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

                   For the Fiscal Year Ended December 31, 2002

                           Commission File No. 0-28720

                            SALES ONLINE DIRECT, INC.
              (Exact name of small business issuer in its charter)

            Delaware                                    73-1479833
   (State or Other Jurisdiction           (I.R.S. Employer Identification No.)
 of Incorporation or Organization)

                4 Brussels Street, Worcester, Massachusetts 01610
                (Address of principal executive office)(Zip Code)

                                 (508) 791-6710
                 Issuer's Telephone Number, Including Area Code

      Securities registered pursuant to Section 12(g) of the Exchange Act:

                         Common Stock, $0.001 Par Value
                                (Title of Class)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

                                 Yes |X| No |_|

Check if there is no disclosure of delinquent filers pursuant 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 Issuer's revenues for its most recent fiscal year: $1,275,888.

The aggregate market value of the shares of common stock of the registrant held
by non-affiliates on March 3, 2003 was approximately $5,739,093 based upon the
average over the counter sales price of $.055 per share on such date (See Item
5).

As of March 3, 2003, the issuer had outstanding 131,680,307 shares of its Common
Stock, par value of $0.001, its only class of voting securities.

                       DOCUMENTS INCORPORATED BY REFERENCE

No documents are incorporated by reference into this Annual Report except those
Exhibits so incorporated as set forth in the Exhibit Index.

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                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

                                     PART I

Item 1.     Description of Business.........................................   2
Item 2.     Description of Property.........................................  10
Item 3.     Legal Proceedings...............................................  10
Item 4.     Submission of Matters to a Vote of Security Holders.............  10

                                     PART II

Item 5.     Market for Common Equity and Related Stockholder Matters........  11
Item 6.     Management's Discussion and Analysis or Plan of Operation.......  11
Item 7.     Financial Statements............................................  15
Item 8.     Changes In and Disagreements With Accountants on
            Accounting and Financial Disclosure.............................  15

                                    PART III

Item 9.     Directors, Executive Officers, Promoters and Control Persons;
            Compliance with Section 16(a) of the Exchange Act...............  16
Item 10.    Executive Compensation..........................................  17
Item 11.    Security Ownership of Certain Beneficial Owners and Management
            and Related Stockholder Matters.................................  19
Item 12.    Certain Relationships and Related Transactions..................  19
Item 13.    Exhibits and Reports on Form 8-K................................  20
Item 14.    Controls and Procedures.........................................  21

Signatures  ................................................................  22

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FORWARD LOOKING STATEMENTS

      This Annual Report on Form 10-KSB (including without limitation the Risk
Factors included as Exhibit 99.1) may contain forward looking statements. We
caution you to be aware of the speculative nature of "forward-looking
statements". Statements that are not historical in nature, including the words
"anticipate," "estimate," "should," "expect," "believe," "intend," and similar
expressions, are intended to identify forward-looking statements. Although these
statements reflect our good faith belief based on current expectations,
estimates and projections about (among other things) the industry and the
markets in which we operate, they are not guarantees of future performance.

      Whether actual results will conform to our expectations and predictions is
subject to a number of known and unknown risks and uncertainties, including the
risks and uncertainties discussed in this Annual Report; general economic,
market, or business conditions; the opportunities that may be presented to and
pursued by us; competitive actions by other companies; changes in laws or
regulations; and other circumstances, many of which are beyond our control.
Consequently, all of the forward-looking statements made in this Annual Report
are qualified by these cautionary statements and there can be no assurance that
the actual results anticipated by us will be realized or, even if substantially
realized, that they will have the expected consequences to, or effects on, us or
our business or operations. Except as required by applicable laws, we do not
intend to publish updates or revisions of any forward-looking statements we make
to reflect new information, future events or otherwise. Readers are urged to
carefully review and consider the various disclosures made by Sales OnLine
Direct, Inc. in this Annual Report, which attempts to advise interested parties
of the risks and factors that may affect our business, financial condition,
results of operations and prospects.

                                     PART I

      Sales OnLine Direct, Inc. (the "Company") was incorporated in Delaware as
Rose International Ltd. on August 9, 1995. The Company's main web address is
located at www.paid.com, which offers updated information on various aspects of
our operations, as well as access to our three primary collectibles sites:
www.rotmanauction.com, www.collectingexchange.com, and
www.collectingchannel.com. We also maintain a website called World Wide
Collectors Digest ("WWCD") at www.wwcd.com, which provides sports information,
listings of stadiums and arenas, live chat rooms and other sports-related
information. The Company has one subsidiary, Rotman Collectibles, Inc.
Information contained in the Company's websites shall not be deemed to be a part
of this Annual Report. The Company's principal executive offices are located at
4 Brussels Street, Worcester, Massachusetts 01610, and the Company's telephone
number is (508) 791-6710.

Item 1. Description of Business.

                                    BUSINESS

Our Business

      Our primary business is to operate an online auction site that provides a
full range of services to sellers and buyers along with a collectibles portal
offering integrated information and services to the collectibles community. A
portal is an Internet website that enables visitors to search for and visit
other related sites, access related services and obtain relevant data. Our
collectibles community provides access to David Maloneys's Collector's Directory
and Resource Guide and our Ask the Appraiser(TM) online appraisal service. The
collectibles industry includes every person that collects items that have either
economic or sentimental value, such as antiques, sports and entertainment
memorabilia, stamps, coins, figurines, dolls, collector plates, plush and die
cast toys, cottage/village reproductions and other decorative or limited edition
items that are intended for collecting and other memorabilia. We also provide
business management tools for online retailers with our patent pending shipping
calculator and automated auction checkout and order processing system.

      For the year ended December 31, 2002, substantially all (97%) of our
revenues are derived from our auction services, conducted through our Rotman
Auction brand. Rotman Auction is an auction house that has provided a full range
of services to sellers and buyers, including live online bidding of premier
collectibles, authentication of


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merchandise, digital photography, fulfillment of orders and the purchase and
sale of authentic memorabilia. Most of the auctions take place through eBay.com,
a person-to-person auction service. Our auctions consist of sports and
non-sports cards, collectibles, Americana, autographed items, and movie
memorabilia, among other types of collectibles from the 1800's to the present
day. Rotman Auction also maintains a substantial inventory of memorabilia with
popular and historical significance which allows customers to directly purchase
the memorabilia without the competition from bidders in an auction format. Most
of these sales are consummated through our website located at
www.rotmanauction.com. We acquire inventory in the ordinary course of our
business from a number of various companies and individuals. We also may acquire
inventory through acquisition of companies that own collectibles, or through the
acquisition of substantially all the assets of a company that holds
collectibles. Merchandise is also auctioned by Rotman Auction under
consignment-type arrangements with the public where we receive a consignment fee
that is paid to us from the final sale of the merchandise. Historically, our
Rotman Auction operations generated approximately 97% of our revenues.

      In 2001, we began to increase our autograph signing activities under the
"Rotman Auction" name. The autograph signings occur at public and private
autograph signing events. We contract and pay the celebrities for their services
and supply products for the event. We hosted celebrities such as Adam Viniateri,
Antoine Walker, Troy Brown, Johnny Damon, Lawyer Milloy, Jim Rice, Ty Law, Terry
O'Reilly, Pete Rose, Ray Bourque, Paul Pierce, Trot Nixon, Brian Daubach, Sergei
Samsonov, Joe Thornton, Byron Dafoe, Derek Lowe, Carl Everett, Shea Hillenbrand
and Alfonso Soriano. Starting in 2002 we began evolving the autograph signing
events to include the creation, development and maintenance of celebrity
websites. We provide comprehensive content managed websites that include message
boards, shopping, articles, statistics, biography information and event
schedules. We currently host such celebrities' websites as Antoine Walker,
Lyndon Byers, Matt Light, Shea Hillenbrand, and Chris Chambers. Revenues are
generated from sales of product produced by the celebrity.

      Our mission is to provide a comprehensive shopping experience for buyers
through our Internet portals, retail location and e-commerce websites, while
also providing management tools and services to businesses that sell on the
Internet. Originally, this was accomplished through our four main business
divisions: Rotman Auction, World Wide Collectors Digest (web design, web hosting
and sports and collectibles information), Internet Auction (an online
person-to-person auction site), and Internet Collectibles (a wholesale and
retail collectibles business that maintained a substantial inventory of
memorabilia). Later, we streamlined our operations, clarified our business model
and focused on the creation of a multi-faceted internet collectibles
marketplace. As a result, the inventory from Internet Collectibles was
consolidated into our Rotman Auction operation, and, because of intense
competition in the person-to-person auction market, we eventually eliminated
this form of auction service provided by the Internet Auction division.

      To create a comprehensive Internet collectibles community, in January 2000
we launched a collectibles portal under the name Collecting Exchange. The
Collecting Exchange contains a search engine devoted specifically to collecting,
memorabilia, antiques, collectibles and other information and services. The
portal searches and collects information from every collectible site on the
Internet and stores it in the site's database. The Collecting Exchange also
contains dealer and storefront databases, stadiums and arenas information,
sports events and dates, and other services and information of interest to the
collecting industry. In February 2000, we launched the resource area, a place
for consumers to locate websites on experts, museums, insurance, appraisers,
galleries, and dealers.

      In November 2000, we acquired certain assets of ChannelSpace
Entertainment, Inc., a Virginia corporation ("CSEI") and Discribe, Ltd.,
("Discribe") a subsidiary of CSEI. CSEI and Discribe are Internet content
providers and producers of affinity portals, including the CollectingChannel.com
and the Tartans.com website

      The Collecting Channel features extensive coverage of all aspects of
collecting from its twelve micro-channels devoted to Antiques, Automotive,
Books/Movies/Music, Jewelry/Gems, Stamps/Coins, Collectibles, Glass/Pottery,
Dolls/Figures, Photo/Electronics, Toys/Beanie Babies, Sports and Miscellaneous.
By combining information from the Collecting Exchange with the Collecting
Channel portal, we have created a comprehensive collectibles site, offering
services such as web searching, broadcast services, appraisal and valuation
information, auction site sign-ins, price guides, shopping and classified ads.
The CollectingChannel has approximately 15,000 articles, 6,000 minutes of video,
and 150,000 items in the realized pricing database archived in various
collecting databases. We paid for the acquired assets with 7,350,000
unregistered shares of our common stock, valued at


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$4,648,996. In February 2002, the Company and CSEI settled claims made by the
Company which granted the Company a call option to purchase 2,283,565 shares of
its common stock at a price of $.001 per share which may be assigned or
exercised anytime after April 14, 2002. Also as part of the settlement, the
Company obtained clear title to the assets.

      Our combined collectibles marketplace has now evolved into a "collectibles
community," which was introduced at the end of 2000. Through this community, we
make available to visitors a number of services and amenities consisting
primarily of (1) the collectibles portal, (2) online appraisal services and (3)
a research center.

