UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB
(Mark One)

     [X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
          OF 1934

          For the fiscal year ended   September 30, 2001
                                     -------------------

     []   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
          ACT OF 1934

          For the transition period from                  to
                                          ------------------------------------

                         Commission file number 1-14072

                             PEN INTERCONNECT, INC.
        (Exact name of small business issuer as specified in its charter)

UTAH                                          87-0430260
(State or other  jurisdiction of     (I.R.S. Employer Identification No)
incorporation or organization)

                      13765 Alton Parkway, Irvine CA.       92618
               (Address of Principal Executive Offices) (Zip Code)

                                 (949) 859-6279
                           (Issuer's telephone number)

         Securities registered under Section 12(b) of the Exchange Act:
                     Common Stock, par value $0.01 per share
                              Common Stock Warrants

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.  Yes X   No
                                                                      ---    ---

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

     State  issuer's  revenues  for its most recent  fiscal  year.  Discontinued
operations.  The Company  disposed of all its' operations and had no revenue for
the year.

     As of December  14,  2001,  there were  311,282,242  shares of the Issuer's
common stock,  par value $0.01,  issued and  outstanding.  The aggregate  market
value of the  Issuer's  voting  stock held by  non-affiliates  of the Issuer was
approximately  $1,447,230 at the closing quotation for the Issuer's common stock
of $0.014 December 14, 2001.

                DOCUMENTS INCORPORATED BY REFERENCE See Item 13 -
                        Exhibits and reports on form 8-K

                                      -1-


<PAGE>

                                   FORM 10-KSB

                             PEN INTERCONNECT, INC.

                                Table of Contents

                                                                            Page

      PART I

      1.   Description of Business                                             3

      2.   Description of Property                                             5

      3.   Legal Proceedings                                                   5

      4.   Submission of Matters to a Vote of Security Holders                 5

      PART II

      5.   Market for Common Equity and Related Stockholder Matters            6

      6.   Management's Discussion and Analysis or Plan of Operation           7

      7.   Financial Statements                                                9


      PART III

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

      10.   Executive Compensation                                            11

      11.   Security Ownership of Certain Beneficial Owners and Management    12

      12.   Certain Relationships and Related Transactions                    12

      13.   Exhibits and Reports on Form 8-K                                  12

      Signatures                                                              14


                                      -2-

<PAGE>


                                     PART I


ITEM 1. DESCRIPTION OF BUSINESS

FORWARD-LOOKING  STATEMENTS. This annual report contains certain forward-looking
statements  within the meaning of section 27A of the  Securities Act of 1933, as
amended,  and section 21E of the  Securities  Exchange Act of 1934,  as amended,
that involve risks and uncertainties.  In addition, the Company may from time to
time make oral forward-looking statements.  Actual results are uncertain and may
be impacted by many factors. In particular, certain risks and uncertainties that
may  impact the  accuracy  of the  forward-looking  statements  with  respect to
revenues,  expenses and operating results include without limitation;  cycles of
customer  orders,  general  economic  and  competitive  conditions  and changing
consumer trends, technological advances and the number and timing of new product
introductions,  shipments of products and components from foreign suppliers, and
changes in the mix of products  ordered by  customers.  As a result,  the actual
results  may differ  materially  from  those  projected  in the  forward-looking
statements.

Because  of these and other  factors  that may affect  the  Company's  operating
results,  past  financial  performance  should not be considered an indicator of
future performance, and investors should not use historical trends to anticipate
results or trends in future periods.

     (A) BUSINESS DEVELOPMENT

     General

     Pen is at present a fully  reporting  public shell company.  The company in
2001 negotiated the merger with The Automatic Answer,  Inc., (tAA). tAA, located
in Irvine,  California,  is a convergence and innovation technology company with
roots in the voice-processing space. The Amanda,  principal software product, is
a client server telephony  enabled software  solution  optimized for Microsoft's
Windows  operating  systems.  Utilizing the worldwide public switched  telephone
network and both  Intranet  and Internet  computer  based  technologies,  Amanda
seamlessly  integrates the computer and the telephone  enabling the PC to be the
communications  medium.  tAA  currently has a network of 550 dealers that resell
the Amanda line of products to the small business  market and four  distribution
houses strategically located in the country serving more than 25,000 independent
dealers.  The Amanda  software  product has been sold to more than 55,000  small
business users.

     Historically,  the  Company  developed  and  produced  on a turnkey  basis,
contract  manufacturing  solutions for original  equipment  manufacturers in the
computer,   telecommunications,   electronic  instrument,  medical  and  testing
equipment industries.

                                      -3-
<PAGE>


     Summary of Current Year Events and Subsequent Events

     Since the end of FY 1999,  Pen has gone  through  substantial  changes  and
problems  caused by a  default  notice  from our  bank,  due to one of our major
customers  going into  receivership  and leaving  Pen with over $1.5  million in
accounts receivable and inventory.  In February 2000, Pen sold its' PowersStream
division to Lund  Engineering of Orem,  Utah for cash and notes.  Lund took over
the assets and debts of PowerStream, which paid off PowerStream's obligations to
Finova which also owns the notes through its' foreclosure actions.

     During the last six (6) months of FY 2000,  Pen  focused  on  completing  a
merger  and  reducing  its'  debt  through a stock  for debt  program  with its'
vendors.  Seventy-six  (76) percent of the vendors  agreed to the program,  thus
reducing Pens' outstanding vendor debt from $3.2 million to $689,541. Pen issued
761,747 shares of unregistered common stock. In FY 2001 Pen issued 10,178 shares
of common stock to pay vendor debt of $25,390.

     In October of 1999 the Company  received  notice  from its  primary  lender
(Finova)  that they were  placing  the  Company's  loan in  default  status  for
non-compliance  with loan  covenants.  The  Company was  originally  given until
December 18, 1999 to pay off the loan balance.

     Finova  extended  the  deadline to February  28, 2000 but no other  lending
arrangements  or  definitive  agreements  to  sell  the  Company  or  any of its
divisions were made. In March 2000,  Finova caused a foreclosure of all of Pens'
assets as a result of the default notice not being  satisfied.  This left Pen as
only a fully  reporting  public shell  company  without  assets,  nor  operating
divisions.

     In May 2001,  the  Company  and Finova  reached an  agreement,  whereby the
Company  would pay  $150,000,  issue  250,000  shares of Pen's  Common Stock and
modify the strike price on 375,000  warrants to One Tenth of One Cent  ($0.001).
The expiration date for such warrants shall remain  September 4, 2004. In return
the  Company  received  back  from  Finova,  certain  assets  which  do not have
significant value as of the current date.

     (B) BUSINESS OF ISSUER

     (1)  Principal Products and Services

     For the year ended  September  30,  2001,  the  Company  had no products or
services.

     (2) Business Strategy

     The Company,  envisions,  with the merger of The Automatic  Answer Company,
Inc.,  to build upon the current  Amanda  product  line.  The  addition of other
products  as well as  adding  additional  dealers  and  expanding  its  products
internationally.  The  acquisition of other  companies  which would fit into the
company's  long-term  strategy.  In  addition  the  Company  expects  to achieve
continued  growth by adding  recurring  service revenue to its base of equipment
sales.

     (3) Employees

     Our success is dependent,  in part,  upon our ability to attract and retain
qualified management and technical personnel. Competition for these personnel is
intense,  and we will be  adversely  affected  if we are unable to  attract  key
employees.

                                      -4-

<PAGE>


ITEM 2.  DESCRIPTION OF PROPERTY FACILITIES

     In February  1999,  the Company's  corporate  offices moved into a building
leased by its' InCirT  division.  After the Company  was  foreclosed  on by its'
bank, we were able to negotiate a month-to-month  rental agreement with InCirT's
landlord for approximately 2000 square feet in an industrial building in Irvine,
California.  In July,  2001, the Company moved it's corporate  office to Irvine,
California.

ITEM 3.  LEGAL PROCEEDINGS

     1.   On October 28, 1999 Color Savvy Systems,  Ltd.,  filed suit to recover
          $165,750 in past due uncontested vendor  obligations.  On February 16,
          2000,  Color  Savvy  obtained  a  judgment  against  the  Company  for
          $165,750.
     2.   On February  15,  2000,  Amistar  Corporation  filed suit  against the
          Company to recover $95,733 in uncontested past due vendor obligations.
          As of this writing,  Amistar has accepted the Company's stock for debt
          offer.
     3.   On March 21, 2000,  Interworks Computer Products,  Inc., filed suit to
          recover $35,771 in past due uncontested vendor obligations.
     4.   On July 22, 2000, Force  Electronics  filed suit to recover $68,816 in
          past due uncontested  vendor  obligations,  and obtained a judgment on
          September 15, 2000.
     5.   Control Design  Supply/Nedco  filed suit to recover $6,788 in past due
          uncontested vendor obligations.
     6.   On March 20, 2000, DHL Airways Inc.  obtained a judgment in the amount
          of $3,868 for past due uncontested vendor obligation.
     7.   On April 5, 2001,  Sony Recording  Media Products  obtained a judgment
          against  the  Company in the amount of  $35,000.  The company has made
          payment totaling $25,000.

     On November 15, 1999, Alan L. Weaver, former CEO of Pen Interconnect, Inc.,
obtained a judgment  against the Company in the amount of $118,500 for breach of
a settlement  agreement relative to Mr. Weavers'  employment  agreement with the
Company.  The Company has reserved  $135,300 as a liability as of September  30,
2001  for this  agreement  as the  company  owes  interest  from the date of the
judgment.

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

     The  following  matters  were  voted on by the  shareholders  at the annual
meeting of the stockholders, which took place on August 30,2001:

     1.   The  election of six persons to serve as  Directors  on the  Company's
          board of directors;
     2.   The ratify the  appointment of Pohl,  McNabola,  Berg & Company LLP as
          independent  auditors  for the  Company,  for the fiscal  year  ending
          September  30,  2001,  for  the  purpose  of  auditing  the  financial
          statements  and books of the  Company,  for,  and  during,  the period
          ending on that date;
     3.   To vote on the merger with tAA Inc., by an exchange of shares;
     4.   To vote on an amendment to the Company's  certificate of incorporation
          to increase the number of shares of the Common Stock, authorized to be
          issued, to 500,000,000 shares;
     5.   To approve an amendment to the Certificate of  Incorporation  in order
          to effect a stock  combination  (reverse split) of the Common Stock in
          an exchange ratio to be approved by the Board,  ranging from one newly
          issued  share for each two  outstanding  shares of Common Stock to one
          newly issued share for each ten outstanding shares of Common Stock;
     6.   To vote on changing the Company name from Pen  Interconnect,  Inc., to
          The Amanda Company, Inc.

                                      -5-

<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

     Our common  stock and warrants  have been traded on the OTC Bulletin  Board
since they were  de-listed from the National  Association of Securities  Dealers
Automated  Quotation  system as of March 30,  1999.  They were traded  under the
symbol "PENC:OB" for the common stock and "PENCW" for the warrants.  On December
11, 2001,  the stock symbols  changed to AMND.OB for the common stock and AMND-W
for the warrants The common stock and  warrants  were first  publicly  traded on
November 17, 1995. The following table sets forth the range of high and low bids
for our common stock for the last three years.

                                            High             Low
Fiscal Year 2000-Quarter Ended
September 30, 2001                         $0.04            $0.03
June 30, 2001                               0.05             0.04
March 31, 2001                              0.11             0.03
December 31, 2000                           0.19             0.02

Fiscal Year 1999-Quarter Ended
September 30, 2000                         $0.30            $0.17
June 30, 2000                               0.36             0.18
March 31, 2000                              0.55             0.20
December 31, 1999                           0.53             0.25

Fiscal Year 1998 Quarter Ended
September 30, 1999                         $0.81            $0.52
June 30, 1999                               1.19             0.78
March 31, 1999                              2.00             0.72
December 31, 1998                           2.50             0.77

     On December 14, 2001 the closing  quotation for the common stock on the OTC
Bulletin  Board was  $0.014 per  share.  As of  December  14,  2001,  there were
311,282,242 shares of common stock issued and outstanding, held by approximately
4,100   shareholders,   including  several  holders  who  are  nominees  for  an
undetermined number of beneficial owners.

