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

                                   Form 10-KSB
              Annual report pursuant to Section 13 or 15(d) of the
                   Securities Exchange Act of 1934, as amended
                  For the fiscal year ended September 30, 1999

                         Commission File Number 0-27842

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

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

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

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

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

           3896 North Federal Highway; Lighthouse Point, Florida 33064
                       (Former address of the Registrant)

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

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

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

     Check whether the Registrant (1) filed all reports  required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934, as amended,  during
the past  twelve  months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports,  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days: Yes [_] No [x]

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

     State Registrant's  revenues for its most recent fiscal year: $ 0 (for year
ended September 30, 1999)

     State the aggregate market value of the voting stock held by non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked  prices of such stock,  as of a specified  date within the past 60
days: $1,380,170 based on a last transaction price of $0.07 as of July 25, 2001,
there  being  11,226,711  shares of common  stock  held by  persons  other  than
officers, directors or control persons of the Registrant on such date.

     State the number of shares outstanding of each of the Registrant's  classes
of equity, as of the latest practicable  date:19,716,711 shares of common stock,
as of August 15, 2001.




<PAGE>



                             Available Information.

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

                       Documents Incorporated by Reference

     Portions of the following documents previously filed by the Registrant with
the Commission are incorporated by reference in this report, all as permitted by
Rule 12b-23 promulgated under authority of the Securities  Exchange Act of 1934,
as amended ("Commission Rule 12b-23").

1.    Form 10-KSB for the year ended September 30, 1998, in its entirety.

2.    Form 8-K for report date of June 25, 2001 [Items 4, 5 and 7(c)].

3.    Forms 10-QSB for the calendar quarters ended December 31, 1998, and
      March 31, 1999 [Item 5].

4.    Registration statement on Form S-8 filed with the Commission on March 16,
      1998, in its entirety.

                 Caveat Pertaining to Forward Looking Statements

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

                                     Context

     The information in this report is qualified in its entirety by reference to
the entire report; consequently,  this report must be read in its entirety. This
is  especially  important  in light of  material  subsequent  events  disclosed.
Information  may  not  be  considered  or  quoted  out  of  context  or  without
referencing  other  information  contained in this report  necessary to make the
information considered, not misleading.

                                     Page 2


<PAGE>



                                Table of Contents

Part       Item    Page
Number     Number  Number  Caption

I           1      3       Description of Business
            2      5       Description of Property
            3      5       Legal Proceedings
            4      6       Submission of Matters to Security Holders

II          5      6       Market  for  Common  Equity  and  Related Stockholder
                            Matters
            6      13      Management's  Discussion  and  Analysis  and  Plan of
                            Operation
            7      16      Financial Statements
            8      17      Changes  In a nd Disagreements  With  Accountants  on
                            Accounting and Financial Disclosure

III         9      17      Directors, Executive Officers, Promoters  and Control
                            Persons
            9      20      Compliance   With  Section  16(a) of the Exchange Act
            10     20      Executive Compensation
            11     24      Security Ownership of Certain  Beneficial  Owners and
                            Management
            12     28      Certain Relationships and Related Transactions
            13     30      Exhibits and Reports on Form 8-K

Signatures         35

Additional Information     36

Exhibits           37


                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS

Organization & Initial Operations

     The response to this item is  incorporated  by reference to the response to
Item 1 of the  Registrant's  report on Form  10-KSB  for the  fiscal  year ended
September 30, 1998, as permitted by Commission Rule 12b-23.

The Operating Subsidiaries

     The response to this item is  incorporated  by reference to the response to
Item 1 of the  Registrant's  report on Form  10-KSB  for the  fiscal  year ended
September 30, 1998, as permitted by Commission Rule 12b-23.

Operations Discontinued

     The response to this item is  incorporated  by reference to the response to
Item 1 of the  Registrant's  report on Form  10-KSB  for the  fiscal  year ended
September 30, 1998, as permitted by Commission Rule 12b-23.

Material Subsequent Divestitures

     As a material subsequent event, on or about March 3, 1999, the Registrant's
board of directors  determined  that because of pending and probable  litigation
(including possible regulatory actions against its subsidiaries based on actions
of  former  personnel),  it was  in  the  best  interests  of  the  Registrant's
stockholders  for the  Registrant  to  divest  itself  of all  ownership  in its
operating  subsidiaries.  On March  25,  1999,  the  Registrant  entered  into a
reorganization agreement

                                     Page 3


<PAGE>



with Richard C. Peplin, Jr. ("Mr. Peplin"), the principal stockholder and former
president of the Registrant,  pursuant to which all the subsidiaries  then owned
by the  Registrant  were conveyed to Mr.  Peplin.  A copy of the  reorganization
agreement was filed as an exhibit to the  Registrant's  Form 10-KSB for the year
ended September 30, 1998.

     On July 6, 2001, the Registrant entered into a clarification agreement with
Mr.  Peplin,  to  include  the  name  of  Tio  Mariano  Cigar  Corp.  which  had
inadvertently  not been listed in the original  March 25,  1999,  reorganization
agreement. A copy of the clarification  agreement is filed as an exhibit to this
report,  see "Part III, Item 13(a),  Exhibits Required by Item 601 of Regulation
SB."

Material Agreements

Consulting Agreement with SBV

     On February 25, 1998, the Registrant entered into a twelve month consulting
agreement with SBV Corporation a/k/a SBV Holdings,  Inc.  ("SBV").  The services
provided  primarily  comprised  the review of business  operations  of potential
transaction  candidates,  initiation and negotiation on behalf of the Registrant
to explore  potential  transactions,  analysis and  evaluation  of the projected
financial  performance of the  Registrant  and assistance in the  negotiation of
definitive  purchase or financing  agreements  with any interested  parties.  As
consideration for the services provided, the Registrant granted SBV an option to
purchase 1,500,000 shares of the Registrant's  common stock at an exercise price
of $2.00 per share.  On or about March 16, 1998,  the options and the underlying
shares were registered with the Commission  under the Securities Act pursuant to
a Registration  Statement on Commission  Form S-8. The options vested and became
exercisable  over a  period  of  approximately  10  months.  The  option  period
terminated on February 25, 2000. As of September 30, 1999,  the  Consultant  had
exercised the option as to 640,000 shares. The remaining 860,000 options expired
in February 2000.

     On May 31, 2001,  the Registrant  entered into a settlement  agreement with
SBV. The Registrant issued 1,844,444 shares of its common stock to SBV in return
for a mutual  cancellation of all  obligations and release of claims.  A copy of
the settlement  agreement is filed as an exhibit to this report,  see "Part III,
Item 13(a), Exhibits Required by Item 601 of Regulation SB."

Consulting and Warrant Agreement between the Registrant and
The Yankee Companies, Inc.

Consulting Agreement

     On January 5, 1999 , the  Registrant  entered into a  consulting  agreement
with Yankees,  a copy of which was filed with the  Commission as an exhibit to a
current report on Form 8-K on or about January 29, 1999. On January 2, 2000, the
Registrant entered into an amended consulting  agreement with Yankees, a copy of
which was filed with the  Commission  as an exhibit on Form  10-KSB for the year
ended  September  30,  1998 . On January 4, 2001,  the  Registrant  and  Yankees
entered into a new  strategic  consulting  agreement,  pursuant to which Yankees
will bill at its standard  hourly rates for all work as to which a prior written
arrangement with different terms has not been entered into;  however,  no hourly
billable  services will be provided except at the Client's specific request and,
the service of Yankees'  directors,  Messrs.  William A. Calvo, III, and Leonard
Miles  Tucker,  will be provided at the fixed rate of $10,000 per month,  in the
aggregate,  payment for which will be deferred and accrued until  adequate funds
become  available.  Hourly  payments  may,  at Yankees  option,  be  accepted in
unregistered   shares  of  the   Registrant's   securities,   based  on  Yankees
preferential   subscription   rights.  In  addition,   the  Registrant  will  be
responsible  for the  payment  of all costs and  disbursements  associated  with
Yankees's  services  subject  to  certain   limitations  and/or  approvals,   as
stipulated in the Agreement. A copy of the latest strategic consulting agreement
is filed as an  exhibit to this  report,  see "Part III,  Item  13(a),  Exhibits
Required by Item 601 of Regulation SB."

Warrant Agreement

     The response to this item is  incorporated  by reference to the response to
Item 1 of the  Registrant's  report on Form 10-KSB for the year ended  September
30, 1998, as permitted by Commission  Rule 12b-23.  Such  information  is hereby
supplemented, as a material subsequent event, as follows: As of the date of this
report,  Yankees has paid $40,000.00  pursuant to its exercise of Class A Option
for approximately 8,000,000 shares of the Registrant's common

                                     Page 4


<PAGE>



stock.  Yankees  has also  loaned the  Registrant  $23,141.82,  pursuant  to its
Consulting Agreement with the Registrant, and is owed consulting compensation of
$70,000.

BellSouth Agreement

     The response to this item is  incorporated  by reference to the response to
Item 1 of the  Registrant's  report on Form  10-KSB  for the  fiscal  year ended
September 30, 1998, as permitted by Commission Rule 12b-23.

Post Reporting Period Strategic Plans & Change of Control

     The response to this item is  incorporated  by reference to the response to
Item 1 of the  Registrant's  report on Form  10-KSB  for the  fiscal  year ended
September  30, 1998,  as permitted by Commission  Rule 12b-23,  supplemented  as
follows:  On May 31, 2001,  the Registrant  entered into a settlement  agreement
with SBV. The Registrant  issued  1,844,444 shares of its common stock to SBV in
return for a mutual  cancellation of all  obligations  and release of claims.  A
copy of the  settlement  agreement  is filed as an exhibit to this  report,  see
"Part III, Item 13(a), Exhibits Required by Item 601 of Regulation SB."

Additional Information

     The foregoing  information is hereby supplemented,  to the extent it is not
inconsistent  with this  Report,  by  reference  to the  comparable  item in the
Registrant's  report on Form 10-KSB for the year ended  September 30, 1998,  the
information  reflected  in the  Registrant's  reports on Form  10-QSB for fiscal
quarters  ended  December  31, 1998 and March 31,  1999;  the reports of current
events on Form 8-K filed with the Commission on or about June 25, 2001(Items 4,5
and 7); and, the registration statement on Form S-8 filed with the Commission on
March 16, 1998, all as permitted by Commission Rule 12b-23.

ITEM 2.           DESCRIPTION OF PROPERTY.

     The response to this item is  incorporated  by reference to the response to
Item 2 of the  Registrant's  report on Form  10-KSB  for the  fiscal  year ended
September 30, 1998, as permitted by Commission Rule 12b-23.

ITEM 3.           LEGAL PROCEEDINGS.

     The response to this item is  incorporated  by reference to the response to
Item 1 of the Registrant's  report on Form 10-QSB for the quarter ended December
31, 1998, as permitted by Commission  Rule 12b-23.  Such  information  is hereby
supplemented, as a material subsequent event, as follows:

*    In the matter of Prime Source Leasing,  Inc. vs. General  Electric  Capital
     Corporation,  et al. (No.  98-010716-AJ,  Palm Beach County,  Florida), the
     trial  scheduled  to begin in August 2001 may be  continued  when the court
     rules on a pending  agreed motion for a  continuance.  In the interim,  the
     parties continue to pursue settlement discussions,  the probable outcome of
     which the Registrant cannot currently assess.

*    In the matter of the  Investigation by the FTC of T2U Co., the November 23,
     1999  Consent  Decree  signed by T2U was approved by the FTC and filed with
     the  U.S.  District  Court  for the  Northern  District  of  Ohio  (Eastern
     Division)  on April 4, 2001.  The Court  entered  final  judgment on May 9,
     2001,  concluding  the  matter.  The  Registrant  was not a  party  to this
     proceeding;  consequently,  it is  not  expected  to  be  effected  by  the
     proceeding or its disposition.

*    In the matter of the People of the State of  Illinois  vs.  RCP,  the Court
     entered a final  judgment  and consent  decree in January 2000 and the case
     has  been  closed.  The  Registrant  was  not a party  to this  proceeding;
     consequently,  it is not expected to be effected by the  proceeding  or its
     disposition.

*    In the matter of the Louisiana  Public Service  Commission  (the "Louisiana
     PSC") vs. RCP and T2U, the Louisiana PSC has decided to dismiss this matter
     without prejudice.



                                     Page 5


<PAGE>



ITEM 4.           SUBMISSION OF MATTERS TO SECURITY HOLDERS.

     The  Registrant  did not submit any  matter to a vote of  security  holders
during  its  fiscal  year  ended  September  30,  1999 and  does not  anticipate
submitting any matters to a vote of securities  holders until it becomes current
in filing its periodic  reports with the  Commission  (currently  expected to be
completed on or about  September  30, 2001).  The  Registrant  understands  that
certain  stockholders may seek to take action increasing its authorized  capital
by written consent in lieu of meeting, if they can meet the exemptive provisions
of Commission Rule 14a-2(b)(2), pertaining to exempt proxy solicitations.


                                     PART II

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

Market Information.

1996, 1997 and 1998

     Prior to July  1996,  there was no  trading  activity  in the  Registrant's
common  stock.  During the report  period (the fiscal year ended  September  30,
1999) the Registrant's  common stock was traded in the  over-the-counter  market
and quoted in what are commonly referred to as on the " Electronic Pink Sheets",
which reports quotations by brokers or dealers in particular securities,  and on
the  over-the-counter  electronic  bulletin  board  operated  by NASD  (the "OTC
Bulletin  Board").  As a material  subsequent  event, bid, offer and transaction
report prices for the Registrant's  common stock were available  through the OTC
Bulletin  Board under the symbol  CLME until the fiscal  calendar  quarter  that
started on October 1, 1999.  On  October  29,  1999,  due to the  failure of the
Registrant to file periodic  reports with the Commission on a timely basis,  the
NASD  precluded  brokers or dealers in  securities  from using the OTC  Bulletin
Board to publish quotes for the Registrant's securities.

     Because of the lack of readily available quotations and the limited trading
volume  frequently  associated  with  over-the-counter  securities,  there  is a
greater risk of market  volatility of such securities than for securities traded
on  national  exchanges.  The  following  over-the-counter   quotations  reflect
inter-dealer prices, without retail mark-up, mark- down, or commissions, and may
not necessarily  represent actual  transactions.  The range of the reported high
and low bid quotations have been derived  primarily from  information  quoted on
the OTC Bulletin Board and the Electronic Pink Sheets.  The following table sets
forth the  quarterly  high and low bid  prices  (to the  nearest  $0.125) of the
Registrant's  common  stock for the  years  ended  September  30,  1998  through
September 30, 1999, and as a material subsequent event, through June 30, 2001.

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

Year Ended September 30, 1998                        High Bid          Low Bid          High              Low
-----------------------------                        --------          -------          ----              -----
                                                                                        Transaction       Transaction
                                                                                        ------------      -----------
                                                                                        Price             Price
                                                                                        -----             -----

First Quarter                                        $5.75             $4.75            $5.75             $4.25
Second Quarter                                       $7.00             $4.25            $7.00             $4.25
Third Quarter                                        $7.00             $4.50            $7.00             $3.00
Fourth Quarter                                       $5.75             $0.84375         $5.375            $.84375

Year Ended September 30, 1999                        High              Low              High              Low
-----------------------------                        ----              ---              ----              -----
                                                                                        Transaction       Transaction
                                                                                        ------------      -----------
                                                                                        Price             Price
                                                                                        -----             -----

First Quarter                                        $1.38             $1.00            $1.375            $0.125
Second Quarter                                       $0.25             $0.09            $0.25             $0.937
Third Quarter                                        $0.14             $0.09            $0.14             $0.07
Fourth Quarter                                       $0.13             $0.08            $0.13             $0.08


                                     Page 6


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Year Ended September 30, 2000                        High              Low              High              Low
-----------------------------                        ----              ---              ----              -----
                                                                                        Transaction       Transaction
                                                                                        ------------      -----------
                                                                                        Price             Price
                                                                                        -----             -----

First Quarter                                        $0.09             $0.01            $0.09             $0.01
Second Quarter                                       $0.09             $0.02            $0.09             $0.015
Third Quarter                                        $0.08             $0.03            $0.08             $0.03
Fourth Quarter                                       $0.31             $0.02            $0.31             $0.02

First Three Quarters of
Year Ended September 30, 2001                        High              Low              High              Low
-----------------------------                        ----              ---              ----              -----
                                                                                        Transaction       Transaction
                                                                                        ------------      -----------
                                                                                        Price             Price
                                                                                        -----             -----

First Quarter                                        $0.24             $0.03            $0.24             $0.03
Second Quarter                                       $0.10             $0.03            $0.10             $0.05
Third Quarter                                        $0.12             $0.03            $0.12             $0.35

</TABLE>

     As of June 30, 2001,  eight NASD member firms were listed as market  makers
in the  Registrant's  common stock:  Knight  Securities,  Inc.;  Schwab  Capital
Markets L.P.; Hill, Thompson Magid, L.P; Wien, Securities Corp.; M.H. Meyerson &
Co.;  Herzog,  Heine,  Geduld,  Inc.;  Fleet  Trading;  WM.  V.  Frankel  &  Co.
Incorporated.  The Transfer Agent for the Registrant's  common stock is American
Stock Transfer & Trust Company, 59 Maiden Lane; New York, New York 10007.

Penny Stock Rules

     The response to this item is  incorporated  by reference to the response to
Item 5 of the  Registrant's  report on Form  10-KSB  for the  fiscal  year ended
September 30, 1998, as permitted by Commission Rule 12b-23.

The Registrant's Common Stock

     The  authorized  capital  stock of the  Registrant  consists of  20,000,000
shares of common stock, $.01 par value. As of the close of business on September
30, 1999, the Registrant had 13,991,692  shares of common stock  outstanding and
held of record by approximately 492 persons.  Although the Registrant's transfer
agent's  records show only  11,741,698  shares  issued as of September 30, 1999,
under  Delaware  law the  Registrant  had  non-cancelable  obligations  to issue
2,250,000 additional shares as of September 30, 1999, that had been paid for but
not yet issued and reflected on the  Registrant's  stock records.  As a material
subsequent event,  since December 31, 1998, the Registrant has funded all of its
operations  and  paid  all  of  its  debts  through  private  placements  of its
securities;  consequently,  as of  August  15,  2001,  19,716,711  shares of the
Registrant's common stock were outstanding.  The number of record holders of the
Registrant's  common stock as of the close of business on August 15,  2001,  was
approximately  989. Of those,  approximately  41 were  holding  such  securities
pursuant to depository  arrangements  with the actual  beneficial  owners (e.g.,
securities  held in street  name for their  clients by  securities  brokers  and
dealers),  and the Registrant has been advised that approximately 338 additional
persons were beneficial owners under such arrangements.  Consequently, the total
number of beneficial owners is four.

     Each holder of shares of the  Registrant's  common stock is entitled to one
vote for each  share held on all  matters  to be voted upon by the  stockholders
generally.  The shares do not have  cumulative  voting rights,  which means that
holders of more than 50% of the shares of the  Registrant's  common stock voting
for the election of directors can elect all the  directors,  and that in such an
event the holders of the  remaining  shares  would not be able to elect a single
director.  The approval of  proposals  submitted  to  stockholders  at a meeting
requires the favorable  vote of a majority of the shares  voting,  except in the
case of certain  fundamental  matters where  Delaware law requires the favorable
vote of at least a majority of all outstanding shares. Shareholders are entitled
to receive such  dividends as may be declared  from time to time by the board of
directors  out  of  funds  legally  available  therefor,  and in  the  event  of
liquidation, dissolution or winding up of the Registrant to share ratably in all
assets  remaining  after  payment of  liabilities.  The holders of shares of the
Registrant's common stock have no preemptive, conversion or subscription rights.

