis for         Amount            Compromise
Claimant                        Claim             of Claim          Offered
Diners Club                      (1)            $  14,206.            (1)
Federal Express                  (2)            $   7,299.            (2)
---------
(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 one of our
     Company's  former  subsidiaries.  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.

     Except  for  recently  initiated  consulting  activities  and  seeking  new
     business  opportunities,  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  and our
     efforts  to become  an  active  reseller  of  BellSouth  telecommunications
     services, as discussed more fully in Item 1.

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

                                    Page 19
<PAGE>



     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.

YEAR ENED SEPTEMBER 30, 2002 COMPARED TO YEAR ENDED SEPTEMBER 30, 2001

     Our Company  reported net income for the year ended  September  30, 2002 of
     $105,624  and a  net  loss  for  the  year  ended  September  30,  2001  of
     $(912,917).  This  translates  to per-share  income of $(0.00) for the year
     ended September 30, 2002 and a per share loss of $(0.03) for the year ended
     September 30, 2001.

     Our Company had no revenues for the year ended September 30, 2002 and 2001,
     respectively.

     Operating  expenses  decreased to $182,596 for the year ended September 30,
     2002 as  compared  to  $833,062  for the year  ended  September  2001.  The
     decrease was due to decreased  consulting  fees resulting from the issuance
     of common  stock  warrants and the accrual of  consulting  fees to Yankees,
     which  aggregated  $(137,846) and $614,142 for the year ended September 30,
     2002  and  2001,  respectively.  Also,  effective  December  31,  2001,  we
     cancelled our consulting agreement with Yankees.

     Professional  fees were  $40,991 for the year ended  September  30, 2002 as
     compared  to  $48,235  for the  year  ended  September  30,  2001  and were
     primarily  attributable  fees associated with the Company's SEC filings and
     the settlement of certain lawsuits and claims.

     Compensation expense increased to $246,457 for the year ended September 30,
     2002 as compared  to $73,056 for the year ended  September  30,  2001.  The
     increase was due to increased  director and officer  activities  related to
     the  restructuring  of the  Company and the  issuance  of common  stock for
     services.

     For the year ended September 30, 2002, selling,  general and administrative
     expenses were $32,994  compared to $97,629 for the year ended September 30,
     2001. The decrease was attributable to cost-cutting  measures and decreased
     corporate expenses.

     For the year ended  September  30, 2002, we recorded  settlement  income of
     $295,483 attributable to the settlement of certain lawsuits and claims.

     For the year  ended  September  30,  2002,  we  recorded  a gain of $30,000
     related to the cancellation of our consulting agreement with Yankees.

     For the year  ended  September  30,  2002,  interest  expense  was  $37,263
     compared to $64,855 for the year ended  September 30, 2001  attributable to
     the Company's borrowings.

     No  additional  meaningful  comparisons  can be  made  for the  year  ended
     September 30, 2002 as compared to the year ended September 30, 2001.

LIQUIDITY AND CAPITAL RESOURCES

     As of September 30, 2002,  our Company had limited cash on hand to meet our
     obligations.  Our Company has financed  our  operating  activities  through
     loans and advances from Yankees, LLC and its members and principals.

                                    Page 20
<PAGE>



     In order to fund short term capital  requirements,  on January 7, 2003, our
     Company  concluded a private  placement of  2,750,000  shares of its common
     stock to directors of our company, their families and friends, at $0.01 per
     share, which provided $27,500 in working capital

     At September 30, 2002, our Company had a stockholders' deficit of $499,736.
     Our Company's  future  operations  and growth are dependent on our ability,
     with the assistance of current stockholders, to raise capital for expansion
     and to implement our strategic plan.

     On May 1, 2002,  our  Company  entered  into a  settlement  agreement  with
     Deutsche Financial Services Corporation ("Deutsche").  Deutsche's claim was
     for $331,000  plus  interest at the per annum rate of prime plus 6.5% since
     August 1, 1998,  and was based on a guaranty by our Company of a promissory
     note  executed by one of our  divested  subsidiaries.  In exchange  for the
     parties'  general  release of all claims and  obligations up to the date of
     the agreement,  Deutsche  received an initial  payment of $20,000 as of the
     filing of this report, and is receiving an additional $2,500 (plus interest
     at the per annum rate of U.S. prime) per month for 32 months beginning June
     15, 2002 and ending  January 15, 2005 (an  aggregate  additional  amount of
     $80,000  plus  interest).   Deutsche  also  received  2,500,000  shares  of
     restricted common stock.

     Net cash used in operations was $(199,125) for the year ended September 30,
     2002 as compared to $(174,637)  for the year ended  September 30, 2001. The
     difference is primarily due to the increase in accounts payable and accrued
     expenses  offset  by  settlement  income  and net  consulting  income  from
     adjustments made under the variable accounting method.

     Net cash provided by financing  activities for the year ended September 30,
     2002 was $199,220 as compared to net cash provided by financing  activities
     of $172,581 for the year ended  September  30,  2001.  The  difference  was
     attributable to the increase in funding from Yankees and its members.

     We currently have no material commitments for capital  expenditures.  Other
     than advances  received from  stockholders,  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.

RECENT ACCOUNTING PRONOUNCEMENTS

     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 accounted 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  implementation  of SFAS 142 on
     October 1, 2002 did not have a material  effect on our financial  position,
     results of operations or liquidity.

     Statement No. 143,  "Accounting for Asset  Retirement  Obligations"  ("SFAS
     143"),  requires  entities to record the fair value of a  liability  for an
     asset retirement obligation in the period in which it is incurred. When the
     liability  is  initially  recorded,   the  entity  capitalizes  a  cost  by
     increasing the carrying amount of the related  long-lived asset. Over time,
     the  liability  is  accreted  to its  present  value each  period,  and the
     capitalized  cost is depreciated over the useful life of the related asset.
     Upon  settlement of the liability,  an entity either settles the obligation
     for its  recorded  amount  or incurs a gain or loss  upon  settlement.  The
     standard is effective for fiscal years  beginning  after June 15, 2002. The
     adoption  of SFAS 143 on October 1, 2002 did not have a material  effect on
     our 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"

                                    Page 21
<PAGE>


     ("SFAS  121").  Though  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. The  implementation of SFAS 144 on October 1, 2002 did not have a
     material  effect  on our  financial  position,  results  of  operations  or
     liquidity.

     Statement  No.  145,  "Rescission  of FASB  Statements  No. 4, 44,  and 64,
     Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS 145")
     updates,  clarifies,  and simplifies  existing  accounting  pronouncements.
     Statement No. 145 rescinds Statement 4, which required all gains and losses
     from  extinguishment of debt to be aggregated and, if material,  classified
     as an  extraordinary  item, net of related income tax effect.  As a result,
     the  criteria  in Opinion 30 will now be used to  classify  those gains and
     losses.  Statement  64  amended  Statement  4, and is no  longer  necessary
     because  Statement  4 has  been  rescinded.  Statement  44  was  issued  to
     establish  accounting  requirements  for the effects of  transition  to the
     provisions of the motor  Carrier Act of 1980.  Because the  transition  has
     been completed, Statement 44 is no longer necessary.

     Statement   145  amends   Statement  13  to  require  that  certain   lease
     modifications   that  have  economic  effects  similar  to   sale-leaseback
     transactions  be  accounted  for  in  the  same  manner  as  sale-leaseback
     transactions.  This  amendment  is  consistent  with FASB's goal  requiring
     similar  accounting  treatment for transactions  that have similar economic
     effects.  This statement is effective for fiscal years  beginning after May
     15,  2002.  The  adoption  of SFAS 145 on  October  1,  2002 did not have a
     material  impact  on our  financial  position,  results  of  operations  or
     liquidity.

     Statement  No. 146,  "Accounting  for Exit or Disposal  Activities"  ("SFAS
     146") addresses the recognition,  measurement,  and reporting of costs that
     are  associated  with  exit and  disposal  activities  that  are  currently
     accounted for pursuant to the guidelines set forth in EITF 94-3, "Liability
     Recognition for Certain  Employee  Termination  Benefits and Other Costs to
     exit an Activity  (including  Certain Cost  Incurred in a  Restructuring),"
     cost  related to  terminating  a contract  that is not a capital  lease and
     one-time benefit  arrangements  received by employees who are involuntarily
     terminated - nullifying the guidance  under EITF 94-3.  Under SFAS 146, the
     cost  associated  with an exit or disposal  activity is  recognized  in the
     periods  in  which it is  incurred  rather  than at the  date  the  Company
     committed  to the  exit  plan.  This  statement  is  effective  for exit or
     disposal  activities   initiated  after  December  31,  2002  with  earlier
     application encouraged.  The adoption of SFAS 146 is not expected to have a
     material  impact  on our  financial  position,  results  of  operations  or
     liquidity.

GOING CONCERN

     The accompanying  financial statements have been prepared assuming that our
     Company will  continue as a going  concern.  Except for recently  initiated
     consulting  activities and seeking new business  acquisitions,  the Company
     has no other active business  operations,  has recurring  losses,  had cash
     used in operations of $199,125 for the year ended September 30, 2002, had a
     working  capital  deficiency  of  $499,736  and an  accumulated  deficit of
     $18,312,354 at September 30, 2002. Additionally, subsequent to year-end and
     as of the date of the accompanying  audit report, the Company is in default
     of a settlement  agreement for non-payment with Duetsche.  These conditions
     raise  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 ALEC license in Florida  received  final approval in May
     2002,  and  management  looks to  expand  on such  operations,  or locate a
     merger/acquisition  candidate. In the meantime, management will continue to
     rely on advances from stockholders to fund operations until other income is
     derived   from   an   acquisition,    consulting    activities,    or   our
     telecommunications  resale  license and  agreements.  No assurances  can be
     provided,  however, that such alternative sources will ever generate income
     or that Yankees will continue to provide loans.