      In November 2001, we acquired Rotman Collectibles, Inc., and merged it
into a company subsidiary. Rotman Collectibles was in the business of buying and
selling movie posters dated generally from the early 1940s through the early
1970s. As payment for the business of Rotman Collectibles, we issued a
$1,000,000 convertible note to Leslie Rotman, the sole stockholder of Rotman
Collectibles. The purchase price was based upon an independent appraisal of the
assets of Rotman Collectibles, consisting exclusively of the movie posters. We
did not assume any known substantial liabilities of Rotman Collectibles.
Pursuant to the independent appraisal, the assets have an appraised value at
retail substantially higher than the principal amount of the note. During
January 2002, the note was converted into 23,916,378 shares of common stock of
the Company. The Company is required to file a registration statement with
respect to the shares. We expect that these movie posters will continue to be
sold at auction on eBay.com and through Rotman Auction's storefront.

      Portal. Visitors to the Company's website at "www.collectingchannel.com"
are able to use the collectibles portal as a source for obtaining collectibles
information to help them make informed decisions about price, authenticity and
trading sites. The site is also intended to provide users with a comprehensive,
one-stop shopping collectible experience, linking top collectible sites to
buyers and sellers around the world to facilitate the purchase and sale of
collectibles. We believe that as a result, our site not only meets the needs of
the collector, but also the needs of dealers and manufacturers.

      Appraisal Services. As part of the services we make available on our site,
we also offer a completely interactive and dynamic appraisal service called Ask
the Appraiser(TM) through eBay.com's partner referral system. The appraisal area
permits visitors to send us an image in order to obtain an online appraisal of
their item for a fee of $19.95 per appraisal. This service enables visitors to
make informed decisions regarding their purchases, and helps sellers define the
prices for their goods.

      AuctionInc. Software Suite; Website Design. AuctionInc. is a suite of
online management tools assisting businesses with e-commerce storefronts, order
processing, customer service, shipping solutions, inventory management, and
auction processing. The application was designed originally to reduce overhead
costs for Rotman Auction, but based on its marketability the Company plans to
offer the application to other sellers in the first half of 2003. A seller's use
of the application reduces overhead and labor costs, and through its
customer-friendly setup improves customer relations and increases sales. The
Company receives a transaction fee for each auction listing that uses AIship, as
described below.

      AIship is a shipping calculator that automatically estimates the shipping,
sales tax, and insurance on auction listings. This module automatically
calculates shipping costs, carrier insurance fees, optional shipping services,
and offers an adjustable shipping fee markup, and co-branded shipping calculator
page. It pre-configures shipping rates with handling costs, and provides a
multiple auctions tab to calculate shipping on numerous auctions. The Company
receives a transaction fee for each auction listing that uses AIship.

      AIseller is an auction management tool used to streamline a seller's order
processing for improved customer service and higher sales. This module is
designed for sellers who are selling more than 50 items per month at online
auctions. It offers summary and detail order and sales reporting, auction/sales
tracking, automated personalized e-mail notifications, auction re-listing
reports, a complete integrated order management system, a customer checkout
system, as well as automatic shipping rates and sales taxes calculations for
consolidating multiple auctions. The Company receives a transaction fee for each
listing at auction that uses AIseller.


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      AIshop will integrate a storefront system into the AI suite so that you
get a plethora of features with limited time and configuration. It also will
work directly with the other modules, and each component may be added at any
time by choosing that option. This module will offer a complete list of
storefront and inventory management tools to make selling online easier. This
component will include intelligent e-mail notifications (bulk and individual),
flexible order processing, inventory management, inventory bulk import/export,
multi-level categorization, customer management, automated personalized e-mail
notifications, shipping manifest integration, delivery tracking, an intelligent
search feature, and a secure site using SSL. The Company does not expect that
AIshop will be ready for use or will generate revenue prior to 2004.

      The AI product line also will offer a more robust and personalized
storefront system, AIcommerce, which will be for smaller companies looking to
distinguish themselves from the rest of the "cookie cutter" style storefront
systems. This will be a fully customized website that includes most of the
features offered in the other modules with other special programming and design.
The Company does not expect that AIcommerce will be ready for use or will
generate revenue prior to 2004.

      Sellers may access the Company to purchase any and all of our tools or
applications for a flat fee and/or per-transaction fee depending on the module
chosen. The Company expects to add more features and modules to the suite to
enable it to grow with sellers and continue to provide them superior online
selling tools.

      We also design, host and maintain client websites for small and medium
size business looking for e-commerce or content managed sites. Our software
allows clients to operate online stores, set prices and sell directly to online
shoppers. We charge a fixed monthly fee for our web hosting services. For
consulting services, our customers are billed monthly at an hourly rate based on
the number of hours of service performed for the customer.

      Research Center. Our research center located on the CollectingChannel.com
enables users to obtain historical pricing information, view actual images,
access experts on authentication and visit websites regarding the collectibles
articles they are researching. The site allows a visitor to validate that a
particular collectible item exists, and provide access to services that can
authenticate that the item is genuine. As a means of preventing the purchases of
fraudulently sold items, we have designed the research center to provide
visitors with the research tools to complete transactions based on the most
accurate, verified material available. Further, to the extent that the user
desires to validate the authenticity of that particular item, we offer the Ask
the Appraiser(TM) service. Authenticity can also be determined by searching
dealer sites for similar items or communicating directly with dealers regarding
the origin, price, and history of an item. Finally, by enabling the user to
verify prices of that item or other similar items, the user is able to obtain
information necessary to strike a realistic bargain.

      Other Amenities. The CollectingChannel.com website also includes other
amenities such as chat rooms, message boards, a classified posting area, and an
information area regarding auctions. The My Collecting(TM) area of the website
enables users to create and customize their own collecting pages, with
personalized news, video, chat capability, wish lists and access to an extensive
database of reference materials. The website also includes MaloneysOnline, a
clearinghouse for hard to find information that contains the searchable Internet
version of the book Maloney's Antiques and Collectibles Resource Directory. In
2003 the Company anticipates that it will offer for the first time advertising
in Maloney's Antiques and Collectibles Resource Directory.

      In the past year we have made significant improvements to our websites by
optimizing our own proprietary software to permit the search engine to obtain
faster results with greater accuracy. We provide video archives from the
"Treasures in Your Home" television show, which aired between 1999 and 2001.

      As set forth above, we currently generate substantially all (97%) of our
revenues from Rotman Auction. As our structure evolves and our site becomes more
popular and attracts more visitors, we expect that our revenue model will
change, with increased revenues from web hosting, AuctionInc, and appraisal
services, as well as earning revenue from banner advertising, product listings
in our shopping area and charging membership fees for using certain aspect of
the Collecting Channel. See "Business Strategy," page 6.


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Industry Background

Growth of the Internet and the Web

      The Internet enables millions of people worldwide to share information,
communicate and conduct business electronically. The growth in the number of Web
users is being driven by the increasing importance of the Internet as a
communications medium, an information resource, and a sales and distribution
channel. The Internet has also evolved into a unique marketing channel. Unlike
the traditional marketing channels, Internet retailers do not have many of the
overhead costs borne by traditional retailers. The Internet offers the
opportunity to create a large, geographically dispersed customer base more
quickly than traditional retailers. The Internet also offers customers a broader
selection of goods to purchase, provides sellers the opportunity to sell their
goods more efficiently to a broader base of buyers and allows business
transactions to occur at all hours.

State of the Collectibles and Online Auction Industries

      The online auction industry continues to be a strong and permanent player
in e-commerce. Online auctions resolve the weaknesses of traditional auctions
(i.e. limited geographical coverage, a dearth of product variety, high
transaction costs and information inefficiency). The Internet overcomes these
issues because it can handle large quantities of data and support an infinite
number of products and services. It also allows buyers and sellers to trade on a
global basis.

Business Strategy

      We believe that the online auction market will continue to grow as a
result of increased merchandise being offered in a variety of different
categories, nostalgia for memorabilia, and investor confidence that collectibles
will appreciate in value. It is our view that this growth in the e-commerce
market is dependent upon the availability of reliable authentication and grading
services, authoritative information necessary to value home goods, furnishings,
merchandise, collectibles and trading forums or venues that enable buyers and
sellers to maximize the value of their goods. We have therefore designed our
portals to accommodate these concerns for collectors and auction participants.
However, in order for collectors to have sellers to buy from, we have introduced
the AuctionInc. software suite of online tools to assist sellers. The success
and growth of these directives is based on the accomplishments and progress
experienced by Rotman Auction.

      Our goal is to provide the tools needed to assist sellers to streamline
their business operations and offer the best resources for merchants to make
informed decisions by implementing the following business strategy:

      o     Continue auction sales on eBay for the Rotman Auction brand which
            provides higher profit margins by reducing the costs of producing
            and mailing catalogs and advertising for our own auctions. Items we
            sell through eBay have a much quicker turnaround time than those
            that we sold through our catalog auctions, and because the eBay
            sales are highly automated, the sales require less personnel to
            complete the sale;

      o     Increase the number of autograph signing events per calendar quarter
            while also increasing the quality of the celebrities and increasing
            the number of celebrity website produced during this year;

      o     Sell and generate revenue from the AuctionInc. software suite
            through both print and online advertising and promotions;

      o     Increase the volume of our online appraisals through high profile
            partnerships and through more effective and efficient advertising
            and promotions;

      o     Sell banner advertising on the CollectingChannel.com by charging a
            fee for every thousand clicks per banner, with the fee varying
            depending on the placement of the banner (i.e., a banner on our
            site's homepage would cost more per 1000 clicks than a banner placed
            throughout the site);


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      o     Increase our web hosting services, charging a one time set up fee
            plus monthly maintenance fees, and an hourly fee for any design or
            feature enhancements we make;

      o     Impose annual fees for dealers and stores listing products on our
            shopping area;

      o     As the number of visitors to our site increases, impose
            monthly/annual membership fees;

      o     As we evolve into a membership-based site, we intend to provide
            unlimited search capability and access to our realized price guides
            to our members only. While visitors will still be permitted limited
            use of our research center, extensive searches and comprehensive
            pricing data will be available only to those who pay our
            monthly/annual membership fees. For example, we may permit visitors
            to search data that covers only the past 30 days; however, if a
            visitor wanted to obtain further historical pricing information, he
            or she would have to join the site and pay the membership fee to
            access this data. We hope to begin charging membership fees in 2003.
            We believe that our current number of unique visitors to the site
            represents approximately 25% of the number of visitors we will need
            to begin charging membership fees.

      We expect the above plan will enable us to increase our Rotman Auction
brand while providing more resources for a sales and marketing campaign on both
the Collecting Channel site and AuctionInc.