                                     Page 7


<PAGE>



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

     Pursuant to  anticipated  consulting  services  that may be rendered by the
Registrant  to third  parties  (see "Item 6") it is possible  that shares of the
capital stock of the Registrant's clients will be registered with the Commission
and issued directly to the Registrant's stockholders,  as a "defacto third party
stock  dividend";   however,  no  assurances  can  be  provided  that  any  such
distribution  will ever take place, or as to the actual economic benefits of any
such distribution.

Amounts of Common Equity Subject to Outstanding Options or Warrants to Purchase,
or Securities Convertible Into Common Equity of the Registrant

Common Stock Purchase Warrants

     Since January 1, 1999,  the  Registrant  has issued  common stock  purchase
warrants to Yankees and to the Registrant's  officers and directors,  in lieu of
cash compensation for their services.  Current details  concerning such warrants
are provided below. As of August 15, 2001,  3,902,000 shares of the Registrant's
common  stock were  reserved  for  issuance  pursuant to  existing  obligations,
including  common stock purchase  warrants held by its officers and directors in
lieu of cash  compensation for their services,  but excluding shares issuable to
Yankees  pursuant  to its current  warrant.  Yankees  recognizes  that the total
number of authorized  shares is not  sufficient to allow for  reservation of the
shares  subject  to its  warrant  but  believes  that it can  obtain  sufficient
director and stockholder  votes to increase the authorized  capital stock of the
Registrant,  as  required  to permit  exercise  of its  warrant  at such time as
stockholder  action can be taken in compliance with applicable  securities laws.
Consequently,  Yankees has  consented  to the issuance  and  reservation  of the
Registrant's common stock in favor of other persons,  which would otherwise have
been subject to Yankees' warrants.

Stock Options

     The response to this item is  incorporated  by reference to the response to
Item 5 of the  Registrant's  report on Form  10-KSB  for the  fiscal  year ended
September 30, 1998, as permitted by Commission Rule 12b-23.

Tabular Information

     As of  August  15,  2001,  the  Registrant  had  3,902,000  shares  of  its
authorized common stock reserved for issuance (excluding the number of shares to
be reserved for Yankees  warrants) in  conjunction  with current  obligations to
issue additional  shares or in the event that currently  outstanding  options or
warrants are exercised.  The following  table provides  summary data  concerning
such options and warrants:

Designation         Nature of          Exercise or           Number of Shares
or Holder           The Security       Conversion Price      Currently Reserved
---------           ------------       ----------------      ------------------
Yankees             Option             $80,000 in total          (1)
(2)                 Warrant            $38,500 in total          770,000
(3)                 (3)                (3)                       1,000,000
(4)                 (4)                (4)                       1,600,000
Anthony Q. Joffe    (5)                (5)                       200,000
(2)                 Warrant            $5,920 in total           332,000
------

(1)  The number of shares cannot be determined with certainty;  rather,  Yankees
     has the right,  for an  aggregate  of $80,000,  to  purchase  shares of the
     Registrant's common stock equal to 75% of the Registrant's  outstanding and
     reserved  shares of common stock,  measured  immediately  after exercise is
     completed. See Notes to Financial

                                     Page 8


<PAGE>



          Statements.  For  purposes  of the  Table,  the  computation  was made
          assuming that only the shares currently  outstanding or reserved would
          be  outstanding  or reserved at the time of  exercise  (an  improbable
          scenario).  The actual  formula for  determining  the total  number of
          Yankees' option shares  issuable is: [the total shares  outstanding at
          the time the final option exercise  payment is made less the number of
          shares issued under the option + the shares then  reserved  other than
          for the Yankees' option]  multiplied by 3 and rounded up or down based
          on proximity to the next whole number.

(2)       Represents the shares issuable to members of the Registrant's board of
          directors,  as disclosed in Part III, Item 10, Executive Compensation;
          such  disclosure  is  being   incorporated  by  reference  herein,  as
          permitted by Commission Rule 12b-23.

(3)       Represents  shares  reserved  for  issuance  in the  event  offers  of
          settlement  by  the  Registrant   are  accepted  by  certain   current
          creditors,  as disclosed at Part I, Item 1,  Description of Business -
          New  Strategic  Plans & Change in Control,  such  disclosure  is being
          incorporated by reference herein, as permitted by Commission Rule 12b-
          23.

(4)       Represents the shares issuable  pursuant to the Registrant's  1998 and
          2000 stock option plans, as disclosed at Part III, Item 10,  Executive
          Compensation;  such  disclosure  is being  incorporated  by  reference
          herein, as permitted by Commission Rule 12b-23. Because the plans were
          not ratified by the stockholders within one year after their adoption,
          no incentive  stock options may be issued,  thereunder,  and the plans
          are now  limited  to  issuance  of  non-qualified  stock  options,  as
          determined under the Internal Revenue Code.

(5)       Represents the shares  issuable to Mr. Joffe as  compensation  for his
          services as the Registrant's President, as disclosed in Part III, Item
          10, Executive  Compensation;  such disclosure is being incorporated by
          reference herein, as permitted by Commission Rule 12b-23.

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

Reporting Period

     As of September  30, 1999,  13,991,692  shares of the  Registrant's  common
stock were outstanding, of which:

         *     2,157,363 are recognized as free trading by the Registrant;

         *     11,834,329 have been issued over the years pursuant to exemptions
               from  registration  and are thus restricted  securities,  some of
               which are eligible for resale  under  Commission  Rule 144 ("Rule
               144").

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

         *     5,869,329   were  issued  prior  to  September   30,  1998,   and
               consequently,  could have been sold  under  Rule 144,  subject to
               Rule 144's volume  limitations,  notice,  public  information and
               manner of sale  conditions.  The  volume  limitations  restricted
               quantities  sold over 90 day  periods to the greater of 1% of the
               total  outstanding  common stock,  or the average  weekly trading
               volume during the four week period preceding the sale;

         *     227,929  were  issued  to  persons  that  do  not  appear  to  be
               affiliates of the  Registrant  prior to September  30, 1997,  and
               consequently may be sold by holders that have not been affiliates
               of the  Registrant  for a period  of at least 90 days,  under the
               more  liberal   provisions  of  Commission   Rule  144(k)  ("Rule
               144(k)"),  which dispense with the volume, public information and
               manner of sale conditions.

Material Subsequent Events

     As of August 15, 2001,  19,716,711 shares of the Registrant's  common stock
were outstanding, of which:

         *     5,792,257 are recognized as free trading by the Registrant;


                                     Page 9


<PAGE>



         *     13,924,454 have been issued over the years pursuant to exemptions
               from  registration  and are thus restricted  securities,  some of
               which are eligible for resale under Rule 144.

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

         *     13,867,397 were issued prior to July 25, 2000, and  consequently,
               may  currently  be sold  under  Rule 144,  subject  to Rule 144's
               volume limitations, notice, public information and manner of sale
               conditions.  The volume limitations restrict quantities sold over
               90 day  periods  to the  greater  of 1% of the total  outstanding
               common stock,  or the average  weekly  trading  volume during the
               four week period preceding the sale;

         *     5,834,329  were  issued  to  persons  that  do not  appear  to be
               affiliates  of  the  Registrant  prior  to  July  25,  1999,  and
               consequently may be sold by holders that have not been affiliates
               of the  Registrant  for a period  of at least 90 days,  under the
               more liberal  provisions of Rule 144(k),  which dispense with the
               volume, public information and manner of sale conditions.


Rule 144

     The response to this item is  incorporated  by reference to the response to
Item 5 of the  Registrant's  report on Form  10-KSB  for the  fiscal  year ended
September 30, 1998, as permitted by Commission Rule 12b-23.

Amount of Common Equity That the Registrant Has Agreed to Register under the
Securities Act for Sale by

Security Holders

     The Registrant  has not agreed to register any of its common stock,  except
in conjunction with an obligation to include the common stock purchase  warrants
for the officers and directors and Yankees  warrant in  registration  statements
that it may otherwise file (commonly referred to as "piggyback" rights).

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

During the Year Following the Reporting Period

     Information  concerning  the  Registrant's  actual shares issued during the
year  ended  September  30,  1999,  is  contained  below  at  "Recent  Sales  of
Unregistered Securities - Material Subsequent Events."

Recent Sales of Unregistered Securities

During The Three Year Period Preceding Reporting Date

     During the three year period  ended  September  30,  1999,  the  Registrant
issued the securities listed in the tables below without  registration under the
Securities  Act in  reliance on the  exemption  from  registration  requirements
cited. Footnotes for all tables follow the last table after "Material Subsequent
Events."

                                    Page 10
<PAGE>




Common Stock:
<TABLE>
<S>                 <C>               <C>                      <C>              <C>                  <C>

                  Amount of                                   Total                              Registration
                  Securities                                  Offering          Total            Exemption
Date              Sold              Subscriber                Consideration     Discounts        Relied on
----              -----             ----------                -------------     ---------        ---------
1997:
none

1998
January 7            46,500         Marshal Family LTD                 (4)      None             (1)
January 12          100,000         Richard Cherskov                   (4)      None             (1)
January 12            18,750        Peter Accorti                      (6)      None             (1)
January 12            50,000        Borden Barrows                     (4)      None             (1)
January 12            25,000        Ronald Denne                       (6)      None             (1)
January 12            50,000        David DeBenedetto                  (4)      None             (1)
January 12            50,000        Leonard J. Feilez, Jr.             (4)      None             (1)
January 12            50,000        Robert S. Gigliotti                (5)      None             (1)
January 12           175,000        Marty Gillespie                    (6)      None             (1)
January 12            30,000        Patrick Graham                     (6)      None             (1)
January 12           937,500        Lakewood Manufacturing             (6)      None             (1)
January 12            11,250        Jeffery Outcalt                    (6)      None             (1)
January 12           400,000        Beth M. Peplin                     (6)      None             (1)
January 12         2,500,000        Richard C. Peplin, Jr.             (6)      None             (1)
January 12             7,500        Richard C. Peplin, Jr              (6)      None             (1)
                                     c/f Richard C. Peplin, III
January 12             7,500        Richard C. Peplin, Jr              (6)      None             (1)
                                     c/f Alexandria M. Peplin
January 12             7,500        Richard C. Peplin, Jr              (6)      None             (1)
                                     c/f Dustin A. Peplin
January 12           100,000        Arlene Powers                      (4)      None             (1)
January 12            15,000        Mark Schmeidle                     (6)      None             (1)
January 12           175,000        Anna Villanueva                    (6)      None             (1)
January 12           200,000        Marshall Family LTD                (4)      None             (1)
January 13                10        Ralph Gesauldo                     (3)      None             (1)
March 10             200,000        Players, Inc.                      (4)      None             (1)
June 11              100,000        Troy D. Wiseman                    (7)      None             (1)
August 19            300,000        Arnold A. Semler, Inc.             (8)      None             (1)
September 19         100,000        Ila Sethi                                   (9)     None              (1)

1999:
February 22       2,000,000         The Yankee Companies, Inc.         (10)     (11)             (2)
April 14          2,000,000         The Yankee Companies, Inc.         (10)     (11)             (2)
June 23             250,000         Madhu & Ila Sethi                  (12)     None             (1)
October 6         2,000,000         The Yankee Companies, Inc.         (10)     (11)             (2)

</TABLE>

Convertible Securities:

     The response to this item is  incorporated  by reference to the response to
Item 1 of the  Registrant's  report on Form 10-KSB for the year ended  September
30, 1998,  as permitted by  Commission  Rule  12b-23.  Such  information  hereby
supplemented,  as a material  subsequent event, as follows: On January 12, 1999,
common stock purchase  warrants  exercisable at $0.05 per share,  were issued to
officers and directors of the Registrant entitling them to purchase an aggregate
of 370,000  shares of common  stock.  See  Footnote 10 for a  discussion  of the
Yankees warrant.

Material Subsequent Events

     Since the end of the three  year  period  ended  September  30,  1999,  the
Registrant issued the securities listed in the tables below without registration
under  the  Securities  Act in  reliance  on  the  exemption  from  registration
requirements cited.


                                     Page 11


<PAGE>


<TABLE>
<S>                 <C>             <C>                        <C>                <C>             <C>
Common Stock:

                  Amount of                                   Total                              Registration
                  Securities                                  Offering          Total            Exemption
Date              Sold              Subscriber                Consideration     Discounts        Relied on
----              -----             ----------                -------------     ---------        ---------
2000:
March 17           34,000       Jack Levine                        (12)          None             (1)
March 17          677,087       Oppenheimer Wolff & Donnelly       (12)          None             (1)
May 11            136,147       Larry Van Etten                    (12)          None             (1)
May 4             200,000       Anthony Q. Joffe                   (13)          None             (2)
May 31            533,333       Troy D. Wiseman                    (12)          None             (1)
September 19    2,000,000       The Yankee Companies, Inc.         (10)          (11)             (2)
October 19        200,000       Bell Entertainment                 (14)          None             (1)

2001:
February 19       100,000       Patrick V. Graham                  (15)          None             (1)
July 2          1,844,444       SBV Holdings, Inc.                 (16)          None             (2)


Convertible Securities:

                  Amount of                                   Total             Terms of         Registration
                  Securities                                  Offering          Conversion       Exemption
Date              Sold              Subscriber                Consideration     or Exercise      Relied on
----              -----             ----------                -------------     -----------      ---------

(17)            1,000,000       Stock Option Plan                  (17)          (17)             (1)
(18)              732,000       Directors/Officers                 (18)          (18)             (2)
(19)            1,000,000       (19)                               (19)          (19)             (1)

</TABLE>


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

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

(3)  Current management has no knowledge pertaining to this transaction.

(4)  Compensation  for  unspecified  services  rendered  for the  benefit of the
     Registrant,  with neither the offering price nor the consideration  clearly
     set forth.

(5)  For services as a director.

(6)  Shares of Tio stock were converted into shares of the  Registrant's  common
     stock.

(7)  Compensation  for  consulting  services for the benefit of the  Registrant,
     with neither the offering price nor the consideration clearly set forth.

(8)  Asset purchase  agreement  dated May 19, 1998,  entered into by and between
     the  Registrant  and  Arnold  A.  Semler,  Inc.  doing  business  under the
     fictitious name "Associated Industries."

                                     Page 12


<PAGE>




(9)  Consideration for the purchase of Business Technology Systems,  Inc. by the
     Registrant.

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

(11)  No commissions  or discounts  were paid to anyone in  conjunction with the
     sale of the foregoing securities.

(12)  Terms of settlement for various services provided to the Registrant.

(13) Compensation  to Anthony Q. Joffe for his services as president from May 4,
     1999 to May 3, 2000.

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

(15) Issued  pursuant to the settlement  agreement  approved by the court in the
     case of Patrick  Graham vs. Five Star  Cigar,  Inc.  and others,  including
     Colmena Corp.  case no.  99-121194(18),  Circuit Court for Broward  County,
     Florida.

(16) On May 31, 2001,  the Registrant  entered into a settlement  agreement with
     SBV. The Registrant  issued  1,844,444 shares of its common stock to SBV. A
     copy of the settlement agreement is filed as an exhibit to this report, see
     "Part III, Item 13(a), Exhibits Required by Item 601 of Regulation SB."

(17) Represents the shares issuable  pursuant to the Registrant's  1998 and 2000
     stock  option  plans,  as  disclosed  at  "Part  III,  Item  10,  Executive
     Compensation".

(18) Represents  the shares  issuable to directors and officers upon exercise of
     their   warrants,   as   disclosed  in  "Part  III,   Item  10,   Executive
     Compensation."  Because  the plans were not  ratified  by the  stockholders
     within one year after their  adoption,  no incentive  stock  options may be
     issued,   thereunder,  and  the  plans  are  now  limited  to  issuance  of
     non-qualified stock options, as determined under the Internal Revenue Code.

(19) Represents  shares  reserved for issuance in the event offers of settlement
     by the Registrant are accepted by certain current  creditors,  as disclosed
     at "Part I, Item 1,  Description of Business - New Strategic Plans & Change
     in Control."


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

Overview

     The  following   discussion   should  be  read  in  conjunction   with  the
Registrant's  audited  financial  statements  and the more detailed  information
contained in this report. During November of 1997, the Registrant became engaged
in the business of marketing and distributing  long-distance  telephone  service
calling cards and in the  manufacture and  distribution  of premium  hand-rolled
cigars,  in each case through wholly owned  subsidiaries.  During March of 1999,
the  Registrant's  board of  directors  concluded  negotiations  to  divest  the
Registrant of all of its wholly owned subsidiaries positioning the Registrant to
undertake  new  business  endeavors or to become a more  attractive  acquisition
candidate. As a material subsequent event, during August of 2001, the Registrant
commenced consulting activities (see "Item 6").




                                     Page 13


<PAGE>

Plan of Operations

     During  January  of 1999,  the  Registrant's  board of  directors  signed a
consulting  agreement  with  Yankees,  which  required  Yankees to  provide  the
Registrant with working capital and assistance in development and implementation
of  new  strategic  plans.  The  Registrant  is  concentrating  on  meeting  our
obligation to file periodic reports under the Exchange Act, including completing
the audit of its financial  statements  for the fiscal year ended  September 30,
1999,  which are  contained  herein.  Additionally,  Yankees  is  assisting  the
Registrant in identifying  persons with claims and potential  claims against the
Registrant and to negotiate with them to amicably resolve such claims.

     The Registrant has completed the audit of its financial  statements for the
fiscal year ended  September 30, 1999 and is currently  completing the quarterly
unaudited  financial  statements  required  in  order to  complete  and file its
reports on Commission  Form 10-QSB for the calendar  quarters ended December 31,
1999 and 2000,  June 30,  2000,  March  31,  2000 and 2001 and the audit for its
fiscal year ended  September 30, 2000. The  Registrant  expects to have all such
financial  statements and reports filed with the  Commission  prior to September
30, 2001.

     Almost all claims and potential claims against the Registrant identified by
Yankees  have been  amicably  resolved  through the  issuance  of  approximately
3,575,000  shares of common  stock,  with the notable  exception of the arbitral
award  in  Deutsche  Financial  Services  Corporation  vs.  Business  Technology
Systems,  Inc.,  Ila Sethi,  Madhu Sethi,  Richard C.  Peplin,  Jr., and Colmena
Corp.,  which  the  Registrant  will  contest  (see  "Part  II,  Item  1,  Legal
Proceedings").  Yankees,  on behalf of the Registrant,  is currently  conducting
negotiations with certain remaining  claimants and has made offers of settlement
for claims. While management believes that there is a reasonable likelihood that
such offers will be accepted, no assurances to that effect can be provided.

     Except for recently  initiated  consulting  activities  (see "Item 6"), the
Registrant  currently has no business  operations other than those pertaining to
correcting   deficiencies  in  filing   obligations   under  the  Exchange  Act,
maintenance  of its  corporate  existence,  and  potential  operations  under  a
negotiated resale agreement involving the purchase of telecommunication services
from BellSouth Telecommunications, Inc. for resale to end users.