                                      Page 22
<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,  2002;  (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, 2002, 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 is filed as an exhibit
to this report as required by Item 601(b)(13)of Regulation S-B.


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, 2002, and related  statements of operations,  stockholder's
equity,  cash flows for the years ended September 30, 2002 and 2001 and notes to
financial  statements  for such years,  including  indexes  therefor,  follow in
sequentially numbered pages numbered @25 through 40.


                                  COLMENA CORP.

                              FINANCIAL STATEMENTS

                           SEPTEMBER 30, 2002 AND 2001

                                  Colmena Corp.

                                    Contents


                                                                Page(s)
                                                             --------------
Independent Auditors' Report                                       1

Balance Sheet                                                      2

Statements of Operations                                           3

Statements of Changes in Stockholders' Deficit                     4

Statements of Cash Flows                                           5

Notes to Financial Statements                                      6 - 23

                                    Page 23

<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, 2002 and the related  statements  of  operations,  changes in  stockholders'
deficit and cash flows for the years ended  September  30, 2002 and 2001.  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,  2002 and the  results  of its  operations  and its cash flows for the years
ended  September  30, 2002 and 2001 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 11 to the
financial statements,  except for recently initiated consulting activities,  the
Company has no active business  operations,  has a stockholders'  deficiency and
working capital deficiency, and as of the date of the audit report has defaulted
on a loan due under a settlement agreement.  This 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 11. The  financial  statements do not
include any adjustments that might result from the outcome of this uncertainty.

/s/ Salberg & Company, P.A.
SALBERG & COMPANY, P.A.
Boca Raton, FL
December 18, 2002


                                    Page 24

<PAGE>
                                  COLMENA CORP.
                                  BALANCE SHEET
                               September 30, 2002

                                     ASSETS

<TABLE>
<S>                                                                                <C>
     Cash
                                                                                    117
                                                                                  -------
      Total Assets

                      LIABILITIES AND STOCKHOLDERS' DEFICIT                       $ 117
                                                                                  ========
CURRENT LIABILITIES:
    Convertible Bonds Payable - Related Parties                                   $ 40,000
    Accounts Payable and Accrued Expenses                                           21,432
    Loans Payable - Related Parties                                                365,921
    Loan Payable                                                                    72,500
                                                                                  ---------


        Total Current Liabilities                                                  499,853
STOCKHOLDERS' DEFICIT:                                                            ---------
    Preferred Stock ($.001 Par Value; 10,000,000 Share Authorized ;
        No Shares Issued and Outstanding)                                           -
    Convertible Preferred Stock ($.001 Par Value; 1,000,000 Share Authorized ;
        27,563 Shares Issued and Outstanding)                                           28
    Convertible Preferred Stock Issuable, $.001 Par Value (260,100 Shares)             260
    Common Stock ($.01 Par Value; 650,000,000 Shares Authorized;
        26,262,532 Shares Issued and Outstanding)                                  262,625
    Common Stock Issuable, $.01 Par Value (32,299,436 Shares)                      322,994
    Additional Paid-in Capital                                                  17,226,711
    Accumulated Deficit                                                        (18,312,354)

        Total Stockholders' Deficit                                               (499,736)

        Total Liabilities and Stockholders' Deficit                                  $ 117

</TABLE>

The accompanying notes are an integral part of these financial statements

                                    Page F25

<PAGE>


                                  COLMENA CORP.
                            STATEMENTS OF OPERATIONS
<TABLE>
<S>                                                                             <C>                   <C>
                                                                                      For the Year
                                                                                   Ended September 30,
                                                                             -------------------------------
                                                                                2002                    2001
REVENUES                                                                 $       -               $       -
                                                                             ----------              ----------

OPERATING EXPENSES:
    Compensation Expense                                                        246,457               73,056
    Consulting                                                                 (137,846)             614,142
    Professional and Legal Fees                                                  40,991               48,235
    Selling, General and Administrative                                          32,994               97,629
                                                                                -------              ----------
 -------                -------

        Total Operating Expenses                                                182,596                833,062
                                                                                -------             ----------

LOSS FROM OPERATIONS                                                           (182,596)              (833,062)
                                                                                --------            ----------

OTHER INCOME (EXPENSES):

    Settlement Income (Expense), net                                            295,483                (15,000)

    Gain on Agreement Rescission                                                 30,000                    -

    Interest Expense, net                                                       (37,263)               (64,855)
                                                                                --------               --------

TOTAL OTHER INCOME (EXPENSES)                                                   288,220                 (79,855)
                                                                                --------                --------
NET INCOME (LOSS)                                                               $105,624              $ (912,917)
                                                                                ==========             ===========
BASIC AND DILUTED:
      Net Income (Loss) Per Common Share - Basic                                 $ 0.00                 $ (0.03)
                                                                                ==========             ===========
      Net Income (Loss) Per Common Share - Diluted                               $ 0.00                 $ (0.03)
                                                                                ==========             ===========
      Weighted Common Shares Outstanding - Basic                                34,191,555             26,505,535
                                                                                ==========             ===========
      Weighted Common Shares Outstanding - Diluted                              117,346,507             26,505,535
                                                                                ===========             ===========

</TABLE>
                                    Page F26
The accompanying notes are an integral part of these financial statements
<PAGE>

                                  COLMENA CORP.
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT For the Years
                        Ended September 30, 2002 and 2001


<TABLE>
<S>                                                       <C>           <C>      <C>      <C>         <C>            <C>
                                                                                   Preferred Stock
                                                       Common Stock $.001 Par    Issuable          Common Stock $.01 Par
                                                        Shares        Amount   Shares    Amount      Shares          Amount

Balance at September 30, 2000                              -          $ -        -       $ -       15,772,259 -     $ 157,723

Shares issued in connection with settlement                -            -        -         -          100,000           1,000

Common stock issuable as compensation                      -            -

Common stock issued as settlement                          -            -                           1,844,444          18,444

Common stock options  issued to directors

Issuance of common stock to consultats                     -            -        -         -        2,000,000          20,000

Stock Warrants issued under consulting agreement

Common stock issued for accrued compensation               -            -                             258,501           2,585

Common stock issuable pursuant to anti-dilutive rights                           -         -

Net Loss for the year  Ended September 31, 2001            -            -        -         -             -               -
                                                     ---------      ------   -------   -------      ----------       ----------

Balance at September 30, 2001                                   -            -        -         -    19,975,204 -       199,752

Stock Warrants issued under consulting agreement and effect of
       variable accounting method                               -            -        -         -             -               -

Common stock previously issuable as compensation                -            -        -         -       200,000           2,000

Stock issuable pursuant to anti-dilutive rights                 -            -  260,100        260         -                  -

Common stock issued for debt and debt-related settlements       -            -        -         -     6,424,869          64,249

Common stock issued for services                                -            -        -         -     1,263,157          12,632

Common stock issued for non-debt related settlements            -            -        -         -     1,030,495          10,305

Stock Warrants issued to Directors'                             -            -        -         -             -               -

Common stock converted to preferred stock                  27,563           28        -         -    (2,756,251)        (27,563)

Common stock issued upon warrant exercise                       -            -        -         -       125,058           1,250

Net Loss for the year ended September 30, 2002                 -            -        -         -             -             -
                                                               --           --       --        --            --              --


Balance at September 30, 2002                             27,563         $ 28     260,100   $ 260      26,262,532     $ 262,625
                                                          =======        =====   ========  ========   ===========   ============

 </TABLE>

The accompanying notes are an integral part of these financial statements

                                    Page F27

<PAGE>

<TABLE>
<S>                                                          <C>           <C>            <C>           <C>              <C>
                                                          Preferred Stock          Additional                            Total
                                                         Issuable                  Paid-in        Accumulated       Stockholders'
                                                        Shares        Amount       Capital         Deficit            Deficit


Balance at September 30, 2000                             8,670,552      $ 86,705   $ 16,538,612   $ (17,505,061)-      $ (722,021)

Shares issued in connection with settlement                   -               -           14,000                             15,000

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

Common stock issued as settlement                                                        119,889                            138,333

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

Issuance of common stock to consultats                    (2,000,000)      (20,000)                                           -

Stock Warrants issued under consulting agreement                                         509,142                            509,142

Common stock issued for accrued compensation                                              21,061                             23,646

Common stock issuable pursuant to anti-dilutive rights      3,604,418      36,044        (36,044)                               -

Net Loss for the year  Ended September 31, 2001                -             -            -            (912,917)         (912,917)
                                                         -------------   ----------    -----------     ---------         ---------

Balance at September 30, 2001                             10,474,970       104,749     17,182,541       (18,417,978)-     (930,936)

Stock Warrants issued under consulting agreement

and effect of  variable accounting method                          -             -       (197,846)                -       (197,846)

Common stock previously issuable as compensation           (200,000)       (2,000)             -                  -             -



Stock issuable pursuant to anti-dilutive rights           22,024,466      220,245        (97,701)                 -         122,804

Common stock issued for debt and debt-related settlement        -             -          219,217                  -         283,466

Common stock issued for services                                -             -           68,575                  -          81,207

Common stock issued for non-debt related settlements            -             -           20,610                  -          30,915

Stock Warrants issued to Directors'                             -             -            5,030                  -           5,030

Common stock converted to preferred stock                       -             -           27,535                  -                -

Common stock issued upon warrant exercise                       -             -         (1,250)                   -                -

Net Loss for the year ended September 30, 2002                  -             -            -             105,624             105,624
                                                               --            --             --          --------             -------