     On December 14, 2001, the closing quotation for the warrants was $0.002 per
warrant.  The Company extended the public warrants for one more year to November
17, 2002 as they were to expire on November 17, 2001.  As of September 30, 2001,
there were  issued and  outstanding  public and  private  warrants  to  purchase
10,509,700 shares of the Company's common stock.

     The  trading  volume of the common  stock and  warrants  of the  Company is
limited,  creating  significant changes in the trading price of the common stock
and warrants as a result of  relatively  minor changes in the supply and demand.
Consequently,  potential  investors should be aware that the price of the common
stock and  warrants in the  trading  market can change  dramatically  over short
periods  as a result  of  factors  unrelated  to the  operations,  earnings  and
business activities of the Company.


                                      -6-

<PAGE>

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

     The following discussion and analysis provides certain  information,  which
the Company's management believes is relevant to an assessment and understanding
of the Company's  results of operations  and financial  condition for the fiscal
years ended  September 30, 2001 and 2000. This discussion and analysis should be
read  in  conjunction  with  the  Company's  financial  statements  and  related
footnotes.

     Results of Operations

     Net sales and cost of sales: There were no sales from continuing operations
for the years ended  September 30, 2001 and 2000.  All operating  divisions were
disposed of during 1999 and 2000, and all operating activity was reclassified as
discontinued  operations.  Since March 2, 2000, the Company  decided to maintain
its' situation as a reporting  public company,  and to reduce its' debt in order
to make the Company  attractive to private  companies that would want to use Pen
to go public. This approach is designed to maintain shareholder value.

     The Company did enter into a Letter of Intent to reverse merge with a small
private .com company, perFORMplace.com,  in the entertainment services business.
A definitive  agreement was signed in late August 2000 with the intent to obtain
shareholder ratification at the next shareholders' meeting. However, on November
8, 2000,  before the  meeting  could be held,  perFORMplace.com  terminated  the
merger.  This caused a serious drop in the Company's stock price and the need to
go back out to seek a new merger partner or acquisition.

     The Company  entered into  Agreement to Acquire  Shares with The  Automatic
Answer, Inc., a California company on April 10, 2001

     Since the  disposition  of the net assets and  operations of our historical
operations,  the  Company  has  reduced  its'  staff  to two  employees  and one
part-time financial consultant.

     Operating Expenses

     Since  the  foreclosure  on the  assets  and the  sale  of  its'  operating
divisions,  the operating costs of the Company have been kept to a minimum, with
two  employees  and  limited  travel  and  expenses.  As a result,  general  and
administrative  expenses decreased from $1,733,596 to $787,591,  a net change of
55%.

     Depreciation  increased $771 from 2000 to 2001. Most of the Company's fixed
assets were disposed of during 2000 and the remainder in 2001.

     Interest  expense  decreased  $315,147  during 2001,  primarily  due to the
foreclosure  of the assets of its' InCirT  division,  and the  resulting  affect
against  the  Company's  line of credit.  Interest  expense of $43,048  resulted
predominantly from the issuance of convertible debentures.

     The Company recorded in ,$320,500 loss from impairment due to the write-off
of advances made to a merger candidate in 2000. In 2001, an additional amount of
$63,000 was recognized as a loss relating to the same event.

     Other Income/Expenses

     As part of the merger between the Company and tAA, the Company made several
loans to tAA in 2001  totaling  $461,200.  The  loans  were  used to fund  tAA's
pre-merger operations.  The merger was effective October 1, 2001 and these loans
will be eliminated upon the  consolidations of the two companies.  The $461,2000
was expensed as acquisition expense.

     The Company recorded a $135,300 loss in FY 2000 from a lawsuit brought by a
former executive of the Company.

                                      -7-

<PAGE>


     Losses  from  discontinued  operations  decreased  to $497,827 in 2000 from
$5,695,148 in 1999.  The Company  disposed of two divisions  during 1999 and the
remaining two divisions early in 2000.

     Losses on the disposal of the Company's two remaining  operating  divisions
in 2000 was $776,384.

     Extraordinary Income

     The  Company  recorded a gain from  extinguishments  of debt of $149,642 in
2001 and $2,018,547 during 2000 resulting from the conversion of vendor payables
to equity.

     Net Loss and Loss Per Share

     Net loss and loss per share.  Net losses  decreased to  $1,294,784 or $0.03
per common share in fiscal year 2000 from  $1,891,199  or $0.10 per common share
in fiscal year 2000; a decrease of $596,415 or $0.07 per share. Decreased losses
result from a reduction  in  operating  expenses  as the Company  sought  merger
candidates.

     Liquidity and Capital Resources

     The Company had negative working capital at September 30, 2001 of $2,377692
compared to negative  working  capital of $1,977,914 at September 30, 2000 for a
decrease in working  capital of $399,778.  The decrease is due to the raising of
additional capital through the issuance of convertible  debentures which allowed
the company to have sufficient working capital to pay salaries,  office rent and
other expenses while the company looked for a merger partner.

     During fiscal 2001 Pen continued to experience cash flow problems. For most
of  fiscal  2000,  the  market  price of Pen's  stock  was  sufficient  to raise
additional funds to support the negative cash flow from operations.  Pen's stock
price has continued to decline since Pen's  securities  were  de-listed from the
NASDAQ National Market in March of 1999.

     In March 2000,  because of Pens' inability to clear the default notice, our
bank,  Finova Capital caused a pre-packaged  foreclosure of all of Pens' assets,
including the take-over of our largest division,  InCirT, which was subsequently
sold to ADTI, a subsidiary of Comtel  Holdings,  Inc.  Since that time,  Pen has
maintained  its' fully  reporting  public status and sought a new  asset/company
that would benefit from a merger with a public company.

     Additional  capital  infusions  will  be  necessary  if the  Company  is to
continue its'  Operations.  The investors which purchased the preferred stock in
FY99 have been willing to continue limited funding to assist the Company.  There
is no guarantee that this will continue for any sustained  period. If Pen cannot
raise additional funding, Pen will have to seek bankruptcy protection.

     In February 2000, Pen sold its' PowerStream division to Lund Engineering or
Orem, Utah for cash and notes. Lund took over the assets and debt of PowerStream
which paid off its' obligations to Finova, which also owns the note through its'
foreclosure actions.

     In September  1999,  Pen  completed  the sale of the MotoSat  division to a
company  controlled by James Pendleton,  Pen's former Chairman and CEO. The sale
did  not  generate  cash  proceeds  but  eliminated   monthly  operating  losses
associated with MotoSat. All assets and liabilities of the MotoSat division were
transferred to Mr. Pendleton's company in exchange for Mr. Pendleton's agreement
to waive any  claim to post  employment,  deferred  compensation  or  retirement
benefits.  The transfer of the MotoSat division to Mr.  Pendleton  resulted in a
loss to the Company of approximately $68,000.


                                      -8-

<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

     The financial  statements and supplementary  data are included beginning at
page A.

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

Not applicable.

                                    PART III

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

Directors and Executive Officers.

     The Company's directors and executive  officers,  and their respective ages
and  positions  with  the  Company,   are  set  forth  below  in  tabular  form.
Biographical  information  on each  person is set forth  following  the  tabular
information.  There are no family  relationships  between  any of the  Company's
directors or executive  officers.  The Company's board of directors is currently
comprised  of six  members,  each  of whom is  elected  for a term of one  year.
Executive  officers  are chosen by and serve at the  discretion  of the Board of
Directors.

      Name                    Age               Position

      Stephen J. Fryer         63               Chairman of the Board, Chief
                                                Executive Officer
                                                And Principal Accounting
                                                Officer

      Brian Bonar              53               Director

      Jose Candia              52               Director

      David Woo                39               Director

      Bill Prevot              57               Director

      Tim Morgan               42               Director

          Stephen J. Fryer has served as Chief Executive  Officer of the Company
     since 1999 and as a director of the Company since 1997. He served as Senior
     Vice  President of Sales and  Marketing  from October 1996 to October 1997.
     From 1989 to 1996,  Mr.  Fryer was a  principal  in Ventana  International,
     Ltd., an Irvine,  California  based venture capital and private  investment
     banking  firm.  Mr.  Fryer   graduated  from  the  University  of  Southern
     California in 1960 with a Bachelors  Degree in Mechanical  Engineering  and
     has spent over  twenty-eight  years in the computer  business in the United
     States, Asia and Europe.

          Brian Bonar was  appointed  a director of the Company on November  30,
     1999.  Mr.  Bonar  currently   serves  as  CEO  and  President  of  Imaging
     Technologies  Corporation  (Itec) and has held this  position  since  April
     1998.  Prior to his  appointment  as CEO of Itec, Mr. Bonar served in other
     capacities  with Itec since  August  1992.  From 1991 to 1992 Mr. Bonar was
     Vice President of Worldwide Sales and Marketing for Bezsier  Systems,  Inc.
     From 1990 to 1991 he was  Worldwide  Sales  Manager for Adaptec,  Inc. From
     1988 to 1990 Mr. Bonar was Vice President of Sales and Marketing for Rastek
     Corporation. From 1984 to 1988 Mr. Bonar was employed as Executive Director
     of  Engineering  at QMS, Inc.  Prior to these  appointments,  Mr. Bonar was
     employed by IBM, U.K. Ltd. for approximately 17 years.


                                      -9-

<PAGE>

          Jose  Candia was  appointed  a director  of the  Company on August 30,
     2001.  Mr.  Candia  currently  serves as CEO and  President  of The  Amanda
     Company,  Inc. He brings 20 years of experience  in the  telecommunications
     and  business  arena.  He was  Senior  V.P.  of Sales  and  Operations  for
     Centrecom.  com, a VOLP  enterprise.  Mr. Candia  directed a sales force of
     over 250 individuals for AT&T Wireless/L.A.  Cellular;  managed the western
     regions of Mitel,  Intecom-Matra  and United  Technologies  Communications;
     directed the national sales efforts for Fujitsu  Communications Company and
     managed  overseas  for  Warner-Lambert  International.  Mr.  Candia  has  a
     business administration degree from Northwood University, Midland, Michigan
     and  a  business   management   degree  from  the  Institoto   Superior  De
     Administracion Y Productividad in Lima, Peru.

          David  Woo,  was  appointed  Chairman  of the Board of the  Company on
     August 30,  2001.  Mr. Woo was the Founder and CEO of tAA. He received  his
     Bachelors  Degree in  Computer  Science  from  Columbia  College,  Columbia
     University.

          Bill  Prevot was  appointed  a director  of the  Company on August 30,
     2001. Mr. Prevot recently served as Chief Operating Officer of OhGolly.com.
     He brings more than eleven years of  experience  from AT&T Wireless and the
     cellular  telephone  industry,  where he has  served as Vice  President  of
     Customer Care, Chief Information Officer and Director of Administration and
     Operations,  overseeing  staff  expansion of over 300% to  accommodate  the
     rapid growth of this division and customer responsiveness.

          E.  Timothy  Morgan was  appointed a director of the Company on August
     30,  2001.  Mr.  Morgan is a Founder and Senior Vice  President of Advanced
     Research  at Mr.  Morgan  has over  twenty  years  experience  in  computer
     programming  and soft ware  engineering.  His work in  concurrent  software
     design  includes  software  tools and  authoring  of  several  publications
     explicity for the analysis of concurrent systems.

     Compliance with Section 16(a) of the Securities Exchange Act of 1934.

     Section  16(a) of the  Securities  Exchange Act of 1934,  and the rules and
regulations promulgated thereunder, require the Company's executive officers and
directors,  and  persons  who  beneficially  own  more  than  ten  percent  of a
registered  class  of the  Company's  equity  securities,  to  file  reports  of
ownership and changes in ownership with the  Securities and Exchange  Commission
and to furnish the Company with copies  thereof.  It is our  understanding  that
these reports have been filed on a timely basis.


                                      -10-

<PAGE>


ITEM 10. EXECUTIVE COMPENSATION

     The  following  table  shows the  compensation  paid by the  Company to its
current  Chairman and Chief  Executive  Officer,  and the  Company's  other most
highly paid executive officer.

     None of the  other  executive  officer's  total  annual  salary  and  bonus
exceeded $100,000 for the years presented.