     The  agreement  pertains to Sections 251 and 252 of the  Telecommunications
Act of 1996,  and allows the  Registrant  to  operate  as an  alternative  local
exchange  telecommunications company in the states of Alabama, Florida, Georgia,
Kentucky, Louisiana,  Mississippi, North Carolina, South Carolina and Tennessee.
The agreement  permits the Registrant to provide  competing  telephone  exchange
services to residential and business  subscribers in territories where BellSouth
operates.  The  Registrant  currently has no customers and is not conducting any
business  under its agreement  with  BellSouth.  As soon as the  Registrant  has
become  current in its filing  obligations  under the Exchange  Act, it plans to
either obtain capital  required to resume  business  operations  pursuant to the
BellSouth  agreement,  or to acquire  complimentary  businesses  in exchange for
shares of the  Registrant's  common stock and a commitment by the  Registrant to
provide required expansion capital.  However, no assurances can be provided that
such business plan can be attained.

Consulting Activities

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

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

     Registration  of  shares  directly  to  the  Registrant's  stockholders  is
necessary  in order  for the  Registrant  to  avoid  inadvertently  becoming  an
investment company,  and provides a major benefit to clients in that they obtain
a large base of stockholders,  including all of the Registrant's  market makers.
The major benefit of the consulting services to the  Registrant  is that it will

                                     Page 14


<PAGE>



be continually exposed to emerging  companies,  some of which should prove to be
attractive   acquisition   candidates  or  candidates  for  strategic  operating
alliances  (cooperative  business  activities  not  involving  shares  of equity
ownership) that fit the Registrant's strategic objectives.

     The  Registrant  does not yet have any consulting  clients,  although it is
discussing  such  possibility  with one company in the  wireless  communications
industry.

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

Year ended September 30, 1999 compared to year ended September 30, 1998


     Prior  to  the  discontinuation  of  past  operations,   substantially  all
financial  activity during fiscal 1998 was a result of business conducted in the
marketing and distributing of long-distance  telephone service calling cards. We
reported net losses from  operations  for the year ended  September  30, 1999 of
$(1,765,748)  and net losses income from operations for the year ended September
30, 1998 of $(15,340,175).  This translates to a per-share (loss) of $(0.17) for
the year ended  September 30, 1999 and per-share  (loss) of $(2.41) for the year
ended September 30, 1998. Additionally, we reported a net gain from discontinued
operations for the year ended September 30, 1999 of $1,475,452 or $.14 per share
as  compared  to a net (loss) from  discontinued  operations  for the year ended
September  30,  1998  of  $(1,484,051)  or  $(.23)  per  share.  The  gain  from
discontinued operation in 1999 was related to the sale of its subsidiaries.

Year ended September 30, 1999 compared to year ended September 30, 1998


     The net (loss)  figures  were  based on  corresponding  revenues  of $0 and
$10,344,480  for the year ended September 30, 1999 and 1998,  respectively.  The
decrease in net revenue and corresponding decrease in cost of revenue in 1999 as
compared to 1998 was attributable to the discontinuation of substantially all of
the marketing and distributing of long-distance telephone service calling cards.
Operating expenses decreased to $1,678,763 for the year ended September 30, 1999
as compared to  $20,682,276  for the year ended  September 30, 1998.  During the
year ended  September 30, 1998, the  Registrant  issued stock options and common
shares  to  consultants  and  employees  and  recorded   consulting  expense  of
$12,611,200  as compared to $1,522,978 of  consulting  expense  recorded for the
issuance of warrants  to  consultants.  Additionally,  in 1998,  the  Registrant
recorded  a loss of the  impairment  of certain  assets and bad debt  expense of
approximately $7,700,000.

     Net cash used in investing activities for the year ended September 30, 1999
was $2,480  compared to net cash used in investing  activities  of $1,558,736 in
the 1998 period.  This  difference  was related to the purchase of equipment and
the acquisition of its discontinued subsidiary, BTS, in fiscal 1998.

     Net cash provided by financing activities in the 1999 period was $47,500 as
compared to net cash provided by financing  activities of $1,472,295 in the 1998
period.  The difference was  attributable  to decreased  proceeds  received from
loans and the sale of common stock.

     No  additional  meaningful  comparisons  can be  made  for the  year  ended
September  30,  1999 as compared to the year ended  September  30, 1998  because
during the year ended  September 30, 1999,  the  Registrant  had no revenues and
costs of sales.

Year 2000 Compliance

     As of the date this  report  was to have been  filed  with the  Commission,
there were serious  concerns about the effects the transition  from the 1900s to
the 2000s  would  have on  computer  programs  designed  to ignore the first two
digits  of  each  year  in  determining  operating  periods.  As a  result,  the
Commission  required  registrants to report on their states of readiness to face
potential Year 2000 problems.  The following disclosure would have been accurate
prior to January 1, 2000:  The   inability of  business  processes  to  continue

                                     Page 15


<PAGE>

to function  correctly  after the  beginning of the Year 2000 could have serious
adverse effects on companies and entities  throughout the world.  The Registrant
does not  currently  own any  computer  equipment  and thus would not be subject
directly to any problems  associated with such Year 2000 problems.  It currently
uses computer  equipment  provided by its  management and  consultants,  none of
which would be materially  affected by Year 2000 software and hardware problems.
However,  in the event it makes a  material  acquisition,  such  problems  could
affect the  acquired  entity's  operations  and,  to the extent that the problem
affects national communications, financial or utility businesses in general, the
Registrant,  like other businesses,  could be adversely  affected.  In the event
that the Registrant  experiences Year 2000 related problems,  it would be forced
to expend such  amounts of its working  capital as might be necessary to correct
the affected software and hardware systems and implement contingency plans.

     As a material  subsequent event, no material Year 2000 problems occurred as
a result of the  transition  from the 1900s to the  2000s on  computer  programs
designed  to ignore the first two digits of each year in  determining  operating
periods.

Liquidity and Capital Resources

     At September 30, 1999,  the Registrant  had a  stockholders'  deficiency of
approximately  $634,820.  The  Registrant's  future  operations  and  growth are
dependent on the Registrant's  ability, with the assistance of Yankees, to raise
capital for expansion and to implement its strategic  plan. If the Registrant is
not  successful  in raising  capital and in resolving  the  remaining  claims of
certain  claimants,  or if the  arbitral  award in Deutsche  Financial  Services
Corporation  vs.  Business  Technology  Systems,  Inc., Ila Sethi,  Madhu Sethi,
Richard C.  Peplin,  Jr.,  and Colmena  Corp.,  were  successfully  reduced to a
judgment,  the Registrant may file for reorganization  pursuant to Chapter 11 of
the  United  States  Bankruptcy  Code.  The  Registrant  has no  other  material
commitments for capital expenditures.

Audit Committee Report

     The Registrant's  Audit Committee (the  "Committee") has certified that (1)
the Committee has reviewed and discussed with  management the audited  financial
statements  for the  year  ended  September  30,  1999;  (2) the  Committee  has
discussed with the independent  auditors the matters required to be discussed by
SAS 61, as may be modified or  supplemented;  (3) the Committee has received the
written disclosures and the letter from the independent  accountants required by
Independence Standards Board Standard No. 1 (Independent  Discussions with Audit
Committees),  as may be modified or  supplemented,  and has  discussed  with the
independent accountants the independent accountant's independence; and (4) based
on the review and  discussion  referred to in paragraphs  (1) through (3) above,
the Committee has  recommended to the  Registrant's  Board of Directors that the
audited financial  statements for the year ended September 30, 1999, be included
in this report.  The members of the Committee are Charles J.  Champion,  Jr. and
Robert S. Gigliotti. A copy of the Audit Committee letter is filed as an exhibit
to this  report,  see "Part III,  Item 13(a),  Exhibits  Required by Item 601 of
Regulation SB."

ITEM 7.  FINANCIAL STATEMENTS.

Index to Financial Statements and Financial Statement Schedules.

     The auditor's  report and audited  balance sheet of the  Registrant for its
years ended  September 30, 1999 and 1998 and related  statements of  operations,
stockholder's  equity,  cash flows and notes to  financial  statements  for such
years,  including  indexes  therefor,  follow  in  sequentially  numbered  pages
numbered F-1 through F-25.




                                      Page 16
<Page>



                                  COLMENA CORP.
                              FINANCIAL STATEMENTS
                           SEPTEMBER 30, 1999 AND 1998

                                  Colmena Corp.

                                    Contents

                                                                      Page(s)


Independent Auditors' Report of Salberg & Co.                            F-1

Independent Auditor's Report of Weinberg & Co.                           F-2(b)

Balance Sheet                                                            F-2

Statements of Operations                                                 F-3

Statements of Changes in Stockholders' Equity (Deficiency)               F-4

Statements of Cash Flows                                                F-5-F-6

Notes to Financial Statements                                           F-7-F-25


<Page>



                          Independent Auditors' Report


To the Board of Directors of:
Colmena Corp.

     We have  audited the  accompanying  balance  sheet of Colmena  Corp.  as of
September  30,  1999  and the  related  statements  of  operations,  changes  in
stockholders'  equity (deficiency) and cash flows for the year then ended. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit. The consolidated  financial  statements as of September 30, 1998 were
audited by other  auditors whose report dated July 31, 1999 (except for Notes 17
and 19 as to which the date is March 17, 2000) on those  statements  included an
explanatory  paragraph describing conditions that raised substantial doubt about
the Company's ability to continue as a going concern.

     We conducted our audit in  accordance  with  auditing  standards  generally
accepted in the United States of America.  These 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  audit  provides  a
reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all  material  respects,  the  financial  position  of  Colmena  Corp.  as of
September  30, 1999 and the results of its  operations  and its cash flows for
the year 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 16 to the
financial statements, the Company is inactive and has a stockholders' deficiency
and working capital  deficiency that raises  substantial doubt about its ability
to continue as a going  concern.  Management's  plans in regard to these matters
are also  described  in Note 16. The  financial  statements  do not  include any
adjustments that might result from the outcome of this uncertainty.


/s/ Salberg & Company /s/
SALBERG & COMPANY, P.A.
Boca Raton, FL
August 8, 2001

                                       F1
<Page>

                           Independent Auditors' Report


Board of Directors and Shareholders:
Colmena Corporation and Subsidiaries


     We have audited the  accompanying  consolidated  statements of  operations,
changes in  stockholders'  deficiency and cash flows of Colmena  Corporation and
Subsidiaries for the year ended September 30, 1998. These consolidated financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

     We conducted  our audit in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  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  audit  provides  a
reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the results of operations and cash
flows of Colmena  Corporation and  Subsidiaries for the year ended September 30,
1998, in conformity with generally accepted accounting principles.

     The accompanying 1998 consolidated  financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
18 to the financial statements, the Company has suffered accumulated losses from
operations of $16,613,070 and has a stockholders' deficiency of $1,921,302 and a
working capital  deficiency of $2,196,900 that raise substantial doubt about its
ability to continue as a going concern. In addition,  through the discontinuance
of  operations  and  the  sale of  subsidiaries,  the  Company  has  ceased  all
operations  (See  Notes  12, 18 and 19).  Management's  plans in regard to these
matters are also described in Note 18. The consolidated  financial statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.


WEINBERG & COMPANY, P.A.

/s/ Weinberg & Company, P.A. /s/

Boca Raton, Florida
July 31, 1999
Except for Notes 17 and 19 as to which the date is March 17, 2000

                                  Page F-1(b)

<PAGE>



                                Colmena Corp.
                                 Balance Sheet
                               September 30, 1999

                                     Assets
                                                                      1999
                                                               ----------------
Current Assets
Cash                                                              $       2,026
                                                               ----------------
Total Current Assets                                                      2,026

Equipment to be repossessed under
  security agreement, net of impairment                                 275,000
                                                               ----------------
Total Assets                                                      $     277,026
                                                               ================

Liabilities and Stockholders' Deficiency

Current Liabilities
Accounts payable and accrued expenses                             $     204,646
Notes payable                                                           375,000
Guaranteed loan                                                         331,000
Due to related party                                                      1,200
                                                               ----------------
Total Current Liabilities                                               911,846
                                                               ----------------

Stockholders' Deficiency
Common stock, $0.01 par value; 20,000,000 shares authorized,
  13,991,692 shares issued and outstanding                              139,917
Additional Paid-In Capital                                           16,128,629
Accumulated deficit                                                 (16,903,366)
                                                                ---------------
Total Stockholders' Deficiency                                         (634,820)
                                                                ---------------

Total Liabilities and Stockholders' Deficiency                    $     277,026
                                                                ===============

                 See accompanying notes to financial statements

                                       F2

<Page>

                                 Colmena Corp.
                            Statement of Operations
                    Years Ended September 30, 1999 and 1998


                                                1999                  1998
                                                               (Consolidated)
                                                                  (Note 1)
                                        ---------------------------------------

Revenues                                $       -                $   10,344,480

Cost of Sales                                   -                     3,164,474
                                        --------------         ----------------

Gross Profit                                    -                     7,180,006
                                        --------------         ----------------

Operating Expenses
Compensation expense                           4,167                    674,582
Consulting                                 1,522,978                 12,481,200
Professional and legal fees                   19,819                    946,947
Provision for doubtful accounts                 -                     5,453,907
Selling, general and administrative          131,799                  1,125,640
                                       ---------------         ----------------
Total Operating Expenses                   1,678,763                 20,682,276
                                       ---------------         ----------------

Loss from Operations                      (1,678,763)               (13,502,270)
                                       ---------------         ----------------

Other (Expenses)
Loss on impairment of assets                  (2,900)                (1,717,491)
Interest expense, net                        (84,085)                  (120,414)
                                       ---------------         ----------------
Total Other Expenses                         (86,985)                (1,837,905)
                                       ---------------         ----------------

Loss Before Discontinued Operations       (1,765,748)               (15,340,175)
                                       ---------------         ----------------

Loss From Discontinued Operations
Loss from operations                        (108,665)                (1,379,547)
Gain (loss) on disposal                    1,584,117                   (104,504)
                                       ---------------         ----------------
Total Loss from Discontinued Operations    1,475,452                 (1,484,051)

Net Loss                             $      (290,296)          $    (16,824,226)
                                       ===============         ================

Net Income (Loss) Per Common Share - Basic and Diluted
Loss from continuing operations      $         (0.17)          $          (2.41)
Income (Loss) from
 discontinued operations                        0.14                      (0.23)
                                      ---------------          ----------------
                                     $         (0.03)          $          (2.64)
                                      ===============          ================
Weighted Common Shares Outstanding        10,502,651                  6,366,877
  Basic and Diluted                   ===============          ================

                 See accompanying notes to financial statements

                                       F3
<Page>

                                 Colmena Corp.
           Statements of Changes in Stockholders' Equity (Deficiency)
                    Years Ended September 30, 1999 and 1998


<Table>
<S>                                      <C>       <C>                <C>                     <C>          <C>
                                          Common Stock             Additional           Accumulated       Total
                                                                 Paid-In Capital         Earnings
                                                                                        (Deficit)
                                        Shares     Amount
                                       -------------------------------------------------------------------------
Balance, September 30, 1997           4,955,192  $ 49,552        $  (166,432)         $   211,156      $  94,276

Shares issued to consultants          1,646,500    16,465          7,694,735                    -      7,711,200

Exercise of options                     640,000     6,400          1,273,600                    -      1,280,000

Common stock issued in exchange
  for equipment                         300,000     3,000            307,935                    -        310,935

Common stock issued in exchange
  for BTS assets                        100,000     1,000            (51,000)                   -        (50,000)

Common stock issued for cash            100,000     1,000            299,263                    -        300,263

Goodwill resulting from BTS purchase          -         -            356,250                    -        356,250

Stock options issued to consultants           -         -          4,770,000                    -      4,770,000

Stock options issued to employees             -         -            130,000                    -        130,000

Net loss, 1998                                -         -                  -          (16,824,266)   (16,824,226)
                                       ---------  --------      -------------       --------------  -------------
Balance, September 30, 1998           7,741,692    77,417         14,614,351          (16,613,070)    (1,921,302)

Stock warrants issued to consultants,
  officers and directors                     -          -          1,522,978                    -      1,522,978

Common stock issued for settlement     250,000      2,500             22,500                    -         25,000

Exercise of warrants                 6,000,000     60,000            (31,200)                   -         28,800

Net loss, 1999                               -          -                  -             (290,296)      (290,296)
                                   ------------   --------      -------------         -------------  ------------
Balance, September 30, 1999         13,991,692  $ 139,917       $ 16,128,629         $(16,903,366)   $  (634,820)
                                   ============  =========      =============         =============  ============


</Table>

                 See accompanying notes to financial statements
                                       F4
<Page>

                                 Colmena Corp.
                            Statements of Cash Flows
                    Years Ended September 30, 1999 and 1998


                                                      1999               1998
                                                                  (Consolidated)
                                                                     (Note 1)
                                                 -------------------------------
Cash Flows From Operating Activities:
Net income (loss)                             $  (290,296)      $   (16,824,226)
Adjustments to reconcile net income (loss)
  to net cash provided by (used in)
  operating activities:
Depreciation                                        4,500                21,045
Amortization                                            -               330,051
Provision for doubtful accounts                         -             5,453,907
Write-off of due from stockholder                       -               115,483
Loss on impairment of customer base                     -             1,232,946
Write-down of inventory to net realizable value         -               110,196
Write-down of goodwill                                  -               365,401
Impairment loss on marketable securities            2,900                73,610
Loss on disposal of property, plant, and equipment      -               104,700
Loss on impairment of equipment to be repossessed       -               410,935
Gain on disposal of subsidiaries               (1,584,117)                    -
Stock and options issued to consultants
  and employees                                 1,547,978            12,611,200
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable                                     -            (4,728,091)
Third party settlement receivable                       -                51,829
Deposits                                                -                 9,624
Other current assets                                    -               178,121
Net assets of discontinued operations                   -               105,035
Increase (decrease) in:
Cash overdraft                                          -                84,386
Accounts payable and accrued expenses             269,754              (544,977)
Deferred revenue                                        -               (22,993)
Net liabilities of discontinued operations              -               949,524
                                                ----------        -------------
Total Adjustments                                 241,015            16,911,932
                                               -----------        -------------
Net Cash Provided by (Used in)
  Operating Activities                            (49,281)               87,706
                                               -----------        -------------
Cash Flow from Investing Activities
Investment in BTS, net of cash acquired                 -               (29,727)
Purchase of property and equipment                      -               (38,322)
Purchase of equipment to be repossessed                 -              (100,000)
Loan to stockholder                                     -              (115,483)
Purchase of customer base                               -            (1,275,204)
Cash of subsidiaries sold                          (2,480)                    -
                                               -----------        -------------
Net Cash Used in Investing Activities              (2,480)           (1,558,736)
                                               -----------        -------------
Cash Flows from Financing Activities
Borrowings (repayment) on notes to
  related parties                                   1,200              (173,930)
Proceeds from borrowings - non-related parties     17,500                65,962
Proceeds from issuance of common stock             28,800             1,580,263
                                               -----------        -------------
Net Cash Provided By Financing Activities          47,500             1,472,295
                                               -----------        -------------
Net Increase (Decrease) in Cash                    (4,261)                1,265
                                               -----------        -------------
Cash - Beginning of Year                            6,287                5,022
                                               -----------        -------------
Cash - End of Year                               $  2,026            $   6,287
                                               ===========        =============

                 See accompanying notes to financial statements
                                       F5

<PAGE>

                                  Colmena Corp
                            Statements of Cash Flows
                    Years Ended September 30, 1999 and 1998

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

During 1998, the Company  purchased  telecommunications  equipment for $685,935,
which  included  non-cash  consideration  of a $275,000 note payable and 300,000
shares of common stock valued at $310,935.

Pursuant to the  recapitalization  (see Note 1(A)), the Company assumed $118,880
of the liabilities.