Balance at September 30, 2002                              32,299,436     $ 322,994    $ 17,226,711     $ (18,312,354)   $ (499,736)
                                                           ===========    ==========   =============    ==============     =========

 </TABLE>

The accompanying notes are an integral part of these financial statements

                                    Page F27
<PAGE>

                                  COLMENA CORP.
                            STATEMENTS OF CASH FLOWS


<TABLE>
<S>                                                                                       <C>                   <C>
                                                                                          For the Year Ended September 30,
                                                                                    -------------------------------------------
                                                                                             2002                  2001
                                                                                    ---------------------  --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net Income (Loss)                                                                     $ 105,624            $ (912,917)
    Adjustments to Reconcile Net Income (Loss) To Net Cash Used in Operations

           Stock Based Compensation                                                         112,123                  -
           Stock Options and Warrants Issued to Consultants, Employees and Directors       (192,816)              550,669
           Stock Based Settlement Expense                                                      -                   15,000
           Settlement Income                                                               (290,389)                 -

           Increase in:
              Accounts Payable and Accrued Expenses                                          66,333               172,611

Net Cash Flows Used in Operating Activities                                                (199,125)             (174,637)


CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from Loans Payable - Related Party                                              24,000                74,726
    Payments on Loan Payable                                                                 (7,500)                 -
    Due to Related Party                                                                    182,720                97,855

Net Cash Flows Provided by Financing Activities                                             199,220               172,581

Net Increase (Decrease) in Cash                                                                  95                (2,056)

Cash - Beginning of Year                                                                         22                 2,078

Cash - End of Year                                                                            $ 117                $ 22

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the year for:
   Interest                                                                                   $ 898                 $ -
   Income Taxes                                                                               $ -                   $ -

NON-CASH INVESTING AND FINANCING ACTIVITIES:
    Note Payable - Related Party Reclassified to Convertible Bond                             $ 40,000              $ -

</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
                                     Page F28


                                  Colmena Corp.
                          Notes to Financial Statements
                               September 30, 2002


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. The Company currently seeks to act
as a consultant in the telecommunications industry.

(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, 2002 and
2001 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  since  the  effect  was
anti-dilutive due to the net loss.

                                    Page F29
<PAGE>

Note 1    Nature of Operations  and Summary of Significant  Accounting  Policies
          (Continued)

(F) Loss per Share (Continued)

The following table presents a reconciliation  of basic and diluted earnings per
share for fiscal year 2002:

Net income                                           $          105,624
Adjustment to net income                                              -
                                                       -----------------
Income available to common shares                    $          105,624
                                                       =================
Weighted average shares outstanding - basic                  34,191,555
                                                       =================
EPS - Basic                                          $             -
                                                       =================
Income available to common shares                    $          105,624
                                                       =================

Weighted average shares outstanding - basic                  34,191,555

Effect of dilutive securities:
     Employee Stock options                                      332,091
     Convertible preferred stock                              26,802,883
     Convertible bonds                                        56,019,978
                                                        -----------------
Weighted average shares outstanding - diluted                117,346,507
                                                        =================
EPS - Diluted                                         $             -
                                                        =================

(G) Recent Accounting Pronouncements

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  accounted  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  implementation  of SFAS 142 on
October  1,  2002 did not have a  material  effect  on the  Company's  financial
position, results of operations or liquidity.

Statement No. 143,  "Accounting for Asset Retirement  Obligations," ("SFAS 143")
requires  entities  to  record  the  fair  value  of a  liability  for an  asset
retirement obligation in the period in which it is incurred.  When the liability
is initially recorded,  the entity capitalizes a cost by increasing the carrying
amount of the related  long-lived asset. Over time, the liability is accreted to
its present value each period,  and the capitalized cost is depreciated over the
useful life of the related asset.  Upon  settlement of the liability,  an entity
either settles the  obligation for its recorded  amount or incurs a gain or loss
upon settlement. The standard is effective for fiscal years beginning after June
15,  2002.  The  adoption of SFAS 143 on October 1, 2002 did not have a material
effect on the Company's results of operations or liquidity.

                                    Page F30
<PAGE>

Note 1    Nature of Operations  and Summary of Significant  Accounting  Policies
          (Continued)

(G) Recent Accounting Pronouncements (Continued)

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").
Though 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.  The  implementation  of SFAS 144 on October 1, 2002 did not
have  a  material  effect  on  the  Company's  financial  position,  results  of
operations or liquidity.

Statement No. 145,  "Rescission of FASB Statements No. 4, 44, and 64,  Amendment
of FASB  Statement  No. 13, and  Technical  Corrections"  ("SFAS 145")  updates,
clarifies, and simplifies existing accounting pronouncements.  Statement No. 145
rescinds Statement 4, which required all gains and losses from extinguishment of
debt to be aggregated and, if material, classified as an extraordinary item, net
of related income tax effect.  As a result,  the criteria in Opinion 30 will now
be used to classify  those gains and losses.  Statement 64 amended  Statement 4,
and is no longer necessary because Statement 4 has been rescinded.  Statement 44
was issued to establish accounting requirements for the effects of transition to
the provisions of the motor Carrier Act of 1980. Because the transition has been
completed, Statement 44 is no longer necessary.

Statement 145 amends  Statement 13 to require that certain  lease  modifications
that have economic effects similar to  sale-leaseback  transactions be accounted
for in the  same  manner  as  sale-leaseback  transactions.  This  amendment  is
consistent  with  FASB's  goal  requiring  similar   accounting   treatment  for
transactions that have similar economic effects. This statement is effective for
fiscal years  beginning  after May 15, 2002. The adoption of SFAS 145 on October
1, 2002 did not have a  material  impact on the  Company's  financial  position,
results of operations or liquidity.

Statement No. 146,  "Accounting  for Exit or Disposal  Activities"  ("SFAS 146")
addresses  the  recognition,   measurement,  and  reporting  of  cost  that  are
associated with exit and disposal  activities  that are currently  accounted for
pursuant to the guidelines set forth in EITF 94-3,  "Liability  Recognition  for
Certain  Employee  Termination  Benefits  and  Other  Costs to exit an  Activity
(including  Certain  Cost  Incurred  in  a  Restructuring),"   cost  related  to
terminating  a  contract  that  is not a  capital  lease  and  one-time  benefit
arrangements received by employees who are involuntarily terminated - nullifying
the guidance under EITF 94-3.  Under SFAS 146, the cost  associated with an exit
or disposal activity is recognized in the periods in which it is incurred rather
than at the date the  Company  committed  to the exit plan.  This  statement  is
effective for exit or disposal activities initiated after December 31, 2002 with
earlier application encouraged. The adoption of SFAS 146 is not expected to have
a material impact on the Company's financial position,  results of operations or
liquidity.

                                    Page F31
<PAGE>

Note 2   Settlement Agreements

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))

On December 31, 2001, the Company's board of directors determined that it was in
the best  interests  of the Company to enter into a  settlement  agreement  with
Strategica  Services  Corporation (the "Settlement  Agreement" and "Strategica,"
respectively).  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,  the Company  issued
Strategica  1,030,495 shares of its common stock,  which represented 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 have anti-dilution  rights tied proportionately
only to the class A convertible bond held by the Yankee  Companies,  LLC members
(the  "Class  A  Bond"  and  "Yankees  members,"   respectively)  upon  complete
conversion  of the Class A Bond.  The  $80,000  Class A Bond,  with a  remaining
principal  amount of $40,000 plus accrued  interest,  gives Yankees  members the
right to acquire up to 75% of the Company's authorized and reserved common stock
(the "Yankees Member Shares"),  and the Strategica  Shares will be reduced below
4.9% only to the extent the Yankees Members 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 Class A Bond and the payment of specified liabilities
of the  Company,  the  Strategica  Shares will not be diluted  below 2.5% of the
Company's then-outstanding common stock but that Strategica will have no further
anti-dilutive  rights thereafter.  Settlement expense of $153,719 was recognized
in fiscal year 2002 based on the  variable  accounting  method  pursuant to EITF
96-18.  The above  aggregate  settlement  expense  related to the  anti-dilutive
provisions  of this  settlement  agreement  may  increase or decrease  under the
variable  accounting  method  until  such  time as the  anti-dilutive  provision
expires and the final shares issued to Strategica  is  determined.  At September
30, 2002, the Company has 6,289,448 shares of common stock issuable  relating to
the anti-dilutive provisions of the settlement agreement.

On March 6, 2002, the Company entered into a settlement  agreement with a vendor
and paid $2,750 in full settlement of debt. In connection with this  settlement,
the Company recorded settlement income of $25,094 on March 6, 2002.

On May 13, 2002, the Company settled the claims asserted by Prime Source Leasing
Inc. ("Prime Source") and General  Electric Capital Corp.  ("GE").  Prime Source
had sued GE for, among other things, $80,000 on a stop-payment check, and GE had
asserted a contingent  third-party claim against our Company for that amount. In
addition, Prime Source had asserted a direct claim against the Company, alleging
failure to pay a promissory  note for $85,606,  plus interest since November 30,
1998 and attorney's  fees.  Prime Source and GE settled their primary claim, and
so the  contingent  third-party  claim  against our Company  was  dismissed.  In
addition,  the Company settled its direct dispute with Prime Source. In exchange
for a general  release,  the Company  issued  Prime Source  1,000,000  shares of
restricted  common stock,  to be held in escrow  pending the receipt of a signed
general  release from Prime  Source.  These shares are included in the 6,424,869
shares in the statement of Changes in Stockholders'  Equity. As of September 30,
2002,  the Company had not  received  the general  release.  Accordingly,  these
shares are still being held in escrow.  In connection with this settlement,  the
Company recorded settlement income of $100,606 on May 13, 2002.