      The business strategy described above is intended to enhance our
opportunities in the online ecommerce market. However, there are a number of
factors that may impact our plans and inhibit our success. See "Risk Factors"
included as Exhibit 99.1. Therefore, we have no guarantees and can provide no
assurances, that our plans will be successful.

Marketing and Sales

      The success of the Collecting Channel is contingent upon the visibility it
will receive on the Internet and the revenues generated by advertising and
services. Successful branding of our corporate identity and services is the key
to our success. We are considering whether a new name, and/or single website,
would result in a more recognizable corporate entity.

      Our marketing has been designed to position the Company as the premier
collectibles site on the Internet. We target both traditional collectors as well
as the new generation of collectors. We target dealers, licensors, licensees,
distributors and others to host collectible pavilions and other e-commerce sites
and storefronts.

      Marketing Internet companies is a relatively new phenomenon. Whereas
earlier Internet advertising was mostly accomplished through banner advertising,
the industry is now marketing websites through a combination of online
advertising and more traditional media and direct mail advertisement. We have
adopted this approach in our marketing campaign.

      Our advertising to date has been minimal, and limited to very selective
trade magazines. We believe that by advertising in a broader range of these
magazines we would be able to increase our exposure substantially. We will also
need to expand our advertising arrangements with auction sites and other
companies in the sports, home furnishings, and collectibles. These website
advertising arrangements will include mutual linking arrangements, such as other
companies linking to our site and our site linking to the sites of those
companies.

      The Company will focus on marketing AuctionInc. throughout 2003. In 2002,
representatives of the Company attended trade shows, events and conferences to
analyze the potential for AuctionInc and to better define the product's market.
Based on experience with existing partnerships that promote AuctionInc., the
Company believes that creating partnerships is an effective marketing tool to
promote and encourage new registrations. The Company will continue to seek new
partnerships. The Company also intends to promote the AuctionInc. product line
in trade publications to reach small and midsize companies.

      Although we believe that this marketing strategy will attract more users
to our site, we have no


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commitments that our marketing will be successful or our sales will increase.
There are a number of factors that may impact our plans and inhibit our success.
See "Risk Factors" described in Exhibit 99.1. Therefore, we have no guarantees
and can provide no assurances that our plans will be successful.

Revenue Sources

      Following the transaction with Internet Auction on February 25, 1999, we
primarily generated revenue from sales of our purchased inventory and from fees
and commissions on sales of merchandise under consignment arrangements. We
charge a 15% to 50% fee for listing items on consignment. Currently, 97% of our
revenues is derived from our Rotman Auction operations, with less than 1% of
revenues from consignment fees. We also generate revenue from web hosting,
advertising, and sponsorship of websites. Of these revenues, approximately 97%
are attributable to sales of our purchased inventory, 2% from web hosting,
advertising and sponsorship of websites, and 1% from Ask the Appraiser(TM). In
2003, we began to receive revenue from sales of AuctionInc. We anticipate that
future sources of revenue will include advertising and service revenue,
including the sale of pavilion spots and referral links. Pavilion spots are
business sponsorships that give companies exclusive storefront rights for their
collectible category. For example, if a music company were to purchase a
pavilion, it would host the only area on collectingchannel.com dealing with
music and music videos. In this pavilion, visitors would be able to research the
history of these items, the historical pricing of these collectibles, read
articles and communicate with experts on authentication. Visitors would also be
provided with referral links to the music company and other sites for purchase
of merchandise.

      It is anticipated that referral links may also become a source of
advertising income for the Company. Sellers of merchandise will pay us for
listing their storefronts on www.collectingchannel.com. When a site visitor
requests a search for a collectible item, we will provide the visitor with a
direct link to the seller's pavilion area or website, thus driving the sale.
This referral link is the manner in which the seller can obtain visibility for
their collectible item. In addition to pavilions and referral links, advertising
revenues may also come from targeted banner advertising and general banner
advertising.

      In terms of services, we currently provide web hosting and online
appraisal services. To date, we have generated minimal revenues from these
services, but we expect that the awareness of the AuctionInc. product line and
Ask the Appraiser(TM) increases, we will be able to increase our advertising and
marketing efforts, which will generate revenue and may attract more visitors
that will utilize these services on our site. As discussed in "Business
Strategy," we also expect to derive revenues from membership fees charged for
accessing certain aspects of the Collecting Channel and fees from stores listing
merchandise in our shopping area. In addition to web hosting, we expect to
increase revenues through the development and design of third party websites. We
have an interactive services agreement with AOL Canada pursuant to which we
handle the content and maintenance of the website www.tartans.com (AOL keyword:
clans) and we are trying to capitalize on that agreement by promoting our
products and services on www.tartans.com by selling advertising space and
company-owned product.

      We also have an agreement with Krause Publications, pursuant to which
Krause Publications prints Maloney's Antiques and Collectibles Resource
Directory and we receive a percentage of the sales revenues from the book sales.
We own "www.MaloneysOnline.com," a clearinghouse for hard to find information
that contains the searchable Internet version of the resource directory.

      Although we expect that this revenue model will generate increased
revenue, if we are not successful in implementing this model, if the
collectibles community is not accepting of the services we provide, if costs are
higher than anticipated, or if revenues do not increase as rapidly as
anticipated, we may not be able to have positive cash flow. There are a number
of factors that may impact our plans and inhibit our success. See "Risk Factors"
included as Exhibit 99.1. Therefore, we have no guarantees and can provide no
assurances, that our plans will be successful.


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<PAGE>

Competition

      The electronic commerce market is relatively new, rapidly evolving and
intensely competitive. Furthermore, we expect competition to intensify in the
future. Barriers to entry are relatively low, and current and new competitors
can launch new sites at a relatively low cost using commercially available
software. Our Rotman Auction operation competes with a variety of other
companies depending on the type of merchandise and sales format offered to
customers. These competitors include: (i) various Internet collectible
companies, Collectors Universe, Shop at Home and Tri-Star Productions; (ii) a
number of indirect competitors that specialize in electronic commerce or derive
a substantial portion of their revenue from electronic commerce, including
Internet Shopping Network and AOL, Shopping.com; and (iii) a variety of other
companies that offer merchandise similar to that of our Company but through
physical auctions.

      In addition, several large companies sell specialty consumer products,
including collectibles through interactive electronic media, including
broadcast, cable and satellite television and, increasingly, the Internet. These
companies include QVC, Home Shopping Network and Shop At Home. They generally
have substantial financial resources and, while their current collectible
offerings tend to be less focused than our collectible offerings, there can be
no guarantee that they will not become significant competitors in the future.

      Because our collectibles portal structure is not a buyer or seller of
collectibles, it is not in direct competition with existing collectible or
online auction sites. The portal will not compete with either the giants or the
small players in the collectibles auction and e-commerce industries; rather, we
will work in collaboration with these companies. Further, because the research
capacity of the website will be able to validate the authenticity of collectible
items by providing visitors with the research tools to complete transactions
based on the most accurate, verified material available, we believe other sites
will value its services. We will, however, compete for banner advertisements
with other portals that offer shopping search engines.

      Since the launch of the collectingexchange.com website in January of 2000
we have been building a micro-portal, which is a portal specific to a particular
subject. As a micro-portal we are specific to the collecting industry. By
acquiring the assets of CSEI and Discribe, we believe we have created an
extremely comprehensive and informative website for collecting on the Internet
and have eliminated a strong source of competition as a search engine. However,
our Rotman Auction operations will continue to face the competition discussed
above. As our model evolves and revenues increase from our other services
provided on the Collecting Channel, we intend to decrease our reliance on Rotman
Auction for revenues. Additionally, we have reduced the number of auctions
hosted by Rotman Auction, limiting them to significant dates or events, and sell
more inventory on other auction sites so we are not directly competing with
those companies in the industry that are utilizing our Collecting Channel
services.

      There can be no assurance that we can maintain our competitive position
against potential competitors, especially those with greater financial,
marketing, customer support, technical and other resources than us. Increased
competition is likely to result in reduced operating margins, loss of market
share and a diminished brand franchise, any one of which could materially
adversely affect the our business, results of operations and financial
condition.

Intellectual Property

      Our web hosting, AuctionInc. software suite, and research center software
programs are proprietary. We have filed one application for a patent related to
AIship. We do not have any patents for our designs or innovations and we may not
be able to obtain copyright, patent or other protection for our proprietary
technologies or for the processes developed by our employees. Legal standards
relating to intellectual property rights in computer software are still
developing and this area of the law is evolving with new technologies. Our
intellectual property rights do not guarantee any competitive advantage and may
not sufficiently protect us against competitors with similar technology. To
protect our interest in our intellectual property, we restrict access by others
to our proprietary software.

      We believe that our products and other proprietary rights do not infringe
on the proprietary rights of third parties. However, there can be no assurance
that third parties will not assert infringement claims against us in the future
with respect to current or future products or other works of ours. This
assertion may require us to enter into royalty arrangements or result in costly
litigation.


                                       9
<PAGE>

      We are also dependent upon existing technology related to our operations
that we license from third parties. When we acquired the assets of the
Collecting Channel we were granted two perpetual licenses for the proprietary
software eCMS and we acquired the source codes for the software. eCMS is the
content management system primarily used by www.collectingchannel.com. We rely
on encryption and authentication technology licensed from VeriSign through an
online user agreement to provide the security and authentication necessary to
effect secure transmission of confidential information.

      We cannot make any assurances that these third-party technology licenses
will continue to be available to the Company on commercially reasonable terms.
Our inability to maintain or obtain upgrades to any of these technology licenses
could result in delays in completing our proprietary software enhancements and
new developments until equivalent technology could be identified, licensed or
developed and integrated. Any of these delays would materially adversely affect
our business, results of operations and financial condition.

      We also utilize free open-source technology in certain areas. Unlike
proprietary software, open-source software has publicly available source code
and can be copied, modified and distributed with minimal restrictions. Our
principal web servers' software is Apache, a free web server software. We are
using PHPShop for our e-commerce to provide highly customizable storefronts. In
addition to PHPShop we develop a substantial portion of our websites with the
language PHP.

Research and Development

      Over the past 2 years the Company has not spent any amount in research and
development.

Employees

      We currently employ 17 full-time personnel. We believe that our future
success will depend in part on our continued ability to attract, hire and retain
qualified personnel.

Government Regulation

      We are not currently subject to direct federal, state or local regulation,
and laws or regulations applicable to access or commerce on the Internet, other
than regulations applicable to businesses generally. However, due to the
increasing popularity and use of the Internet and other online services, it is
possible that a number of laws and regulations may be adopted with respect to
the Internet or other online services covering issues such as user privacy,
freedom of expression, pricing, content and quality of products and services,
taxation, advertising, intellectual property rights and information security.

Item 2. Description of Properties.

      Our corporate headquarters are located at 4 Brussels Street, Worcester,
Massachusetts 01610. Currently, we are tenants-at-will, but we are not required
to pay rent on the Brussels Street, Worcester location.