In February  1998,  the Company issued 100,000 shares of common stock as part of
the  total  consideration  to  acquire  the net  assets of  Business  Technology
Systems, Inc. (See Note 9)

                 See accompanying notes to financial statements

                                       F6
<PAGE>


                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

Note 1   Nature of Operations and Summary of Significant Accounting Policies

      (A) Nature of Operations

          Colmena Corp. (the "Company") is a Delaware  corporation  that through
          its former subsidiaries was engaged in various industries. Through its
          former  subsidiary,  T2U Co. (formerly known as RCP Enterprises Group,
          Inc.),  which was doing  business as RCP  Communications  Group,  Inc.
          ("RCP")  and through its former  subsidiary,  TechTel  Communications,
          Inc. ("TechTel"), the Company was engaged in the business of marketing
          and  distributing  telecommunications  services.  Through  its  former
          subsidiary,   Business   Technology   Systems,   Inc.,  ("BTS")  whose
          operations were discontinued in 1998 (See Note 11), the Company was in
          the business of selling computer equipment.  In addition,  the Company
          was  in  the  business  of  manufacturing  and  distributing   premium
          hand-rolled  cigars through its former  subsidiary,  Tio Mariano Cigar
          Corp.  ("Tio"),  whose operations were  discontinued in 1998 (See Note
          11). In March 1999, the Company transferred one hundred percent of its
          subsidiaries,  RCP,  BTS,  and  Tio to  its  president  and  principal
          stockholder in a transaction  accounted for as a sale. In addition, in
          March 1999,  90% of TechTel was sold to various  parties.  In November
          1999, the Company sold its 10% holdings in TechTel (See Note 2).

          On November  10,  1997,  RCP was  acquired by  Sports-Guard,  Inc.,  a
          publicly  traded  company,  which had no  operations  as of the merger
          date.  Sports-Guard,  Inc. issued  3,000,000 shares of common stock to
          complete the acquisition.  In addition,  on November 10, 1997, Tio was
          acquired by Sports-Guard, Inc. for the issuance of 1,310,000 shares of
          stock.  The  transactions  are  treated for  accounting  purposes as a
          recapitalization of Colmena at historical costs.

          During 1998, the Company's operations were significantly impacted from
          the bankruptcy of its sole service bureau. (See Note 3)

      (B) Principles of Consolidation

          The 1998 consolidated financial statements include the accounts of the
          Company and its then  subsidiaries  RCP,  BTS,  Tio, and TechTel.  All
          significant   intercompany   balances  and   transactions   have  been
          eliminated in consolidation.

          The 1999 financial  statements  include the operating  activity of the
          subsidiaries RCP, BTS, Tio, and Techtel through the sale date of March
          16, 1999.  The  investment  in TechTel was recorded at a zero cost and
          accounted for using the cost basis from March 1999.

      (C) Use of Estimates

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


                                       F7
<PAGE>


                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

      (D) Cash and Cash Equivalents

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

      (E) Property and Equipment

          Property  and   equipment  are  stated  at  cost,   less   accumulated
          depreciation. Expenditures from maintenance and repairs are charged to
          expense as incurred.  Depreciation is provided using the straight-line
          method over the  estimated  useful life of the assets of five to seven
          years.

      (F) Investments

          The Company accounts for investments in marketable  equity  securities
          in accordance with Statement of Financial  Accounting Standards Number
          115,   "Accounting   for  Certain   Investments  in  Debt  and  Equity
          Securities."  Management determines the appropriate  classification of
          its  investments  at the  time of  acquisition  and  reevaluates  such
          determination  at each  balance  sheet date.  Trading  securities  are
          characterized  by the Company's  intent to sell them in the near term,
          while  available-for-sale  securities are those securities that do not
          qualify as trading securities.  Trading securities are carried at fair
          value, with unrealized  trading gains and losses included in earnings.
          Available-for-sale   securities  are  carried  at  fair  value,   with
          unrealized  gains  and  losses,  net of tax,  reported  as a  separate
          component of stockholders'  equity. In determining  realized gains and
          losses,  the cost of the  securities  sold is  based  on the  specific
          identification method.

      (G) Long Term Investments

          The  Company  accounts  for  investments  in   non-marketable   equity
          securities  in accordance  with  Accounting  Principles  Board Opinion
          Number 18  ("Accounting  Principles  Board  Opinion  18") and  related
          interpretations.   Under  Accounting   Principles  Board  Opinion  18,
          investments in corporate joint ventures and other common stock of less
          than 20% are  generally  accounted  for  using the cost  method  while
          investments  between 20% and 50% are generally accounted for using the
          equity method.

          Under the cost  method,  investments  are  recorded  and  reported  at
          original cost until they are partially or entirely  disposed of or the
          original cost value has been impaired.  Under the equity  method,  the
          investment  is recorded at original  cost and  periodically  increased
          (decreased) by the investor's proportionate share of earnings (losses)
          of the entity  invested in and decreased by all dividends  received by
          the investor from the entity invested in.


                                     F8

<PAGE>


                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

      (H) Revenue Recognition and Cost of Revenue

          The  Company  recognizes  revenue,  less an amount  for  uncollectible
          accounts,  based upon their experience and others in the long distance
          service calling cards industry,  and related costs from the selling of
          their long distance  telephone service calling cards at the expiration
          of  its  use,  generally  thirty  days  or  end of  month.  Until  the
          thirty-day  period has passed,  the Company  defers all  revenues  and
          costs.

      (I) Stock Options

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

      (J) Income Taxes

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

      (K) Loss Per Share

          Net income  (loss) per common share for the years ended  September 30,
          1999 and 1998 is based upon the  weighted  average  common  shares and
          dilutive  common  stock  equivalents  outstanding  during  the year as
          defined by  Statement of Financial  Accounting  Standards,  Number 128
          "Earnings Per Share." The assumed exercise of common stock equivalents
          was not utilized in 1999 and 1998 since the effect was  anti-dilutive.
          At September 30, 1999,  there were 300,000 stock options and 2,326,530
          stock  warrants  outstanding,  which could  potentially  dilute future
          earnings per share.


      (L) Reclassification


          Certain  amounts in the 1998  consolidated  financial  statements have
          been reclassified to conform with the 1999 presentation.


                                       F9
<PAGE>



                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

 Note 2   Reorganization Agreement and Sale of Subsidiaries

     On March 16,  1999 (the  "Sale  Date"),  a  Reorganization  Agreement  (the
"Agreement")  was entered  into by and between the Company and Mr.  Peplin,  the
principal  stockholder and former  president of the Company.  Under the terms of
the Agreement,  as amended, the Company conveyed to the order of Mr. Peplin, and
Mr. Peplin accepted,  all of the Company's right,  title, and interest in and to
all of the  capital  stock  of T2U  Co.,  BTS,  and  Tio  (the  "Subsidiaries"),
expecting that Mr. Peplin will designate a newly organized corporation to assume
ownership of the  Subsidiaries.  The transaction was accounted for as a sale, at
fair market value, the  consideration  being an assumption of net liabilities by
Mr. Peplin.  The Company agreed to pay all reasonable costs required to effect a
liquidation of the Subsidiaries by Mr. Peplin's  designee  pursuant to Chapter 7
of the United States  Bankruptcy Code and to defend any resulting  litigation or
regulatory  actions  provided  that all work  required is  effected  through the
Company's  attorneys.  Furthermore,  the  Company  agreed to spin out 20% of the
capital stock of TechTel to the Company's  stockholders and to use the remaining
80% of the capital stock of TechTel to settle outstanding liabilities of TechTel
to Mr. Peplin, to a principal of Yankees (see Note 14 (A)) and to other persons,
based on negotiations to be conducted by Yankees.  Mr. Peplin irrevocably agreed
that any net assets remaining after liquidation of the Subsidiaries will be used
to pay taxes and liabilities of TechTel guaranteed by Mr. Peplin or the Company,
with the net balance  returned to the Company,  such net balance  interest to be
represented by a security interest memorialized in one or more Forms UCC-1 to be
filed in each state in which the Subsidiaries have any assets.  Ultimately,  90%
of  TechTel  common  stock  was  transferred  to  Mr.  Peplin  and  others  in a
transaction  accounted for as a sale, the consideration  being the assumption by
the transferees of all liabilities of TechTel. The spinout discussed above never
occurred.  In  November  1999,  the  interest  of all  stockholders  in TechTel,
including the Company, was acquired by FON Digital Network, Inc. ("FON"), an OTC
Bulletin Board company.  FON issued 50,000 shares to various  parties  including
5,000 to the Company in exchange for TechTel shares. The shares were recorded at
zero cost due to the de minimis value.

     At the Sale Date,  the Company  recognized a gain on sale of $1,584,117 net
of the  retention  of a BTS loan  and  related  accrued  interest  liability  of
$343,000 at the Sale Date, which the Company had guaranteed.

     The   reorganizations   discussed   above  do  not   qualify  as   tax-free
reorganizations.  However,  no taxes will be payable, as the income generated by
the Company as a result of its reorganizations is from the relief of liabilities
which is fully excludable under the insolvency/bankruptcy  exception. Under such
exception,  the net operating  loss and other tax attributes are reduced in lieu
of reporting income.

     On May 4, 1999, Mr. Peplin resigned from all offices and directorships held
in the Company. (See Note 13 (D))

Note 3   Provisions for Doubtful Accounts

     In September 1998,  International  Telemedia Associates,  Inc. ("ITA"), the
Company's  then  billing  and  collection  agent,  was placed  into  involuntary
bankruptcy  pursuant to Chapter 7 of the United States Bankruptcy Code (See Note
15). The provision for doubtful  accounts in 1998 includes  primarily the amount
due from ITA.


                                      F10
<PAGE>


                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

     Also included in the provision is an advance made during 1998 pursuant to a
potential acquisition. Such advance was deemed uncollectable as of September 30,
1998.

Note 4   Property and Equipment

     Depreciation  expense for the year ended September 30, 1998 was $21,045, of
which  $19,765 is part of  discontinued  operations,  and $1,280 is  included in
continuing operations.

     The Company applies Statement of Financial Accounting Standards Number 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." In evaluating the potential  impairment of Property & Equipment
as of September 30, 1998, the Company  determined that a portion of the carrying
amount of the  telecommunications  equipment,  originally  recorded at a cost of
$685,935,  was not recoverable.  The equipment was therefore written down to its
net realizable  value of $275,000.  Accordingly,  an impairment loss of $410,935
has been recorded in 1998,  which is included in other expenses on the statement
of operations.  On October 1, 1999, the Company received a Notice of Proposal to
Retain Collateral  pursuant to the Security Agreement of August 14, 1998 in full
satisfaction  of the  obligation  secured  by the  Security  Agreement  totaling
$275,000 at September  30, 1998.  The equipment  was  repossessed  subsequent to
September 30, 1999.  The equipment  totaling  $275,000 at September 30, 1999 was
not in use and was  recorded  as  equipment  to be  repossessed  under  security
agreement,  net of  impairments.  Depreciation  of $4,500 on the  equipment of a
subsidiary is included in 1999 for the period up to the subsidiary  sale date of
March 16, 1999. (See Notes 7 and 10)

Note 5   Amortizable Customer Base

     The  Company  purchased  customer  databases  from  third  parties.   These
databases  were used to market the Company's  service  plans.  These  databases,
which are not re-saleable, were amortized over a 12-month period. During 1998, a
subsidiary of the Company acquired a customer database for $1,476,191, which was
amortized through September 30, 1998. Since the subsidiary ceased operations and
there  was no use in its  business  plan  for  the  customer  base,  nor  was it
saleable,  the Company has written off the  remaining  $1,232,946  net  carrying
value of this  asset,  which has been  included as an  impairment  loss in other
expenses in 1998. Amortization for the period prior to write-off was $243,245.

Note 6   Loss on Impairment of Stock

     A loss on  impairment  of stock  aggregating  $73,610 has been  included in
other expenses during 1998 as part of the loss on impairment of assets.  Another
impairment  of $2,900 on the same stock was  recognized  in 1999.  The stock was
owned by a subsidiary, which was sold in March 1999.

Note 7   Notes Payable

     The following schedule reflects loans payable at September 30, 1999:


                                      F11

<PAGE>


                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

Note payable,  interest at 9% per annum,  maturing  August 14, 1999,
payable in monthly  principal  and  interest  installments  secured
by  telecommunications equipment.  In default  and due  immediately.
On October 1, 1999,  the  Company received  Notice of Proposal to
retain  collateral in full  satisfaction of this note.
(See Notes 4 and 10).                                               $  275,000

Note  payable,  interest  at 10% per annum,  due and  payable on
July 30,  1999. Holder may  convert  any  portion of the  principal
balance  into shares of the Company's  common stock at a conversion
price of $0.40 per share. In default as of August 1, 1999.             100,000
                                                                     -----------
                                                                     $ 375,000
                                                                     ===========

     On May 30, 2001, the $100,000 note and related accrued interest was settled
for 1,844,444 shares of the Company's common stock.

Note 8   Guaranteed Loans

     On or about  February 26, 1997 (the  "Effective  Date"),  an agreement,  as
amended, for wholesale financing (the "Loan Agreement") was entered into between
Deutsche Financial Services Corporation,  Business Technology Systems, Inc. (the
"Borrower"),  and Colmena Corp. and certain individuals (the "Guarantors").  The
Loan Agreement provided for inventory financing for the Borrower. The loans made
under the Loan  Agreement  were secured by a first  priority  perfected lien and
security  interest in all of Borrower's  assets,  rights,  and proceeds thereof,
owned at the Effective Date or thereafter acquired by the Borrower. (See Note 9)

     On August 19, 1998, an extension agreement (the "Extension  Agreement") was
entered  into  between  Deutsche   Financial  Services   Corporation,   Business
Technology  Systems,  Inc. (the  "Borrower"),  and the Guarantors.  (See further
discussion  regarding the repudiation of this extension  agreement in succeeding
paragraph.)  The Extension  Agreement  extended the terms of the Agreement  (see
above) entered into on February,  26 1997, as amended,  and extended the payment
of the debt,  including past due  obligations.  Under the terms of the Extension
Agreement,  the Borrower  acknowledged an indebtedness due to Deutsche Financial
Services Corporation of $348,858 representing principal as of August 14, 1998 of
$345,474,  interest charges of $3,384 through July 31, 1998, additional interest
charges  from August 1, 1998 at the per annum rate of Prime plus 6.5%,  and fees
and expenses incurred by Deutsche Financial  Services  Corporation (the "Debt").
In  addition,  the  Borrower  agreed to  surrender  its  inventory  to  Deutsche
Financial   Services   Corporation  for  the  purpose  of  its  liquidation  and
application  to the Debt as of the date of the  Extension  Agreement.  Under the
repayment  terms, the Debt was to be paid on or before September 15, 1998 by the
Borrower or the Guarantors.  Furthermore, the Borrower and the Guarantors agreed
to the entry of a consent  arbitration  award  for the total  Debt as  described
above.

     As of September 30, 1999, the remaining debt including  accrued interest of
$60,000  totaled  approximately  $391,000.  As of that date,  the  Borrower  and
Guarantors were in default.  In 1999,  Deutsche Financial  Services  Corporation
filed a Consent  Arbitration  Award based upon alleged  breach of the  Extension
Agreement.  Due to matters relating to the execution of the Consent  Arbitration
Award,  the Company  repudiated its signing of the Extension  Agreements and has
taken the position that the Consent  Arbitration  Award entered  pursuant to the
Extension  Agreement  is not  legally  binding  (see Note  15(C)).  Based on the
contingency to Colmena Corp. relating to the initial guarantee,  the Company has
recorded  the  liability  of $331,000  plus  accrued  interest of $60,000 on its
records as of September 30, 1999.


                                      F12
<PAGE>


                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

Note 9   Purchase of Assets and Liabilities of Business Technology Systems, Inc.

     Effective  February 19, 1998, the Company and its wholly owned  subsidiary,
RCP, (the "Buyer") entered into an agreement with Business  Technology  Systems,
Inc., to acquire the assets and assume the  liabilities  of Business  Technology
Systems,  Inc.  As  consideration  for the  purchase,  the  Buyer  agreed to pay
$100,000 in cash and to issue 100,000  restricted shares of the Company's common
stock. The agreement was later amended to lower the cash portion of the purchase
price to $50,000 from $100,000.  For financial reporting purposes, the Company's
common stock issued  pursuant to the  acquisition  was valued at $306,250.  From
February 19,  1998,  Business  Technology  Systems,  Inc.  operated as a defacto
corporation  until the  articles  of  incorporation  were  filed in the State of
Florida on May 15,  1998.  All assets and  liabilities  were  pushed down to the
subsidiary using pushdown accounting.

     The  purchase  was  recorded  under  the  purchase  method  of  accounting.
Accordingly, the purchase price was allocated to assets acquired and liabilities
assumed  based on the estimated  fair market values at the date of  acquisition.
The fair market value of the net assets  acquired was a net liability of $57,412
resulting in the recording of goodwill totaling $413,662.

     As of September 30, 1998,  the Company  discontinued  operations of BTS and
wrote down any  unamortized  goodwill to its net  realizable  value of zero (See
Notes 8 and 11 (B)).

Note 10  Purchase of Telecommunications Equipment

     Effective  May 19,  1998,  the Company  entered  into an  agreement  with a
business entity, to purchase telecommunications  equipment. As consideration for
the  equipment,  the  agreement  stipulated a total  payment of $375,000 and the
issuance  of  300,000  shares of the  Company's  common  stock.  Of the total of
$375,000,  the  Company  agreed  to pay  $100,000  in cash and  issue a 24 month
secured promissory note for $250,000,  at an annual interest rate of 9%, payable
and due on August 14, 1999. The remaining  $25,000 was agreed to be covered by a
credit issued by an affiliate of the Seller.  As the latter never occurred,  the
Company still owes the seller an additional $25,000, which has been added to the
total outstanding promissory note resulting in a balance of $275,000.

     The equipment was recorded  under the purchase  method of accounting for an
aggregate  $685,935  consisting  of the  common  stock  issued  with a value  of
$310,935 based upon the discounted  trading price of the Company's  common stock
on the  transaction  date,  a note  payable of  $275,000  and a cash  payment of
$100,000.

     The equipment was written down to its net  realizable  value of $275,000 at
September 30, 1998 (See Note 4). On October 1, 1999, the Company received Notice
to Retain  Collateral  regarding  this  equipment  in full  satisfaction  of the
$275,000 of related debt. The collateral was  repossessed in October 1999.  (See
Note 4 and 7)


                                      F13
<PAGE>


                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

Note 11  Discontinued Operations

     During  1998,   the  Company   discontinued   operations   of  two  of  its
subsidiaries, Tio (See Note 11 (A) below) and BTS (See Note 11 (B) below).