                           Summary Compensation Table

                               Annual Compensation
      Name and Principal        Fiscal Year       Salary          Bonus

      Stephen J. Fryer          2001             $ 63,267        $     0
      President & CEO           1200              148,802          4,116
                                1999              139,000         17,304

      Jim Pendleton (1)         1999              139,666              0
      Chairman/CEO

      Mehrdad Mobasseri (1)     1999               96,000         89,282
      President-InCirT


      Alan Weaver (1)           1999              100,000         30,881
      Vice President

o        The tables above do not include certain insurance, the use of a car,
         and other personal benefits, the total value of which does not exceed
         $50,000 or 10% of such person's salary and bonus.

     (1)  - Resigned in 1999/2000.

                                      -11-

<PAGE>


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth the number of shares of the Company's common
stock  beneficially  owned as of September  30, 2001,  (i) by each person who is
known by the Company to own  beneficially  more than 5% of the Company's  common
stock,  (ii)  by  each  director  and  director  nominee,  (iii)  by each of the
Company's named executive officers, and (iv) by all directors, director nominees
and  executive  officers,  as a group,  as reported by each such person.  Unless
otherwise indicated,  each stockholder's address is c/o the Company, 13765 Alton
Parkway, Suite F Irvine, CA. 92618.

<TABLE>
<CAPTION>
 Name and Address of             Amount and Nature of       Amount Issuable on           Percentage of
  Beneficial Owner                  Beneficial Owner         Exercise of Options     Outstanding Common stock
-----------------------------  ------------------------- -------------------------- -------------------------
<S>                                 <C>                  <C>                                <C>
Steven Fryer                        3,092,500                                               1.0
Brian Bonner                        1,150,000                                                .4
E. Timothy Morgan                  43,344,769                                              13.9
David L. Woo                       55,786,309                                              17.9

All Officers and Directors as
 A Group (4 persons)              103,373,578                                              33.2
</TABLE>

     (1)  In addition to shares  issuable on exercise of  warrants,  consists of
          shares  issuable upon conversion of shares of Series A preferred stock
          and Series B preferred  stock  based on a market  price equal to $0.34
          per  share.  The terms of the Series A and  Series B  preferred  stock
          prevent the holders from converting their shares of preferred stock if
          the  conversion  would  cause the holder to be deemed  the  beneficial
          owner of more than 9.9% of Pen's common  stock,  except with the prior
          consent of the holder.

     Except as set forth above, the Company knows of no beneficial owner of five
percent  or more  of the  Company's  Common  Stock,  and  does  not  know of any
arrangement  which may at a subsequent date result in a change of control of the
Company.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The following information  summarizes certain transactions,  either engaged
in within the last two (2) years or,  proposed  to be engaged in, by the Company
and the individuals described.

     Former officers and board members, James Pendleton and Wayne Wright reached
a modified settlement with the Company, per their management and deferred income
statements,  by each accepting 250,000 warrants,  priced at $0.65 per share, and
376,000 shares of common stock in place of monetary payments.

ITEM 13 - Index of Exhibits and Reports on Form 8-K

     (a)  Reports on Form 8-K

          Reports on Form 8-K were filed by the Company  during the three months
          ended September 30, 2001.

     (b)  Exhibits

          Exhibit
          No.                 Description

       1.      Underwriter's  Warrant Agreement  including Form of Underwriter's
               Warrant,  incorporated by reference to the Company's Registration
               Statement filed on Form SB-2, SEC File No. 33-96444.

       3.      Articles of Incorporation and By-Laws,  incorporated by reference
               to the Company's  Registration  Statement filed on Form SB-2, SEC
               File No. 33-96444

       4.1     Certificate of Amendment creating Series A Convertible  Preferred
               Stock as amended,  as filed  February  10,  1999.  See Exhibit to
               report on Form 8-K filed on February 17, 1999.

       4.2     Certificate of Amendment creating Series B Convertible  Preferred
               Stock as amended.

      10.4     Form of Warrant between the Registrant and JW Charles Securities,
               Inc., BMC Bach International Ltd., Gordon Mundy, Louis Centofanti
               and Heracles Holdings.  See Registration  Statement filed on Form
               S-3, SEC File No. 333-60451.

      10.5     Form of 1995 Stock Option Plan. See Registration  Statement filed
               on Form SB-2, SEC File No. 33-96444.

      10.7     Loan and Security  Agreement between FINOVA and the Company.  See
               Exhibit to Report on Form 10-KSB, dated September 30, 1997.

      10.8     Employment  Agreement  between  Stephen J. Fryer and the Company.
               See Exhibit to Report on Form 10-KSB, dated September 30, 1997.

      10.11.1  Finder's  Agreement  between  the  Registrant  and JW Charles
               Securities,  Inc., dated June 2, 1998. See Registration Statement
               filed on Form S-3, SEC File No. 333-60451.

      10.12    Convertible   Preferred  Stock  and  Warrant  Purchase  Agreement
               between Pen, RBB Bank AG, Austost Anstalt  Schaan,  Balmore Funds
               SA and AMRO International,  SA dated as of February 12, 1999. See
               Exhibits to Report on Form 8-K filed February 17, 1999.


                                      -12-

<PAGE>


         Exhibit
          No.                 Description

      10.13    Amendment  in Total  and  Complete  Restatement  of the  Deferred
               Compensation  Salary  Continuation Plan and Employment  Agreement
               between Pen and James S. Pendleton, dated as of July 23, 1999.

      10.14    Amendment  in Total  and  Complete  Restatement  of the  Deferred
               Compensation  Salary  Continuation Plan and Employment  Agreement
               between Pen, Wayne R. Wright, and Rent A Profession,  dated as of
               October 1, 1999.

      10.15    Change  in  Pen's  Auditors  from  Grant  Thornton  LLP to Berg &
               Associates as of March 7, 2000, and FINOVA's  foreclosure  action
               on  Pen's  assets  to  recover  its'  loans to the  Company.  See
               Exhibits to Report on Form 8-K filed on March 14, 2000,  SEC File
               No. 1-14072.

      10.16    Amended  Registration Rights Agreement for registration of Common
               stock, Form S-B2 filed February 16, 2000.  Registration Statement
               # 333-79631.

      10.17    1999  Consulting  Services  Agreement and  Compensation  Plan for
               outside consultants (Incorporated by reference to Form S-8, filed
               September 3, 1999.

      10.18    2000  Consulting  Services  Agreement and  compensation  plan for
               outside consultants. (Incorporated by reference to Form S-8 filed
               May 17, 2000.

      10.19    2001  Consulting  and  Advisors  Service  Agreement  for  outside
               consultants  (Incorporated  by reference to Form S-8 filed on May
               19, 2001;  Form S-8 filed on August 14,  2001;  Form S-8 filed on
               February 23, 2001 and Form S-8 filed on January 25, 2001.


                                      -13-
<PAGE>




                                   Signatures

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


      Date:   January 11, 2002           PEN INTERCONNECT, INC.



                                        By:_/s/ Stephen J. Fryer
                                           Stephen J. Fryer
                                           Chairman, CEO and
                                           Chief Accounting Officer

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



      Date:  January 11, 2002            By:/s/ Stephen J. Fryer
                                            Stephen J. Fryer
                                            Chairman, CEO and
                                            Chief Accounting Officer

      Date:  January 11, 2002            By:/s/ Brian Bonar
                                            Brian Bonar
                                            Director


      Date:  January 11, 2002            By:/s/ Jose M. Candia
                                           Jose M. Candia
                                           Director

      Date:  January 11, 2002            By:/s/ David L. Woo
                                            David L.Woo
                                            Director

      Date:  January 11, 2002            By:/s/ Bill Prevot
                                            Bill Prevot
                                            Director

      Date:  January 11, 2002            By:/s/ E. Timothy Morgan
                                            E. Timothy Morgan
                                            Director

                                      -14-

<PAGE>



                             Pen Interconnect, Inc.

                          AUDITED FINANCIAL STATEMENTS

                               FOR THE YEARS ENDED
                           SEPTEMBER 30, 2001 AND 2000




                                     Page A

<PAGE>


                             PEN INTERCONNECT, INC.

                          AUDITED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000





                                                                          Page

         Report of Independent Auditors.....................................1


         Balance Sheets.....................................................2


         Statements of Operations and Retained Earnings...................3-4


         Consolidated Statement of Stockholders Equity ...................5-6


         Statements of Cash Flows.........................................7-9


         Notes to Financial Statements..................................10-31



<PAGE>








                         Report of Independent Auditors



Board of Directors
Pen Interconnect, Inc.
Irvine, California

We have audited the  accompanying  balance sheets of Pen  Interconnect,  Inc., a
Utah Corporation,  as of September 30, 2001 and 2000, and the related statements
of operations,  stockholders'  deficit, and cash flows for the years then ended.
These  financial  statements  are the  responsibility  of the  management of Pen
Interconnect,  Inc.  Our  responsibility  is to  express  an  opinion  on  these
financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial  position of Pen Interconnect,  Inc. as of
September  30,  2001 and 2000,  and the results of its  operations  and its cash
flows for the  years  then  ended,  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 2 to the
financial statements, the Company has suffered recurring losses from operations.
The Company has a stockholders' deficit of ($2,313,110) and ($1,977,041) and its
current  liabilities  exceeded its current assets by $817,888 and $972,729 as of
September 30, 2001 and 2000,  respectively.  These  factors,  among  others,  as
discussed in Note 2 to the financial  statements,  raise substantial doubt about
the  Company's  ability to continue as a going  concern.  Management's  plans in
regards to these matters are also described in Note 2. The financial  statements
do not  include  any  adjustments  that might  result  from the  outcome of this
uncertainty.


/s/Pohl, McNabola, Berg & Company LLP
San Francisco, California
January 11, 2002


                                       1
<PAGE>


                             Pen Interconnect, Inc.
                                 BALANCE SHEETS
                        AS OF SEPTEMBER 30, 2001 AND 2000



                                                  ASSETS
<TABLE>
<CAPTION>
                                                                                2001             2000
                                                                          ----------------------------------
Current assets:
<S>                                                                       <C>              <C>
 Cash and cash equivalents (Note 1)                                       $         6,839  $       9,319
                                                                          ----------------------------------

  Total Current Assets                                                              6,839          9,319
                                                                          ----------------------------------

Property and equipment, net of accumulated depreciation (Note 1)                        -            874
Discontinued operations                                                                 -          9,605
                                                                          ----------------------------------

   Total assets                                                           $         6,839  $      19,798
                                                                          ==================================


                                   LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
 Accounts payable                                                                 176,017        200,751
 Accrued liabilities                                                              648,710        781,296
                                                                          ----------------------------------
  Total current liabilities                                                       824,727        982,047

 Convertible debentures                                                           800,000        150,000
 Advances payable                                                                  40,000              -
                                                                          ----------------------------------
  Total non-current liabilities                                                   840,000        150,000

 Liabilities from discontinued operations                                         655,222        864,791
                                                                          ----------------------------------

  Total liabilities                                                             2,319,949      1,996,838

 Stockholders deficit:
 Convertible preferred stock, $.01 par value, authorized 5,000,000
  shares Series A, issued and outstanding, 91 shares in 2001
  And 130 shares in 2000                                                                1              1
  Series B, issued and outstanding, 886 shares in 2001
   and 926 shares in 2000                                                               9              9
 Common stock, $.01 par value, authorized 50,000,000 shares
  issued and outstanding 49,873,603 shares in 2001
  and 27,596,946 shares in 2000                                                   498,736        275,969
 Additional paid in capital                                                    20,008,060     19,282,402

 Accumulated deficit                                                          (22,819,916)   (21,535,421)
                                                                          ----------------------------------
  Total stockholders' deficit                                                  (2,313,110)    (1,977,040)
                                                                          ----------------------------------

  Total liabilities and stockholders' deficit                             $         6,839  $      19,798
                                                                          ==================================

</TABLE>



   The accompanying notes are an integral part of these financial statements.
                                     - 2 -

<PAGE>


                             Pen Interconnect, Inc.
                            STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000



<TABLE>
<CAPTION>
                                                                             2001                 2000
                                                                      ------------------- ---------------------

Revenues:
<S>                                                                   <C>                  <C>
   Net revenues (Note 1)                                              $              -     $                -
   Costs of revenues                                                                 -                      -
                                                                      ------------------- ---------------------
                                                                                     -                      -
                                                                      ------------------- ---------------------

General and administrative expenses                                            951,355              1,733,596
Depreciation                                                                       874                    103
                                                                      ------------------- ---------------------
     Loss from operations                                                      952,229              1,733,699