Item 3. Legal Proceedings.

      None.

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

      None.


                                       10
<PAGE>

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

      Our common stock, par value $.001 per share, began trading on August 11,
1995 and is presently traded on the Over-the-Counter Bulletin Board ("OTCBB")
under the symbol, "PAID".

      The following table sets forth the high and low bid prices for our common
stock as reported by OTCBB for the eight quarters ended December 31, 2002. The
quotations from the OTCBB reflect inter-dealer prices without retail mark-up,
mark-down, or commissions and may not represent actual transactions.

      2002                                           High $       Low $
                                                     ------       -----
      Quarter ended March 31, 2002                   $ .550       $ .040
      Quarter ended June 30, 2002                    $ .300       $ .077
      Quarter ended September 30, 2002               $ .105       $ .050
      Quarter ended December 31, 2002                $ .090       $ .041

      2001                                           High         Low
                                                     ----         ---
      Quarter ended March 31, 2001                   $ .220       $ .190
      Quarter ended June 30, 2001                    $ .033       $ .029
      Quarter ended September 30, 2001               $ .013       $ .012
      Quarter ended December 31, 2001                $ .050       $ .033

      As of March 3, 2003, there were approximately 264 holders of record of our
common stock.

      We have not previously paid cash dividends on our common stock, and intend
to utilize current resources to expand the business; thus, it is not anticipated
that cash dividends will be paid on our common stock in the foreseeable future.

                      Equity Compensation Plan Information

<TABLE>
<CAPTION>
                                                                                                         Number of Securities
                                                                                                       Remaining Available For
                                              Number of Securities To   Weighted-Average Exercise    Future Issuance Under Equity
                                              be Issued Upon Exercise      Price of Outstanding     Compensation Plans (Excluding
                                              of Outstanding Options,     Options, Warrants and        Securities Reflected in
                                                Warrants and Rights               Rights                     Column (a))
                                                        (a)                        (b)                           (c)
----------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                       <C>                          <C>
Equity Compensation Plans
  Approved by Security Holders                0                         $0                           0
----------------------------------------------------------------------------------------------------------------------------------
Equity Compensation Plans
  Not Approved by Security Holders            25,242,250                $.066                        9,358,099
----------------------------------------------------------------------------------------------------------------------------------
Total                                         25,242,250                $.066                        9,358,099
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Refer to Note 6, Notes to Consolidated Financial Statements for the Years ended
2002 and 2001, incorporated by reference in Part II, Item 7, of this Annual
Report, for a detailed discussion of the stock options and warrants that are
outstanding.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

      Our consolidated financial statements and notes thereto included elsewhere
in this Annual Report on Form 10-KSB contain detailed information that should be
referred to in conjunction with the following discussion.


                                       11
<PAGE>

Overview

      Our primary business, based on our revenues, is the purchase and sale of
collectibles and memorabilia. We operate an online auction site that provides a
full range of services to sellers and buyers, and maintain multiple collectibles
portals, offering integrated information and services to the collectibles
community. The collectibles industry includes every person that collects items
having either economic or sentimental value, such as antiques, sports and
entertainment memorabilia, stamps, coins, figurines, dolls, collector plates,
plush and die cast toys, cottage/village reproductions and other decorative or
limited edition items that are intended for collecting and other memorabilia. A
portal is an Internet website that enables visitors to search for, and visit,
other related sites, access related services, and obtain relevant data. Over the
past two years, our focus has been portal development in our own industry of
collectibles; to that end, we developed our website www.CollectingChannel.com,
and we acquired a large collection of entertainment memorabilia. We plan to
converge our multiple sites into one integrated site in 2003. We also plan to
build other portals, some that will charge fees to access their services, and
others to leverage company-owned technology and websites. In 2003, we began to
offer "AuctionInc." software, a suite of online management tools developed by us
during 2001 and 2002, to other online sellers, and we expanded our online
appraisal services and autograph signing events.

Critical Accounting Policies

      Our significant accounting policies are more fully described in Note 3 to
our financial statements. However, certain of our accounting policies are
particularly important to the portrayal of our financial position and results of
operations and require the application of significant judgment by our
management; as a result, they are subject to an inherent degree of uncertainty.
In applying these policies, our management makes estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosures. Those estimates and judgments are based upon our historical
experience, the terms of existing contracts, our observance of trends in the
industry, information that we obtain from our customers and outside sources, and
on various other assumptions that we believe to be reasonable and appropriate
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. Our critical accounting
policies include:

      Inventory: Inventory is stated at the lower of average cost or market on a
first-in, first-out method. On a periodic basis we review inventories on hand to
ascertain if any is slow moving or obsolete. In connection with this review, we
establish reserves based upon our experience and management's assessment of
current product demand.

      Property and Equipment and Other Intangible Assets: Property and equipment
and other intangible assets are stated at cost. Depreciation and amortization
are computed over estimated useful lives that are reviewed periodically. In
connection with this review we consider changes in the economic environment,
technological advances, and management's assessment of future revenue potential.

Results of Operations

      The following discussion compares our results of operations for the year
ended December 31, 2002, with those for the year ended December 31, 2001.

      Revenues. For the year ended December 31, 2002 revenues were approximately
$1,276,000, 97% of which is attributable to sales of our own product and fees
from buyers and sellers through the Rotman Auction operations. Gross sales of
our own product were approximately $1,238,000; gross sales of items on
consignment totaled approximately $5,000. Web hosting, advertising, and
sponsorship revenues were approximately $38,000, representing 2.9% of our
revenues.

      Our 2002 revenues reflect an increase of approximately $304,000 or 31%
from the year ended December 31, 2001, in which revenues were $972,000. For the
year ended December 31, 2001, sales of our own product were approximately
$837,000 and sales of items on consignment were approximately $97,000. For that
year, sales of our


                                       12
<PAGE>

own product represented 79.4% and sales of consignment merchandise represented
9.2% of all sales, but because we only receive a fee for sales on consignment
sales of our own product represented 86.2% and sales on consignment represented
1.5% of our revenues. Web hosting, advertising, or sponsorship revenues for the
year ended December 31, 2001 were $120,000, representing 12.3% of our revenues.
The primary reason for the increase in revenues was a combination of greater
sales of our Company owned product of approximately $401,000, offset by lower
consignment sales of $92,000, from which we receive only a 15% to 50% fee, or
$15,000, and a decrease in web hosting, advertising and sponsorship revenues of
$82,000.

      Gross profit from Company-owned product sales for the year ended December
31, 2002 was $490,000, which represents an increase of $330,000 from the year
ended December 31, 2001, which had a gross profit from Company-owned product
sales of approximately $161,000. The Company generated commissions on
consignment sales of $1,000 for the year ended December 31, 2002, compared to
$15,000 in commissions on consignment sales for the year ended December 31,
2001. The Company earned $31,000 in web hosting, advertising, and sponsorship
revenues for the year ended December 31, 2002, compared to $113,000 in 2001, and
approximately $6,000 in revenues for sales of the Maloney's Antiques and
Collectibles Resource Directory for the year ended December 31, 2002, compared
to $5,000 in revenue in 2001.

      The Company's total gross profit was $528,000 for the year ended December
31, 2002, compared to $294,000 for the year ended December 31, 2001, an increase
of $234,000, or 80%. The increase in gross profit is a result of higher quality
product and more selective purchasing, offset by a decrease of commissions on
consignment sales and revenues generated from web hosting, advertising, and
sponsorships. The decrease in web hosting, advertising and sponsorships revenues
is due primarily to a focus on developing the ActionInc. suite and planned
build-out celebrity websites that are expect to generate revenues during 2003.

      The Company has continued to enhance its web properties, which it has done
gradually over time to minimize the need for capital investment. The Company's
revenues continued to be derived primarily from Rotman Auction.

      Operating Expenses. Total operating expenses for the year ended December
31, 2002 were approximately $3,664,000, compared to $3,785,000 for the
corresponding period in 2001.

      Sales, general and administrative ("SG&A") expenses for the year ended
December 31, 2002 were approximately $2,735,000, compared to $2,742,000 for the
year ended December 31, 2001. Administrative and non-technical payroll related
costs increased by $222,000 over the year ended December 31, 2001. The increase
in payroll expenses is largely attributable to the hiring of more collectibles
related staff for Rotman Auction Depreciation and amortization decreased by
$31,000 principally due some older assets becoming fully depreciated in 2001.
Professional fees decreased by $114,000, primarily attributable to a decrease in
costs associated with the Company's litigation in 2001 and settlements of
balances due various professionals in 2002. Marketing and advertising costs,
primarily attributable to print and online marketing and advertising programs
designed to create brand awareness for the Company's online sites, increased by
approximately $40,000. Other SG&A expenses decreased by $114,000 principally due
to lower lease termination costs.

      Costs associated with planning, maintaining and operating the Company's
websites for the year ended December 31, 2002 decreased approximately $114,000
from the year ended December 31, 2001. This decrease is due primarily to
decreases in payroll of $119,000, consulting fees of $53,000, offset by
increases in computer expenses of $41,000 and depreciation of $138,000. During
2002 the Company capitalized $121,000 more in website development costs than it
did in 2001.

      Interest expense. For the year ended December 31, 2002, the Company
incurred $418,000 in interest expense charges principally associated with
convertible notes, including $164,000 of amortization of beneficial conversion
discounts, and $48,000 of amortization of warrants. For the year ended December
31, 2001 the Company incurred $900,000 in interest expense, including $277,000
of amortization of beneficial conversion discounts, and $135,000 of amortization
of warrants. See "Working Capital and Liquidity" below.


                                       13
<PAGE>

      Net Loss. The Company realized a loss for the year ended December 30, 2002
of $3,531,000, or ($.03) per share, compared to $4,358,000, or ($.07) per share
for the year ended December 31, 2001.

      Inflation. Management believes that inflation has not had a material
effect of its results of operations.

Assets

      At December 31, 2002, total assets of the Company were $4,308,000 compared
to $5,584,000 at December 31, 2001. The decrease was primarily due to
depreciation and amortization totaling $1,424,000, offset by $350,000 in
property and equipment additions.

Working Capital and Liquidity

      The Company had cash and cash equivalents of $41,000 at December 31, 2002,
compared to $48,000 at December 31, 2001. The Company had $317,000 of working
capital at December 31, 2002, compared to working capital of $97,000 at December
31, 2001. At December 31, 2002 current liabilities were $804,000 compared to
$1,242,000 at December 31, 2001. During the year ended December 31, 2002 current
liabilities were reduced primarily through the issuance of common stock for
interest and professional fees, agreed upon settlements of various professional
fee liabilities, and settlement of lease termination liabilities.