                                     Page F32
<PAGE>

Note 2   Settlement Agreements (Continued)

On May 1, 2002,  the Company  entered into a settlement  agreement with Deutsche
Financial Services Corporation  ("Deutsche").  Deutsche's claim was for $331,000
plus interest at the per annum rate of prime plus 6.5% since August 1, 1998, and
was based on a guaranty by the Company of a promissory  note  executed by one of
our divested  subsidiaries.  In exchange for the parties' general release of all
claims and  obligations  up to the date of the agreement,  Deutsche  received an
initial payment of $20,000 as of the filing of this report,  and is receiving an
additional  $2,500 (plus interest at the per annum rate of U.S. prime) per month
for 32 months  beginning June 15, 2002 and ending January 15, 2005 (an aggregate
additional  amount of $80,000 plus interest).  Additionally,  the Company issued
2,500,000  common shares in connection with this settlement (see Note 6 and Note
8).  These  shares are  included in the  6,424,869  shares in the  statement  of
Changes in Stockholders'  Equity. In connection with this settlement  agreement,
the  Company  recorded  settlement  income  of  $323,502.  As of the date of the
accompanying  audit  report,  the  Company  is in  default  of  this  settlement
agreement for non-payment (see Note 14).

Note 3   Accrued Expenses

Other  litigation  related  amounts  totaling  $21,300  are  included in accrued
expenses at September 30, 2002 (see Note 10).

Note 4   Convertible Bonds Payable - Related Parties

On  December  31,  2001 (the  "Exchange  Date"),  the  Company  issued a Class A
Convertible Bond to Yankees in exchange for 19,820,712  unexercised warrants 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, and essentially consolidated the warrants 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  $80,000),  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 the
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,  as  defined in the bond  document,  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 the Company's  stock of
which 26,009,989 common shares and 260,100  convertible  preferred shares remain
issuable at September 30, 2002,  respectively.  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  were based.
Accordingly,   aggregate   consulting  expense  related  to  the  bond  and  the
predecessor  warrants was reduced by $197,846 over the 2001 aggregate amount. On
May 31,  2002,  the  bond was  assigned  by  Yankees  LLC to the  Tucker  Family
Spendthrift  Trust ("TFST") and the Calvo Family  Spendthrift  Trust ("CFST") in
equal shares (See Note 8(A)).

                                    Page F33
<PAGE>

Note 5   Loans Payable - Related Parties

On September  24, 2001,  the Company  entered into a $150,000  revolving  credit
agreement with Yankee Companies,  Inc. Each loan under the agreement will be due
one year from the date of the loan and bears  interest at an annualized  rate of
2% over the prime  rate  charged  during  the period by  Citibank,  N.A.  and is
payable upon demand after the one year term. The line of credit was cancelled on
December 31, 2001. A new revolving credit agreement was entered into with Yankee
Companies,  LLC  containing  terms  identical  to  the  agreement  with  Yankees
Companies,  Inc. The revolving credit agreement expires in January 2004, subject
to automatic annual renewal,  and is secured by all of the Company's  assets. As
of September 30, 2002, the Company entered into several loans under these credit
agreements.   Borrowings  under  the  revolving  credit  agreements   aggregated
$334,314,  of which all were  assigned to Tucker  Family  Spendthrift  Trust and
Calvo Family Spendthrift Trust in equal amounts.  On March 28, 2002, the Company
borrowed an aggregate of $24,000 from Tucker Family  Spendthrift Trust and Calvo
Family  Spendthrift  Trust  (the  "Trusts")  under the same  terms as above.  At
September 30, 2002, loans payable to the Trusts amounting to $365,921  including
accrued interest payable of $7,607 are as follows:

             Date of Notes                     Amount                Due Date
             -------------            -------------------     ------------------
               09/30/01               $            96,190            09/30/02
               12/31/01                            32,430            12/31/02
               03/28/02                            24,000            03/28/03
               03/31/02                             9,668            03/31/03
               06/30/02                            39,444            06/30/03
               06/30/02                             6,664            06/30/03
               09/30/02                           149,918            09/30/03
             Accrued interest                       7,607           on demand
                                      -------------------
             Total                    $           365,921
                                      ===================

Note 6   Loan Payable

On May 1, 2002,  the Company  entered into a settlement  agreement with Deutsche
Financial Services Corporation  ("Deutsche").  Deutsche's claim was for $331,000
plus interest at the per annum rate of prime plus 6.5% since August 1, 1998, and
was based on a guaranty by the Company of a promissory  note  executed by one of
our divested  subsidiaries.  In exchange for the parties' general release of all
claims and  obligations  up to the date of the agreement,  Deutsche  received an
initial payment of $20,000 as of the filing of this report,  and is receiving an
additional  $2,500 (plus interest at the per annum rate of U.S. prime) per month
for 32 months  beginning June 15, 2002 and ending January 15, 2005 (an aggregate
additional  amount of $80,000 plus interest).  Additionally,  the Company issued
2,500,000  common shares in connection  with this settlement (see Note 2). As of
September 30, 2002, loan payable to Deutsche amounted to $72,500. As of the date
of the accompanying  audit report,  the Company is in default of this settlement
agreement for  non-payment.  Due to the default,  all amount due to Deutche Bank
have been classified and reflected as a current liability at September 30, 2002

                                    Page F34
<PAGE>

Note 7   Commitments and Contingencies

(A) Consulting Agreement with Related Party

Under a consulting agreement with Yankee Companies, Inc. (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  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 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 exercisable from the 10th day until the 365th day following the
effective  date.  The term of Class A options  was amended in January 2, 2000 to
extend the term for  exercise to the later of December 31, 2002 or the 100th day
following  the date the Company  becomes  current in its SEC  filings  under the
Exchange Act.

On January 4, 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 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 warrants was extended to the later of December 31,
2002 or the 100th  day after the  Company  registers  the stock  underlying  any
unexercised 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  services  are  offered  to any other  person,  and
eliminated  the 5%  introduction  fee.  During the quarter  ended June 30, 2002,
Yankees and the Company  mutually  agreed to terminate the  Agreement  effective
December 31, 2001. In connection  with this  amendment,  the Company  recorded a
gain from the agreement  rescission of $30,000 during the quarter ended June 30,
2002.

In connection with the consulting  agreement between the Company and Yankees, an
additional  3,091,484  shares of common  stock  became  subject to the  Yankees'
warrants  during  the  year  ended  September  30,  2002 as a  result  of  their
anti-dilutive  provisions.   Accordingly,  consulting  expense  of  $86,963  was
recognized  during the year ended September 30, 2002.  Since Yankees  previously
paid for 50% of these shares,  the Company  included  1,545,742 shares in common
stock issuable as of September 30, 2002. The consulting  agreement was cancelled
on December 31, 2001 upon  conversion of all the warrants to a convertible  bond
(see Note 4).

See Note 8(C) for warrant grants and exercise under these agreements.

                                    Page F35
<PAGE>

Note 7   Commitments and Contingencies (Continued)

(B) Employment Agreements

Effective May 10, 2002, 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 has a initial term of 30
days and then  continues on a  month-to-month  basis until the next  election of
Company  officers by the board of directors  or unless  terminated  earlier.  As
consideration for the President's services, the President receives 50,000 shares
of common stock per month for services  rendered.  This  compensation is paid at
the end of each  month in shares of the  Company's  common  stock.  Compensation
expense is recorded  monthly  and is  calculated  by using the  average  closing
transaction  price of the common  stock for the month then ended.  See note 8(A)
for stock issuances.

Effective June 14, 2001, the Company  entered into an employment  agreement with
its 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  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 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.  Effective July 1, 2002, the Company amended its
engagement agreement with Kevin W. Dornan, Esquire, who will henceforth serve as
the Company's  part-time  securities counsel. As consideration for his services,
the Company has agreed to  compensate  him  according to the  Company's pro rata
share  (which is  currently  50%,  based on the number of clients for whom he is
providing  legal  services)  of (1) his current  base salary of $700 per week in
cash and (2) $400 per week in common  stock.  The equity  portion is paid at the
end of the month, and is paid by equivalent amount of the Company's common stock
calculated  by using the average  closing  transaction  price for the month then
ended.

In July 2002, the Company engaged its Chief Financial Officer and Controller who
is paid hourly for services  performed  and $1,000 worth of common shares of the
Company  per month  computed  based on the average  closing  price for the month
ended.

                                    Page F36
<PAGE>

Note 7   Commitments and Contingencies (Continued)

(B) Employment Agreements

Effective May 9, 2002, the Company  entered into an agreement with 7 individuals
(the "Directors") pursuant to which they will serve as Directors.  The agreement
is for a term of one year. As  consideration  for the Director's  services,  the
members of the Company's  board of directors will each receive 10,000 shares per
month of the Company's common stock plus 5,000 additional  shares for service on
the audit and executive committee, 2,500 shares for each additional committee of
the board of directors on which they serve,  2,000 additional shares for service
on the audit or  executive  committee  of the board of  directors  on which they
serve as chair, and 1,000  additional  shares for each committee of the board of
directors on which they serve as chair plus shares for attending meetings.

(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 agreement's  initial term ended November 22, 2001 and then continues
from month to month.  In May 2002, the Company  renewed this agreement until May
2005.