Other income and expense
   Interest (income) expense                                                    33,048                358,195
   Acquisition Expense                                                         461,200                      -
   Loss on impairment                                                           63,000                320,500
   Loss on lawsuit                                                                   -                135,300
   Liquidation damage waiver                                                         -                 86,941
                                                                      ------------------- ---------------------
     Total other income and expense                                            557,248                900,936

     Loss from continuing operations before income taxes                     1,509,477              2,634,635
     Income Taxes                                                                  800                    900
                                                                      ------------------- ---------------------
       Loss from continuing operations                                       1,510,277              2,635,535

     (Gain) loss from discontinued operations, net of taxes of $-0-
       InCirT                                                                  (65,851)                     -
       Powerstream                                                                    -               269,356
                                                                      ------------------- ---------------------
          Total (gain) loss from discontinued operations                       (65,851)               269,356

</TABLE>


                                   (continued)

   The accompanying notes are an integral part of these financial statements.
                                      -3-


<PAGE>


                             Pen Interconnect, Inc.
                      STATEMENTS OF OPERATIONS (CONTINUED)
                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000



<TABLE>
<CAPTION>
                                                                        2001             2000
                                                                 ------------------------------------
  Loss from foreclosed segment:
<S>                                                              <C>                  <C>
  InCirT                                                                          -        228,471

  (Gain) loss from disposal of discontinued operations, net of
  taxes of $-0-
  Powerstream                                                                     -        963,027
  InCirT                                                                          -       (186,643)
                                                                 ------------------------------------
     Total loss from disposal of discontinued operations                          -        776,384

        Total (gain) loss from discontinued operations                      (65,851)     1,274,211
                                                                 ------------------------------------

 Net loss before extraordinary item                                       1,444,426      3,909,746
                                                                 ------------------------------------

 Extinguishment of debt                                                    (149,642)    (2,018,547)

 Net loss                                                         $       1,294,784 $    1,891,199
                                                                 ====================================

Earnings per share, basic and fully diluted:


 Loss before discontinued items and extraordinary item           $          (0.03)  $        (0.14)
 Loss from discontinued items                                                -               (0.07)
                                                                 ------------------------------------
  Loss before extraordinary item                                            (0.03)           (0.21)
                                                                 ------------------------------------

 Extinguishment of debt                                                      -                0.11
                                                                 ------------------------------------

 Net loss per share                                              $          (0.03)  $        (0.10)
                                                                 ====================================

 Shares used in per share calculation - basic and fully diluted        37,701,171       18,556,461
                                                                 ====================================
</TABLE>


   The accompanying notes are an integral part of these financial statements.
                                      -4-




<PAGE>


                             Pen Interconnect, Inc.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000



<TABLE>
<CAPTION>
                                                                                                 Retained
                                               Common               Preferred        Additional  earnings
                                                Stock                 Stock           paid-in  (accumulated
                                          Shares       Amount     Shares    Amount    Capital    deficit)       Total
                                       ------------- ------------------------------- -------------------------------------
<S>                                    <C>           <C>         <C>       <C>      <C>        <C>           <C>
 Balance September 30, 1999              9,638,114   $ 96,381        2,800 $    28  $17,447,876$ (19,354,413)$(1,810,128)
                                       ------------- ---------------------------------------------------------------------


 Conversion of Preferred Stock -
Series B                                   411,112      4,111          (74)     (1)     (4,111)                      (1)

 Conversion of Preferred Stock -
Series A                                 9,057,654     90,577       (1,670)    (17)    (90,577)                     (17)

 Common stock issued in lieu of
    preferred stock dividend payable       349,323      3,493                           61,088                   64,581

 Compensation expense recognized
    on repricing of options and
warrants                                                                               339,822                  339,822

 Conversion of warrants - Preferred
    Stock Series A into common stock       315,000      3,150                           83,792                   86,942

 Exercise of stock options               1,150,000     11,500                          254,941                  266,441

 Exercise of warrants                    2,766,668     27,667                          273,451                  301,118

 Common stock issued for services        1,760,193     17,602                          416,372                  433,974

 Conversion of trade payables and debt
    into common stock                    1,061,747     10,617                          250,655                  261,272

 Sale of common stock                    1,087,135     10,871                          206,843                  217,714

 Dividends on Preferred Stock                                                                       (289,809)  (289,809)

 Stock options granted as compensation                                                  42,250                   42,250

 Net loss                                                                                         (1,891,199) (1,891,199)
                                       ------------- ---------------------------------------------------------------------

 Balance September 30, 2000             27,596,946   $275,969        1,056 $    10  $19,282,402$ (21,535,421)$(1,977,040)
                                       ============= =====================================================================
</TABLE>


   The accompanying notes are an integral part of these financial statements.
                                      -5-



<PAGE>


                             Pen Interconnect, Inc.
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000



<TABLE>
<CAPTION>
                                                                                                    Retained
                                                       Common            Preferred     Additional   earnings
                                                       Stock               Stock         paid-in  (accumulated
                                                  Shares     Amount  Shares   Amount     Capital    deficit)        Total
                                               --------------------------------------- ---------------------------------------
<S>                                            <C>        <C>        <C>     <C>     <C>          <C>          <C>
 Balance September 30, 2000                     27,596,946$  275,969   1,056 $   10  $ 19,282,402 $(21,535,421)$ (1,977,040)
                                               -------------------------------------------------------------------------------

 Conversion of Preferred Stock - Series B        1,617,648    16,177     (40)     -       (16,177)                        -

 Conversion of Preferred Stock - Series A        1,667,039    16,670     (39)     -       (16,670)                        -

 Exercise of options                               346,000     3,460                       40,882                    44,342

 Exercise of warrants                           16,102,251   161,023                      483,162                   644,185

 Common stock issued for services                  683,950     6,840                       21,920                    28,760

 Conversion of trade payables and debt
     into common stock                             760,178     7,602                       15,776                    23,378

 Stock granted as compensation                   1,100,000    11,000                       33,000                    44,000

 Compensation expense granted on options and
warrants                                                                                  163,765                   163,765

 Preferred dividend adjustment                                                                         10,289        10,289

 Other                                                (409)       (4)                                                    (4)

 Net loss                                                                                          (1,294,784)   (1,294,784)
                                               -------------------------------------------------------------------------------

 Balance September 30, 2001                     49,873,603$  498,736     977 $   10  $ 20,008,060 $(22,819,916)$ (2,313,110)
                                               ===============================================================================
</TABLE>


   The accompanying notes are an integral part of these financial statements.
                                      -6-


<PAGE>

                             Pen Interconnect, Inc.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        AS OF SEPTEMBER 30, 2001 AND 2000



<TABLE>
<CAPTION>
                                                                                   2001                2000
                                                                            ----------------------------------------

Increase (decrease) in cash and cash equivalents
 Cash flows from operating activities
<S>                                                                          <C>                <C>
  Net loss                                                                   $      (1,294,784) $       (1,891,199)
  Adjustments to reconcile net loss to net cash used                                                              .
   in operating activities
   Depreciation and amortization                                                           874              90,514

   Allowance for note receivable                                                             -             320,500



   Common stock issued for services                                                     28,760             433,974
   Compensation expense granted on options and warrants                                163,765                   -
   Extinguishment of debt                                                                    -          (2,018,547)
   Conversion of warrants                                                                    -              86,941
   Debt conversion to common stock                                                      23,378             261,272
   Common stock issued for dividends payable                                                 -              64,581


   Common stock issued in lieu of compensation                                          44,000                   -
   Stock options issued for services at below the fair market value
    of the stock on the date of the grant and repricing of options                           -             382,071
   Discontinued operations
   Loss on sale of divisions                                                                 -            (186,643)
   Loss on foreclosure of division                                                           -             963,027
   Changes in assets and liabilities
   Trade accounts receivable                                                                 -             790,429
   Inventories                                                                               -           1,300,987
   Prepaid expenses and other current assets                                             9,605               9,171
   Accounts payable                                                                   (234,303)          1,861,945
   Accrued liabilities                                                                (132,586)           (141,401)
                                                                            ----------------------------------------

   Cash flow generated by (used in) operating activities                            (1,391,292)          2,327,622
                                                                            ----------------------------------------


Cash flow from investing activities:
  Advances to perFORMplace                                                                   -             320,500
  Collections of notes receivable                                                            -            (374,567)
  Proceeds from sale of divisions                                                            -              75,689
                                                                            ----------------------------------------

   Net cash generated by investing activities                                                -              21,622
                                                                            ----------------------------------------
</TABLE>

                                   (continued)


   The accompanying notes are an integral part of these financial statemens.
                                      -7-



<PAGE>


                             Pen Interconnect, Inc.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                        AS OF SEPTEMBER 30, 2001 AND 2000



<TABLE>
<CAPTION>
Cash flow from financing activities:
<S>                                                                      <C>                <C>
 Issuance of preferred stock                                                            -             (18)
 Proceeds from issuance of common stock                                                 -         217,714
 Proceeds from convertible debenture                                              650,000         150,000
 Proceed from advances                                                             40,000
 Net change in line of credit                                                           -      (1,840,467)
 Net change in long-term debt obligations                                               -      (1,611,010)
 Preferred dividends adjustment                                                    10,285               -
 Exercise of warrants                                                             644,185         301,117
 Exercise of stock options                                                         44,342         266,440
                                                                        ------------------------------------

        Net cash provided (consumed) in financing activities                    1,388,812      (2,516,224)
                                                                        ------------------------------------

        Net (decrease) in cash and cash equivalents                                (2,480)       (166,980)
                                                                        ------------------------------------

        Cash and cash equivalents at beginning of year                              9,319         176,299
                                                                        ------------------------------------

        Cash and cash equivalents at end of year                         $          6,839 $         9,319
                                                                        ====================================


Supplementary disclosures of cash flow information
 Cash paid during the year for
  Interest                                                               $              - $       360,296
  Income taxes                                                           $            800 $           900

 Sale of Division
          On January 21, 2000, the Company sold  substantially all of the assets
     and certain  liabilities of its  Powerstream  division (Note 3, 9) noted as
     follows:

     Cash                                                                                 $              -
     Accounts receivable, net                                                                      142,017
     Inventories                                                                                    74,262
     Note Receivable                                                                                 9,017
     Property, equipment and leaseholds, net                                                        69,229
     Accounts Payable                                                                             (166,661)
     Unearned revenue                                                                             (216,000)
     Note payable                                                                                  (14,820)
     Capital leases                                                                                 (7,998)
                                                                                          ------------------
        Net gain on sale of Division                                                              (110,954)
     Less consideration received
        Note receivable                                                                   $             -
        Cash                                                                                       75,689
                                                                                          ------------------

     (Gain) on sale of division                                                           $      (186,643)
                                                                                          ==================
</TABLE>


   The accompanying notes are an integral part of these financial statements.
                                      -8-




<PAGE>


                             Pen Interconnect, Inc.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                        AS OF SEPTEMBER 30, 2001 AND 2000


Foreclosure of Division

          On March 3, 2000,  the Company's  InCirT  Division was  foreclosed and
     substantially  all of the  assets and  liabilities  were  turned  over to a
     secured  lender  (Note  3, 9).  The  value of the  assets  and  liabilities
     transferred were as follows:


<TABLE>
<CAPTION>
<S>                                                                             <C>
Accounts receivable, net                                                        $        2,038,322
Inventories                                                                              2,875,412
Notes receivable                                                                           299,662
Property, equipment and leaseholds, net                                                    959,758
Accounts payable                                                                        (2,614,032)
Other debt obligations                                                                  (2,596,095)
                                                                                -----------------------

      Loss on foreclosure of division                                           $         (963,027)
                                                                                =======================
</TABLE>


 Conversion of debt and trade payables

          During  2001,  debt and trade  payables in the amount of $23,378  were
     converted in to 760,178  shares of common  stock.  During fiscal year 2000,
     debt and trade  payables  in the amount of  $261,272  were  converted  into
     1,061,747 shares of common stock.