      The Company has outstanding an 8% convertible note held by Augustine Fund,
L.P. ("Augustine Fund") in the amount of $3,000,000. The note no longer bears
interest. As of December 31, 2002, Augustine Fund had converted $429,000 of this
note into common stock. The note is convertible into common stock at a
conversion price equal to the lesser of $.375 or 73% of the average of the
closing bid price for the common stock for the five trading days immediately
preceding the conversion date. The $3,000,000 note was due December 31, 2002,
but was extended to March 31, 2003 by mutual agreement, and may be additionally
extended through March 31, 2005. In connection with the $3,000,000 note, the
Company issued warrants to Augustine Fund and Delano Group Securities to
purchase 300,000 and 100,000 shares of common stock, respectively. The purchase
price per share of common stock is $2.70. The warrants expire on March 31, 2005.

      The Company has outstanding a second 8% convertible note to Augustine, in
the amount of $2,000,000, convertible on substantially the same terms as the
original convertible note and secured by substantially all assets of the
Company. However, the conversion price is the lesser of $.25 or 73% of the
average of the closing bid price for the common stock for the five trading days
immediately preceding the conversion date, and the maturity date is November 7,
2004, with an additional extension to November 7, 2005 permitted by the Company
or Augustine Fund. The Company has drawn $1,613,000 on this second note. The
funding was used to finance the Company's operations. During 2002, Augustine had
refused to honor certain draw requests, citing inadequate liquidity in the
Company's common stock and Augustine's lack of cash resources. As of December
31, 2002, Augustine Fund was current with all draw requests. If, in the future,
Augustine Fund fails to honor draw requests, the Company may need to seek
alternative financing or seek damages for breach of contract from Augustine
Fund.

      The Company issued a 6% convertible note on November 7, 2001 in the amount
of $1,000,000 to Leslie Rotman (the "Rotman Note"), as the sole stockholder of
Rotman Collectibles, Inc., upon the merger of Rotman Collectibles, Inc. into a
subsidiary of the Company under the same name. Rotman Collectibles, Inc.
obtained a large collection of entertainment memorabilia in connection with this
transaction. In January 2002 the Rotman Note was converted into 23,916,378
shares of common stock of the Company. Management believes that sales from
Rotman Collectibles, Inc. inventory will generate up to $400,000 in the next 12
months. The Rotman Note was issued on substantially the same terms as the
original convertible note to Augustine Fund, except that the interest rate was
6% rather than 8%, and the base price at which the note could be converted into
shares of common stock of the Company was 80%, rather than 73%.

      Had periodic advances under the November 7, 2001 convertible notes been
converted upon issuance, the holders would have received a total of
approximately $846,500 more in aggregate value of the Company's common stock
than they had advanced. As a result, in accordance with EITF 00-27, the
intrinsic value of the beneficial conversion feature of approximately $846,500
is being charged to interest expense over the term of the related notes.


                                       14
<PAGE>

Since the Rotman Note was fully converted in January 2002, substantially all the
related beneficial conversion feature of $250,000 was charged to interest
expense in 2001.

      The Company's independent auditors have issued a going concern opinion on
the Company's consolidated financial statements. The Company needs an infusion
of $500,000 of additional capital to fund anticipated operating costs over the
next 12 months. However, management anticipates continued growth in gross
profit. Management anticipates that its suite of management tools, called
"AuctionInc.", its new online appraisal service, Ask the Appraiser(TM), offered
through eBay, and sales from its movie poster inventory, will continue to
increase revenues and result in higher gross profit. Subject to the discussion
below, management believes that the Company has sufficient cash commitments to
fund operations during the next 12 months. These commitments include call
options for approximately 2.3 million shares of common stock, which, once
assigned by the Company, can generate between $95,000 and $750,000 of cash. In
addition, Augustine Fund is required to provide financing, at the Company's
request, of up to $2,000,000, from which the Company, as of December 31, 2002,
has previously drawn $1,613,000. Management also obtained private financing in
2002 in the aggregate amount of $115,000 pursuant to 8% promissory notes, and
anticipates up to $250,000 in additional short term financing at higher interest
rates for the purpose of purchasing inventory. We anticipate that this private
financing will be repaid shortly after the related inventory is sold.

      Management believes that these plans should result in obtaining sufficient
operating cash through the end of 2003. However, there can be no assurance that
an assignment of the call options can be concluded on reasonably acceptable
terms or that Augustine will honor our draw requests. If these assignments are
not completed or draw requests are not honored, management may need to seek
alternative sources of capital to support operations. In addition, management
believes that operating costs and interest expense will continue to decrease.
Management believes that future software development fees will decrease
substantially because the AuctionInc. software development is substantially
complete, payroll will decline due to changes in benefits and staffing, and
professional fees will decline because the Company has resolved its litigation
issues.

Item 7. Financial Statements.

      The consolidated financial statements and supplementary data required by
this item appear on Page F-1 immediately following the signature page and
certifications.

Item 8. Changes In and Disagreements with Accountants on Accounting and
        Financial Disclosure.

      Effective January 27, 2003, the Company's audit committee, with the
subsequent approval of the Company's Board of Directors, dismissed Wolf &
Company, P.C. ("Wolf") as the Company's independent accountants.

      The reports of Wolf on the financial statements of the Company for each of
the past two fiscal years did not contain any adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope, or
accounting principles, except that the reports of Wolf on the financial
statements of the Company for the fiscal years ended December 31, 2001 and
December 31, 2000 were modified to express substantial doubt as to the Company's
ability to continue as a going concern.

      In addition, during the Company's two most recent fiscal years and through
January 27, 2003, there were no disagreements with Wolf on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement, if not resolved to the satisfaction of
Wolf, would have caused Wolf to make reference to the subject of that
disagreement in its reports on the Company's financial statements for those
fiscal periods.

      The Company had previously requested that Wolf furnish it with a letter
addressed to the Securities and Exchange Commission stating whether or not it
agrees with the Company's statements. A copy of the letter stating Wolf's
agreement with such statements, dated January 31, 2003, is attached hereto as
Exhibit 16.1.


                                       15
<PAGE>

      On January 31, 2003, the Company's Board of Directors, based on a
recommendation of its Audit Committee, appointed Carlin, Charron & Rosen, LLP
("Carlin") as the Company's new independent accountants commencing with the
audit of the Company's financial statements for the year ended December 31,
2002. During the two most recent fiscal years and the interim period preceding
the engagement of Carlin, the Company has not consulted with Carlin regarding
the application of accounting principles to a specific completed or contemplated
transaction, or the type of audit opinion that might be rendered on the
Company's financial statements, nor was other written or oral advice provided
that was an important factor considered by the Company in reaching a decision as
to the accounting, auditing, or financial reporting issue, or regarding any
matter that was either the subject of a "disagreement" or a reportable event, as
those terms are used in Item 304(a)(1)(iv) of Regulation S-B and the related
instructions to Item 304 of Regulation S-B.

                                    PART III

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

Directors and Executive Officers

      The following table sets forth certain information regarding the directors
and executive officers of Sales Online:

      Name              Age   Position
      ----              ---   --------
      Gregory Rotman*   36    Director, Chief Executive Officer
                              & President

      Richard Rotman*   32    Director, Chief Financial Officer, Vice President,
                              Treasurer & Secretary

      Andrew Pilaro     33    Director

----------
*Gregory Rotman and Richard Rotman are brothers.

      Each of the Directors was elected as of September 19, 2000, for a term
expiring at the 2001 Annual Meeting of Stockholders and until their successors
are elected and qualified. The Company did not hold an annual meeting in 2001 or
2002. Under the Delaware General Corporation Law, each director holds office
until such director's successor is elected and qualified or until such
director's earlier resignation or removal.

      The following is a description of the current occupation and business
experience for the last five years for each director and executive officer.

      Gregory P. Rotman has served as a Director and the Chief Executive Officer
and President of Sales Online since February 1999. From 1995 to 1998, he served
as a Partner of Teamworks, Inc., LLC , which was responsible for the design,
financing and build-out of MCI National Sports Gallery.

      Richard S. Rotman has served as a Director and the Chief Financial
Officer, Vice President, Treasurer and Secretary of Sales Online since February
1999. Prior to joining Sales Online, he was involved in the management and
day-to-day operations of Rotman Auction, which he formed in February 1997. From
1995 until February 1997, Mr. Rotman worked for the family business, Rotman
Collectibles, where he began in sales and distribution in the new product
division. As the industry was changing, Rotman Collectibles began focusing on
auctions as a more permanent division and during 1996, he began to create a
presence on the Internet. Mr. Rotman's primary expertise is in management and
daily operations. From 1994 to 1995, Mr. Rotman served as the director of an art
gallery in Jackson, Wyoming, selling original artwork to high-end clientele.

      Andrew Pilaro has served as a Director of Sales Online since September
2000. Since August, 1996, he has served as the Assistant to the Chairman of CAP
Advisors Limited, an investment management company, with


                                       16
<PAGE>

responsibility for asset management. From August, 1995 to August, 1996, Mr.
Pilaro was a clerk at Fowler, Rosenau & Geary, L.P., a stock specialist firm.

Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
the Company's outstanding Common Stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock. These persons are required by SEC regulation to furnish the
Company with copies of all such reports they file.

      To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and representations that no other reports were
required, all Section 16(a) filing requirements applicable to its officers and
directors and to Gregory Rotman and Richard Rotman, who are beneficial owners of
more than 10% of the Company's stock, have been complied with for the period
which this Form 10-KSB relates, except John Martin, former Director and
executive officer, filed a Form 4 that was 30 days late with respect to 17
transactions that were completed in February 2002, filed a Form 4 that was 30
days late with respect to 3 transactions that were completed in March 2003, and
filed a Form 4 that was 10 days late with respect to 9 transactions that were
completed in June 2002. Effective September 24, 2002, Mr. Martin resigned as
Director of the Company and from all other management duties for the Company to
devote more time as an employee to development of the Company's software.

Item 10. Executive Compensation

      The following table sets forth the compensation of the Company's chief
executive officer, the chief financial officer, and each officer whose total
cash compensation exceeded $100,000, for the last three fiscal years ended
December 31, 2002, 2001, and 2000.

<TABLE>
<CAPTION>
                                              SUMMARY COMPENSATION TABLE
                                                                                           Long-Term Compensation
                                                                 Annual Compensation     ----------------------------
                                                                                                   Awards
---------------------------------------------------------------------------------------------------------------------
    Name and                                   Fiscal                 Salary              Securities Underlying
    Principal Position(1)                     Year (1)                                            Options
                                                                                                    (#)
---------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                   <C>                           <C>
    Gregory Rotman                              2002                  $ 83,464                      (1)
    President and Chief Executive               2001                  $ 74,704                       0
    Officer                                     2000                  $ 98,928                       0
---------------------------------------------------------------------------------------------------------------------
    Richard Rotman                              2002                  $ 83,464                      (1)
    Chief Financial Officer and Vice            2001                  $ 75,667                       0
    President and Secretary                     2000                  $ 98,771                       0
---------------------------------------------------------------------------------------------------------------------
</TABLE>

      (1) On October 11, 2002, both Gregory Rotman and Richard Rotman were
granted options to purchase 10,000,000 shares of common stock at an exercise
price of $.041, under the Company's 2002 Stock Option Plan, pursuant to the
following vesting schedule: options to purchase 4,000,000 shares of common stock
vest on April 11, 2003; options to purchase 3,000,000 shares of common stock
vest on October 11, 2003, and options to purchase 3,000,000 shares vest on
October 11, 2004, subject to termination, change in control and other
restrictions.