     The loss from discontinued  operations reported separately in the Statement
of  Operations  for the  year  ended  September  30,  1998 is  comprised  of the
following amounts:

                                                                   1998
                                                              ---------------
     Loss from Discontinued Operations
     Loss from Operations
     Tio                                                      $     (172,599)
     BTS                                                          (1,206,948)
                                                              ---------------
      Total Loss from Operations                               $  (1,379,547)
                                                              ---------------
     Loss on Disposal
     Tio                                                     $      (104,504)
                                                              ---------------
      Total Loss on Disposal                                        (104,504)
                                                              ---------------
      Total Loss from Discontinued Operations                 $   (1,484,051)
                                                              ===============

      (A) Discontinued Operations - Tio

          On February 8, 1998 (the "Measurement  Date"),  management  decided to
          discontinue operations of the Company's subsidiary,  Tio, which was in
          the business of  manufacturing  and distributing  premium  hand-rolled
          cigars.  Effective  March 1, 1998 (the "Disposal  Date"),  the Company
          sold  the  inventory  and  fixed  assets  of  Tio to  Dominican  Cigar
          Corporation,  ("Dominican"),  a publicly held corporation, in exchange
          for 10,000 restricted shares (300,000 restricted  pre-split shares) of
          Dominican.  At the time of the exchange,  the  Dominican  shares had a
          market  value of  $77,010.  The book  value  of the  assets  exchanged
          exceeded the value of the stock. Accordingly, a loss on disposal under
          discontinued operations of $85,176 was recorded. In addition, the loss
          on operations  incurred from the Measurement Date to the Disposal Date
          totaling  $19,328  has been  included  in the loss on  disposal  under
          discontinued operations.  The loss from operations of $172,599 for the
          period up to the  Measurement  Date is shown as loss  from  operations
          under discontinued operations.

      (B) Discontinued Operations - Business Technology Systems, Inc.

          On  September   30,  1998,   the  Company's   management   decided  to
          discontinued  operations  of  its  subsidiary,   BTS.  The  loss  from
          operations  of  $1,206,948  for 1998 is shown as loss from  operations
          under discontinued operations (See Notes 8 and 9).


                                      F14
<PAGE>


                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

          Because of the  discontinuance of BTS operations,  its inventory as of
          September 30, 1998 totaling $34,094 had no current use in its business
          plan. The Company  determined that the inventory could not be sold and
          therefore  had no market value.  Accordingly,  the Company has written
          down the  inventory to its net  realizable  value of zero and included
          the loss in the loss from operations under discontinued  operations in
          1998.

          The Company applies Statement of Financial Accounting Standards Number
          121  "Accounting  for the  Impairment  of  Long-Lived  Assets  and for
          Long-Lived  Assets to Be Disposed  Of." In  evaluating  the  potential
          impairment  of Property & Equipment  as of  September  30,  1998,  the
          Company  determined  that  office  equipment  and  furniture  totaling
          $71,235 had no current use in the business  plan of BTS because of the
          discontinuance of its operations,  and was not saleable.  Accordingly,
          the Company has  written  down the  remaining  net  carrying  value by
          recording an  impairment  loss of $71,235,  which has been included in
          the loss from discontinued operations.

Note 12  Income Taxes

     RCP was formed as a limited liability company with total capital of $1,000.

     Tio was  incorporated  as a C Corporation,  with 850 shares of common stock
and contributed capital of $1,000.

     Tio  incurred a loss for the period of July 1, 1997 to  September  30, 1997
and has a net operating  loss of  approximately  $119,500,  which can be carried
forward,  subject to certain  limitations for 15 years. At September 30, 1997, a
deferred  tax  asset of  approximately  $36,000  was  recorded.  Because  of the
uncertainty  surrounding this asset, a valuation  allowance for $36,000 was also
recorded at September 30, 1997. RCP is a limited liability company and was taxed
as a partnership  until November 10, 1997, the date of the merger.  There was no
current  income tax provision  for the year ended  September 30, 1998 due to the
Company's net loss.

     The Company's tax expense  differs from the  "expected" tax expense for the
years ended  September  30,  1999 and 1998  (computed  by  applying  the Federal
Corporate tax rate of 34 percent to loss before taxes), as follows:

                                                  1999               1998
                                              -------------------------------

Computed "expected" tax expense (benefit)  $     (64,258)       $  (5,720,237)
Non-deductible stock based compensation          517,812            4,243,608
Effect of net operating loss carry forwards     (453,554)           1,476,629
                                              ------------       ------------
                                           $           -        $           -
                                              ------------       ------------

     The tax  effects of  temporary  differences  that give rise to  significant
portions of deferred tax assets and  liabilities  at September 31, 1999 and 1998
are as follows:


                                      F15
<PAGE>


                                                  1999               1998
                                              --------------------------------
Deferred tax assets:
Net operating loss carryforward            $   1,023,075        $   1,476,629
Stock based compensation                       4,761,420            4,243,608
                                              -----------        ------------
Total gross deferred tax assets                5,784,495            5,720,237
Less valuation allowance                      (5,784,495)          (5,720,237)
                                              -----------        ------------

Net deferred tax assets                    $           -        $          -
                                              ===========        ============

     At September 30, 1999, the Company had net operating loss carry forwards of
approximately  $3,009,044  for income tax  purposes,  available to offset future
taxable income expiring on various dates through 2019.

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

     The  valuation  allowance at  September  30, 1998 was  $5,720,237.  The net
change in the valuation allowance was an increase of $64,258.

Note 13  Stockholders' Equity

      (A) Stock Issuances

          During 1998, the Company issued 1,646,500 to various consultants.  The
          stock was expensed at the trading price on the grant date.

          During  June 1999,  the  Company  issued  250,000  common  shares as a
          settlement.  The shares  were  valued at $25,000  based on the trading
          price  of the  shares  at the  settlement  date  and  an  expense  was
          recorded.

          During 1999, the Company issued  6,000,000 common shares upon exercise
          of warrants.

      (B) Stock Option Plan

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


                                      F16
<PAGE>


                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

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

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

      (C) Stock Options Granted to Consultant

          On February  25,  1998,  the Company  issued  1,500,000  common  stock
          options at an  exercise  price of $2.00 per share to a  consultant  as
          consideration for services.  The options vested and became exercisable
          over a period of 10 months.  As of September 30, 1998,  the consultant
          had exercised  640,000 options and 860,000 options were outstanding as
          of September 30, 1999.  The 860,000  options  expired  unexercised  in
          February  2000.  The Company  applies the fair market  value method of
          Statement of Financial  Accounting  Standards  123 in  accounting  for
          stock options issued to consultants.  Accordingly,  consulting expense
          of $4,770,000  was  recognized  during 1998 for the 1,500,000  options
          issued.

      (D) Stock Options Granted to the Company's Former President

          On June 1, 1998, the Company issued  1,000,000 common stock options to
          the President and Chief Executive  Officer of the Company at that time
          under an  employment  agreement  effective  as of the same  date.  The
          options vest at a rate of 200,000 shares per year on each  anniversary
          date of the employment  agreement,  and were  exercisable at $6.00 per
          share for six years  following  the grant of such  options.  On May 4,
          1999, the President resigned and the employment  contract  terminated.
          All options expired unvested and unexercised.

      (E) Stock Options Granted to Directors and Officers

          The  Company  granted  300,000  vested  options in January  1999 at an
          exercise price of $0.05 expiring  January 2002.  Pursuant to APB25, an
          expense of $21,600  was  recognized  in 1999 pro rata over the service
          period based on the trading  price of the  underlying  common stock on
          the grant date.

                                      F17
<PAGE>


                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

      (F) Warrants Granted to Consultant

          During 1999,  8,326,530  warrants  were  granted to a  consultant  and
          2,356,530 were outstanding at September 30, 1999 (see Note 14(A)). The
          Company  recognized a $1,501,378  consulting  expense in 1999 based on
          the fair value options pricing method of SFAS 123.

      (G) Pro Forma Disclosures

          In accordance  with Statement of Financial  Accounting  Standards 123,
          for options issued to employees,  the Company has elected to apply the
          intrinsic value method of Accounting  Principles  Board Opinion Number
          25 and related interpretations.  Accordingly,  $130,000 was charged to
          compensation  during 1998 and  $21,600 in 1999,  since the fair market
          value of the common  stock based upon the  trading  price at the grant
          date  exceeded  the  exercise  price.  Had   compensation   cost  been
          recognized  based on the fair market value of the options on the grant
          date consistent with Statement of Financial  Accounting Standards 123,
          the Company's net loss for the years ended September 30, 1999 and 1998
          would have been increased to the pro forma amounts as follows:

                                                    1999                1998
                                                 -----------         ---------

          As reported                        $     (290,296)      $ (16,824,226)
          Pro Forma                          $     (291,196)      $ (18,894,226)

          Net loss per share:
          As reported                        $     (0.03)         $       (2.64)
          Pro Forma                          $     (0.03)         $       (2.67)

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

Note 14  Commitments and Contingencies

     (A) Consulting Agreement Between The Company and a Consultant

          On January 5, 1999 (the "Effective Date"), a consulting agreement (the
          "Agreement")  was  entered  into  by and  between  the  Company  and a
          Consultant (the "Consultant"),  a Florida  corporation.  The Agreement
          was  established  for a term of 730 days from the  Effective  Date and
          will be renewed  automatically,  on a continuing annual basis,  unless
          terminated by one of the parties 30 days prior to the  termination  of


                                      F18
<PAGE>



                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

          the then current term. The services  provided by the  Consultant  were
          agreed  to be the  services,  on a  reasonable,  as  required,  basis,
          consistent  with  the  Consultant's  other  business  activities.  The
          Consultant's  areas of  expertise  are mainly  comprised  of corporate
          structure, organization, and reorganization, mergers, acquisitions and
          divestitures, strategic corporate development, corporate financial and
          equity  analysis,  and  other  corporate  matters.   Furthermore,  the
          Consultant  agreed to be responsible for administering the expenditure
          of the  proceeds  derived by the Company  from the exercise of options
          that were given to the consultant as part of its  compensation for the
          services  rendered  (see below) in order to  implement  the  strategic
          plans  developed by the  Consultant  and to settle and  discharge  the
          corporate  obligations  of the Company.  In this role,  the Consultant
          agreed to establish and operate bank  accounts for the Company,  using
          such signatories as the Consultant deems appropriate.

          As consideration for the first 200 hours of services provided (in lieu
          of  document  license  fees  and  required  cash  payments  valued  at
          $20,000), the Company agreed to issue within the first 365 days of the
          agreement  (the "Initial  Term") to the Consultant  8,066,326  Class A
          options to purchase  8,066,326 shares of the Company's common stock at
          an aggregate  exercise  price of $40,000,  under the  assumption  that
          7,750,000  common  shares  were  outstanding  or  reserved  for future
          issuance,  and therefore resulting in the consultant owning 51% of the
          Company's common stock. Any increase or decrease in the outstanding or
          reserved  shares would  result in a  corresponding  adjustment  of the
          options'  quantity  and exercise  price per share.  The options may be
          executed from the 10th day until the 365th day following the effective
          date.  This term was amended in January 2, 2000 to extend the term for
          exercise  and for  determining  the quantity of shares to the later of
          complete exercise of original options or 100th day following  the date
          the Company becomes current in its SEC filings under the 1934 exchange
          act. As of the date of the accompanying  audit report,  the Consultant
          has  been  issued  8,326,530  warrants  and  has  exercised  6,000,000
          warrants at an adjusted  exercise  price of $0.0048 per share based on
          the $40,000  aggregate  price.  (See subsequent  issuances of warrants
          below.)

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

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

             (i)    a fee of 25% of the  savings  achieved,  or
             (ii)   if equity  funding is  provided  through  Consultant  or its
                    affiliates,  a  discount  of 10% from the bid  price for the
                    subject  equity  securities,  if  issuable  as free  trading
                    securities,  or a discount of 50%, if issuable as restricted
                    securities,  or
             (iii)  an introduction fee of 5% of the aggregate proceeds obtained
                    if funding is  provided  by any  persons  introduced  to the
                    Company by the Consultant;

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


                                      F19
<PAGE>



                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

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

               On January 4, 2000,  the  Agreement  was amended a second time to
               require  payment  to the  Consultant  based  on the  Consultant's
               standard  hourly rates,  which payments the Consultant may accept
               in capital stock at the conversion rate of 50% of the fair market
               value of such stock.  In  addition,  the  Consultant's  ownership
               after exercise of the warrants shall increase to 75% from 51% and
               the aggregate exercise price increased to $80,000. The Consultant
               also  has   preferential   rights  to  subscribe  for  additional
               securities  at a purchase  price of 50% of the fair market value.
               The  term of the  warrants  has  been  extended  to the  later of
               December  31, 2002 or 100th day after the Company  registers  the
               stock underlying any unexercised warrants.

               On January 4, 2001, a third amendment  changed the consulting fee
               to $10,000 per month,  eliminating  hourly and document licensing
               fees. All provisions from prior agreements  regarding issuance of
               warrants remain intact.

               Subsequent  to the year end September  30, 1999,  21,014,574  and
               5,833,332  additional  warrants were issued to the  Consultant in
               2000 and 2001  resulting in an expense of $432,125 and  $460,000,
               respectively. (See Note 17(C))

     (B)  Employment Agreements

          The Company  entered into an employment  agreement on January 12, 2000
          with a term  through the later of December 31, 2000 or the election of
          a new Secretary,  to employ its corporate  secretary (the "Employee").
          Compensation  is  24,000  common  stock  options  pro rata  each  year
          exercisable  at $0.02 per share,  beginning  January  1, 2001  through
          December 31, 2001. In addition,  the Employee  shall  receive  certain
          commissions or fees based on stipulated criteria. On January 29, 1999,
          the Secretary was granted 20,000 and on January 3, 2000, the Secretary
          was  granted  24,000.  The  stock  options  vest  immediately  and are
          recorded as  compensation  expense  over the service  period under the
          intrinsic  value  method  of APB  25,  at  the  trading  price  of the
          underlying  common stock on the vesting date,  resulting in an expense
          in 1999 of $75 and in 2000 of $655.

          The  Company  entered  into an  employment  agreement  on May 4,  1999
          expiring May 3, 2000 and automatically renewing unless terminated,  to
          employ its  President.  Compensation  is 200,000  common shares of the
          Company  each year  payable  only upon the 365th day of  service  (the
          "vesting date") and certain  commissions or fees as stipulated.  Based
          on this contingency the Company recorded compensation expense over the
          one-year  service  period based on the estimated  fair market value on
          the vesting date resulting in the expense of $4,167 in 1999 and $1,833
          in 2000.  An  additional  200,000  shares  are  issuable  based on the
          service period ending in 2001.


                                      F20
<PAGE>



                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

Note 15  Legal Matters

    (A)   The Company Versus ITA

          In September  1998,  ITA  defaulted in its payments to T2U Co.,  doing
          business as RCP, for services  rendered to third  parties,  payment of
          which  was   collected   by  ITA.   Thereafter,   RCP  and  two  other
          corporations,  Psychic Discovery  Network,  Inc.  ("PDN"),  a Delaware
          corporation  affiliated with the Company  through common  ownership by
          the  principal  shareholder  of PDN's parent,  Viatech  Communications
          Group, Inc. and BLJ Communications,  Inc., a Florida corporation,  all
          creditors  of  ITA,  filed  a  petition   seeking  ITA'S   involuntary
          bankruptcy pursuant to Chapter 7 of the United States Bankruptcy Code.
          It is management's  assertion that a favorable outcome for the Company
          is  not  likely.   Accordingly,  a  100%  allowance  of  the  accounts
          receivable due from ITA was recorded  during 1998 as bad debt expense.
          (See Note 2)

     (B)  Investigation of T2U Co. by Federal Trade Commission

          On December 9 and 10,  1998,  the  president  and  regulatory  affairs
          manager,  respectively,  of  T2U  Co.  were  asked  to  testify  in  a
          confidential,  non-public  hearing  before staff of the Federal  Trade
          Commission  ("FTC")  to  determine  whether  various  entities  may be
          engaging  or have  engaged  in unfair  or  deceptive  action,  acts or
          practices  in or  affecting  commerce in violation of Section 5 of the
          Federal  Trade   Commission   Act,  15  U.S.C.   Section  45,  or  the
          Commission's  (FTC) Trade  Regulation  Rule  pursuant to the Telephone
          Disclosure  and Dispute  Resolution  Act of 1992,  16 CFR part 308. As
          monetary relief for any such  violations,  the FTC is seeking consumer
          redress and disgorgement  from the United States Treasury of up to the
          full amount of income  generated by RCP. A proposed  Stipulated  Final
          Judgment  and Order for  Permanent  Injunction  and  Consumer  Redress
          ("Consent  Decree")  was signed by T2U and Mr.  Peplin on November 23,
          1999 and sent to the Division of Marketing Practices, FTC. The Consent
          Decree,  signed by the FTC, will result in certain  injunctions  and a
          judgment against T2U and Mr. Peplin in an amount of $3,200,000.  Based
          upon  representations  made by the  Company to the FTC  regarding  the
          Company's  financial  insolvency,  in lieu of payment of the foregoing
          amount, T2U and Mr. Peplin are to assign to the FTC all rights,  title
          and interest they may have in their proceedings in bankruptcy  against
          ITA.  Management and its counsel believe that since T2U is no longer a
          subsidiary  of the  Company,  that  absent the  ability to "pierce the
          corporate veil," no liabilities  attributable to T2U should affect the
          Company.  However,  this  matter is likely to have a material  adverse
          impact  on T2U  and its  former  president.  In  April  2001,  the FTC
          announced a stipulated  final  judgment and order  against T2U barring
          T2U from a variety of deceptive  "telephone billing"  transactions and
          suspending  T2U's  $3.2  million  financial   judgment  due  to  T2U's
          insolvency. The Court entered the order on May 9, 2001, concluding the
          case.


                                      F21
<PAGE>



                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

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

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

    (D)   Ziff Davis, Inc. vs. BTS

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

    (E)   Louisiana Public Service  Commission vs. RCP Enterprises  Group, Inc.,
          T2U Communications

          Although no formal  complaint was filed, the parties were requested to
          appear  before the  Louisiana  Public  Service  Commission  ("PSC") by
          notice  dated  January  7, 1999.  Management  of the  Company  and its
          counsel believe that absent the ability to "pierce the corporate veil"
          no liabilities  attributable to this matter should affect the Company.
          As of the date of the accompanying audit report,  this matter has been
          dismissed without prejudice by the PSC.

    (F)   Various Creditor Claims

          The Company has judgments and claims against it aggregating  $101,300.
          All  known  amounts  have been  expensed  in 1999 and  accrued  by the
          Company as of September 30, 1999.


                                      F22
<PAGE>



                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

Note 16  Going Concern

     The accompanying  financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is inactive, has recurring
losses,  had cash  used in  operations  of  $49,281  and had a  working  capital
deficiency of $909,820 and an  accumulated  deficit of  $16,903,366 at September
30, 1999. These conditions raise  substantial  doubt about the Company's ability
to continue as a going concern.

     The Company  maintains a license as a telephone  service reseller with Bell
South  and  Management  looks  to  expand  on  such  operations,   or  locate  a
merger/acquisition candidate.

Note 17  Subsequent Events

    (A)   Bell South Agreement

          In November 1999, the Company  entered into a two-year  agreement with
          Bell South  Telecommunications,  Inc. to become an  alternative  local
          exchange telecommunications company ("CLEC") in stipulated states. The
          Company has not activated its service and has no obligation  under the
          agreement until usage begins.

    (B)   Common Stock Issuances

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

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

          On May 4, 2000,  200,000 common shares were issued under an employment
          agreement and on May 4, 2001,  another 200,000 were issuable (see Note
          14(B)).

          On May 11, 2000 (the "Settlement  Date"),  the Company settled various
          disputes with an individual by issuing  136,147 of its common  shares.
          The Company  recorded an expense of $4,084 based on the trading  price
          of the common shares on the Settlement Date.