Note 8   Stockholders' Deficit

(A)      Preferred Stock

On May 14, 2002,  the  Company's  board of directors  adopted a  certificate  of
designation  for 1,000,000  shares of the 10,000,000  shares of preferred  stock
authorized  by the  shareholders  at the Annual  Meeting  (the  "Certificate  of
Designation").  The Certificate of Designation  designated  1,000,000  shares as
"Class A Non-Voting,  Convertible  Preferred Stock" (the "Preferred Stock"). The
holder  of shares of the  Preferred  Stock  will be  entitled  to all  dividends
declared by the board of  directors  at a rate per share 100 times that paid per
share of common  stock,  and will be entitled to convert each share of Preferred
Stock for 100 shares of common stock (subject to adjustment  upon the occurrence
of certain events as specified in the Certificate of  Designation),  but only to
the  extent  that the  aggregate  number of shares of common  stock  held by the
holder  (and any other  person with whom the holder  must  aggregate  shares for
purposes of Commission  Rule 144) is less than 5% of our  Company's  outstanding
common stock so that the holder will not be deemed to have "control"  within the
meaning of Commission Rule 405. The Certificate of Designation further provides:
(1) for liquidation rights that treat one share of Preferred Stock as if it were
100  shares of  common  stock in the event of the  liquidation,  dissolution  or
winding  up of our  Company;  (2) that the  Preferred  Stock will have no voting
rights;  and (3) that no holder of  Preferred  Stock may serve as an  officer or
director of our Company,  or serve in any  capacity  with our Company that would
render such person a "control  person"  within the meaning of the Securities Act
or the Exchange Act.

                                    Page F37
<PAGE>

Note 8   Stockholders' Deficit (Continued)

(B) Stock Issuances

On June 18, 2002, the CFST exchanged  2,756,251 common shares for 27,563 Class A
Non-Voting,  Convertible  Preferred Shares,  which is an amount equal to 1/100th
the number of shares of Preferred  Stock as the number of shares of common stock
exchanged.  The purpose of the exchange was to reduce the  stockholder's  common
stock holdings so that stockholder will not be considered a control person under
Item 403(d) of  Regulation  SB. The exchange was  transacted  at the fair market
value so that there was no gain or loss on the transaction.

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
to Patrick Graham. 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. In fiscal 2001, 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 SBV Holdings, a 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 2)

As of May 2001,  the Company was  obligated to issue  200,000  common  shares to
Anthony Q. Joffe, a former  president and current  chairman of the board,  under
his employment agreement,  which has terminated. On November 15, 2001, 24,788 of
the shares issuable under this agreement were issued, with the remaining 175,212
shares issued in June 2002.

In July  2001,  2,000,000  of the  then  8,670,552  common  shares  issuable  at
September 30, 2000 under the Yankees 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.

During 2002 and 2001,  3,091,484  and  7,208,835  common  shares,  respectively,
became subject to the consultant  warrants and subject to  anti-dilutive  rights
related to the  convertible  bonds  payable  (Note 4). Of the total  112,039,951
common  shares  underlying  the warrants and  convertible  bonds payable with an
aggregate  exercise  price of  $80,000,  34,009,988  common  shares and  260,100
convertible  preferred shares were considered as having been issuable based on a
$40,000 payment for exercise made through September 30, 2002, of which 8,000,000
common  shares and no  convertible  preferred  shares have been issued,  leaving
26,009,988 common shares and 260,100 convertible preferred shares issuable as of
September  30,  2002.  The fair  value  of the  warrants  and the  anti-dilutive
convertible  bonds common stock equivalents were estimated on the dates of grant
using the  variable  accounting  method  pursuant  to EITF  96-18.  Accordingly,
consulting (income) expense of $(197,846) and $509,142 was recognized during the
years ended September 30, 2002 and 2001, respectively.

                                    Page F38
<PAGE>

Note 8   Stockholders' Deficit (Continued)

(B) Stock Issuances (Continued)

On December 31, 2001, the Company's board of directors determined that it was in
the best  interests  of the Company to enter into a  settlement  agreement  with
Strategica  Services  Corporation (the "Settlement  Agreement" and "Strategica,"
respectively)  (See note 2). 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,   and  subject  to  the   effectiveness   of  a  sufficient   increase  in
capitalization  by the Company's  stockholders,  the Company  issued  Strategica
1,030,495 shares of its common stock on June 13, 2002, 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 have  anti-dilution  rights tied
proportionately  only to the Class A Bond held by the Yankee Companies,  LLC (or
any successor  instrument thereto) upon complete conversion of the Class A Bond.
The Class A Bond,  in the  original  principal  amount of $80,000  plus  accrued
interest,  gives  Yankees  the  right  to  acquire  up to 75%  of the  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 Class A
Bond and the payment of specified  liabilities  of the Company,  the  Strategica
Shares will not be diluted below 2.5% of the Company's  then-outstanding  common
stock but that Strategica will have no further anti-dilutive rights thereafter.

In connection with the above Strategica Shares, the Company recorded  settlement
expense of $30,915 or $.03 per share  during the year ended  September  30, 2002
which  represents  the fair market value of the common  shares  issued as of the
date of the agreement.  Additional settlement expense of $122,804 was recognized
in fiscal year 2002 based on the  variable  accounting  method  pursuant to EITF
96-18. The above aggregate  settlement  expense of $153,719 based on a September
30, 2002 trading price of $.021 related to the anti-dilutive  provisions of this
Settlement  Agreement  may increase or decrease  under the  variable  accounting
method  until such time as the  anti-dilutive  provision  expires  and the final
quantity of shares to be issued as settlement  is known.  At September 30, 2002,
the  Company  has  6,289,449  shares of common  stock  issuable  relating to the
anti-dilutive provisions of the Settlement Agreement.

On May 1, 2002,  the Company  entered into a settlement  agreement with Deutsche
Financial Services  Corporation  ("Deutsche") (See Note 2). Deutsche's claim was
for $331,000 plus interest at the per annum rate of prime plus 6.5% since August
1,  1998,  and was based on a  guaranty  by the  Company  of a  promissory  note
executed  by one of our  divested  subsidiaries.  In exchange  for the  parties'
general  release of all claims and  obligations up to the date of the agreement,
Deutsche  has  received  an initial  payment of $20,000 as of the filing of this
report,  and is to receive an additional  $2,500 (plus interest at the per annum
rate of U.S.  prime) per month for 32 months  beginning June 15, 2002 and ending
January 15, 2005 (an  aggregate  additional  amount of $80,000  plus  interest).
Deutsche received 2,500,000 shares of restricted common

                                    Page F39
<PAGE>

Note 8   Stockholders' Deficit (Continued)

(B) Stock Issuances (Continued)

stock,  issued within 10 business days of the  effectiveness  of the increase in
capitalization  approved  by the  Company's  shareholders  at its recent  Annual
Meeting.  The Company  valued  these shares at $87,500 or $.035 per share during
the year ended September 30, 2002 which  represents the fair market value of the
common shares issued,  based on the quoted trading price,  as of the date of the
agreement.  In connection with this settlement  agreement,  the Company recorded
settlement income of $323,502.  As of the date of the accompanying audit report,
the Company is in default of this agreement for non-payment.

On May 10, 2002,  the Company  ratified a series of  amendments to the Company's
certificate of incorporation, which included the following:

     (a)  Increased  the  authorized  common  stock  from  20,000,000  shares to
     650,000,000  shares,  with a par value of $0.01  per  share

     (b) Authorized  10,000,000 additional shares as preferred stock, with a par
     value of $0.001,  and with all the  preferences and  characteristics  to be
     determined  by the board of  directors  on a  case-by-case  basis  prior to
     issuance.

On May 13, 2002, the Company settled the claims asserted by Prime Source Leasing
Inc. ("Prime Source") and General  Electric Capital Corp.  ("GE").  Prime Source
had sued GE for, among other things, $80,000 on a stop-payment check, and GE has
asserted a contingent  third-party claim against our Company for that amount. In
addition, Prime Source had asserted a direct claim against the Company, alleging
failure to pay a promissory  note for $85,606,  plus interest since November 30,
1998 and attorney's  fees.  Prime Source and GE settled their primary claim, and
so the  contingent  third-party  claim  against our Company  was  dismissed.  In
addition,  the Company settled its direct dispute with Prime Source. In exchange
for a general  release,  the Company  issued  Prime Source  1,000,000  shares of
restricted  common stock,  to be held in escrow  pending the receipt of a signed
general  release from Prime Source.  In  connection  with this  settlement,  the
Company recorded settlement income of $100,606.

In June 2002,  the Company issued  2,924,869  common shares for debt of $130,966
related to accrued officer and director compensation.  These shares are included
in the 6,424,869 shares in the statement of Changes in Stockholders' Equity.

During the year ended September 30, 2002, the Company issued 1,263,157 shares of
common stock to directors and officers for services rendered. In connection with
these shares, the Company recorded compensation expense of $81,207.

                                    Page F40
<PAGE>

Note 8   Stockholders' Deficit (Continued)

(C) Stock Option Plan

In June 2002, in connection with the cashless exercise of 242,000 warrants,  the
Company issued 125,058 shares of common stock.

Effective  January 1, 2002,  the Board of Directors  of the Company  adopted the
2002  Non-Qualified  Stock Option and Stock  Incentive Plan (the "2002 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 2002 Plan are designed either as incentive stock options or as
non-qualified  stock  options.  The 2002 Plan will terminate on January 1, 2012,
unless earlier terminated.  The 2002 Plan authorizes options for the purchase of
up to an  aggregate of  5,000,000  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 100% 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 (10) 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 (10)  percent of the
total combined voting power.  Through the date of the accompanying audit report,
no stock options have been granted under the plan.

(D) Warrants and Options

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 per share,  for  services
performed in year 2000.  These warrants  expire December 31, 2002. An expense of
$2,881 was recognized  immediately based on the intrinsic value method under APB
25.