                                       17
<PAGE>

      The following table sets forth certain information related to options
granted to the named executive officers:

                        OPTION GRANTS IN LAST FISCAL YEAR
                               (Individual Grants)

<TABLE>
<CAPTION>
                                                   Number of           Percent of
                                                   Securities        Total Options/
                                                   Underlying         SARs Granted
                                                    Options/          to Employees     Exercise or Base     Expiration
                       Name                      SARs Granted (#)     in Fiscal Year      Price ($/Sh)          Date
---------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>                   <C>                 <C>           <C>
    Gregory Rotman, President and CEO              10,000,000            37.88%              $.041         October 11, 2012
---------------------------------------------------------------------------------------------------------------------------
    Richard Rotman, Vice President, CFO and
    Secretary                                      10,000,000            37.88%              $.041         October 11, 2012
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

      The following table sets forth certain information related to the number
of options exercised and the number and value of exercisable and unexercisable
options of the named executive officers as of December 31, 2002:

                         AGGREGATED OPTION/SAR EXERCISES
                IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
                                                                                Number of
                                                                               Securities            Value of
                                                                               Underlying           Unexercised
                                                                               Unexercised         In-The-Money
                                                                             Options/SARs at      Options/SARs at
                                                   Shares        Value         FY-End (#)           FY-End ($)
                                                Acquired on    Realized       Exercisable/         Exercisable/
                       Name                     Exercise (#)      ($)         Unexercisable        Unexercisable
---------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>         <C>                   <C>
    Gregory Rotman, President and CEO                0            $0          0/10,000,000          $0/$130,000
---------------------------------------------------------------------------------------------------------------------------
    Richard Rotman, Vice President, CFO and          0            $0          0/10,000,000          $0/$130,000
    Secretary
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

      (1) Based on closing price of $.054 on December 31, 2002 as reported by
the OTC Bulletin Board.

      None of the Company's directors receives any compensation from the Company
for serving as directors. However, on October 11, 2002, Andrew Pilaro received
options to purchase 2,000,000 shares of common stock at an exercise price of
$.041, pursuant to the 2002 Stock Option Plan, subject to the following vesting
schedule: options to purchase 800,000 shares of common stock vest immediately;
options to purchase 600,000 shares of common stock vest October 11, 2003, and
options to purchase 600,000 shares of common stock vest on October 11, 2004.
Based on a closing price of the Company's common stock as report on the OTC
Bulletin Board of $.054 as of December 31, 2002, Mr. Pilaro's exercisable
options have a value of $10,400, and Mr. Pilaro's unexercisable options have a
value of $15,600.


                                       18
<PAGE>

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

      To the knowledge of the management of the Company the following table sets
forth the beneficial ownership of our common stock as of March 3, 2003 of each
of our directors and executives officers, and all of our directors and executive
officers as a group. The address of each person named below is the address of
the Company.

         Name and Address of                Number of Shares           % of
         Beneficial Owner                   Beneficially Owned        Class
         ----------------                   ------------------        -----
          Gregory Rotman                      12,309,005 (1)          9.07%
          Richard Rotman                      14,155,451 (1)         10.43%
          Andrew Pilaro                          868,700 (2)           .66%

          All directors and                   27,333,156             19.46%
          officers as a group
          (3 individuals)

----------
(1)   Includes options to purchase 4,000,000 shares of the Company's common
      stock at an exercise price of $.041, exercisable April 11, 2003.

(2)   Includes 17,200 shares held indirectly as custodian for Mr. Pilaro's minor
      sons and options to purchase 800,000 shares of the Company's common stock
      at an exercise price of $.041, exercisable immediately.

      To the knowledge of the Company's management, as of March 3, 2003, there
are no persons and/or companies who or which beneficially own, directly or
indirectly, shares carrying more than 5% of the voting rights attached to all
outstanding shares of the Company, other than Gregory Rotman and Richard Rotman,
as set forth above.

      The information regarding the Company's Equity Compensation Plan
Information is incorporated herein by reference in Part II, Item 5 of this
Annual Report on Form 10-KSB.

Item 12. Certain Relationships and Related Transactions.

      On October 23, 2001, the Company entered into an agreement to acquire
Rotman Collectibles, Inc., through the merger of Rotman Collectibles into a
Company subsidiary. Rotman Collectibles was in the business of buying and
selling movie posters dated generally from the early 1940s through the early
1970s. On November 7, 2001, as payment for the business of Rotman Collectibles,
the Company issued a $1,000,000 convertible note to Leslie Rotman, the sole
stockholder of Rotman Collectibles. The note was secured by the Company's
assets, until it was converted in January 2002 into 23,916,378 shares of the
Company's common stock. The purchase price was based upon an independent
appraisal of the assets of Rotman Collectibles, consisting exclusively of the
movie posters. The Company did not assume any substantial known liabilities of
Rotman Collectibles. Pursuant to the independent appraisal, the assets have a
retail appraised value substantially higher than the principal amount of the
note. The sole stockholder, director and officer of Rotman Collectibles was
Leslie Rotman, who is the mother of Gregory Rotman and Richard Rotman.
Management believes that the terms of the transaction with Leslie Rotman and
Rotman Collectibles are fair and reasonable to the Company and no less favorable
than could have been obtained by an unaffiliated third party.

      In December 2001, the Company engaged Steven Rotman to provide consulting
services to the Company. Steven Rotman is the father of Gregory Rotman and
Richard Rotman. Mr. Rotman receives compensation in shares of common stock of
the Company equal to $40,000 per calendar quarter. In 2002, the Company obtained
private financing from Mr. Steven Rotman in the aggregate amount of $115,000
pursuant to 8% promissory notes. Management believes that the terms of the
engagement with Mr. Rotman are fair and reasonable to the Company and no less
favorable than could have been obtained by an unaffiliated third party.


                                       19
<PAGE>

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

      (a)   Exhibits.

      Exhibits are numbered in accordance with Item 601 of Regulation S-B.

   Exhibit No.    Description of Exhibits
   ----------     -----------------------
      3.1         Certificate of Incorporation, as amended (incorporated by
                  reference to Exhibit 3.1 to Form 10-KSB, filed on
                  April 1, 2002)

      3.2         Amended and Restated Bylaws (incorporated by reference to
                  Exhibit 3.2 to Form 10-KSB, filed on April 14, 2000)

      4.1         Specimen of certificate for Common Stock (incorporated by
                  reference to Exhibit 4.1 to Form SB-2/A filed on December 1,
                  2000)

      4.2         Convertible Note, dated November 7, 2001, issued to Leslie
                  Rotman pursuant to Agreement and Plan of Merger (incorporated
                  by reference from Exhibit 4.1 to Form 8-K filed on November
                  21, 2001)

      4.3         Convertible Note, dated November 7, 2001, issued to Augustine
                  Fund, L.P., pursuant to Loan Agreement (incorporated by
                  reference from Exhibit 4.2 to Form 8-K filed on November 21,
                  2001)

      4.4         Registration Rights Agreement, dated November 7, 2001, by and
                  between Leslie Rotman and the Company (incorporated by
                  reference from Exhibit 4.3 to Form 8-K filed on November 21,
                  2001)

      4.5         Registration Rights Agreement, dated November 7, 2001, by and
                  between Augustine Fund, L.P. and the Company (incorporated by
                  reference from Exhibit 4.4 to Form 8-K filed on November 21,
                  2001)

      10.2        1999 Stock Option Plan (incorporated by reference to Exhibit
                  10.2 to Form SB-2/A filed on December 1, 2000)

      10.3        1999 Omnibus Share Plan (incorporated by reference to Exhibit
                  10.3 to Form SB-2/A filed on December 1, 2000)

      10.4        Internet Data Center Services Agreement dated July 21, 1999
                  between the Registrant and Exodus Communications, Inc.
                  (incorporated by reference to Exhibit 10.4 to Form 10-KSB
                  filed on May 11, 2001)

      10.5        Securities Purchase Agreement dated March 23, 2000 between the
                  Registrant and Augustine Fund, LP. (incorporated by reference
                  to Exhibit 10.2 to Form 10-KSB filed on April 14, 2000)

      10.6        Convertible Note dated March 23, 2000 issued to Augustine
                  Fund, LP pursuant to Securities Purchase Agreement
                  (incorporated by reference to Exhibit 10.3 to Form 10-KSB
                  filed on April 14, 2000)

      10.7        Warrant dated March 23, 2000 issued to Augustine Fund, LP
                  pursuant to Securities Purchase Agreement (incorporated by
                  reference to Exhibit 10.4 to Form 10-KSB filed on April 14,
                  2000)

      10.8        Registration Rights Agreement (incorporated by reference to
                  Exhibit 10.5 to Form 10-KSB filed on April 14, 2000)

      10.9        Escrow Agreement dated March 23, 2000 among the Registrant,
                  Augustine Fund, LP and H. Glenn Bagwell, Jr. pursuant to
                  Securities Purchase Agreement (incorporated by reference to
                  Exhibit 10.6 to Form 10-KSB filed on April 14, 2000)

      10.10       Warrant issued by the Registrant to Delano Group Securities,
                  LLC (incorporated by reference to Exhibit 10.7 to Form 10-KSB
                  filed on April 14, 2000).

      10.11       Modification Agreement dated September 19, 2000 between the
                  Registrant and Augustine Fund, L.P. (incorporated by reference
                  to Exhibit 4.7 to Form S-3 filed on October 25, 2000).


                                       20
<PAGE>

      10.12       Software License Agreements dated November 8, 2000 between the
                  Registrant and CSEI (incorporated by reference to Exhibit 10.1
                  to Form 8-K filed on November 22, 2000)

      10.15       Loan Agreement, dated November 7, 2001, by and between
                  Augustine Fund, L.P. and the Company (incorporated by
                  reference from Exhibit 10.1 to Form 8-K filed on November 21,
                  2001)

      10.16       2001 Non-Qualified Stock Option Plan, as amended (incorporated
                  by reference from Exhibit 99.1 to Form S-8 filed on January
                  24, 2002)

      10.17       2002 Stock Option Plan*

      16.1        Letter regarding Change of Certifying Accountant (incorporated
                  by reference from Exhibit 16.2 to Form 8-K filed on February
                  3, 2003).