                                      F23
<PAGE>



                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

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

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

          On  November  8, 2000 (the  "Settlement  Date"),  the  Company  became
          obligated to issue  100,000 of its common shares under a court ordered
          settlement stipulation.  The shares were physically issued in February
          2001 to settle an  obligation  of Tio  Mariano  Cigar  Corporation,  a
          subsidiary of the Company, which was sold in March 1999, and any other
          unknown  obligations  of the Company.  The Company  recorded a $15,000
          expense  based  on the  trading  price  of  the  common  stock  at the
          Settlement  Date.  The expense  represents the write-off of the amount
          due from that subsidiary to settle its obligation.

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

          In July 2001, 2,000,000 common stock warrants were exercised (see Note
          14(A)).

          The Company is obligated to issue  200,000  common  shares to a former
          president  under his employment  agreement,  which has terminated (see
          Note 14(B)).

    (C)   Warrants and Options

          The Company  granted  296,000  options to  directors  and  officers in
          January 2000 at an exercise price of $0.02  expiring  December 2002. A
          compensation  expense of $5,490  was  recognized  under the  intrinsic
          value method of APB 25.

          The Company  granted 70,000 options in March 2000 at an exercise price
          of $0.05 expiring  January 2002. A compensation  expense of $1,050 was
          recognized under APB 25.

          The Company  issued  21,014,574  warrants and 5,833,332  warrants to a
          consultant  in  fiscal  years  2000 and 2001,  respectively  (see Note
          14(A)).  A consulting  expense of $432,125 and $460,000 was recognized
          in 2000  and  2001,  respectively,  based on the  fair  value  options
          pricing method of SFAS 123.


                                      F24
<PAGE>



                                  Colmena Corp.
                          Notes to Financial Statements
                           September 30, 1999 and 1998

          The Company granted 36,000 options in July 2001 for services performed
          in year 2000. An expense of $2,880 was recognized immediately based in
          the intrinsic value method under APB 25.

    (D)   Employment Agreements

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

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

          Effective  June 18, 2001,  the Company  engaged an  individual  as its
          general  counsel.  As  consideration  for his services the Company has
          agreed to  compensate  him  according to the  Company's pro rata share
          (based on the  number of  Yankees'  clients  for whom he is  providing
          legal services) of (1) his current base salary of $40,000 per year and
          (2) $2,5000 per month in common  stock.  The stock  portion is paid at
          the end of each  month,  and is paid by an  equivalent  amount  of the
          Company's  common  stock  calculated  by  using  the  average  closing
          transaction price of the stock for the month then ended.


                                      F25


<PAGE>



ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

     The response to this item is  incorporated  by reference to the response to
Item 4 of the  Registrant's  report on Form 8-KSB filed with the  Commission  on
June 25, 2001, as permitted by Commission Rule 12b-23.

                                    PART III

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

Directors and Executive Officers

Directors and Executive Officers as of September 30, 1999

     As of September 30, 1999, the following  persons served as the Registrant's
directors and executive officers:

Name                             Age (1)   Term (2)      Positions
----                             -------   --------      ---------
Anthony Q. Joffe                 58       (3)(4)      President, director,
                                                       chairman of the board of
                                                       directors
Penny Adams Field                44       (3)(5)      Director, chairperson of
                                                       the audit committee
Charles J. Champion, Jr.         34       (3)(6)      Director and member of the
                                                       audit committee
Vanessa H. Lindsey               30       (3)(7)      Secretary and director
G. Richard Chamberlin, Esquire   54       (3)(9)      General counsel
Robert S. Gigliotti              52       (10)        Director

Material Subsequent Event

         As of August 15, 2001, the following persons served as the Registrant's
directors and executive officers:

Name                             Age (1)  Term (2)     Positions
----                             -------  --------     ---------
Anthony Q. Joffe                 58       (3)(4)       Director, chairman of the
                                                        board of directors.
Charles J. Champion, Jr.         34       (3)(6)       Director and chairperson
                                                        of the audit committee
Vanessa H. Lindsey               30       (3)(7)       Vice-President, Secretary
                                                        and Director
Lawrence R. Van Etten            64          (8)       Director
Kevin W. Dornan                  49         (11)       General counsel
Robert S. Gigliotti              52         (10)       Director
Edward C. Dmytryk                55         (12)       President,Chief Executive
                                                        Officer and Director
(1)  As of August 15, 2001.
(2)  All  directors  were  elected  for a term ending at such time as his or her
     successor  is  elected  at the  next  annual  meeting  of the  Registrant's
     stockholders  and is  qualified in office,  and all  officers  serve at the
     pleasure of the board of directors,  subject to any  contractual  rights to
     compensation  that may  survive  their  termination.
(3)  Term  started  on January 12, 1999.
(4)  Mr. Joffe was elected as a member of the Registrant's
     board of directors on January 12, 1999, as the chairman of the Registrant's
     board of directors in March 1999, as the  Registrant's  president on May 4,
     1999 and resigned as President and Chief Executive Officer on May 14, 2001,
     but  remained as its Chairman  and a director.
(5)  Ms. Field resigned as chair of the audit  committee on November 4, 1999 and
     as a member of the  Registrant's  board of directors  on March 1, 2000,  in
     each case due to other business commitments.

                                     Page 17


<PAGE>



(6)  Mr.  Champion  became  the  chairperson  of the  audit  committee  upon the
     resignation  of  Penny  Fields.
(7)  Mrs. Lindsey was elected as the Registrant's secretary on January 12, 1999,
     as a member of the Registrant's  board of directors  effective  February 1,
     2000, and as the Registrant's  Vice-President on June 14, 2001.
(8)  Mr.  Van  Etten  was  elected  as a  member  of the  Registrant's  board of
     directors on May 31, 2000.
(9)  Mr.  Chamberlin  resigned  as  general  counsel  in order to  pursue  other
     business  interests as of March 31, 2000.
(10) Mr.  Gigliotti  was  elected  as a  member  of the  Registrant's  board  of
     directors  on  December  11,  1997.
(11) Mr. Dornan was elected as the Registrant's  general counsel  effective June
     18, 2001; a copy of his engagement agreement is filed as an exhibit to this
     report,  see  "Part  III,  Item  13(a),  Exhibits  Required  by Item 601 of
     Regulation   SB."
(12) Mr. Dmytryk was elected as a member of the Registrant's  board of directors
     and as its president and chief executive officer on May 14, 2001.

Biographies of Directors and Executive Officers

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

     Mr. Joffe's  biography is incorporated  by reference from the  Registrant's
report on Form 10-KSB for the fiscal year ended September 30, 1998, as permitted
by Commission Rule 12b-23.

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

     Mr. Dmytryk's  biography is incorporated by reference from the Registrant's
report on Form 10-QSB for the quarter  ended March 31,  1999,  as  permitted  by
Commission Rule 12b-23.

Penny Adams Field, Former director and audit committee chair.

     Mrs. Fields's  biography is incorporated by reference from the Registrant's
report on Form 10-KSB for the fiscal year ended September 30, 1998, as permitted
by Commission Rule 12b-23.

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

     Mr. Champion's biography is incorporated by reference from the Registrant's
report on Form 10-KSB for the fiscal year ended September 30, 1998, as permitted
by Commission Rule 12b-23.

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

     Mrs. Lindsey's biography is incorporated by reference from the Registrant's
report on Form 10-KSB for the fiscal year ended September 30, 1998, as permitted
by Commission Rule 12b-23.

G. Richard Chamberlin, Esquire, Former general counsel.

     Mr.   Chamberlin's   biography  is   incorporated  by  reference  from  the
Registrant's report on Form 10-KSB for the fiscal year ended September 30, 1998,
as permitted by Commission Rule 12b-23.

Robert S. Gigliotti, Director, audit committee member.

     Mr.   Gigliotti's   biography  is   incorporated   by  reference  from  the
Registrant's report on Form 10-KSB for the fiscal year ended September 30, 1998,
as permitted by Commission Rule 12b-23.

Lawrence R. Van Etten, Director.

     Mr. Van Etten,  age 64,was elected as member of the  Registrant's  board of
directors  on May 31,  2000.  Mr.  Van Etten  graduated  from New York  Military
Academy,  Cornwall On Hudson, New York in 1954 and attended  Gettysburg College,
Gettysburg,  Pennsylvania from 1954 -1956 and Marist College,  Poughkeepsie, New
York from 1981-1982,  He was employed by IBM from 1956 until 1987, where he held
several senior  management  positions  including  Corporate  Control  Operations
Manager,   Corporate  Scheduling  Manager  and  Director  of  Logistics  Special
Processes. Since leaving  IBM,  Mr. Van Etten has  served as an  executive  with

                                     Page 18


<PAGE>

several companies in the United States and Canada [Vice President - Remtec, Inc.
Chambly, QC - Manufacturer of Refueling Vehicles 1987-1988; Vice President - The
Enterprise   Group  -  Clearwater   Florida  -   Development   Of  New  Business
Opportunities  1993-1994;  Vice President - International Digital Communications
Systems,  Inc. - Miami,  FL -  Telecommunications  Sales - 1996-1998;  President
Techtel  Communications,  Inc.,  Pompano Beach, FL- CLEC Service Provider 1998 -
1999 and owned and managed his own  consulting  company LVE &  Associates - US &
Canada - Several  long term  contracts  with Toyada  Gosei,  Best Glove  Canada,
Remtec, Inc. Prestige Auto & Strategic Health Development Corporation].  Much of
his recent work experience has dealt with business management systems, materials
management,  management development,  personal computer application software and
the  Internet.  From May 22, 2000 to December 22, 2000,  Mr. Van Etten served as
acting president and chief operating officer and until June 13, 2001 as a member
of the board of directors of AmeriNet Group.com,  Inc., a publicly held Delaware
corporation.

Kevin W. Dornan, Esquire, General Counsel

     Kevin W. Dornan, age 49, was engaged as the Registrant's general counsel as
of June 18, 2001. He is a graduate of the Johns Hopkins University  (Bachelor of
Arts, philosophy, 1973); the University of North Carolina at Chapel Hill (Master
of Arts, philosophy,  1975); the Catholic University of America (Master of Arts,
religious  studies,  1979);  and the University of Maryland School of Law (Juris
Doctor,  1987),  where he served as  editor-in-chief of the 1986-87 Maryland Law
Review. During law school, he also served as a judicial intern for The Honorable
James R. Miller,  Jr., of the U.S.  District Court for the District of Maryland.
After practicing from 1987-1996 in Washington, DC and Maryland, primarily in the
areas of corporate and commercial transactions and litigation, Mr. Dornan became
the general counsel for DWA Corp.,a telecommunications company in St. Augustine,
Florida.  In June 2001, he became the general counsel for The Yankee  Companies,
Inc. He is admitted to practice before the Court of Appeals of Maryland  (1988),
the District of Columbia Court of Appeals  (1993);  the Supreme Court of Florida
(1996);  the U.S. Courts of Appeals for the District of Columbia (1988),  Second
(1988),  Fourth (1988),  and Eleventh  (1996)  Circuits;  and the U.S.  District
Courts for the District of Maryland (1988), the Eastern and Western Districts of
Arkansas  (1992),  the District of Columbia  (1994),  and the Middle District of
Florida  (1997).  Mr.  Dornan has served  since 1996 as an adjunct  professor of
business ethics at Saint Leo University in Saint Leo and St. Augustine, Florida,
and as an adjunct  professor of management and business at Eckerd College in St.
Petersburg, Florida. In 1998, he was named to Who's Who in American Law.

Other Material Personnel

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

Family Relationships.

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

Involvement in Certain Legal Proceedings.

     Based  on  information  provided  in  response  to the  Registrant's  legal
counsel,  except as otherwise  disclosed  in this  report,  during the five year
period ending on September 30, 1999, no current  director,  person  nominated to
become a director or executive officer, and no promoter or control person of the
Registrant has been a party to or the subject of:

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

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

(3)  Any order,  judgment,  or decree, not subsequently  reversed,  suspended or
     vacated, of any court of competent jurisdiction, permanently or temporarily
     enjoining, barring, suspending or otherwise limiting his or her involvement
     in any type of business, securities or banking activities; and Page 19


<PAGE>





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

Compliance with Section 16(a) of the Exchange Act

     To the best of the Registrant's  knowledge, no one subject to Section 16(a)
of the Exchange Act engaged in any transactions in the  Registrant's  securities
during 1999, except with reference to receipt of securities from the Registrant,
as described in this report.

ITEM 10.    EXECUTIVE COMPENSATION.

Summary Compensation Table

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

                  Annual Compensation                Awards                             Payouts
                                                                       Securities
                                            Other                      Underlying       Long              All
Name and                                    Annual   Restricted        Options &        Term              Other
Principal                                   Compen-Stock               Stock Apprecia-  Incentive         Compe
Position          Year     Salary   Bonus   sation   Awards            tion Rights      Payouts           sation
--------          ----     ------   -----   ------   ------            -----------      -------           ------
Mr. Joffe (1)     2000     *        *       *        200,000           *                *                 *
Mr. Joffe (1)     2001     *        *       *        200,000           *                *                 *

</TABLE>

(1)  Mr. Joffe was elected as a member of the Registrant's board of directors on
     January 12, 1999, as the chairman of the Registrant's board of directors in
     March 1999,  as the  Registrant's  president on May 4, 1999 and resigned as
     President and Chief Executive Officer on May 14, 2001.

*    Not Applicable

Options and Stock Appreciation Rights Grants Table

For Fiscal Year Ended September 30, 1999:

                Quantity of      Percentage of Total
                Securities       Options or Stock
                Underlying       Appreciation      Exercise
                Options & Stock  Rights Granted    or Base
                Appreciation     to Employees      Price Per     Expiration
Name            Rights Granted   In Fiscal Year    Share         Date
----            --------------   --------------    -----         ----
Mrs. Lindsey    20,000             25%             $0.05       January 12, 2002
Mr. Chamberlin  70,000             75%             $0.05       January 12, 2002


For Quarter Ended June 30, 2000:

                 Quantity of      Percentage of Total
                 Securities       Options or Stock
                 Underlying       Appreciation      Exercise
                 Options & Stock  Rights Granted    or Base
                 Appreciation     to Employees      Price Per   Expiration
Name             Rights Granted   In Fiscal Year    Share       Date
----             --------------   --------------    -----       ----
Mrs. Lindsey     24,000            100%             $0.02     December 31, 2002



                                     Page 20


<PAGE>


Aggregated Option & Stock Appreciation Right Exercises and Fiscal Year-End
Options & Stock Appreciation

Rights Value Table

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

Long Term Incentive Plan Awards Table

Long Term Incentive Plans - Awards in Last Fiscal Year

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

Compensation of Directors

Standard Arrangements

     In 1999,  the members of the  Registrant's  board of directors and officers
were  compensated  through  the  grant of  warrants  to  purchase  shares of the
Registrant's common stock, as disclosed in the following table:

                             Date of  Expiration     Exercise        Underlying
Name                         Warrant  Date           Price           Shares
----                         ------   -----          -----           ------
Anthony Q. Joffe (1)         (3)     (4)             $0.05            70,000
Penny Adams Field (1)        (3)     (4)             $0.05            70,000
Charles J. Champion, Jr.(1)  (3)     (4)             $0.05            70,000
Vanessa H. Lindsey (2)       (3)     (4)             $0.05            20,000
G. Richard Chamberlain (2)   (3)     (4)             $0.05            70,000
------
(1)  Directors
(2)  Officers
(3)  January 29, 1999
(4)  January 12, 2000; however, in January of 2000 the warrants were extended to
     January 12,  2001;  in January of 2001,the  warrants  were  extended  until
     January 12, 2002.

     As of December 30, 2000, the members of the Registrant's board of directors
and officers were  compensated  through the grant of warrants to purchase shares
of the Registrant's common stock, as disclosed in the following table:


                                     Page 21


<PAGE>



                             Date of  Expiration        Exercise     Underlying
Name & Category              Option   Date              Price        Shares
---------------              ------   ----              -----         -------
Anthony Q. Joffe (1)(4)        (5)    (8)               $0.02           72,000
Charles J.Champion, Jr.(1(4)   (5)    (8)               $0.02           72,000
Robert S. Gigliotti (1)(4)     (5)    (8)               $0.02           60,000
Penny Fields(1)(4)             (5)    (8)               $0.02            8,000
Vanessa H. Lindsey (1)(4)      (5)    (8)               $0.02           60,000
Vanessa H. Lindsey (2)         (5)    (8)               $0.02           24,000
Robert S. Gigliotti (1)(3)     (6)    (9)               $0.05           70,000
Lawrence R. Van Etten (1)(4)   (7)    (8)               $0.02           28,000
David K. Cantley(1)(4)         (7)    (8)               $0.02            8,000
------
(1)  Director
(2)  Officer
(3)  Director compensation for the year 1999.
(4)  Director compensation for the year 2000.
(5)  January 3, 2000
(6)  Mr.  Gigloitti  was  omitted  from the minutes in 1999;  the  minutes  were
     corrected  March 14,  2000.
(7)  July 27, 2001
(8)  December 31, 2002
(9)  In January of 2000 the  warrants  were  extended  to January 12,  2001;  in
     January of 2001,the warrants were extended until January 12, 2002.

     At Yankees  recommendation,  on January 3, 2000, the  Registrant  adopted a
plan to compensate its directors  based on set quantities of options for service
on the  board of  directors  and for  services  on  committees  of the  board of
directors, for services chairing the board of directors and its committees; with
forfeiture  provisions in the event of non- participation.  Because the plan was
not  ratified  by the  stockholders  within  one year  after  its  adoption,  no
incentive stock options may be issued thereunder, and the plan is now limited to
issuance of  non-qualified  stock  options,  as  determined  under the  Internal
Revenue Code.

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

     During  the  fiscal  year  that  started  on  October  1, 1998 and ended on
September 30, 1999, the Registrant had no employment  contracts,  termination of
employment or change in control arrangements with any of its executive officers,
except as set forth below.

Employment Agreements

Mr. Peplin

     On June 1, 1998, the Registrant  entered into an employment  agreement with
Mr. Peplin  pursuant to which he was engaged as the  Registrant's  president and
chief executive officer. The terms and conditions of Mr. Peplin's employment are
incorporated  by  reference  to the  Registrant's  report on Form 10-KSB for the
fiscal year ended September 30, 1998, as permitted by Commission Rule 12b-23.  A
copy  of  the  Peplin  employment  agreement  was  filed  as an  exhibit  to the
Registrant's report on Form 10-KSB for year ended September 30, 1998.

     On July 23, 2001, the  Registrant  entered into a  clarification  agreement
with Mr. Peplin,  which clarified Section 6.2 of his employment agreement signed
on June 1, 1998. A copy of the clarification agreement is filed as an exhibit to
this  report,  see "Part  III,  Item  13(a),  Exhibits  Required  by Item 601 of
Regulation SB."

Mr. Joffe

     As a material  subsequent event, in conjunction with the resignation of Mr.
Peplin as the Registrant's  president and a member of the Registrant's  board of
directors,  on May 4, 1999, the Registrant's  board of directors elected Anthony
Q. Joffe as its president.  The terms and  conditions of Mr. Joffe's  employment
are incorporated by reference to the Registrant's  report on Form 10-KSB for the
fiscal year ended  September  30, 1998, as  permitted by Commission Rule 12b-23.

                                     Page 22


<PAGE>



A copy  of the  Joffe  employment  agreement  was  filed  as an  exhibit  to the
Registrant's report on Form 10-KSB for the year ended September 30, 1998.

Mrs. Lindsey

     On January 12, 1999, the Registrant's board of directors elected Vanessa H.
Lindsey as its secretary.  The terms and conditions of Mrs. Lindsey's employment
are incorporated by reference to the Registrant's  report on Form 10-KSB for the
fiscal year ended September 30, 1998, as permitted by Commission Rule 12b-23.  A
copy of the agreement to serve as corporate  director was filed as an exhibit to
the Registrant's report on Form 10-KSB for the year ended September 30, 1998.