The  Company  granted  options to  purchase  503,000  shares of common  stock to
directors and officers in April 2002,  at an exercise  price of $0.02 per share,
for services.  These warrants  expire on December 31, 2002. An expense of $5,030
was recognized immediately based in the intrinsic value method under APB 25.

Subsequently,  all of the above  warrants have been extended  until December 31,
2003.

                                    Page F41
<PAGE>

Note 8   Stockholders' Deficit (Continued)

(D) Warrants and Options (Continued)

The Company issued warrants for the purchase of 8,326,530, 21,014,574, 7,208,835
and 3,091,484 shares of common stock to a consultant in fiscal years 1999, 2000,
2001, and 2002,  respectively (see Note 7(A)). Based on the fair value method of
SFAS 123, a consulting expense of $1,501,378,  $428,125,  $509,142,  and $86,963
was recognized in fiscal years 1999,  2000,  2001, and through December 31, 2001
of fiscal 2002,  the date of conversion  of the warrants to a  convertible  bond
(See note 4 for reversal of certain consulting expenses in fiscal 2002 under the
variable  accounting  method),  respectively,  based on the variable  accounting
method pursuant to EITF 96-18.  The above aggregate  consulting  expense for all
years  relating to these  warrants may  increase or decrease  under the variable
accounting method as described in Note 4.

A summary of the options and warrants  issued as of September  30, 2002 and 2001
and changes during the years is presented below:

<TABLE>
<S>                                        <C>                      <C>              <C>                      <C>
                                                         2002                                       2001
                                                         ----                                       ----
                                           Number of               Weighted                                   Weighted
                                            Options                Average            Number of               Average
                                              and                  Exercise          Options and              Exercise
                                           Warrants                 Price              Warrants                Price
                                       --------------- ------ ---------------- -- ---------------- ----- ----------------
    Stock Options
    Balance at beginning of year           1,102,000       $        0.04                 666,000      $        0.04
    Granted                                  503,000                0.02                 436,000               0.05
    Exercised                               (242,000)               0.04                  -                      -
    Forfeited                                (70,000)               0.05                  -                      -
                                       --------------- ------ ---------------- -- ---------------- ----- ----------------
                                       --------------- ------ ---------------- -- ---------------- ----- ----------------
    Balance at end of year                 1,293,000       $        0.03               1,102,000      $        0.04
                                       =============== ====== ================ == ================ ===== ================
                                       =============== ====== ================ == ================ ===== ================

    Options exercisable at end of
      period                               1,293,000       $        0.03               1,102,000      $        0.04
                                       =============== ====== ================ == ================ ===== ================
                                       =============== ====== ================ == ================ ===== ================
    Weighted average fair value of                         $        0.02                              $        0.05
      options granted during the
      period

</TABLE>

          The following table summarizes information about warrants outstanding
at September 30, 2002:

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

                              Options and Warrants Outstanding                          Options and Warrants Exercisable
          --------------------------------------------------------------------------    ----------------------------------

                                                        Weighted
                                     Number             Average          Weighted            Number            Weighted
                 Range of        Outstanding at        Remaining          Average        Exercisable at         Average
                 Exercise         September 30,       Contractual        Exercise         September 30,        Exercise
                   Price              2002                Life             Price              2002               Price
                ------------    ------------------    -------------     ------------    ------------------    ------------
             $         0.05               233,000       0.28 Years   $         0.05               233,000  $         0.05
                       0.02             1,060,000       0.25 Years             0.02             1,060,000            0.02
                                ------------------                      ------------    ------------------    ------------
                                        1,293,000                    $         0.04             1,293,000  $         0.04
                                ==================                      ============    ==================    ============

</TABLE>
                                     Page F42
<PAGE>

Note 8   Stockholders' Deficit (Continued)

(E) 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, $5,030 and $2,881 were charged to compensation during 2002 and 2001
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 income (loss) for the years ended September 30, 2002 and
2001 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.

Note 9   Income Taxes

There was no current income tax provision for the years ended September 30, 2002
and 2001 due to the Company's net loss.

The Company's tax expense  differs from the "expected" tax expense for the years
ended  September 30, 2002 and 2001  (computed by applying the Federal  Corporate
tax rate of 34 percent to loss before taxes), as follows:

<TABLE>
<S>                                                         <C>                 <C>
                                                             2002               2001
                                                         --------------     --------------
                                                         --------------     --------------
Computed "expected" tax expense (benefit)             $       35,912     $      (310,391)
Non-deductible stock based compensation                              -           187,227
Effect of net operating loss carry forwards                  (35,912)            123,164
                                                         --------------     --------------
                                                         --------------     --------------
                                                      $          -       $          -
                                                         ==============     ==============
</TABLE>

The tax effects of temporary  differences that give rise to significant portions
of deferred tax assets and  liabilities  at  September  30, 2002 and 2001 are as
follows:
<TABLE>
<S>                                                           <C>              <C>

                                                             2002               2001
                                                        ---------------    ---------------
                                                        ---------------    ---------------
Deferred tax assets:
Net operating loss carryforward                      $      1,112,465   $      1,162,694
Stock based compensation                                    5,113,736          5,099,419
                                                        ---------------    ---------------
Total gross deferred tax assets                             6,226,201          6,262,113
Less valuation allowance                                   (6,226,201)        (6,262,113)
                                                        ---------------    ---------------
Net deferred tax assets                              $           -      $           -
                                                        ===============    ===============
</TABLE>
                                    Page F43
<PAGE>
Note 9   Income Taxes (Continued)

The net change in the valuation  allowance  during the year ended  September 30,
2002 was a decrease of $35,912.

At September  30, 2002,  the Company had net  operating  loss carry  forwards of
approximately  $3,271,955  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, or by the alternative minimum tax.

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  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 10   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.

(B) 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.

(C) Various Creditor Claims

The Company has judgments and claims against it aggregating  $21,300.  The total
of $21,300 remains accrued by the Company as of September 30, 2002 (See Note 3).

Note 11  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 $199,125 in 2002, had a working
capital  deficiency of $499,736 and an  accumulated  deficit of  $18,312,354  at
September  30,  2002.  Additionally,  as of the date of the  accompanying  audit
report,  the Company is in default of a loan under a  settlement  agreement  for
non-payment.  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.
                                    Page F44
<PAGE>

Note 12  Related Parties

During  2002 and 2001,  the Company  recorded  $30,000  (net of $30,000  gain on
agreement rescission) and $90,000 in consulting fees, respectively, payable to a
principal stockholder under a consulting agreement. (See Note 7(A))

The Company owes the CFST and the TFST $365,921 under notes payable (see note 5)
and $40,000 under a convertible  bond (See note 4) at September 30, 2002, in the
aggregate.

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

Note 13  Concentration of Credit Risk

Currently,  Yankee  Companies,  LLC and its  members,  a related  party,  is the
Company's only source of funding.

Note 14  Subsequent Events

Subsequent to September 30, 2002,  the Company  issued  603,350 shares of common
stock to directors and employees for services rendered. In connection with these
shares, the Company recorded compensation expense of $10,942.

Subsequent to September  30, 2002,  loans  payable to Yankee  Companies,  LLC of
$12,122 were assigned to the Trusts in equal amounts.

Subsequent to September 30, 2002, loans payable to the Calvo Family  Spendthrift
Trust of $3,300.

Subsequent to September 30, 2002, loans payable to the Tucker Family Spendthrift
Trust of $3,300.

As of the date of the accompanying  audit report, the Company is in default on a
loan under a settlement for non-payment.

In order to fund  short term  capital  requirements,  on  January  7, 2003,  the
Company concluded a private placement of 2,750,000 shares of its common stock to
directors of the Company,  their families and friends, at $0.01 per share, which
provided $27,500 in working capital.  The private placement was effected without
registration  under the Securities Act in reliance on the exemption  provided by
Section 4(2) thereof.

On December 18, 2002,  at the request of the Company,  the holders of all of our
Company's Class A Bonds, converted the bonds into shares of the Company's common
stock (which the Calvo Family Trust ("CFST")  immediately  converted into shares
of non-voting  preferred  stock pursuant to a conversion  agreement  between our
Company  and the  CFST),  and on  December  23,  2002,  converted  all of  their
unrelated  loans made to the Company into shares of its common  stock,  at $0.01
per  share.  As a result of the  sequence  and  timing of such  conversion,  the
Company converted the Bonds and issued  approximately  104,039,954 shares of its
common stock (of which 52,019,977 shares were immediately  converted by the CFST
into 520,200 shares of non-voting  preferred  stock),  a  substantially  smaller
number of shares that would otherwise have been required,  and issued 19,381,549
shares  of common  stock and  193,815  shares of  preferred  stock for loans and
accrued consulting fees of $387,630 (based on a contemporaneous  market price of
$0.01 per share), thereby eliminating a majority of its debts.

In consideration for the agreement to effect their debt conversion in the manner
requested by the Company,  the Company granted them best price and anti-dilutive
rights,  which would be triggered in the event the Company issued shares at less
than $0.01 per share within the next 24 months.

In December 2002, the Company formed a new subsidiary,  Fitness & Longevity USA,
Inc., in anticipation of acquiring a new business.

                                    Page F45
<PAGE>

ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

     Pursuant to Rule 12b-23 and General  Instruction  E.2.(a),  the information
called for by Item 8 is incorporated by reference from the corresponding Item in
our Company's  annual report to security  holders on Form 10-KSB/A-2  filed with
the  Commission  on March  27,  2002,  which is filed as an  exhibit  hereto  as
required by Item 601(b)(13)of Regulation S-B.