      21.1        Subsidiaries of the Registrant (included in Item I)*

      23.1        Consent of Carlin, Charron & Rosen, LLP*

      23.2        Consent of Wolf & Company, P.C. (incorporated by reference to
                  Exhibit 23.1 to Form 10-KSB, filed on April 1, 2002)

      99.1        Risk Factors*

      99.2        Certification of President and CFO pursuant to Section 906 of
                  the 2002 Sarbanes-Oxley Act*

----------
* filed herewith

            (b)   Reports on Form 8-K.

      The Company filed a report on Form 8-K with the Securities and Exchange
Commission as of February 3, 2003, announcing that Wolf & Company, P.C. had been
dismissed as the Company's independent accountants effective January 27, 2003,
and that Carlin, Charron & Rosen, LLP has been appointed as the Company's
independent accountants effective January 31, 2003.

Item 14. Controls and Procedures.

      Based on the evaluation of the Company's disclosure controls and
procedures as of a date within 90 days of the filing date of this annual report,
each of Gregory Rotman, the President of the Company, and Richard Rotman, the
Chief Financial Officer of the Company, have concluded that the Company's
disclosure controls and procedures are effective in ensuring that information
required to be disclosed by the Company in the reports that it files or submits
under the Securities and Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported, within the time period specified by the
Securities and Exchange Commission's rules and forms.

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


                                       21
<PAGE>

                                   SIGNATURES

      In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                      SALES ONLINE DIRECT, INC.


                                               /s/ Gregory Rotman
Date:  March 29, 2003                 By: _______________________________
                                           Gregory Rotman, President

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


                                      /s/ Gregory Rotman
Date:  March 29, 2003                 ___________________________________
                                      Gregory Rotman, President and Director


                                      /s/  Richard Rotman
Date:  March 29, 2003                 ____________________________________
                                      Richard Rotman, Vice President, Treasurer,
                                      Secretary and Director


                                      /s/  Andrew C. Pilaro
Date:  March 29, 2003                 ____________________________________
                                      Andrew Pilaro, Director

                                 CERTIFICATIONS

      I, Gregory Rotman, certify that:

      1. I have reviewed this annual report on Form 10-KSB of Sales Online
Direct, Inc.

      2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report.

      3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.

      4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:


                                       22
<PAGE>

      a)    designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;

      b)    evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and

      c)    presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date.

      5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

      a)    all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      b)    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

      6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date:  March 29, 2003                          /s/  Gregory Rotman
                                               ---------------------------------
                                               Gregory Rotman, President

      I, Richard Rotman, certify that:

      1. I have reviewed this annual report on Form 10-KSB of Sales Online
Direct, Inc.

      2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report.

      3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.

      4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

      a)    designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;

      b)    evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and

      c)    presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date.


                                       23
<PAGE>

      5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

      a)    all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      b)    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

      6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date:  March 29, 2003                    /s/ Richard Rotman
                                         ---------------------------------------
                                         Richard Rotman, Chief Financial Officer


                                       24
<PAGE>

                      Consolidated Financial Statements and
                              Report of Independent
                          Certified Public Accountants

                    Sales Online Direct, Inc. and Subsidiary
                           December 31, 2002 and 2001


                                      F-1
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                           DECEMBER 31, 2002 AND 2001
                        CONSOLIDATED FINANCIAL STATEMENTS

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditors' Report (Carlin, Charron & Rosen, LLP)......         F-3

Independent Auditors' Report (Wolf &Company, P.C.) ..............         F-4

Consolidated Balance Sheets at December 31, 2002 and 2001........         F-5

Consolidated Statements of Operations
Years ended December 31, 2002 and 2001...........................         F-6

Consolidated Statements of Shareholders' Equity  (Deficit)
Years ended December 31, 2002 and 2001...........................         F-7

Consolidated Statements of Cash Flows
Years ended December 31, 2002 and 2001...........................      F-8-F-9

Notes to Consolidated Financial Statements
Years ended December 31, 2002 and 2001...........................    F-10 - F-19


                                      F-2
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Shareholders of Sales Online Direct, Inc.

We have audited the accompanying consolidated balance sheet of Sales Online
Direct, Inc. and subsidiary (the Company) as of December 31, 2002, and the
related consolidated statements of operations, shareholders' equity (deficit)
and cash flows for the year then ended. 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
audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 consolidated 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 financial position of Sales Online Direct,
Inc. and subsidiary as of December 31, 2002, and the results of their operations
and their cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred recurring losses,
has had negative cash flows from operations and has a shareholders' deficit at
December 31, 2002. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans regarding those
matters are also described in Note 2. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.


/s/ Carlin, Charron & Rosen LLP

Worcester, Massachusetts
March 14, 2003


                                      F-3
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Sales OnLine Direct, Inc.
Worcester, Massachusetts

We have audited the accompanying balance sheets of Sales OnLine Direct, Inc. as
of December 31, 2001, and the related statements of operations, changes in
stockholders' equity and cash flows for year ended. 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 audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 consolidated 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 financial position of Sales OnLine Direct,
Inc. as of December 31, 2001 and the results of their operations and their cash
flows for years then ended in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred recurring losses
from operations and has a stockholders' deficit at December 31, 2001. These
circumstances raise substantial doubt as to the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note 2. The accompanying consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.


/s/ Wolf & Company, P.C.

March 24, 2002
Boston, Massachusetts


                                      F-4
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                  DECEMBER 31,

<TABLE>
<CAPTION>
                                ASSETS                           2002            2001
                                                                 ----            ----
<S>                                                       <C>              <C>
Current assets:
  Cash and cash equivalents                               $      41,283    $     47,669
  Accounts receivable                                             7,495          15,295
  Marketable securities                                              --             121
  Inventories                                                   966,749       1,160,810
  Prepaid expenses                                               86,544          37,595
  Other current assets                                           18,413          77,557
                                                          -------------    ------------
     Total current assets                                     1,120,484       1,339,047

Property and equipment, net                                     907,785       1,136,931
Other intangible assets, net                                  2,279,799       3,078,391
Debt financing costs, net                                            --          30,000
                                                          -------------    ------------

Total assets                                              $   4,308,068    $  5,584,369
                                                          =============    ============

                LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
  Notes payable                                           $     115,000    $         --
  Accounts payable                                              260,546         359,218
  Accrued expenses                                              428,005         882,433
                                                          -------------    ------------
  Total current liabilities                                     803,551       1,241,651
                                                          -------------    ------------
  Convertible debt                                            3,778,377       4,544,968
                                                          -------------    ------------
  Contingencies                                                      --              --
                                                          -------------    ------------

Shareholders' deficit:
  Common stock, $.001 par value, 350,000,000 shares
   authorized; 128,309,528 and 79,683,494 shares issued
   and outstanding at December 31, 2002
   and 2001, respectively                                       128,310          79,683
  Additional paid-in capital                                 15,231,677      12,010,313
  Accumulated deficit                                       (15,589,228)    (12,057,863)
  Unearned compensation                                         (44,619)       (234,383)
                                                          -------------    ------------
     Total shareholders' deficit                               (273,860)       (202,250)
                                                          -------------    ------------
Total liabilities and shareholders' deficit               $   4,308,068    $  5,584,369
                                                          =============    ============
</TABLE>

          See accompanying notes to consolidated financial statements


                                      F-5
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                  DECEMBER 31,

                                                        2002            2001
                                                        ----            ----

Revenues                                          $   1,275,888    $    971,802
Cost of revenues                                        747,727         678,275
                                                  -------------    ------------
Gross profit                                            528,161         293,527
                                                  -------------    ------------
Operating expenses:
  Selling, general, and administrative expenses       2,734,980       2,742,018
  Web site development costs                            929,499       1,043,359
                                                  -------------    ------------
     Total operating expenses                         3,664,479       3,785,377
                                                  -------------    ------------
Loss from operations                                 (3,136,318)     (3,491,850)
                                                  -------------    ------------
Other income (expense):
  Interest expense                                     (417,634)       (899,785)
  Other income                                           23,313          30,880
  Unrealized gain on marketable securities                   --          36,291
  Loss on sale of marketable securities                    (726)        (33,092)
                                                  -------------    ------------
     Total other expense, net                          (395,047)       (865,706)
                                                  -------------    ------------
Loss before income taxes                             (3,531,365)     (4,357,556)
                                                  -------------    ------------
Provision for income taxes                                   --              --
                                                  -------------    ------------
  Net loss                                        $  (3,531,365)   $ (4,357,556)
                                                  =============    ============
Loss per share:
  Basic and diluted                               $       (0.03)   $      (0.07)
                                                  =============    ============
  Weighted average shares                           116,127,347      63,196,649
                                                  =============    ============

          See accompanying notes to consolidated financial statements


                                      F-6
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
            CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                 Common stock       Additional
                                          ----------------------      Paid-in      Accumulated     Unearned
                                            Shares       Amount      Capital         deficit      Compensation       Total
                                          -----------   --------   ------------    ------------   ------------     -----------
<S>                                       <C>           <C>        <C>             <C>             <C>             <C>
Balance, December 31, 2000                 54,763,281   $ 54,763   $ 10,448,176    $ (7,700,307)   $(424,147)      $ 2,378,485

Issuance of common stock in merger with
  Rotman Collectibles, Inc.                       100         --              7              --           --                 7

Reclassification of temporary equity          200,000        200        237,300              --           --           237,500

Registration costs                                 --         --       (244,600)             --           --          (244,600)

Common stock issued in payment of
  interest on convertible debt              3,193,126      3,193        174,505              --           --           177,698

Beneficial conversion discount                     --         --        619,862              --           --           619,862

Common stock issued in payment of
  legal and consulting fees                 4,929,229      4,929        173,643              --           --           178,572

Issuance of common stock pursuant to
  exercise of stock options granted to
  employees for services                   16,597,758     16,598        601,420              --           --           618,018

Amortization of stock-based
  compensation                                     --         --             --              --      189,764           189,764

Net loss                                           --         --             --      (4,357,556)          --        (4,357,556)
                                          -----------   --------   ------------    ------------    ---------       -----------

Balance, December 31, 2001                 79,683,494   $ 79,683   $ 12,010,313    $(12,057,863)   $(234,383)      $  (202,250)

Amortization of stock-based
  compensation                                     --         --             --              --      189,764           189,764

Common stock issued in payment of
  interest on convertible debt              3,054,556      3,055        257,511              --           --           260,566

Issuance of common stock pursuant to
  exercise of stock options granted to
  employees for services                    6,401,518      6,402        484,700              --           --           491,102

Common stock issued in payment of
  professional and consulting fees          9,176,396      9,176        850,304              --           --           859,480

Exercise of stock options                     294,750        295          2,653              --           --             2,948