Material Subsequent Events

     Effective  June  14,  2001,  the  Registrant  entered  into  an  employment
agreement with Mr. Dmytryk  pursuant to which he is engaged as the  Registrant's
president and chief executive officer.  The agreement is for a term of one year,
with renewal  thereafter  from year to year unless either the  Registrant or Mr.
Dmytryk gives at least 60 days' notice prior to the end of the then-current term
of an intention not to renew, and contains  confidentiality  and non-competition
clauses. As consideration for Mr. Dmytryk's services,  the Registrant has agreed
to compensate him at the rate of $50.00 per hour of services to the  Registrant,
plus   reimbursement   for  all  reasonable   expenses  related  thereto.   This
compensation  is  paid at the end of each  month,  and is  currently  paid by an
equivalent  amount of the  Registrant's  common  stock  calculated  by using the
average closing transaction price of the stock for the month then-ended.  A copy
of Mr. Dmytryk's employment agreement is filed as an exhibit to this report, see
"Part III, Item 13(a), Exhibits Required by Item 601 of Regulation SB."

     Effective  June  14,  2001,  the  Registrant  entered  into  an  employment
agreement with Mrs. Lindsey pursuant to which she is engaged as the Registrant's
vice  president and  secretary.  The  agreement is for a term of one year,  with
renewal  thereafter  from year to year  unless  either  the  Registrant  or Mrs.
Lindsey gives at least 60 days' notice prior to the end of the then-current term
of an intention not to renew, and contains  confidentiality  and non-competition
clauses. As consideration for Mrs. Lindsey's services, the Registrant has agreed
to compensate her according to the  Registrant's  pro rata share  (assuming a 40
hour work  week) of a base  salary of  $5,000.00  per month,  for time  actually
devoted to her duties on behalf of the Registrant.  This compensation is paid at
the end of each month, and is paid partly in cash and partly in an amount of the
Registrant's  common stock  calculated by using the average closing  transaction
price of the stock for the month then-ended. A copy of Mrs. Lindsey's employment
agreement  is filed as an exhibit to this  report,  see "Part III,  Item  13(a),
Exhibits Required by Item 601 of Regulation SB."

     Effective June 18, 2001, the Registrant  engaged Kevin W. Dornan,  Esquire,
as its general counsel.  As consideration  for his services,  the Registrant has
agreed to compensate him according to the  Registrant's pro rata share (based on
the number of Yankees'  clients for whom he is providing  legal services) of (1)
his current base salary of  $40,000.00  per year and (2)  $2,500.00 per month in
common stock. The stock portion is paid at the end of each month, and is paid by
an equivalent  amount of the  Registrant's  common stock calculated by using the
average closing transaction price of the stock for the month then-ended.  A copy
of Mr. Dornan's engagement  agreement is filed as an exhibit to this report, see
"Part III, Item 13(a), Exhibits Required by Item 601 of Regulation SB."

Report of Re-Pricing of Options or Stock Appreciation Rights

     During the report period (October 1, 1998 until September 30, 1999), to the
best  knowledge of the  Registrant,  the former  management did not re-price any
options  or  stock  appreciation   rights  previously  granted  to  any  of  the
Registrant's   executive  officers,   whether  by  amendment,   cancellation  or
replacement grants, or any other means.

     Except as disclosed  below,  the Registrant has not adjusted or amended the
exercise price of stock options or stock appreciation  rights previously awarded
to any of the named directors or executive officers,  whether through amendment,
cancellation  or  replacement  grants,  or any  other  means,  nor are any  such
adjustments or amendments currently contemplated. As material subsequent events,
during the period  commencing on January 12, 1999 and ending on the date of this
report, the Registrant took the following actions:

1.   The consulting  agreement with Yankees was  renegotiated  during January of
     2000 at the Registrant's  request, due to its inability to start making the
     cash payments  called  for by the  original agreement.   As a result of the

                                     Page 23


<PAGE>



     amendment,  Yankees  option was increased from the right to purchase 51% of
     the  Registrant's  common stock for $40,000 to the right to purchase 75% of
     the Registrant's  common stock for $80,000,  in consideration  for Yankees'
     agreement  to waive its  hourly  and  licensing  fees for  services  to the
     Registrant  until December 31, 2000. On January 4, 2001, the Registrant and
     Yankees entered into a strategic  consulting  agreement,  pursuant to which
     Yankees will bill at its  standard  hourly rates for all work as to which a
     prior written  arrangement  with different terms has not been entered into;
     however,  no  hourly  billable  services  will be  provided  except  at the
     Client's specific request,  and the service of Yankees' directors,  Messrs.
     William A. Calvo,  III, and Leonard Miles  Tucker,  will be provided at the
     fixed rate of $10,000 per month,  in the aggregate,  payment for which will
     be deferred and accrued until adequate funds become available.

2.   On or about January 3, 2000, the expiration  date of the options granted to
     the  members  of the  Registrant's  board of  directors  and its  executive
     officers who assumed  office on and after  January 12,  1999,  was extended
     until January 12, 2001. In January of 2001, the options were extended until
     January 12, 2002.

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

As of the end of the Report Period

     As of September  30, 1999,  the  Registrant's  only  currently  outstanding
voting  securities  were  13,991,692  shares of common  stock,  $0.01 par value.
Although the Registrant's  transfer agent's records show only 11,741,698  shares
issued  as of  September  30,  1999,  under  Delaware  law  the  Registrant  had
non-cancelable  obligations to issue 2,250,000 additional shares as of September
30,  1999,  that  had been  paid for but not yet  issued  and  reflected  on the
Registrant's stock records. The following tables disclose information concerning
ownership of the Registrant's common stock by officers,  directors and principal
stockholders (holders of 5% or more of the Registrant's common stock) as of such
date. The Registrant's  outstanding shares of common stock for purposes of these
calculations,  include  both  outstanding  securities  as of the report date and
securities  which a named person had a right to acquire within 60 days following
the report date (September 30, 1999). Consequently,  the number of shares deemed
outstanding for purposes of the first table (principal  stockholders)  will vary
materially  from those  deemed  outstanding  for  purposes  of the second  table
(executive officers and directors).

     Footnotes to all tables follow the second table after "Material  Subsequent
Events."

Security Ownership of Certain Beneficial Owners

     As of September 30, 1999,  the following  persons  (including  any "group")
were,  based on information  available to the Registrant,  beneficial  owners of
more than five  percent  of the  Registrant's  common  stock  (its only class of
voting  securities).  Of the number of shares shown in column 2, the  associated
footnotes  indicate  the amount of shares with respect to which such persons had
the right to acquire  beneficial  ownership  as  specified  in  Commission  Rule
13(d)(1),  within 60 days  following  the report date.  For purposes of Table A,
26,613,657   shares  of  the  Registrant's   common  stock  are  assumed  to  be
outstanding.

                                                Amountand Nature         Percent
                                                Of Beneficial             of
Name and Address of Beneficial Owner (1)        Ownership (2)             Class
----------------------------------------        -------------             -----
Richard C. Peplin, Jr.                          2,419,985 (3)              6%
25100 Detroit Road;
Westlake, Ohio 44145

The Yankee Companies, Inc.
(and its affiliates)(4)(5)                     6,000,000 (5)              23%
2500 North Military Trail, Suite 225;
Boca Raton, Florida 33431.




                                     Page 24


<PAGE>



Security Ownership of Management

     As of September 30, 1999, the following  table  discloses the  Registrant's
common  stock  (the  only  outstanding   class  of  equity  securities  for  the
Registrant,  its  parents  or  subsidiaries  held  by  persons  other  than  the
Registrant) other than directors'  qualifying shares,  beneficially owned by all
directors and nominees,  naming them each; each of the named executive  officers
as defined in Item 402(a) of Commission  Regulation  S-B; and, all directors and
executive officers of the Registrant as a group,  without naming them. The table
shows in column 2 the total number of shares  beneficially owned and in column 4
the percent  owned.  Of the number of shares  shown in column 2, the  associated
footnotes  indicate  the amount of shares,  if any,  with  respect to which such
persons had the right to acquire beneficial ownership as specified in Commission
Rule  13(d)(1),  within 60 days  following the report date. For purposes of this
table,  13,991,692  shares of the Registrant's  common stock are assumed to have
been  outstanding  based on the  options to acquire  shares of the  Registrant's
common stock exercisable within the next 60 days held by the persons listed.

Name and Address of                  Amount           Nature of         Percent
Beneficial                           Of Equity        Beneficial        of
Owner    (1)                         Owned            Ownership         Class
-----    ---                          -----            ---------         -----
Richard C. Peplin, Jr.              2,419,985           (3)               17%
25100 Detroit Road;
Westlake, Ohio 44145

Robert S. Gigliotti                    90,000           (6)               1%
901 Wilshire Drive, Suite 400;
Troy, Michigan 48084

All officers and directors
as a group                          2,509,985           (2)              18%

Material Subsequent Events

     The Registrant has issued a material quantity of its common stock (its only
class of outstanding  securities) since the report date (September 30, 1999). As
of  August  15,  2001,  the  Registrant's  only  currently   outstanding  voting
securities  are  19,716,711  shares of common  stock,  $0.01 par value,  held by
approximately 518 registered  holders of record and approximately 338 additional
holders whose  securities  are  registered  in "street name" (e.g.,  held in the
names of brokers or dealers in securities  or their  designees,  the  Depository
Trust Company,  etc.).  The following  tables  disclose  information  concerning
ownership of the Registrant's common stock by officers,  directors and principal
stockholders  (holders  of 5% or more of the  Registrant's  common  stock).  The
Registrant's currently outstanding shares of common stock, for purposes of these
calculations,  are calculated  based on  information  available as of August 15,
2001, and include both currently  outstanding  securities and securities  that a
named person has a right to acquire  within 60 days  following  the date of this
report.  Consequently,  the number of shares deemed  outstanding for purposes of
the first table (principal  stockholders) will vary materially from those deemed
outstanding for purposes of the second table (executive officers and directors).

         Security Ownership of Certain Beneficial Owners

     As of August 15, 2001, the following  persons  (including any "group") are,
based on information available to the Registrant, beneficial owners of more than
five  percent  of the  Registrant's  common  stock  (its  only  class of  voting
securities). Of the number of shares shown in column 2, the associated footnotes
indicate  the amount of shares with respect to which such persons have the right
to acquire beneficial ownership as specified in Commission Rule 13(d)(1), within
60 days following the date of this report. For  purposes  of Table A, 58,572,844
shares of the Registrant's common stock are assumed to be outstanding.




                                     Page 25


<PAGE>



                                                    Amount
                                                    and Nature           Percent
                                                    Of Beneficial        of
Name and Address of Beneficial Owner (1)            Ownership (2)        Class
----------------------------------------            ----------           -----
Tucker Family Spendthrift Trust
(4)                                                 4,546,250              8%
2500 North Military Trail, Suite 225;
Boca Raton, Florida 33431.

The Yankee Companies,Inc.(and its affiliates)
(4)(5)                                             38,856,133             66%
2500 North Military Trail, Suite 225;
Boca Raton, Florida 33431.

Calvo Family Spendthrift Trust
(6)                                                 3,756,250              6%
1941 Southeast 51st Terrace;
Ocala, Florida 34471

         Security Ownership of Management

     As of August 15, 2001,  the  following  Table  discloses  the  Registrant's
common  stock  (the  only  outstanding   class  of  equity  securities  for  the
Registrant,  its  parents  or  subsidiaries  held  by  persons  other  than  the
Registrant) other than directors'  qualifying shares,  beneficially owned by all
directors and nominees,  naming them each; each of the named executive  officers
as defined in Item 402(a) of  Commission  Regulation  S-B; and all directors and
executive officers of the Registrant as a group,  without naming them. The table
shows in column 3 the total number of shares  beneficially owned and in column 4
the percent  owned.  Of the number of shares  shown in column 2, the  associated
footnotes  indicate  the amount of shares,  if any,  with  respect to which such
persons  have  the  right  to  acquire  beneficial  ownership  as  specified  in
Commission Rule 13(d)(1),  within 60 days following the date of this report. For
purposes of this Table,  20,826,711 shares of the Registrant's  common stock are
assumed  to be  outstanding  based  on the  options  to  acquire  shares  of the
Registrant's  common  stock  exercisable  within  the  next 60 days  held by the
persons listed. Footnotes follow this table.

Name and Address of              Amount           Nature of         Percent
Beneficial                       Of Equity        Beneficial        of
Owner (1)                        Owned            Ownership         Class
---------                        ------            ---------         -----
Robert S. Gigliotti              320,000          (7)               0.02%
901 Wilshire Drive, Suite 400;
Troy, Michigan 48084

Anthony Q. Joffe                 442,000          (8)               0.02%
101 Southwest 11th Avenue;
Boca Raton, Florida 33486

Vanessa H. Lindsey               404,000          (11)              0.02%
340 Southeast 55th Avenue;
Ocala, Florida 34471

Charles J. Champion              242,000          (12)              0.01%
Post Office Box 952259;
Lake Mary, Florida 32795

Lawrence R. Van Etten            164,147          (13)              0.01%
1601 North 15th Terrace;
Hollywood, Florida 33020

Edward C. Dmytryk                      0           (9)                0%
315 Premier Vista Way;
St. Augustine, Florida 32080

Kevin W. Dornan, Esquire               0          (10)                0%
5001 Southwest 20th Street;
Ocala, Florida 34474

All officers and
directors as a group           1,572,147           (2)             0.08%

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

The following footnotes apply to the preceding four tables:

                                     Page 26


<PAGE>



(1)  This table  pertains to common stock,  the  Registrant's  only  outstanding
     equity securities.
(2)  Beneficial and record.
(3)  Mr. Peplin served as the Registrant's  president,  chief executive officer,
     as a member of the  Registrant's  board of directors  and as its chair from
     November 10, 1997 until May 4, 1999 (except that he resigned as chairman on
     March 3, 1999). Lakewood Mfg. Co. is an entity controlled by Mr. Peplin and
     holds  793,944  shares of the  Registrants'  Common  Stock.
4)   The Tucker  family is comprised of Michelle  Tucker,  Leonard Miles Tucker,
     her husband,  Shayna and Montana, their minor daughters and Jerrold Tucker,
     her father-in-law. Mr. Jerrold Tucker holds 440,000 shares in trust for his
     minor  granddaughters  and, in  addition,  250,000  shares are held by Mrs.
     Tucker,  100,000  shares  are held by Blue Lake  Capital  Corp.,  a Florida
     corporation  owned by Mrs.  Tucker  and  3,756,250  shares  are held by the
     Tucker  Family  Spendthrift  Trust.
(5) The Yankee  Companies,  Inc., is a
     Florida corporation,  50% of which is owned by members of the Tucker family
     and 50%  which  is owned by the  Calvo  family.
(6)  The Calvo family is comprised  of Cyndi Calvo,  William A. Calvo,  III, her
     husband, William, Alexander and Edward, their minor sons.
(7)  Mr. Gigliotti has served as a member of the Registrant's board of directors
     since December 11, 1997,  and as its secretary  until January 12, 1999.
(8)  Mr.  Joffe has served as a member of the  Registrant's  board of  directors
     since January 12, 1999 to present,  as its  president  and chief  executive
     officer  from May 4, 1999 to May 14,  2001.  Mr.  Joffe is  entitled  to an
     additional 200,000 common shares for his services through May 2001.
(9)  Mr. Dmytryk was elected as a member of the Registrant's board of directors,
     and as its president and chief executive  officer on May 14, 2001.
(10) Mr. Dornan was elected as the Registrant's  general counsel  effective June
     18, 2001.
(11) Mrs. Lindsey was elected as the Registrant's secretary on January 12, 1999,
     as a member of the Registrant's  board of directors  effective  February 1,
     2000, and as the Vice-President on June 14, 2001.
(12) Mr. Champion has served as a member of the Registrant's  board of directors
     since  January 12, 1999.
(13) Mr.  Van  Etten  was  elected  as a  member  of the  Registrant's  board of
     directors on May 31, 2000.

Changes in Control

     As of the end of the report period  (September 30, 1999),  material changes
in control  have  taken  place (see  "Part  III,  Item 9,  Directors,  Executive
Officers,  Promoters  and Control  Persons ...." for a discussion of how current
management assumed control of the Registrant  starting in January of 1999). As a
result of the investments by Yankees and equity compensation to which Yankees is
entitled under its consulting  agreement with the Registrant,  the  Registrant's
former principal stockholder (Mr. Peplin) can no longer control decisions by the
Registrant's  stockholders,  although he has fully  supported  the  Registrant's
current  management.  Based on its  current  stock  ownership  and its option to
acquire up to 75% of the Registrants common stock,  Yankees and its stockholders
should be deemed to currently control the Registrant and to have the capacity to
pass matters to be acted on at stockholders meetings.  Except for the foregoing,
to the best knowledge and belief of the Registrant,  there are no  arrangements,
understandings,  or agreements  relative to the disposition of the  Registrant's
securities, the operation of which would at a subsequent date result in a change
in control of the Registrant.

Parents of the Registrant

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

     The  following  table  discloses  all  persons  who  were  parents  of  the
Registrant  (as such term is  defined  in  Securities  and  Exchange  Commission
Regulation C) as of September  30, 1999,  showing the basis of control and as to
each parent, the percentage of voting securities owned or other basis of control
by its immediate parent if any.

                                            Basis for       Percentage of Voting
Name                                        Control         Securities Owned
----                                        -------           ----------------
Yankees                                     *                          80%
---------
*  Stock ownership, options and consulting agreement.  The discussion of Yankees
   association with the Registrant is  discussed in Part I, Item 1,  Description

                                     Page 27


<PAGE>



     of Business of this report. Leonard Miles Tucker, a resident of Boca Raton,
     Florida,  serves  as  Yankees'  president  and as a member  of its board of
     directors;  William A.  Calvo,  III,  serves as  Yankees'  vice  president,
     treasurer  and as a member of its board of  directors;  Vanessa H.  Lindsey
     (also an  officer  and  director  of the  Registrant)  serves  as  Yankees'
     secretary  and chief  administrative  officer.  Kevin W.  Dornan  (also the
     Registrant's  general counsel) serves as Yankee's general counsel.  Yankees
     is owned in equal shares by members of Mr.  Tucker's family and Mr. Calvo's
     family.

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The response to this Item set forth below is supplemented, to the extent it
is  not  inconsistent  with  this  report,  by  information   contained  in  the
Registrant's reports: on Form 10-KSB for the year ended September 30, 1998; and,
the current  report on Form 8-K filed with the  Commission on June 25, 2001, all
hereby incorporated by reference, as permitted by Commission Rule 12b-23,

Materially Adverse Proceedings

     The  Registrant  is not aware of any  proceedings  involving  its executive
officers or directors adverse to the Registrant's interests.