<TABLE>
<CAPTION>
                                                                               2001                2000
                                                                        ------------------- -------------------
    The following are the other non-cash charges to common stock:
<S>                                                                     <C>
    Conversion of preferred stock into common stock                     $                   $            (18)
    Common stock issued in lieu of dividends payable                                                  64,581
    Conversion of warrants-preferred stock into common stock                                          86,941
    Common stock issued and warrants converted for services                       151,395            433,974
    Common stock issued for compensation                                           44,000                  -
    Compensation expense on stock options                                         163,765                  -
    Compensation expense on repricing of options and warrants                           -            339,822
</TABLE>


   The accompanying notes are an integral part of these financial statements.
                                      -9-

<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


1.   Organization and Summary of Significant Accounting Principles

Organization

Pen  Interconnect,  Inc. ("the Company" or "Pen") was  incorporated on September
30, 1985, in the State of Utah.  Through March 3, 2000,  the date of foreclosure
of its last operating division, the Company was a total interconnection solution
provider  offering custom design and  manufacturing  of circuit boards,  battery
chargers,  power  supplies and  uninterrupted  power supply systems for original
equipment manufacturers.  Most of the Company's sales, before the closure of its
operating divisions, consisted of printed circuit boards.

The Company  experienced  severe cash flow  problems for several years and in an
attempt to satisfy the  demands of its  creditors,  sold three of its  operating
divisions, noted as follows:

      Division Name                 Date Sold
     ---------------------------    -------------------------
      Cable Davison                 January 31, 1999
      MOTO-SAT                      September 30, 1999
      Powerstream                   January 21, 2000

On March 3, 2000 the Company and its secured asset based lender, Finova Capital,
entered into a voluntary  foreclosure  in which all the assets in the  Company's
last  remaining  division,  InCirt,  was  transferred  to Finova to satisfy  the
revolving  credit  and term loans  held by the bank In a  subsequent  agreement,
dated  May 31,  2001  Finova  Capital  and Pen  Interconnect  agreed  to a final
settlement of all claims between them.

During the  second  quarter of FY2000,  the  Company  announced  a change in its
strategic  direction and began seeking merger  candidates with new technologies.
On March 29, 2000,  the Company  announced  the signing of a letter of intent to
acquire  perFORMplace.com,  a privately  held  Internet  provider of  electronic
business-to-business  services to the  entertainment  industry.  On November 11,
2000,  perFORMplace.com  informed  the Company that it had decided not to pursue
the merger.

The  Company  subsequently  signed a  merger  agreement  with the The  Automatic
Answer, Inc. ("tAA").  tAA, a distributor of voice mail systems, has developed a
client  service based  software  products that are used in a Microsoft  Window's
environment.  The Company's  products include voice mail,  automated  attendant,
call  control,  messaging  and voice  over  Internet.  The  merger  with tAA was
effective October 1, 2001.

Basis of Presentation

The financial statements include the corporate operations of Pen Interconnect as
continuing  operations.  All the remaining  activity  from the  Company's  prior
operating divisions, including Cable, MOTO SAT, Powerstream and InCirt have been
disclosed as discontinued  operations in the financial  statements for the years
ended  September  30, 2000 and 2001.  During 2001,  activity  from  discontinued
operations was limited to the settlement of accounts payable.

                                      -10-
<PAGE>


                             PEN INTERCONNECT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


1.   Organization and Summary of Significant Accounting Principles (continued)

Basis of Presentation (continued)

Transactions  related to the October 1, 2001  merger with tAA consist  solely of
advances from the Company to tAA to cover tAA's  operating  expenses  during the
pre-merger period. These advances have been expensed as acquisition expense.

Cash, Cash Equivalents and Short-Term Investments

The Company considers cash on hand, cash in banks,  certificates of deposits and
time deposits with original maturities of three months or less when purchased as
cash equivalents.  Short-term investments are investments with original maturity
greater than ninety days and less than one year.

Property and Equipment

Property and  equipment  are recorded at cost.  Expenditures  for  additions and
major improvements are capitalized. Expenditures for repairs and maintenance and
minor  improvements  are  charged to expense as  incurred.  Gains or losses from
retirements and disposals are recorded as other income or expense.

Property and  equipment  are  depreciated  over their  estimated  useful  lives.
Leasehold  improvements  and assets  financed under capital leases are amortized
over their  estimated  useful  lives or the lease  term,  whichever  is shorter.
Depreciation and amortization are calculated using straight-line and accelerated
methods over the following estimated useful lives:

                                                    Years
                                                -------------
              Production equipment                  5-6
              Furniture and fixtures                 10
              Transportation equipment               10
              Leasehold improvements                 5


                                      -11-



<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


1.   Organization and Summary of Significant Accounting Principles (continued)

Income Taxes

The Company utilizes the liability method of accounting for income taxes.  Under
the liability  method,  deferred tax assets and liabilities are determined based
on  differences  between  financial  reporting  and  tax  bases  of  assets  and
liabilities  and are measured  using the enacted tax rates and laws that will be
in effect when the  differences  are expected to reverse.  An allowance  against
deferred  tax assets is  recorded  when it is more likely than not that such tax
benefits will not be realized.

Financial Instruments

Cash and cash equivalents,  trade accounts payable,  and accrued liabilities are
reflected in the financial statements at cost that approximates fair value.

Stock-Based Compensation

The Company accounts for its stock-based  compensation  plan based on Accounting
Principles  Board  ("APB")  Opinion  No.  25. In  October  1995,  the  Financial
Accounting  Standards  Board  ("FASB")  issued  SFAS No.  123,  "Accounting  for
Stock-Based Compensation." The Company has determined that it will not change to
the  fair  value  method  and  will  continue  to use  APB  Opinion  No.  25 for
measurement  and  recognition  of any expense  related to  employee  stock based
transactions.

In March 2000, the FASB released  Interpretation No.44, " Accounting for Certain
Transactions  Involving  Stock  Compensation."  This  Interpretation   addresses
certain  practice  issues related to APE Opinion  No.25.  The provisions of this
Interpretation are effective July 1, 2000, and except for specific  transactions
noted in paragraphs 94-96 of this Interpretation, shall be applied prospectively
to new awards, exchanges of awards in business combinations, modifications to an
outstanding  award,  and exchanges in grantee status that occur on or after that
date.

Certain  events and  practices  covered in this  Interpretation  have  different
application  dates, and events that occur after an application date but prior to
July 1, 2000, shall be recognized only on a prospective basis.  Accordingly,  no
adjustment  shall be made upon  initial  application  of the  Interpretation  to
financial  statements for periods prior to July 1, 2000.  Thus, any compensation
cost measured upon initial application of this Interpretation that is attributed
to  periods  prior to July 1, 2000  shall not be  recognized.  The  Company  has
adopted the provisions of this Interpretation starting July 1,2000.

                                      -12-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


1.   Organization and Summary of Significant Accounting Principles (continued)

Comprehensive Income

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 130,
"Reporting  Comprehensive  Income" ("SFAS 130") which establishes  standards for
reporting  and  display  of  changes  in equity  from  non-owner  sources in the
financial statements.  The Company does not have any components of comprehensive
income in 2001 or 2000.

Valuation of Long-lived Assets

The Company periodically evaluates the carrying value of long-lived assets to be
held and used,  including  intangible  assets,  when  events  and  circumstances
warrant such a review.  The carrying  value of a long-lived  asset is considered
impaired when the anticipated discounted cash flow from such asset is separately
identifiable  and is less than its  carrying  value.  In that  event,  a loss is
recognized  based on the amount by which the  carrying  value  exceeds  the fair
market value of the long-lived asset. Fair market value is determined  primarily
using the anticipated cash flows discounted at a rate commensurate with the risk
involved.  Losses on  long-lived  assets to be disposed of are  determined  in a
similar  manner,  except  that fair  market  values are  reduced for the cost to
dispose.

Fair Value of Financial Instruments

SFAS No. 107, "Disclosure About Fair Value of Financial  Instruments,"  requires
certain disclosures regarding the fair value of financial instruments.  Cash and
cash equivalents,  accounts receivable, accounts payable and accrued liabilities
are  reflected  in  the  financial  statements  at  fair  value  because  of the
short-term  maturity of these instruments.  Because of the unique aspects of the
subordinated  debentures  and  long-term  debt,  fair values  cannot  readily be
determined.

Revenue Recognition

Sales are  generally  recorded  when  products are shipped or when  services are
rendered.

Estimates

The  preparation  of the  financial  statements in  conformity  with  accounting
principles  generally  accepted  in the  United  States of  America  necessarily
requires  management to make estimates and assumptions  that affect the reported
amounts of assets and  liabilities  and  disclosures  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenue and expenses during the reporting period.  Significant estimates include
allowance for doubtful  accounts,  inventory  obsolescence,  estimated lives for
fixed assets,  goodwill and intangibles,  the liabilities  posed by lawsuits and
collection  of  contingent  assets.  Actual  results  could  differ  from  these
estimates.

                                      -13-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


1.   Organization and Summary of Significant Accounting Principles (continued)

Advertising

The Company did not incur any significant amount of advertising expenses.

Earnings per share

Basic earnings per common share are computed  using the weighted  average number
of common shares outstanding during the period.

Diluted  earnings per common share  incorporate the incremental  shares issuable
upon the assumed exercise of stock options and warrants.

Certain of The Company's  stock options were  excluded from the  calculation  of
diluted  earnings per share  because they were  antidilutive,  but these options
could be dilutive in the future.

Segment and geographic information

The  Company  has  adopted  SFAS No.  131,  "Disclosures  about  Segments  of an
Enterprise  and Related  Information."  SFAS 131 requires  enterprises to report
information about operating segments in annual financial statements and selected
information  about reportable  segments in interim  financial  reports issued to
shareholders,  on the  basis  that is used  internally  for  evaluating  segment
performance  and  deciding  how to  allocate  resources  to  segments.  It  also
established  standards  for related  disclosures  about  products and  services,
geographic areas and major customers. Segment disclosures have been provided for
discontinued operations.

Recent pronouncements

In June 1998, the Financial  Accounting  Standard Board (FASB) issued  Statement
No. 133, "Accounting for the Derivative Instruments and Hedging Activities". The
Statement  will require The Company to recognize all  derivatives on the balance
sheet at fair value.  This  statement  is effective  for fiscal years  beginning
after June 15,  2000,  and has been  adopted by The Company for the years ending
September  30,  2001 and  2000.  The  management  does not  anticipate  that the
adoption of the new Statement  will have a  significant  effect on The Company's
revenues and earnings,  as The Company  currently  does not have any  derivative
instruments.

The FASB issued SFAS No. 131 on "Disclosures about Segments of an Enterprise and
Related  Information"  effective in 1998. The Company evaluated SFAS No. 131 and
determined that the Company operates in only one segment.

                                      -14-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


1.   Organization and Summary of Significant Accounting Principles (continued)


In July 2001,  the Financial  Accounting  Standards  Board issued  Statements of
Financial Accounting Standards No. 141, "Business  Combinations" ("FAS 141") and
No. 142,  "Goodwill  and Other  Intangible  Assets"  ("FAS  142").  SFAS No. 141
requires all business combinations initiated after June 30, 2001 to be accounted
for using the  purchase  method.  Under SFAS No. 142,  goodwill  and  intangible
assets with  indefinite  lives are no longer  amortized  but instead  tested for
impairment at least  annually in accordance  with the provisions of FAS No. 142.
FAS No. 142 will also  require that  intangible  assets with  definite  lives be
amortized over their respective useful lives to their estimated residual values,
and reviewed for impairment in accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of."
The provisions of this Statement are required to be applied starting with fiscal
years  beginning  after December 15, 2001. The Company will continue to amortize
goodwill  existing at  September  30, 2001 until the new standard is adopted and
test goodwill for  impairment  in  accordance  with SFAS No. 121. The Company is
currently  evaluating  the effect that adoption of the provisions of FAS No. 142
will have on its results of operations and financial position.

In June 2001,  the FASB issued SFAS No. 143,  "Accounting  for Asset  Retirement
Obligations."  SFAS No.  143  requires  liability  recognition  for  obligations
associated with the retirement of tangible  long-lived  asset and the associated
asset  retirement  costs.  The Statement is effective  for financial  statements
issued for fiscal years beginning  after June 15, 2002 with earlier  application
encouraged.  The  implementation of SFAS No. 143 will not have a material affect
on the Company's results of operations or financial position.