                                    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, 2002,  the following  persons  served as our Company's
directors and executive officers:
<TABLE>
<S>                                 <C>               <C>                 <C>
Name                                Age (1)          Term (2)          Positions
----                                -------          --------          ---------
Anthony Q. Joffe                    60               (3)               President, Chief Executive Officer, Director,
                                                                       Chairman of the board of directors
Charles J. Champion, Jr.            35               (4)               Director, chairperson of the audit committee
Vanessa H. Lindsey                  31               (5)               Vice-President, Secretary and Director
Lawrence R. Van Etten               65               (6)               Director
Robert S. Gigliotti                 53               (7)               Director, member of the audit committee
Kevin W. Dornan                     50               (8)               Counsel
Edward C. Dmytryk                   57               (9)               Director
Adam Wasserman                      38               (10)              Chief Financial Officer & Controller
G. Richard Chamberlin               56               (11)              Director

</TABLE>

(1)      As of September 30, 2002.
(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 remained as its Chairman and a director. On May 10, 2002, he was
         elected as our Company's President and Chief Executive Officer
(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 counsel effective June 18,
         2001.
(9)      Mr. Dmytryk was elected as a member of our Company's board of directors
         and served as its President and Chief Executive Officer from May 14,
         2001 to May 10, 2002.
(10)     Mr. Wasserman was elected as our Company's Chief Financial Officer and
         Controller on March 26, 2002. (11) Mr. Chamberlin was elected to serve
         as a member of our Company's board of directors on May 10, 2002.

                                     Page 46


<PAGE>

Biographies of Directors and Executive Officers

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

     Anthony Q. Joffe,  age 60, 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 remained as chairman of the board and a director. On May 10, 2002,
he was re-elected as our Company's  President and Chief Executive  Officer.  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  Park City
Group,  Inc.), a publicly held Delaware  corporation  from November 1998 to June
2001.

Edward C. Dmytryk, Director, former president and chief executive officer.

     Mr. Dmytryk, age 57, serves as a member of our Company's board of directors
and served as the president and chief executive officer from May 14, 2001 to May
10, 2002. 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  Park City  Group,  Inc. ), a
publicly  held Delaware  corporation,  and as a member of its board of directors
from 1999 to the  present.  He currently  serves as the acting  chief  financial
officer for Park City Group, Inc.

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

     Charles J.  Champion,  Jr., age 35, 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 Park City Group,  Inc.), a publicly held Delaware  corporation,  from
December 2000 to June 2001.

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

     Vanessa H. Lindsey,  age 31, 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 Park City Group,
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.

                                     Page 47


<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 65,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 Park City Group, Inc.), a publicly held Delaware corporation.

Kevin W. Dornan, Esquire, Counsel

     Kevin W. Dornan,  age 50, was engaged as our  Company's  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
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, St.  Augustine  and Ocala,  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.  Since June 2001, he has also served
as  counsel  for  Explorations   Group,  Inc.,  a  publicly  reporting  Delaware
corporation.

Adam Wasserman, Chief Financial Officer & Controller

     Adam Wasserman, age 38 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. Since June 14, 2002, he has also served as the chief
financial  officer and  controller  for  Explorations  Group,  Inc.,  a Delaware
corporation.

                                     Page 48


<PAGE>


G. Richard Chamberlin, Director and former general counsel

     G. Richard  Chamberlin age 56, served as our Company's general counsel from
January  12,  1999  until  March  31,  200,0  and was  elected  as member of our
Company's  board of  directors  on May 10,  2002.  He is a  graduate  of Eastern
Military  Academy,  Huntington,  New York  (College  Prep  Diploma,  1964):  The
Citadel,  The Military  College of South  Carolina,  (B.A.,  political  science,
1968): and the University of Georgia School of Law, (J.D.,  1971).  From 1973 to
1974 he served as Trust  Officer with Central Bank & Trust  Company,  Jonesboro,
Georgia.  Mr. Chamberlin is a practicing attorney and is a member of the Georgia
Bar, (since 1974), and the Florida Bar, (since 1990). He is also a member of the
Bars for the Federal District Court for the Northern District of Georgia, (since
1974) and the Federal District Court for the Northern District of Florida (since
1995),  the Court of  Appeals  for the State of  Georgia,  (since  1974) and the
Supreme Court for the State of Georgia  (since 1974).  Mr.  Chamberlin is also a
member of the Bar for the Eleventh District Court of Appeals,  (since 1982). Mr.
Chamberlin earned a Certificate from the American Bankers Association,  National
Trust School,  (1974). Mr. Chamberlin is a two term former member of the Georgia
House of Representatives, (1979-1983). In the State House, Mr. Chamberlin served
on  the  Following  committees:   House  Journal  Committee,  Natural  Resources
Committee,  Special  Judiciary  Committee  and Labor  Committee.  He is a former
member of the  Counsel  for  National  Policy.  He is the founder of the Georgia
Roundtable,  Inc., and served as President from 1981 to 1986.: He is the founder
of the Georgia Heritage  Foundation,  and served as President from 1982 to 1986.
He is the  former  Principal  of Soul's  Harbor  Christian  Academy,  Belleview,
Florida,  (1990-1992).  Mr. Chamberlin served as national music chairman for the
Religious  Roundtable,  Inc.,  at the premier  event known as the 1992  National
Affairs Briefing in Dallas,  Texas wherein President George Bush was the keynote
speaker.  Mr. Chamberlin has received Resolutions of Commendation from the House
of Representatives  for the Commonwealth of Kentucky,  (1985) and from the House
of  representatives  for the State of Georgia,  (1982). Mr. Chamberlin is former
president and director for Atrieties Development Company,  Inc., a publicly held
corporation  involved in the real estate industry,  (1986 through 1987), and has
held  licenses as a real estate agent,  (Georgia and Florida).  From November of
1998 to May 2001, Mr. Chamberlin served as a member of the board of directors of
AmeriNet  Group.com,  Inc.  (currently  Park City Group,  Inc.], a publicly held
Delaware corporation,  and until November 11, 1999, also served as its secretary
and general counsel until March 31, 2000.

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'
members have the right to acquire the  equivalent  of 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,  2002,  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);


                                     Page 49


<PAGE>



(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
Position          Year     Salary   Bonus   sation   Awards            tion Rights      Payouts           sation
--------          ----     ------   -----   ------   ------            -----------      -------           ------
Mrs. Lindsey (1)  2000     *        *       *        *                 24,000           *                 *
Mr. Joffe (2)     2000     *        *       *        $6,000            *                *                 *
Mr. Joffe (2)     2001     *        *       *        $1,735            *                *                 *
Mr. Dmytryk (3)   2001     *        *       *        $21,175           *                *                 *
Mrs. Lindsey (4)  2001     $2,442   *       *        $16,098           *                *                 *
Mr. Dornan (5)    2001     $7,692   *       *        $8,750            *                *                 *
Mr. Dmytryk(3)    2002     *        *       *        $30,*67           *                *
Mr. Joffe(2)      2002     *        *       *        $16,625           *                *                 *
Mr. Dornan(5)     2002     $4,196   *       *        $32,360           *                *                 *
Mr. Wasserman(6)  2002     $3,858   *       *        $6,250            *                *                 *
Mrs. Lindsey (4)  2002     $2,115   *       *        $53,624           *                *                 *
-------
</TABLE>

(1) For services as our Company's secretary.
(2) For services as our Company's president.
(3) For services as our Company's president and chief executive officer.
(4) For services as our Company's vice president and secretary.
(5) For services as our Company's counsel.
(6) For services as our Company's controller and chief financial officer
*   Not Applicable


                                     Page 50


<PAGE>


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, 2001 and ended on
September  30,  2002,  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:


                                     Page 51


<PAGE>


<TABLE>
<S>                        <C>             <C>                        <C>       <C>
                          Date of          Expiration                 Exercise  Underlying
Name & Category           Option           Date                       Price     Shares
---------------           ------           ----                       -----     -----------
Lawrence Van Etten         (1)             December 31, 2002          $0.02       64,000
Anthony Q. Joffe           (1)             December 31, 2002          $0.02      112,000
Charles Champion           (1)             December 31, 2002          $0.02      112,000
Robert Gigliotti           (1)             December 31, 2002          $0.02       80,000
Vanessa Lindsey            (1)             December 31, 2002          $0.02       80,000
Edward Dmytryk             (1)             December 31, 2002          $0.02       55,000
------------
</TABLE>

(1)  For Services as aboard member from January 1, 2001 to April 30, 2002. Since
     May 2002,  the board of directors has been  compensated  on a monthly basis
     with our  Company's  common stock,  in  accordance  with the terms of their
     director agreements.

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

     During  the  fiscal  year  that  started  on  October  1, 2001 and ended on
September 30, 2002,  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  400,000  common  shares.  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.

     On May 10,  2002,  Mr.  Joffe  was again  elected  as  president  and chief
executive  officer of our Company.  The agreement is for a term of 30 days, with
renewal  thereafter  from month to month unless  either our Company or Mr. Joffe
gives at least 30 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. Joffe's  services,  our Company has agreed to
compensate him with 50,000 shares of common stock per month of services, payable
at the end of each month. A copy of the agreement is filed as an exhibit to this
report.

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.


                                     Page 52


<PAGE>

     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.

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 counsel.  The agreement was amended as of July 1, 2002. 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 $700 per week
(assuming a 20-hour  workweek) and (2) $400 per week 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  amended
engagement  agreement  was filed as an exhibit to our  Company's  report on Form
10-QSB for quarter ended June 30, 2002.

Mr. Wasserman

     Effective  July 1, 2002,  our Company  engaged Adam  Wasserman as its Chief
Financial Officer and Controller As consideration for his services,  our Company
has agreed to compensate him $85 per hour for services  performed and $1,000 per
month in 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.
Wasserman's  amended  engagement  agreement  was  filed  as an  exhibit  to  our
Company's report on Form 10-QSB for quarter ended March 31, 2002.