Certain Business Relationships

As of the Report Date

     Except as specifically set forth below, none of the Registrant's  directors
or nominees for director:

(1)  Was during  the fiscal  year ended  September  30,  1999 (the "1999  fiscal
     year"),  an  executive  officer of, or owned of record or  beneficially  in
     excess of ten percent  equity  interest  in, any  business or  professional
     entity that made or proposed to make during the 2000 fiscal year,  payments
     to the Registrant or its subsidiaries for property or services in excess of
     five percent of (i) the  Registrant's  consolidated  gross revenues for the
     1999 fiscal year, or (ii) the other  entity's  consolidated  gross revenues
     for its 1999 fiscal year;

(2)  Was during the 1999  fiscal  year an  executive  officer  of, or owned,  or
     during the 1999 fiscal year owned,  of record or  beneficially in excess of
     ten percent  equity  interest  in, any business or  professional  entity to
     which the Registrant or its subsidiaries  made during the 1999 fiscal year,
     or proposed to make during the 2000 fiscal  year,  payments for property or
     services  in excess of five  percent of (i) the  Registrant's  consolidated
     gross  revenues  for its  1999  fiscal  year,  or (ii) the  other  entity's
     consolidated gross revenues for its 1999 fiscal year;

(3)  Was during the 1999  fiscal  year an  executive  officer  of, or owned,  or
     during 1999 fiscal year had owned,  of record or  beneficially in excess of
     ten percent  equity  interest  in, any business or  professional  entity to
     which the  Registrant  or its  subsidiaries  was indebted at the end of the
     Registrant's  1999  fiscal  year in an  aggregate  amount in excess of five
     percent of the Registrant's  total  consolidated  assets at the end of such
     fiscal year;

(4)  Was during the 1999  fiscal  year a member of, or of counsel to, a law firm
     that the  Registrant  retained  during the 1999  fiscal year or proposed to
     retain during the 2000 fiscal year,  which had or was expected to result in
     payment of fees exceeding five percent of the law firm's gross revenues for
     that firm's last 1999 fiscal year;

(5)  Was  during the 1999  fiscal  year a partner  or  executive  officer of any
     investment banking firm that performed  services for the Registrant,  other
     than as a participating underwriter in a syndicate,  during the 1999 fiscal
     year or that the Registrant  proposed to have perform  services  during the
     2000  fiscal  year and the dollar  amount of  compensation  received  by an
     investment  banking firm exceeded or was expected to exceed five percent of
     the investment  banking firm's  consolidated gross revenues for that firm's
     1999 fiscal year; or

(6)  Was  during  the 1999 year  involved  in any other  relationships  that the
     Registrant  is aware of between the nominee or director and the  Registrant
     that  is or  was  substantially  similar  in  nature  and  scope  to  those
     relationships listed in paragraphs (1) through (5).


                                     Page 28

<PAGE>



                                            Nature of                 Amount
                         Relationship to    Interest in the           of Such
Name                     The Registrant     Transaction               Interest
----                     --------------     -----------               --------
Richard C. Peplin, Jr.   (1)                (2) (3)                   (2) (3)
-------
(1)  Mr. Peplin served as a member of the  Registrant's  board of directors,  as
     its chairman and as the Registrant's  president and chief executive officer
     from  November  10, 1997 until May 4, 1999  (except as  chairman,  where he
     resigned  on  March  3,  1999).  He was  also  the  Registrant's  principal
     stockholder until Yankees attained that status.

(2)  On November 10, 1997, the Registrant  acquired RCP Enterprises  Group, LLC,
     an Ohio limited liability company and Tio Cigars,  Inc., both of which were
     principally  owned by Mr. Peplin, in exchange for an aggregate of 4,310,000
     shares of the  Registrant's  common  stock (see details at "Part I, Item 1,
     Description of Business ").

(3)  As a material  subsequent event, on or about March 16, 1999, the Registrant
     conveyed all of the capital stock of all of its  subsidiaries to Mr. Peplin
     (see  details  at "Part I,  Item 1,  Description  of  Business  -  Material
     Subsequent Event Divestitures").

Material Subsequent Events

     Except as  specifically  set forth  below,  during the period  starting  on
October  1,  1999 and  ending  on  August  15,  2001,  none of the  Registrant's
directors or nominees for director:

(1)  Is, or during the last fiscal year has been,  an  executive  officer of, or
     owns, or during the last fiscal year has owned,  of record or  beneficially
     in excess of ten percent equity  interest in, any business or  professional
     entity that has made during the  Registrant's  last full  fiscal  year,  or
     proposes to make during the Registrant's  current fiscal year,  payments to
     the  Registrant or its  subsidiaries  for property or services in excess of
     five percent of (i) the  Registrant's  consolidated  gross revenues for its
     last full  fiscal  year,  or (ii) the  other  entity's  consolidated  gross
     revenues for its last full fiscal year;

(2)  Is, or during the last fiscal year has been,  an  executive  officer of, or
     owns, or during the last fiscal year has owned,  of record or  beneficially
     in excess of ten percent equity  interest in, any business or  professional
     entity to which the  Registrant  or its  subsidiaries  has made  during the
     Registrant's  last  full  fiscal  year,  or  proposes  to make  during  the
     Registrant's  current  fiscal  year,  payments  for property or services in
     excess of five percent of (i) the Registrant's  consolidated gross revenues
     for its last full  fiscal  year,  or (ii) the other  entity's  consolidated
     gross revenues for its last full fiscal year;

(3)  Is, or during the last fiscal year has been,  an  executive  officer of, or
     owns, or during the last fiscal year has owned,  of record or  beneficially
     in excess of ten percent equity  interest in, any business or  professional
     entity to which the Registrant or its  subsidiaries was indebted at the end
     of the Registrant's  last full fiscal year in an aggregate amount in excess
     of five percent of the Registrant's total consolidated assets at the end of
     such fiscal year;

(4)  Is, or during the last fiscal year has been, a member of, or of counsel to,
     a law firm that the issuer has  retained  during  the last  fiscal  year or
     proposes to retain during the current fiscal year, which has or is expected
     to result in payment of fees exceeding five percent of the law firm's gross
     revenues for that firm's last full fiscal year;

(5)  Is, or during the last fiscal year has been, a partner or executive officer
     of any  investment  banking  firm  that  has  performed  services  for  the
     Registrant,  other  than as a  participating  underwriter  in a  syndicate,
     during the last fiscal year or that the Registrant proposes to have perform
     services  during the  current  year and the dollar  amount of  compensation
     received by an  investment  banking firm  exceeded or is expected to exceed
     five percent of the investment  banking firm's  consolidated gross revenues
     for that firm's last full fiscal year; or

(6)  Is,  or  during  the  last  fiscal  year  has been  involved  in any  other
     relationships  that the  Registrant  is aware of  between  the  nominee  or
     director and the Registrant that is or was substantially  similar in nature
     and scope to  those relationships listed in paragraphs (1) through (5).

                                     Page 29


<PAGE>





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

Exhibits Required by Item 601of Regulation S-B

     The response to this Item as contained in the  Registrant's  report on Form
10-KSB for the year ended September 30, 1997 and 1998, is hereby incorporated by
reference,  as permitted by  Commission  Rule 12b-23,  except as modified by the
disclosure  contained  in the  Registrant's:  reports  on  Form  10-QSB  for the
quarters ended December 31, 1998 and March 31, 1999; and, the current reports on
Form 8-K filed with the Commission on January 29, 1999, February 12, 1999, March
22,  1999,  May 18, 1999 and June 25,  2001,  and for the  following  additional
exhibits  filed  herewith.  The exhibits  listed below and  designated  as filed
herewith  (rather than  incorporated by reference)  follow the signature page in
sequential order.

Designation      Page
of Exhibit       Number
as Set Forth     or Source of
in Item 601 of   Incorporation
Regulation S-B   By Reference     Description

(1)                 *             Underwriting Agreement

(2)                               Plan of acquisition, reorganization,
                                   arrangement, liquidation or succession:

       2.1         (1)            Merger Agreement among Sports-Guard, Inc., RCP
                                   Enterprise, Inc. and RCP Enterprises Group,
                                   LLC, dated October 31, 1997
       2.2         (1)            Merger Agreement among Sports-Guard, Inc., Tio
                                   Mariano Cigar Corp. and   Tio  Cigars,  Inc.,
                                   dated October 31, 1997
       2.3         (8)            Agreement for Purchase and Sale  of  Assets By
                                   and  among  RCP  Communications  Group, Inc.,
                                   Colmena  Corp.  and   Business     Technology
                                   Systems, Inc., dated February 19, 1998.

(3)    (i)                        Articles of incorporation:

       3.1          (2)           Certificate of Incorporation  of  the company,
                                   dated July 17, 1995.
       3.2          (1)           Certificate  of Amendment  of  Certificate  of
                                   Incorporation of the Company, dated  November
                                   10, 1997

       (ii)                               Bylaws:

       3.3          (2)           Bylaws of the company.
       3.4          (1)           Amended and Restated Bylaws of the Registrant.
       3.5          (8)           Amended and Restated Bylaws of the Registrant.

(4)                               Instruments  defining  the  rights of holders,
                                   including indentures:
       4.1          (2)           Specimen Common Stock Certificate
       4.2          (2)           (Form of) Stock Purchase Warrant
       4.3          (3)           (Form of) 10% Convertible Notes
       4.4          (4)           Registrant's 1998 Stock Option Plan  and Forms
                                   of Incentive Stock Option Agreement  and Non-
                                   Qualified Stock Option Agreement.
       4.5          (8)           Yankees Warrant Agreement,effective January 5,
                                   1999
       4.6          (8)           Common  Stock  Purchase Warrants  between  the
                                   directors  and  officers of  the  Registrant,
                                   dated January 29, 1999.
       4.7          (8)           Yankees  Amended  Warrant  Agreement,   dated
                                   December 30, 1999
       4.8          (8)           Amended Common Stock Purchase Warrants between
                                   the directors and officers of the Registrant,
                                   dated January 3, 2000.


                                     Page 30


<PAGE>


Designation        Page
of Exhibit         Number
as Set Forth       or Source of
in Item 601 of     Incorporation
Regulation S-B     By Reference     Description

       4.9          (8)           Registrant's 2000 Non-qualified Stock Option &
                                   Stock Incentive Plan, dated January 3, 2000.

(5)                  *            Opinion re: legality

(6)                  *

(8)                  *            Opinion re: tax matters

(9)                               Voting trust agreements

(10)                              Material Contracts:

       10.1         (5)           Yankee Consulting Agreement, dated January 5,
                                   1999
       10.3         (6)           Reorganization  Agreement  with     Richard C.
                                   Peplin, Jr., dated March 25, 1999

       10.4         (8)           Financing    Agreement,   Amended    Financing
                                   Agreement, Extension Agreement with Dueutsche
                                   and BTS, dated February 26, 1997   and August
                                   19, 1998 .
       10.5         (8)           Customer Billing &  Collection  Contract  with
                                   International  Telemedia  Associates,   dated
                                   June 20, 1997.
       10.6         (8)           Loan Agreement between Wiseman Family, Peplin
                                   and RCP, dated October 13, 1997.
       10.7         (8)           Consulting Agreement between The Kaplan  Group
                                   and the Registrant, dated November 10, 1997
       10.8         (8)           Consulting   Agreement  between  Robert   S.
                                   Gigliotti and the Registrant,  dated November
                                   10, 1997.
       10.9         (8)           Consulting Agreement between Troy Wiseman  and
                                   the Registrant, dated November 10, 1997.
       10.10        (8)           Consulting Agreement and Termination Agreement
                                   between Jeff    Outcalt and  the  Registrant,
                                   dated November 10, 1997 and May 1, 1998.
       10.11        (8)           Consulting  Agreement  between   Michael    J.
                                   Feldman and the Registrant,
                                   dated November 10, 1997.
       10.12        (8)           Consulting Agreement between Sohail Quraushi
                                   and the Registrant, dated November 10, 1997.
       10.13        (8)           Purchase Agreement between Arnold Semler, Inc.
                                   and the Registrant, dated November 10, 1997
       10.14        (8)           Employment Agreement between  Madhu Sethi  and
                                   the Registrant, dated February 18, 1998.
       10.15        (8)           Consulting Agreement between SBV Holdings,Inc.
                                   and the Registrant, dated February 25, 1998.
       10.16        (8)           Investment Banking  and  Advisory     Services
                                   Agreement with Strategica and  the Registrant
                                   dated May 7, 1998.
       10.17        (8)           Employment Agreement between Richard C.Peplin,
                                   Jr. and the Registrant, dated June 1, 1998.
       10.18        (8)           SBV Promissory Note, dated October 1, 1998.
       10.19        (8)           Settlement Agreement between Madhu Sethi   and
                                   the Registrant, dated June 3, 1999.
       10.20        (8)           Supplemental    Services   Agreement   between
                                   Yankees and the Registrant, dated October 15,
                                   1999

                                     Page 31


<PAGE>


Designation         Page
of Exhibit          Number
as Set Forth        or Source of
in Item 601 of      Incorporation
Regulation S-B      By Reference     Description


       10.21        (8)           Memorandum of Acquisition between  Fon Digital
                                   Network, Inc.  and  TechTel   Communications,
                                   Inc., dated November 1999.
       10.22        (8)           Agreement between  Registrant  and   BellSouth
                                   Telecommunications, dated November 22, 1999.
       10.23        (8)           Yankees  Second  Amendment  to     Consulting
                                   Agreement, dated January 2, 2000.
       10.24        (8)           Agreement  to  Serve as  Corporate   Secretary
                                   between Vanessa Lindsey and  the  Registrant,
                                   dated January 3, 2000.
       10.25        (8)           Employment agreement between  Anthony Q. Joffe
                                   and the Registrant, dated January 3, 2000.
       10.26        (8)           Settlement Agreement  between Jack  Levine and
                                   the Registrant, dated January 17, 2000.
       10.27        (8)           Settlement   Agreement   between  Lawrence Van
                                   Etten and the Registrant, dated May 11, 2000.
       10.28        (8)           Settlement Agreement between Troy D.  Wiseman,
                                   Richard C. Peplin, Jr. and  the   Registrant,
                                   dated May 31, 2000.
       10.29        (7)           Strategic Consulting Agreement  with  Yankees,
                                   dated January 4, 2001.
       10.30        (7)           Settlement Agreement  between   Patrick Graham
                                   and the Registrant, dated  November 8, 2000.
       10.31        37            Clarification Agreement, dated July 6, 2001,to
                                   the Reorganization
                                  Agreement with Richard C. Peplin, Jr., signed
                                   on March 25, 1999
       10.32        42            Settlement Agreement between SBV Holdings  and
                                   the Registrant, dated May 31, 2001.
       10.33        49            Strategic Consulting Agreement between Yankees
                                   and the Registrant dated, January 4, 2001.
       10.34        58            Clarification Agreement, dated July   3, 2001,
                                   to the Employment Agreement with   Richard C.
                                   Peplin, Jr., signed on June 1, 1998.
       10.35        59            Employment agreement between Edward C. Dmytryk
                                   and the Registrant, dated July 19, 2001.
       10.36        73            Employment agreement between Vanessa H.
                                  Lindsey and the Registrant, dated July 19,2001
       10.37        87            Engagement agreement between Kevin  W.  Dornan
                                   and the Registrant, dated July 19, 2001.
(11)                ___           Statement re computation of per share earnings

(13)                 *            Annual or quarterly reports, Form 10-QSB

(15)                 *            Letter on unaudited interim financial
                                    information

(16)                              Letter on change in certifying accountant

       16.3         (9)          Letter re   Change in  Certifying   Accountant
                                   Weinberg & Co.

(17)                 **           Letter on director resignation

(18)                 **           Letter re change in accounting principals

(19)                  *           Reports furnished to security holders

                                     Page 32


<PAGE>


                    Designation Page
of Exhibit          Number
as Set Forth        of Source of
in Item 601 of      Incorporation
Regulation S-B      By Reference     Description

(20)                  **          Other  ocuments  or  statements  to   security
                                   holders   or  any  document  incorporated  by
                                   reference

(21)                  ___         Subsidiaries of the Registrant

(22)                  **          Published  report regarding matters  submitted
                                   to vote

(23)                              Consent of experts and counsel

(24)                  **          Power of attorney

(25)                   *          Statement re eligibility of trustee

(26)                   *          Invitation for competitive bids

(27)                  **          Financial data schedule

(99)                              Additional Exhibits:

       99.4           91          Audit Committee Letter
-------
*        Not applicable

**       None

(1)  Filed as an  exhibit  to the  Registrant's  Report on Form  10-KSB  for the
     fiscal year ended  September  30,  1997,  bearing  the exhibit  designation
     number  shown  above;  incorporated  by  reference  herein as  permitted by
     Commission Rule 12b-23.

(2)  Filed as an  exhibit to the  Registrant's  Registration  Statement  on Form
     10-SB filed February 23, 1996, bearing the exhibit designation number shown
     above;  incorporated  by reference  herein as permitted by Commission  Rule
     12b-23.

(3)  Filed as an  exhibit to the  Registrant's  Registration  Statement  on Form
     10-SB/A filed June 3, 1996,  bearing the exhibit  designation  number shown
     above;  incorporated  by reference  herein as permitted by Commission  Rule
     12b-23.

(4)  Filed as an exhibit to the  Registrant's  Report on Form 8-K dated  January
     29, 1999, bearing the exhibit designation number shown above;  incorporated
     by reference herein as permitted by Commission Rule 12b-23.

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

(6)  Filed as an exhibit to the Registrant's  Report on Form 8-K dated March 22,
     1999, bearing the exhibit  designation number shown above;  incorporated by
     reference herein as permitted by Commission Rule 12b-23.


                                     Page 33


<PAGE>





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

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

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

Reports on Form 8-K Filed During Quarter Ended September 30, 1998

     During the calendar quarters ended September 30, 1999, the Registrant filed
the following reports on Form 8-K with the Commission:

                                    Financial
Items Reported                      Statements Included       Date Filed
--------------                      -------------------       ----------
1,2,4,5 and 7                       No                        January 29, 1999
4 and 7                             No                        February 12, 1999
2 and 5                             No                        March 22, 1999
1                                   No                        May 18, 1999

     As material  subsequent  events, the Registrant filed the following reports
on Form 8-K with the Commission after September 30, 1999:

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


                                    Page 34


<PAGE>



                                   Signatures

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

         Dated:   August 20, 2001

                                        Colmena Corp.


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


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


Signature                           Date                      Title

/s/Edward C. Dmytryk/s/         August 20, 2001     President, Chief   Executive
                                                    Officer, Director
/s/Vanessa H. Lindsey/s/        August 20, 2001     Vice President,    Secretary
                                                    & Director
/s/Charles J. Champion, Jr. /s/ August 20, 2001     Director & Audit Committee
                                                    Member
/s/Robert S. Gigliotti/s/       August 20, 2001     Director & Audit   Committee
                                                    Member
/s/Lawrence R. Van Etten/s/     August 20, 2001     Director
/s/ Anthony Q. Joffe/s/         August 20, 2001     Director, Chairman   of  the
                                                    Board

                                     Page 35


<PAGE>


                             Additional Information

                                  Colmena Corp.
                                   Registrant

                            Crystal Corporate Center;
                     2500 North Military Trail, Suite 225-D;
                           Boca Raton, Florida 33431
    Telephone Number: (561) 998-3435; Facsimile Transmission (561) 998-3425;
                           E-mail aqj@colmenacorp.com
                             Corporate Headquarters

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

                                    Officers

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

                              Board of Directors

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

                         Independent Public Accountants

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

                                 Transfer Agent

     Exhibits to this Form 10-KSB are available on the  Securities  and Exchange
Commission's  web site  located at  www.sec.gov  in the EDGAR  archives,  on the
Registrant's website located at www.colmenacorp.com and will be provided without
charge to  stockholders  of the  Registrant  upon written  request  addressed to
Vanessa H. Lindsey,  Secretary;  Colmena  Corp.;  1941  Southeast  51st Terrace;
Ocala, Florida 34471.

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

                                     Page 36


<PAGE>