In August 2001, the FASB issued SFAFS No. 144, "Accounting for the Impairment or
Disposal  of  Long-Lived   Assets."  SFAS  No.  144  supersedes  SFAS  No.  121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be  Disposed  of", in that it removes  goodwill  from its  impairment  scope and
allows for different approaches in cash flow estimation.  However,  SFAS No. 144
retains  the  fundamental  provisions  of SFAS No. 121 for (a)  recognition  and
measurement  of  long-lived  assets to be held and used and (b)  measurement  of
long-lived  assets to be disposed of. SFAS No. 144 also  supersedes the business
segment   concept  in  APB   opinion   No.  30,   "Reporting   the   Results  of
Operations-Reporting  the Effects of  Disposal  of a Segment of a Business,  and
Extraordinary,  Unusual and Infrequently  Occurring Events and Transactions," in
that it permits presentation of a component of an entity,  whether classified as
held for sale or disposed of, as a discontinued operation. However, SFAS No. 144
retains the requirement of APB Opinion No. 30 to report discontinued  operations
separately  from  continuing  operations.  The  provisions of this Statement are
effective  for  financial  statements  issued for fiscal years  beginning  after
December 15, 2001 with earlier  application  encouraged.  Implementation of SFAS
No. 144 will not have a material  effect on the Company's  results of operations
or financial position.

Reclassifications

Certain  reclassifications  have been made to the 2000  financial  statements to
conform to the 2001 presentation.  Such  reclassifications  had no effect on net
income as previously reported.

                                      -15-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


2.   Financial Results and Liquidity

The Company has incurred net losses of $1,294,784, $1,891,199, in 2001 and 2000,
respectively. In addition, the Company has a stockholders' deficit of $2,313,110
and  $1,977,041  and a working  capital  deficit of $817,888  and $972,729 as of
September 30, 2001 and 2000,  respectively.  These factors,  among others, raise
substantial doubt about the Company's ability to continue as a going concern.

The Company's  operations,  including its combined  operations with tAA once the
merger  becomes  effective,  continue  to generate  operating  losses and to use
rather than provide cash flow.  The Company has issued common  stock,  preferred
stock,  debentures  and  convertible  debt in exchange  for cash and services to
provide the necessary  resources and working  capital to help meet its strategic
goals and to meet its current obligations.

While the Company continues to seek additional  equity capital,  there can be no
assurance that The Company will be successful. Without an infusion of sufficient
additional capital, the Company will not be able to continue as a going concern.
The financial  statements do not include any adjustments that might be necessary
should The Company be unable to continue as a going concern.

3. Disposition of Operating Divisions

Cable Division

Effective January 31, 1999, the Company sold substantially all of the assets and
certain of the liabilities of its Cable Division to Cables To Go, Inc (CTG). Net
assets of  $2,732,059  were sold for  $1,075,000  in cash and a royalty  payment
contingent  upon the future  revenues  of the Cable  Division.  $150,000  of the
royalty  payment was  guaranteed  and has been recorded by the Company as a note
receivable  from  CTG.  CTG  agreed to use and  compensate  the  Company  for an
additional  $558,747  of the net assets  contingent  upon  certain of its future
operating  needs.  The  Company  originally  recorded  a loss of  $948,312  upon
disposition of the Cable Division but has adjusted the loss to $1,507,059  based
on its  determination  that CTG will not use nor  compensate the Company for the
additional $558,747 of net assets.

MOTO-SAT Division

Effective  September 30, 1999, the Company sold  substantially all of the assets
and  liabilities  of its MOTO-SAT  Division to James  Pendleton,  the  Company's
former CEO and Chairman. The net assets of $68,438 were sold in exchange for Mr.
Pendleton's   agreement  to  waive  any  claim  to   post-employment,   deferred
compensation,  or retirement benefits.  The Company recognized a loss of $68,438
upon disposition of the MOTO-SAT Division.

                                      -16-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


3.   Disposition of Operating Divisions (continued)

Powerstream Division

Effective January 21, 2000, the Company sold substantially all of the assets and
liabilities of its Powerstream Division to Lund Instrument Engineering, Inc. The
net assets of $ (110,954) were sold for cash of $75,689 plus a royalties ranging
from 8% to 16% of the gross  profits  generated by the sale of certain  products
for a  period  of  three  years  subsequent  to  the  sale  subject  to  certain
adjustments.  The Company  recognized a gain of $186,643 upon the disposition of
the  PowerStream  division.  Cash proceeds were used to pay down a note due to a
secured lender.

InCirt Division

The  Company had been  operating  under a default  notice  with its  asset-based
lender,  Finova  Capital,  since  September 1999, when the Company began seeking
buyers for its two remaining  divisions  PowerStream and InCirT.  In February of
2000,  a Letter  of Intent  to sell the  InCirT  division  to  another  contract
manufacturer was terminated. The Company then solicited a competitor to purchase
most of the assets and to  negotiate  a supplier  agreement  with the  Company's
largest account as part of a voluntary  foreclosure of all the remaining  assets
of the Company, for which Finova had a perfected security interest.  The Company
recognized a loss of $963,027  during 2000 resulting from the foreclosure of the
InCirT division.

4.   Concentrations

Financial  instruments that potentially  subject The Company to concentration of
credit  risk  include  cash  deposits  in excess of FDIC  limits and  short-term
investments.  The Company  restricts  investment  of cash  balances to financial
institutions with high credit standing.

5.   Investment in tAA

The Company concluded a merger agreement with The Automatic Answer,  Inc. (tAA),
a distributor of voice mail systems and other telephone  products,  on April 13,
2001. Under the agreement, the Company will give up sixty-seven percent (67%) of
its shares to acquire tAA subject to the  adjustment,  noted  below.  Certain of
tAA's debt  holders  are to convert  their  outstanding  notes to a new class of
preferred shares within 120 days after the close of the transaction.

The number of shares that the  Company  will give to tAA will be adjusted if the
average closing price of the Company's stock, in the aggregate,  for the 60 days
after the close of the transaction, falls below $10,000,000.


                                      -17-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


5.   Investment in tAA (continued)

As part of the  transaction,  the Company  made  several  loans to tAA  totaling
$461,200. The loans were used to fund tAA's pre-merger cash flow.

The merger was effective October 1, 2001 and these loans are eliminated upon the
consolidation  of the two companies.  These  financial  statements  classify the
$461,200 as acquisition  expenses.  The  transaction  will be accounted for as a
reverse merger with tAA as the surviving  entity.  Pen shareholders  will retain
approximately 7% of the merged company.

6.   Foreclosure

The Company entered into a financing  agreement with a bank for $6,300,000.  The
agreement consisted of a $5,000,000 revolving credit line and two term loans for
$800,000 and $500,000.  Under the loan  agreements for these loans,  the Company
was required to meet certain  financial  ratios and specific  minimum  levels of
earnings and net worth. The loan agreements also restricted  employee  advances,
capital expenditures,  compensation, and additional indebtedness; and restricted
the payment of dividends.  The Company had borrowed $4,436,562 under the line of
credit at September  30, 1999. At times,  including at September  30, 1999,  the
Company  had been in  violation  of  certain  of the  covenants  of this  credit
facility.  The Company  operated  under a  forbearance  agreement  during all of
fiscal 1999.

As of September 30, 1999,  the Company had not received a waiver from the lender
and all  obligations  under this credit  facility  were payable on demand of the
lender  and  were  classified  as  current  liabilities  in the  balance  sheet.
Subsequent  to September  30, 1999,  the lender  declared the loan  agreement in
default.

The Company  continued  operating  under a default  notice with its Lender as it
disposed of its remaining operating divisions.  Finova and the Company agreed to
a voluntary  foreclosure of all the remaining  assets of the Company,  for which
Finova had a perfected  security  interest.  The  Company's  September  30, 2000
balance sheet reflects the transfer of all  collateral  assets to Finova and the
Company recognized an equal offset of the bank's line of credit balance and term
loans owed by the Company.  The Company recorded a loss on transfer of assets of
$900,000.

During 2001, the Company negotiated an agreement with the Lender, which resulted
in the  complete  satisfaction  of all the debt with the Lender in exchange  for
$150,000,  of which  $40,000  remains  unpaid  as of  September  30,  2001.  The
agreement  also  includes  the  issuance of 250,000  additional  share of common
stock,  the repricing of 350,000  warrants from $1.00 to $.001, and the issuance
of an additional 150,000 warrants at $.001.

Finova also  transferred  back to the Company  rights to recover  certain assets
owned by the  Company  prior to the  foreclosure.  These  assets,  which have an
estimated  original  book  value of  $800,000,  have been fully  reserved  as of
September 30, 2001.

                                      -18-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


7.   Long Lived Assets

On an ongoing  basis,  management  reviews the valuation of  long-lived  assets,
including  intangible assets, to determine possible  impairment by comparing the
carrying value to the  undiscounted  estimated  future cash flows of the related
assets and necessary  adjustments,  if any, are recorded.  Based upon  operating
losses from certain  divisions,  continued  cash flow  problems and  managements
decision to  negotiate  the sale of other  divisions,  the  Company  reduced the
carrying costs of certain of its long-lived assets by $320,500 in 2000 to better
reflect  management's  current expectations for the realization of these assets.
The adjustments relate to assets of the Company's various discontinued divisions
and to assets from continuing operations.

During  2001,  the Company  decided to fully  reserve the balance of amounts due
from  perFORMplace.com.   The  Company  had  signed  a  Letter  of  Intent  with
perFormplace.com  during April 2000  providing  for a reverse  merger of the two
companies. On November 8, 2000, perFormplace.com terminated the agreement.

The following is a summary of the assets charged-off to impairment for the years
ended December 31:

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

          Goodwill               $            -       $               -
          Investments                    63,000                 320,500
                                 -----------------    -------------------

                                 $       63,000       $         320,500
                                 =================    ===================

8.   Operating Leases

The Company rents office space on a monthly basis.  There are no long-term lease
commitments.


                                      -19-

<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


9.   Discontinued Operations

With the sale of its Cable and MOTO SAT  operations  during 1999 and the sale of
Powerstream  operation and the  foreclosure of its InCirt  division in 2000 (See
Footnote 3), all of the operating  divisions of the Company have been classified
as discontinued operations.

Following is a summary of the operating activity and the discontinued assets and
liabilities of these operations:

<TABLE>
<CAPTION>
                                                      2001                      2000
                                              ---------------------     ---------------------

                Revenues:
<S>                                           <C>                       <C>
                InCirT Division               $                 -       $        6,674,890
                Cable Division                                  -                        -
                Other Divisions                                 -                   50,489
                                              ---------------------     ---------------------

                                              $                 -       $        6,725,379


                Gross Profit:
                InCirT Division               $                 -       $        1,160,301
                Cable Division                                  -                        -
                Other Divisions                                 -                   17,818
                                              ---------------------     ---------------------

                                              $                 -       $        1,178,119

                Indentifiable Assets:
                InCirT Division               $                 -       $            9,605
                Cable Division                                  -                        -
                Other Divisions                                 -                        -
                                              ---------------------     ---------------------

                                              $                 -       $            9,605

                Identifiable Liabilities:
                InCirT Division               $          (655,222)      $         (864,791)
                Cable Division                                  -                        -
                Other Divisions                                 -                        -
                                              ---------------------     ---------------------

                                              $          (655,222)      $         (864,791)
                                              =====================     =====================
</TABLE>


                                      -20-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


9.   Discontinued Operations (continued)

<TABLE>
<CAPTION>
                                                                    2001                 2000
                                                               ----------------   -------------------
              Assets from Discontinued Operations
<S>                                                            <C>                <C>
                   Prepaid Expenses                            $            -     $           9,605
                                                               ----------------   -------------------

                                                               $            -     $           9,605
                                                               ================   ===================


              Liabilities from Discontinued Operations
                   Accounts Payable                            $      655,222     $         864,791
                                                               ----------------   -------------------

                                                               $      655,222     $         864,791
                                                               ================   ===================
</TABLE>

During 2001, activity from discontinued operations was limited to the settlement
of accounts payable.

10.  Related Party Transactions

Stephen J. Fryer, former Chairman,  CEO, President and Chief Accounting Officer,
received options for 4,700,000 shares in 2001.

Brian Bonar and Milton  Haber,  Directors  of Pen,  received  500,000  shares of
common stock for their  continued  service as Board Members.  Additionally,  Mr.
Bonar received options for 500,000 shares of the Company's common stock.