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  strategic
     consulting  agreement,  pursuant to which  Yankees  billed 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 were to be provided except at our Company's specific request,  and
     the service of Yankees' members, Messrs. William A. Calvo, III, and Leonard

                                     Page 53


<PAGE>



     Miles Tucker,  was 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 has been deferred and accrued until adequate funds
     become available. The agreement also permitted Yankees to accept payment in
     capital  stock at the  conversion  rate of 50% of the fair market  value of
     such stock. The agreement was terminated as of December 31, 2001.

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, 2003. On December 19, 2002,  the board  extended the expiration
     date on final time,  until  January 12, 2004 and also extended all warrants
     due to expire on December 30, 2002 to 2003.

ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of the end of the Report Period

     As of September 30, 2002, our Company's only currently  outstanding  voting
securities  were  26,262,533  shares of common  stock,  $0.01  par  value.  As a
material subsequent event, as of the close of business on December 30, 2002, our
Company had 104,931,558 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 December  30,  2002.  The  following  two tables
includes persons who currently have the right to acquire  additional  securities
of our Company  within sixty days as specified in  Commission  Rule 13(d)(1) and
the total number of outstanding would be 106,224,558.

All footnotes to the tables follow the second table.

Security Ownership of Certain Beneficial Owners

     As of December 30, 2002, 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).

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

                                                                   Amount
                                                                   and Nature    Percent
                                                                   Of Beneficial  of
Name and Address of Beneficial Owner (1)                           Ownership (2) Class
----------------------------------------                           -------------  -----

Tucker Family Spendthrift Trust (3)
2500 North Military Trail, Suite 225;  Boca Raton, Florida 33431    78,014,026    73%

Strategica Services Corporation
701 Brickell Avenue, Suite 2500; Miami, Florida 33131                7,328,494   6.8%

</TABLE>
         Security Ownership of Management

     As of December 30, 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.

                                     Page 54


<PAGE>


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

Name and Address of                                                    Amount           Nature of         Percent
Beneficial                                                             Of Equity        Beneficial        of
Owner (1)                                                              Owned            Ownership         Class
---------                                                              -----            ------------      -----

Robert S. Gigliotti                                                    538,000          (4)               0.5
901 Wilshire Drive, Suite 400; Troy, Michigan 48084

Anthony Q. Joffe                                                       1,227,000        (5)               1.2
101 Southwest 11th Avenue; Boca Raton, Florida 33486

Edward C. Dmytryk                                                      1,211,517        (6)               1.1
315 Premier Vista Way; St. Augustine, Florida 32080

Kevin W. Dornan, Esquire                                               1,515,965        (7)               1.4
5001 Southwest 20th Street; Ocala, Florida 34474

Vanessa H. Lindsey                                                     2,304,897        (8)               2.2
340 Southeast 55th Avenue; Ocala, Florida 34471

Charles J. Champion                                                    357,558          (9)               0.3
Post Office Box 952259;Lake Mary, Florida 32795

Lawrence R. Van Etten                                                  319,647          (10)              0.3
1601 North 15th Terrace; Hollywood, Florida 33020

Adam Wassrman                                                          271,349          (11)              0.2
1643 Royal Grove Way, Weston, Florida 33327

G. Richard Chamberlin                                                  210,500          (12)              0.1
4518 Southwest 44th Lane; Ocala, Florida 34474

All officers and directors as a group                                  7,956,433        (2)               7.5%

</TABLE>

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

         The following footnotes apply to the preceding two tables:

(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 andMontana, their minor daughters. 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 78,914,026 shares
     are held by the  Tucker  Family  Spendthrift  Trust for which  Leonard  and
     Michelle  Tucker  serve as the  trustees  and who  jointly  hold voting and
     investment power over those shares.

(4)  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 warrants to acquire 310,000 shares.

(5)  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  and May 10,  2002  to the  present,  Mr.  Joffe
     currently holds warrants to acquire 354,000 shares.

(6)  Mr. Dmytryk was elected as a member of our Company's board of directors and
     served as its  president and chief  executive  officer from May 14, 2001 to
     May 10,  2002.  Mr.  Dmytryk  currently  holds  warrants to acquire  55,000
     shares.

(7)  Mr. Dornan was elected as our Company's counsel effective June 18, 2001.

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<PAGE>



(8)  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
     warrants to acquire 284,000 shares.

(9)  Mr.  Champion  has served as a member of our  Company's  board of directors
     since January 12, 1999. Mr.  Champion  currently  holds warrants to acquire
     112,000 shares.

(10) Mr. Van Etten was elected as a member of our  Company's  board of directors
     on May 31, 2000. Mr. Van Etten  currently  holds warrants to acquire 92,000
     shares.

(11) Mr.  Wasserman was elected as our  Company's  Chief  Financial  Officer and
     Controller on March 26, 2002.  (12) Mr.  Chamberlin was elected as a member
     of our  Company's  board  of  directors  on May 10,  2002.  Mr.  Chamberlin
     currently holds warrants to acquire 70,000 shares.

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'  members'  current
stock ownership,  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.

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 September  30,  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

Tucker Family Spendthrift Trust                 (1)                  74%
---------

(1) Stock ownership.


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 in Part 1, Item 1, which discussions are
incorporated by reference as permitted by Commission Rule 12b-23(a)(2).



                                     Page 56


<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 and 2001,  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,  March 31,  2001,  June 30, 2001,
December 31, 2001, March 31, 2002 and June 30, 2002; and, the current reports on
Forms 8-K filed with the  Commission on January 15, 2002 and June 28, 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      (4)             Certificate of Renewal and Revival of Charter,
                                  dated August 13, 2001.
(4)                               Instruments defining the rights of holders,
                                  including indentures:
         4.5      (2)             Yankees Warrant Agreement, effective
                                  January 5, 1999
         4.7      (2)             Yankees Amended Warrant Agreement,
                                  dated December 30, 1999
         4.10     (5)             Class A, Series A, Convertible Bond,
                                  dated December 31, 2001
         4.11     (7)             Our Company's 2002 Non-qualified Stock Option
                                 & Stock Incentive Plan, dated February 15, 2002

(10) Material Contracts:

         10.23    (2)             Yankees Amended Consulting Agreement,
                                  dated January 2, 2000.
         10.24    (2)             Agreement to Serve as Corporate Secretary
                                  between Vanessa Lindsey and our company ,
                                  dated January 3, 2000.
         10.25    (2)             Employment agreement between Anthony Q. Joffe
                                  and our Company, dated January 3, 2000.
         10.29    (1)             Strategic Consulting Agreement with Yankees,
                                  dated January 4, 2001.
         10.31    (3)             Clarification Agreement, dated July 6, 2001,
                                  to the Reorganization Agreement with
                                  Richard C. Peplin, Jr., signed on March 25,
                                  1999
         10.35    (3)             Employment agreement between Edward C.Dmytryk
                                  and our Company, dated July 19, 2001.
         10.36    (3)            Employment agreement between Vanessa H. Lindsey
                                  and our Company, dated July 19, 2001.
         10.37    (3)             Engagement agreement between Kevin W. Dornan
                                  and our Company, dated July 19, 2001.
         10.38    (4)             Loan Agreement, Security Agreement, Promissory
                                  Note between our Company and Yankees, dated
                                  September 24, 2001
         10.39    (5)             Settlement Agreement with Strategica Services
                                  Corporation dated December 31, 2001.
         10.40    (6)             Loan Agreement, Security Agreement, Promissory
                                  Note between our Company and Yankees LLC.,
                                  dated January 2, 2002.
         10.48                    Conversion Agreement between our Company and
                                  the Calvo Family Spendthrift Trust.
         10.49                    Conversion Agreement between our Company and
                                  the Tucker Family Spendthrift Trust.


                                     Page 57


<PAGE>



         10.50                    Employment Agreement Employment agreement
                                  between Anthony Q. Joffe and our Company ,
                                  dated May 10, 2002.


(99) Additional Exhibits:

         99.8                     Audit Committee Report
         99.9                     Sarbanes-Oxley CEO Certification
         99.10                    Sarbanes-Oxley CFO Certification
-------

(1)  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.

(2)  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.

(3)  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.

(4)  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.

(5)  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.

(6)  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.

(7)  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, 2002

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


                                   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:    January 8, 2003

                                  Colmena Corp.


                          By: /s/ Anthony Q. Joffe /s/
                       President & Chief Executive Officer



                                     Page 58


<PAGE>



     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/ Anthony Q. Joffe/s/             1/8/03    President, Chief Executive Officer
                                              Director, Chairman of the Board
/s/ Vanessa H. Lindsey/s/           1/8/03    Vice President, Secretary &
                                              Director
/s/ Adam Wasserman /s/              1/8/03    Chief Financial Officer &
                                              Controller
/s/ Charles J. Champion, Jr. /s/    1/8/03    Director & Audit Committee Chair
/s/ Robert S. Gigliotti/s/          1/8/03    Director & Audit Committee Member
/s/ Edward C. Dmytryk/s/            1/8/03    Director
/s/ Lawrence R. Van Etten/s/        1/8/03    Director
/s/ G. Richard Chamberlin/s/        1/8/03    Director



                                     Page 59


<PAGE>

                            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

             Anthony Q. Joffe, President & Chief Executive Officer;
             Vanessa H. Lindsey, Vice President, Secretary & Chief
           Administrative Officer; Kevin W. Dornan, Esquire, 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 and G. Richard Chamberlin
                                     ------
                               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.



                                     Page 60


<PAGE>