Brian Bonar has been a Director with Pen since January 2000 and is also Chairman
of the Board at Itec. As of the foreclosure date, Itec owed InCirT/Pen  $850,000
for services performed by InCirT. During the year, the Company received payments
of $93,000 from Itek.

11.  Convertible Debentures

During 2001, the Company issued $800,000 in new one-year convertible  debentures
with interest rates ranging from 7% to 8%, payable  quarterly.  These debentures
are convertible in the Company's common stock at the lower of $.04 or 70% of the
average  of the three  lowest  closing  prices  during  the 30 days prior to the
conversion.  All these  debentures  are redeemable in cash due one year from the
date of issuance.

In August 2000, the Company entered into a convertible  debenture  agreement for
$600,000 in exchange for  4,000,000  shares of the Company's  common stock.  The
convertible  debenture  has an interest  rate of 7% per annum.  The debenture is
convertible  into common stock at the lesser of $0.15 per share or 70% of market
price on the conversion date.


                                      -21-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


12.  Stock Holders' Equity

Preferred Stock Dividends in Arrears Deferred

Payments of annual  dividends  for 2001 and 2000 were  deferred by the Company's
board of  directors  on the  outstanding  preferred  stocks  because  of  losses
sustained by the  Company.  As of September  30,  2001,  preferred  dividends in
arrears amounted to $480,323 on the Preferred Stock Series A and B.


Conversion of Convertible Preferred Stock - Series A

In 2000,  the Company  converted  1,670 shares of Preferred  Stock Series A into
9,057,654 shares of common stock, and the Company converted $64,581 of dividends
payable on these share shares of Preferred  Stock into 349,323  shares of common
stock.  During 2001, the Company  redeemed 39 shares of Preferred Stock Series A
for 1,667,039 shares of common stock.

Conversion of Convertible Preferred Stock - Series B

In 2000,  the  Company  converted  74 shares of  Preferred  Stock  Series B into
411,112 shares of common stock.  During 2001, the Company  redeemed 40 shares of
Preferred Stock Series B stock for 1,617,648 shares of common stock.

Conversion of Preferred Stock - Series A Warrants

In 2000, the Company  converted  warrants to purchase  shares of Preferred Stock
Series A into  315,000  shares of common stock in a cashless  exercise,  and the
Company  recorded  an expense  of $86,941  based on the fair value of the common
stock on the date of conversion.  During 2001, an additional  13,121,201  shares
were  issued in exchange of warrants at prices that ranged from $0.02 to $0.063.
An additional 3,327,050 warrants were converted in lieu of payments for services
rendered.

Repricing of Stock Options

In order to  continue to attract and retain  employees,  the Board of  Directors
authorized  the  repricing of options and warrants to purchase  shares of common
stock  effective  March 2000,  to the then fair market value of $0.30 per share.
All  repriced  options  maintained  the  same  expiration  terms.  Approximately
1,240,000  options and warrants were repriced under this program.  The repricing
included members of the Board of Directors and executive officers.

                                      -22-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


12.  Stock Holders' Equity (continued)

Warrants Activity for the Period

During the year ended  September 30, 2001,  the Board of Directors  approved the
issuance  of  warrants to purchase  an  aggregate  of  21,754,251  shares of the
Company's  common stock.  Such warrants are  exercisable  at prices ranging from
$0.02 to $0.10 per share, vest immediately,  and expire at various times through
December 2004.

In order to continue to meet  operating cash flow  requirements,  and to attract
and retain  employees and  consultants,  the Board of Directors  authorized  the
repricing  of options  and/or  warrants  to purchase  shares of common  stock in
November 2000, February, 2001, March 2001 and June 2001, to the then fair market
value,  which  ranged  from $0.25 to $0.06 per share.  Approximately  14 million
options/warrants  were  repriced  under this  program.  The  repricing  included
approximately  2.6 million options and warrants  granted to members of the Board
of Directors and executive officers. The repricing of options/warrants  resulted
in  warrants/options  being exercised for  approximately  11.7 million shares of
common stock.

In September  2001,  the Board of Directors  authorized  the  repricing  and the
extended the expiration date of the public warrants to purchase shares of common
stock to be effective  November 2001. The price per share was repriced to $0.20,
(the per  share  price  has to be at a  minimum  of $0.24  for 15 days  prior to
conversion),  from $6.50 per share and the  expiration  date was extended by one
year (warrants will expire in November 2002.  Approximately 2.8 million warrants
were repriced under this program.

Included in the issuance of warrants to purchase 14 million  aggregate shares of
the Company's  common stock are warrants that were issued to  individuals  under
terms of a consulting  agreement  during the years ended  September 30, 2001 and
2000.  Such issuances were accounted for under  Financial  Accounting  Standards
Board Statement No. 123 using primarily the Black-Scholes  option pricing model,
which  resulted in the  recording  of  compensation  cost during the years ended
September 30, 2001 and 2000 (see note 14).


Grant of Equity Interest in Full Settlement of Trade Payable and Troubled Debt

Due to significant cash flow problems,  in April 2000 the Company commenced on a
program to reach agreements with its vendors to grant shares of its common stock
to the vendors in full settlement of the amounts due the vendors. At the date of
issuance of the shares,  the amounts due vendors  exceeded the fair market value
of the common stock issued by  $1,988,218,  which is classified in the statement
of operations as an extraordinary  gain due to the  extingushment of debt. As of
September 30, 2000, the Company has issued  1,061,747 shares of its common stock
under this program.  An additional  760,178  shares were issued as settlement of
debt during 2001.


                                      -23-

<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


13.  Preferred Stock

The  Company  issued  two  series of  Preferred  Stock.  Series A was  issued in
February 1999 consisting of 1,800 shares,  par value $0.01 per share, for $1,000
per  share.  Series B was  issued in April 1999 at the same price but only 1,000
shares were  issued.  As  mentioned in Note C, part of the funds raised from the
issuance of this stock were used to repay the bridge  loans made  earlier in the
fiscal year. After repayment of the bridge loans and paying $238,500 in fees and
expenses, the net cash raised by the Company for operations was $1,665,500. Both
series of  Preferred  Stock  carry a 16  percent  dividend  rate,  which is paid
quarterly.

Both issuances of Preferred Stock are  convertible  into shares of the Company's
Common  Stock.  Each share of Series A Preferred  Stock is  convertible  into an
amount of shares of Pen Common  Stock equal to $1,000  divided by the average of
the two lowest  closing bid prices for Pen Common  Stock during the period of 22
consecutive  trading  days ending  with the last  trading day before the date of
conversion,  after  discounting that market price by 15 percent (the "Conversion
Price").  During  the  first  six  months,  the Board of  Directors  approved  a
reduction of the maximum  Conversion  Price for the Series A Preferred Stock and
Series B Preferred Stock to $.53 from $1.17 and $.79 per share respectively. The
reduction  was  granted  to obtain a waiver in  relation  to the sale of a major
asset - InCirT Technologies Division. The shares of Series B Preferred Stock are
convertible  into  Common  Stock at the same  Conversion  Price as the  Series A
Preferred  Stock.  Warrants  to  acquire  335,453  shares  of  Common  Stock  at
conversion prices ranging from $0.86 to $1.434 per share were also issued to the
purchasers  of the Series A and Series B Preferred  Stock.  The warrants  expire
three years from date the Preferred Stock and warrants were initially issued.

Convertible Debentures

On October 22, 1997, the Board of Directors of the Company approved the issuance
of up to $1,500,000 of 3 percent  convertible  Debentures with a maximum term of
24 months.  On June 16, 1998, the Board of Directors of the Company approved the
issuance of up to $1,000,000 of additional three percent convertible  debentures
with a maximum term of 24 months. The convertible  debentures (the "Debentures")
mature,  unless earlier converted by the holders, into shares of common stock of
the Company.  The Company filed a registration  statement with the United States
Securities  and  Exchange  Commission  with  respect to the common  stock of the
Company into which the Debentures may be converted.

The Debentures were convertible by the holders thereof into the number of shares
of common  stock  equal to the face  amount of the  Debentures  being  converted
divided by the lesser of (i) eighty  percent  (80  percent)  of the  closing bid
price of the  Company's  common stock as reported on the NASDAQ Small Cap market
on the day of conversion,  or (ii) $2.75.  The Debentures  could be converted in
three equal  installments  beginning on the earlier of (i) the 75th day of their
issuance,  and continuing  through the 135th day of their issuance,  or (ii) the
day following the effective date of the Registration Statement, through the 60th
day following  the effective  date of the  Registration  Statement.  The Company
could cause the Debentures to be converted into shares of common stock after the
110th day following the effective  date of the  Registration  Statement,  if the
common stock traded at or above $5.50 per share for 20 consecutive days.

As of  September  30,  1998,  the  Company  had issued all  $2,500,000  of these
convertible  Debentures  and  $1,000,000 had been converted to 689,332 shares of
common stock. As of September 30, 1999, the remaining  $1,500,000 of convertible
Debentures had been converted into 2,092,671 shares of common stock.

                                      -24-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


13.  Preferred Stock (continued)

Convertible Debentures (continued)

Because of the favorable  conversion feature of the Debentures,  the Company has
recognized  interest  expense  relating to the price  below  market at which the
Debentures  can be  converted  into  common  shares of stock.  The  interest  is
initially set up as a deferred charge against the subordinated debenture balance
with an offset to additional paid-in capital. The deferred interest is amortized
over a period  corresponding to time  restrictions as to when the Debentures can
be converted into stock. The resulting charge to interest expense  increases the
effective interest rate of the Debentures. Deferred interest expense of $250,032
was recorded on the  $1,000,000  in Debenture  issue  relative to the  favorable
conversion  feature and was  amortized  over four months and charged to interest
expense.  Amortization of the $250,032 deferred charge totaled $98,571 in fiscal
1999  ($151,461 in fiscal 1998).  This interest  along with the stated 3 percent
interest  rate in the  Debentures  results in an  inherent  interest  rate of 31
percent.

In connection with the $1,500,000 Debenture issue, the Company recorded $389,591
of deferred interest expense related to the beneficial  conversion feature.  The
entire  deferred  charge was  amortized  and charged to  interest  expense as of
September 30, 1998.  This  interest when added to the stated 3 percent  interest
rate of the Debenture results in an inherent interest rate of 28 percent.

14.  Stock Options and Warrants

The  Company  has a Stock  Option Plan (the  Plan).  The Plan  provides  for the
granting of both Incentive Stock Options (ISOs) and Non-qualified  Stock Options
(NSOs) to  purchase  shares of common  stock.  ISOs are granted at not less than
market value on the date of grant,  whereas NSOs may be granted at not less than
85 percent of the market value on the date of the grant.  Options may be granted
under the Plan to all  officers,  directors,  and  employees of the Company.  In
addition,  NSOs may be granted to other  parties  who perform  services  for the
Company.  The Board of Directors has granted  management  the authority to issue
non-statutory  stock options and/or warrants to employees and consultants of the
Company.

As of September  30, 2001 and 2000,  the Company  granted to its  employees  and
other eligible  participants  options and warrants exercisable for the Company's
common stock and preferred stock. Options and warrants to purchase shares of its
common  stock are usually  granted at the prices equal to the current fair value
of the Company's common stock at the date of grant.

Under the Plan,  no option may be  exercised  after the  expiration  date of ten
years from the date of grant.  As of September 30, 2000,  there are two types of
convertible securities (NSOs and Warrants) outstanding.

NSOs may be granted to any eligible  participant as determined by the management
of the Company.

                                      -25-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


14.  Stock Options and Warrants (continued)

Stock  options  and  warrants  issued  as of  September  30,  2001  and 2000 are
summarized as follows:

<TABLE>
<CAPTION>
                                                          2001                               2000
                                             --------------------------------    ------------------------------
                                                                   Average                           Average
                                                                  Exercise                          Exercise
                                                 Shares             Price           Shares            Price
                                             ----------------    --- --------    --------------    --- --------
<S>                                             <C>              <C>              <C>              <C>
     Outstanding at beginning of year           11,036,654       $        2.34    11,086,667       $        2.45
     Granted                                    21,754,251                0.05     4,304,655                0.34
     Exercised                                 (16,448,251)               0.04    (4,231,668)               0.16
     Forfeited/Cancelled                        (1,150,000)               0.06      (123,000)               2.45
                                             ----------------    -------------   --------------    -------------
     Outstanding at end of year                 15,192,654                0.34    11,036,654       $        1.23
                                             ================    =============   ==============    =============

     Exercisable at end of year                 15,187,654       $        1.32    11,029,154       $        2.34
                                             ================    =============   ==============   ==============
</TABLE>

The  non-statutory  stock  options and  warrants  are for periods of two to five
years.

Under  APB-25,  the cost of  compensation  is measured by the excess of the fair
market  price of the stock over the  option  exercise  price on the  measurement
date.  This is referred  to as the  intrinsic  value  method.  Accordingly,  the
Company recorded  compensation  expense of $163,765 and $339,822 for options and
warrants granted for the years ended September 30, 2001 and 2000.

The  following  table   summarizes   information   about  options  and  warrants
outstanding at September 30, 2001:

<TABLE>
<CAPTION>
                                           Options Outstanding                       Options Exercisable
                              -----------------------------------------------  --------------------------------
                                  Number          Weighted       Weighted           Number
                               Outstanding        Average                        Exercisable       Weighted
                                  as of          Remaining        Average           as of           Average
              Range of        September 30,     Contractual      Exercise       September 30,      Exercise
          Exercise Prices          2001             Life           Price             2001            Price
         -------------------  ---------------  --------------- --------------  ----------------- --------------
<S>        <C>                    <C>                   <C>    <C>                   <C>         <C>
           $0.01 - $0.06          11,049,701            0.65   $        0.08         11,049,701  $      0.08
            $0.07 -$0.10             510,000            4.27   $        0.10            510,000  $      0.10
           $0.11 - $0.50             315,000            3.69   $        0.31            310,000  $      0.31
           $0.51 - $1.00             326,953            4.96   $        0.73            326,953  $      0.73
           $1.01 - $2.00             140,000            1.13   $        1.72            140,000  $      1.72
           $2.01 - $6.50           2,851,000            0.09   $        6.49          2,851,000  $      6.49
                              ---------------  --------------- --------------  ----------------- --------------
                                  15,192,654            0.83   $        0.34         15,187,654  $      1.32
                              ===============  =============== ==============  ================= ==============
</TABLE>


                                      -26-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


14.  Stock Options and Warrants (continued)

The  following  table   summarizes   information   about  options  and  warrants
outstanding at September 30, 2000:

<TABLE>
<CAPTION>
                                           Options Outstanding                       Options Exercisable
                              -----------------------------------------------  --------------------------------
                                  Number          Weighted       Weighted           Number
                               Outstanding        Average                        Exercisable       Weighted
                                  as of          Remaining        Average           as of           Average
              Range of         eptember 30,     Contractual      Exercise       September 30,      Exercise
          Exercise Prices     S    2000             Life           Price             2000            Price
         -------------------  ---------------  --------------- --------------  ----------------- --------------
<S>          <C>                   <C>                  <C>    <C>                  <C>          <C>
             0.01 -0.20            2,074,201            0.65   $        0.06        2,074,201    $      0.65
             0.21 -0.30            2,067,500            4.27   $        0.30        2,060,000    $      4.27
            0.31 - 1.00              921,953            3.69   $        0.86          921,953    $      3.69
            1.01 - 2.00            3,112,000            4.96   $        1.85        3,112,000    $      4.96
            2.01 - 3.00               11,000            1.13   $        2.71           11,000    $      1.13
            3.01 - 6.50            2,850,000            0.09   $        6.50        2,850,000    $      0.09
                              ---------------  --------------- --------------  ----------------- --------------
                                  11,036,654            2.65   $        1.23       11,029,154    $      2.34
                              ===============  =============== ==============  ================= ==============
</TABLE>

The exercises  period for the options  ranges from  immediate to four years from
the date of the grant and have various vesting requirements.

The Company  has  adopted  only the  disclosure  provisions  of SFAS No. 123. It
applies APB Opinion No. 25 and related  interpretations  in  accounting  for its
stock  options and warrants  granted to employees or to members of the Company's
Board of Directors.  Pursuant to FASB Interpretation No. 44, the Company applies
provisions  of SFAS No. 123 for options and warrants  granted to third  parties.
Accordingly,  in  2000,  compensation  cost has been  recognized  for its  stock
options and warrants  granted to outside  third  parties  subsequent to June 30,
2000.  This  information  is  required  to be  determined  as if the Company had
accounted for its employee stock options/warrants granted subsequent to December
31,  1994,  under the fair value  method of that  statement.  If the Company had
elected to recognize compensation expense based upon the fair value at the grant
date for awards under this plan consistent  with the  methodology  prescribed by
SFAS No. 123, the  Company's net loss and loss per share would be reduced to the
pro forma amounts indicated below for the years ended September 30:

<TABLE>
<CAPTION>
                                                          2001                   2000
                                                   -------------------    -------------------
                        Net Loss:
<S>                                                <C>                    <C>
                             As reported           $       (1,294,784)    $       (1,891,199)
                             Pro forma             $       (1,388,495)    $       (1,966,130)

                        Basic and diluted loss per common share:
                             As reported:
                                 Basic             $           (0.035)    $           (0.10)
                                 Diluted           $           (0.035)    $           (0.10)
                             Pro forma:
                                 Basic             $           (0.037)    $           (0.11)
                                 Diluted           $           (0.037)    $           (0.11)
</TABLE>


                                      -27-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


14.  Stock Options and Warrants (continued)

Options/warrants  are granted at prices  equal to the current  fair value of the
Company's  common stock at the date of grant.  All options and warrants  granted
during fiscal year 2000 vest immediately.

The fair value of these  options  was  estimated  at the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions:  2000: dividend yield of 0%; expected volatility of 200%; risk-free
interest rate of 5.6%, and expected life of 2 to 5 years;  2001:  dividend yield
of 0%;  expected  volatility  of 300%;  risk-free  interest  rate of  5.8%,  and
expected life equal to the actual life for the period. The weighted-average fair
value of options and warrants  granted were $0.02 and $0.06 for 2001,  and $0.25
and $0.33 for 2000.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options,  which have no vesting  restrictions and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the  Company's  employee  stock  options  have   characteristics   significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its stock options.

15.  Earnings Per Share

The number of  weighted  common  shares  outstanding  used in the loss per share
calculation is 37,701,171 in 2001 and 18,556,461 in 2000.

<TABLE>
<CAPTION>
                                                                   2001                  2000
                                                            -------------------   -------------------
<S>                                                         <C>                   <C>
                  Net loss                                  $      (1,294,784)    $     (1,891,199)

                  Dividends on preferred stock                         10,289             (289,809)

                  Imputed dividends from beneficial
                  conversion feature                                        -                    -
                                                            -------------------   -------------------

                  Loss applicable to common stock           $      (1,284,495)    $     (2,181,008)
                                                            ===================   ===================
</TABLE>


For the years ended September 30, 2001 and 2000, all of the options and warrants
that were  outstanding  were not  included  in the  computation  of diluted  EPS
because to do so would have been anti-dilutive.

                                      -28-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


16.  Income Taxes

Income tax expense from continuing operations consists of the following:

                                         2001            2000
                                      ------------    ------------
                      Federal         $         -     $        -
                      State                   800            900
                                      ------------    ------------

                                      $       800     $      900
                                      ============    ============

Reconciliation of income taxes (benefit)  computed at the federal statutory rate
of 34 percent is as follows:

<TABLE>
<CAPTION>
                                                                           2001                  2000
                                                                     ------------------    ------------------
<S>                                                                  <C>                   <C>
       Federal income taxes (benefit) at statutory rate              $       (258,957)     $       (568,743)
       State income taxes (benefit), net of federal tax benefit              (129,478)             (147,873)
       Permanent differences                                                        -                     -
       Increase in valuation allowance                                        387,635               717,516
                                                                     ------------------    ------------------

       Income taxes                                                  $            800      $            900
                                                                     ==================    ==================
</TABLE>

Deferred tax assets and liabilities consisted of the following:

<TABLE>
<CAPTION>
                                                               2001                  2000
                                                        -------------------    ------------------
         Deferred tax assets (liabilities)
<S>                                                     <C>                    <C>
                Net operating loss                      $      8,295,665       $      7,954,332
                Impairment of note receivable                    157,057                137,302
                Other                                             26,547                      -
                                                        -------------------    ------------------

                Deferred tax asset                             8,479,269              8,091,634

                Valuation allowance                           (8,479,269)            (8,091,634)
                                                        -------------------    ------------------

                Net deferred tax asset                  $              -       $              -
                                                        ===================    ==================
</TABLE>

The Company sustained net operating losses in each of the periods presented. For
2001 and 2000, there were no deferred tax assets or income tax benefits recorded
in the financial  statements  for net  deductible  temporary  differences or net
operating  loss  carryforwards  because the  likelihood  of  realization  of the
related tax  benefits  cannot be fully  established.  A valuation  allowance  of
$8,479,269  has been  recorded  in 2001  ($8,091,634  in 2000) to reduce the net
deferred tax assets to their estimated net realizable value.

                                      -29-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


16.  Income Taxes (continued)

As of September 30, 2001,  the Company as net operating loss  carryforwards  for
tax reporting  purposes of approximately  $17,315,000  expiring in various years
through  2020.  The  merger  with tAA  results  in a greater  than 50% change in
ownership and represents a different line of business.  This severely  restricts
the use of these loss carryforwards.

17.  Commitments and Contingencies

Litigation

From time to time,  the  Company is engaged in various  lawsuits  or disputes as
plaintiff or defendant arising in the normal course of business.

Following are the matters pending as of September 31, 2001:

1) On October 28, 1999 Color Savvy Systems,  Ltd. filed suit to recover $165,750
in past due uncontested  vendor  obligations.  On February 16, 2000, Color Savvy
obtained a judgment against the Company for $165,783.

2) Sony  Recording  Media Products  obtained a judgment  against the Company for
$35,086 plus interest during 2001. The Company has been making monthly  payments
of $5,000 per month against the outstanding balance.

3) On November 15, 2000 Alan L. Weaver,  former CEO of Pen  Interconnect,  Inc.,
obtained a judgment  against the Company in the amount of $118,500 plus interest
for  breach  of a  settlement  agreement  relative  to Mr.  Weaver's  employment
agreement with the Company. The Company is currently  negotiating a payment plan
with the former CEO.

4) The Company is in discussion with Wayne Wright, the prior CFO of the Company,
regarding a claim the CFO has  regarding the value of certain stock given to him
as part a settlement of his employment agreement.  The resolution of amounts due
under this potential claim is not currently determinable.

Capitalized Leases

Subsequent to the cessation of manufacturing  operations in March 2000,  various
lessors  foreclosed  upon  capitalized  lease  equipment  and the  equipment was
returned to the  lessors.  At the  beginning  of the fiscal  year,  October 1999
future lease payments were $558,492. The Company had made certain payments prior
to default.  The lessors have not made additional  claims after  repossession of
the equipment.

                                      -30-
<PAGE>


                             PEN INTERCONNECT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000


18.  Subsequent Events

The merger with tAA was effective  October 1, 2001.  The name of the Company and
its  trading  symbol was  changed to The Amanda  Company,  Inc  (trading  symbol
AMND.OB), effective with the merger.

In accordance with the merger agreement with tAA, the Company issued 408,163,265
shares of the Company stock to the tAA  shareholders and will issue an estimated
additional 200,000,000 shares to the tAA shareholders to complete the merger. An
additional  50,000,000  shares are to be issued to  Bi-Coastal,  Inc., a company
that helped orchestrate the merger.

The Company anticipates that the 10-1 reverse split approved by the shareholders
at the annual meeting on August 30, 2001 will be effective in January 2002.

The Company leased 5000-sq.ft.  new office space Irvine, CA over a 60-month term
at $ 5056 per month.

The Company issued $100,000 in one year convertible  debentures with interest at
8%, payable quarterly.  These debentures are convertible in the Company's common
stock at the lower of $.04 or 70% of the  average  of the three  lowest  closing
prices during the 30 days prior to the conversion.  These debentures are due one
year from the date of issuance.

The Company issued  convertible  promissory  notes totaling  $450,000 in October
2001.  These notes are convertible  into the company's  common stock at $.01 per
share and have a  8,055,853  warrant  exercisable  for common  stock at $.02 per
share and 1,500,000 warrants at $.01 per share.


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