Conversions of notes payable               29,698,814     29,699      1,399,551              --           --         1,429,250

Beneficial conversion discount                     --         --        226,645              --           --           226,645

Net loss                                           --         --             --      (3,531,365)          --        (3,531,365)
                                          -----------   --------   ------------    ------------    ---------       -----------
Balance, December 31, 2002                128,309,528   $128,310   $ 15,231,677    $(15,589,228)   $ (44,619)      $  (273,860)
                                          ===========   ========   ============    ============    =========       ===========
</TABLE>

          See accompanying notes to consolidated financial statements


                                      F-7
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            YEARS ENDED DECEMBER 31,

                                                        2002            2001
                                                        ----            ----
Operating activities:
  Net loss                                          $(3,531,365)   $(4,357,556)
  Adjustments to reconcile net loss to net
   cash used in operating activities
     Depreciation and amortization                    1,423,819      1,421,325
     Amortization of unearned compensation              189,764        189,764
     Amortization of debt discount                       47,804        215,000
     Beneficial conversion feature                      164,000        277,360
     Stock issued in payment of interest                260,566        177,698
     Stock options issued for compensation              491,102        618,018
     Net loss (gain) on marketable securities               726         (3,118)
     Stock issued in payment of consultants             859,480        178,572
     Loss on abandonment of property & equipment             --         45,852
     Changes in assets and liabilities:
       Accounts receivable                                7,800        (15,295)
       Inventories                                      194,061        240,516
       Accounts payable                                 (98,672)       221,941
       Accrued expenses                                (454,428)       152,825
       Other, net                                        10,195         28,912
                                                    -----------    -----------
         Net cash used in operating activities         (435,148)      (608,186)
                                                    -----------    -----------
Investing activities:
  Purchase of securities                                 (1,117)            --
  Proceeds from sale of marketable securities               512         20,193
  Acquisition of other intangible assets                (16,000)            --
  Cash received from Rotman Auction, Inc.                    --         10,698
  Property and equipment additions                     (350,081)      (168,244)
                                                    -----------    -----------
        Net cash used in investing activities          (366,686)      (137,353)
                                                    -----------    -----------
Financing activities:
  Net proceeds from note payable                        115,000             --
  Net proceeds from convertible debt                    677,500        935,274
  Proceeds from exercise of stock options                 2,948             --
  Payment of stock registration costs                        --       (244,600)
                                                    -----------    -----------
  Net cash provided by financing activities             795,448        690,674
                                                    -----------    -----------
        Net decrease in cash and cash equivalents        (6,386)       (54,865)

Cash and cash equivalents, beginning                     47,669        102,534
                                                    ===========    ===========
Cash and cash equivalents, ending                   $    41,283    $    47,669
                                                    ===========    ===========

          See accompanying notes to consolidated financial statements


                                      F-8
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                            YEARS ENDED DECEMBER 31,

               SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                                2002          2001
                                                                                ----          ----
<S>                                                                         <C>          <C>
Cash paid during the year for:

  Income taxes                                                              $       --   $        --
                                                                            ==========   ===========
  Interest                                                                  $    2,212   $        --
                                                                            ==========   ===========
<CAPTION>
      SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
<S>                                                                         <C>          <C>
Convertible debt converted to common stock                                  $1,429,250   $        --

Merger of Rotman Collectibles, Inc. accounted for using the
  purchase method of accounting. The assets were recorded at
  their fair value as follows:

    Cash received in the transaction                                        $       --   $    10,698
    Inventories                                                             $       --   $ 1,015,353
    Other liabilities assumed                                               $       --   $   (26,044)
    Convertible debt issued                                                 $       --   $(1,000,000)
    Issuance of common stock                                                $       --   $        (7)

Acquisition of Internet Collectible Awards for temporary equity
    Reclassification of temporary
      equity to permanent equity                                            $       --   $   237,500

Reduction in acquisition price of certain assets of
  ChannelSpace Entertainment, Inc. due to settlement agreement
    Property and equipment                                                  $       --   $   (30,300)
    Other intangible assets                                                 $       --   $  (269,700)
    Accrued expenses reversed                                               $       --   $   300,000
</TABLE>

          See accompanying notes to consolidated financial statements


                                      F-9
<PAGE>

Note 1. Organization

The Company operates and maintains an internet portal dedicated to collectibles
in a variety of categories. The Company conducts person to person online
auctions of its own merchandise and items posted under consignment arrangements
by third party sellers.

On November 8, 2000, the Company acquired certain assets of ChannelSpace
Entertainment, Inc., a Virginia corporation ("CSEI") and Discribe, Ltd.,
("Discribe") a Canadian corporation wholly owned by CSEI. CSEI and Discribe are
converged Internet content providers and producers of affinity portals,
including the CollectingChannel.com and the CelticChannel.com websites. The
consideration paid by the Company for the acquired assets was 7,530,000
unregistered shares of the Company's common stock valued at $4,648,996 and
$300,000 worth of the Company's common stock to be registered (711,136 shares).
On February 1, 2002 the Company entered into a Settlement Agreement and Mutual
Release regarding a variety of claims by both parties to the above transaction.
The settlement discharged the Company from the requirement to issue, and
register, the above mentioned 711,136 shares of common stock and granted to the
Company a call option for 2,283,565 shares of unregistered common stock held by
CSEI as discussed in Note 6. The assets acquired - consisting principally of
software licenses, a video library, a library of articles, a user list, Domain
names, furniture, and fixtures and equipment - had an estimated fair value of
approximately $4,974,000. The fair values of the individual assets acquired, and
the consideration paid, have been determined by independent appraisal. The
excess of the fair value of the assets acquired over the purchase price,
approximately $325,000, has been allocated pro-rata as a reduction of the fair
values of the intangible assets acquired.

On November 7, 2001 the Company, through a subsidiary, Rotman Collectibles Inc.
(a Delaware Corporation), entered into a merger agreement with Rotman
Collectibles, Inc. (a Massachusetts Corporation) ("RCI"), a seller of movie
posters. In connection with this agreement the Company issued 100 common shares
in exchange for the outstanding common shares of RCI. The acquisition has been
accounted for under the purchase method of accounting. In addition, the Company
issued the Rotman convertible note discussed in Note 8 in the amount of
$1,000,000 in exchange of a convertible note previously issued by RCI. The sole
stockholder, director, and officer of RCI was Leslie Rotman, who is the mother
of Gregory and Richard Rotman, both of whom are executive officers and directors
of the Company.

Note 2. Management's Plans

The Company has continued to incur significant losses and has a limited
operating history. For the years ended December 31, 2002 and 2001 the Company
reported losses of approximately $3,530,000 and $4,360,000, respectively.

To date the Company has met its cash needs from the proceeds of convertible debt
and the related warrants and the assignment of call options discussed in Note 8.

The Company has increased gross margins from auctions during 2002. In addition,
the Company's suite of management tools, called "Auction Inc.", its new online
appraisal service, Ask the Appraiser(TM), offered through eBay, and sales from
its movie poster inventory, are expected to continue to increase revenues and
result in higher gross profit. In addition, management anticipates that
operating costs will continue to decrease. Software development costs are
expected to decrease since the AuctionInc software is substantially complete,
and payroll and related costs are expected to decline due to changes in benefits
and staffing. Subject to the discussion below, management believes that the
Company has sufficient cash commitments to fund operations during the next
twelve months.

The Settlement Agreement and Mutual Releases related to the CSEI assets
discussed in Note 1 provided the Company with call options for approximately 2.3
million shares of common stock. Management believes that the assignment of these
call options can generate between $95,000 and $750,000 of cash. In addition,
Augustine Fund is required to provide financing, at the Company's request, of an
additional $387,000. Management also obtained private financing in 2002 in the
aggregate amount of $115,000 pursuant to 8% promissory notes, and anticipates up
to $250,000 in additional short term financing at higher interest rates for the
purpose of purchasing inventory. Management believes that this private financing
will be repaid shortly after the related inventory is sold.


                                      F-10
<PAGE>

While management believes that these plans will result in obtaining sufficient
operating cash, there can be no assurance that an assignment of the call options
can be concluded on reasonably acceptable terms or that Augustine will honor the
Company's draw requests. If these assignments are not so completed, or draw
requests not honored, management will seek alternative sources of capital to
support operations. Based upon current cash positions, the Company needs an
infusion of $500,000 of additional capital to fund anticipated operating costs
over the next 12 months.

Although there can be no assurances, the Company believes that the above
anticipated additional revenues, additional financing, and anticipated option
assignments will be sufficient to meet the Company's working capital
requirements through the end of 2003.

Note 3. Summary Of Significant Accounting Policies

Principles of consolidation

      The accompanying financial statements include the accounts of Sales Online
      Direct, Inc. and its wholly-owned subsidiary, Rotman Collectibles, Inc.
      incorporated on November 2, 2001.

Cash and cash equivalents

      The Company considers all highly liquid investments purchased with an
      original maturity of three months or less to be cash equivalents.

Marketable Securities

      The Company classifies its marketable equity securities as trading
      securities in accordance with Statement of Financial Accounting Standards
      No. 115 "Accounting for Certain Investments in Debt and Equity
      Securities." Consequently, unrealized gains and losses are recognized in
      earnings for the period.

Inventories

      Inventories consist of collectible merchandise for sale and are stated at
      the lower of average cost or market on a first-in, first-out (FIFO)
      method.

      On a periodic basis management reviews inventories on hand to ascertain if
      any is slow moving or obsolete. In connection with this review, at
      December 31, 2002 and 2001 the Company has provided for reserves totaling
      $180,000 and $190,000, respectively.

Property and Equipment

      Property and equipment are stated at cost. Depreciation is computed using
      the straight line and double declining balance method over the estimated
      useful lives of from 3 to 5 years.

Other Intangible Assets

      Other intangible assets are being amortized on a straight-line basis over
      an estimated useful life of five years.

      The Company adopted Financial Accounting Standards Board Statement No. 142
      "Goodwill and Other Intangible Assets" (SFAS No. 142), effective January
      1, 2002. SFAS No. 142 addresses the initial recognition and measurement of
      intangible assets acquired outside of a business combination and the
      accounting for goodwill and other intangible assets subsequent to
      acquisition. SFAS No. 142 provides that intangible assets with finite
      lives be amortized and that goodwill and intangible assets with indefinite
      lives not be amortized, but rather be tested at least annually for
      impairment. The adoption of SFAS No. 142 in 2002 had no significant impact
      on the Company.

Debt Financing Costs


                                      F-11
<PAGE>

      Debt financing costs were amortized on a straight-line basis over the life
      of the related debt.

Revenue Recognition

      The Company generates revenue on sales of its purchased inventories, from
      fees and commissions on sales of merchandise under consignment type
      arrangements, from web hosting services, from appraisal services and from
      advertising and promotional services.

      For sales of merchandise owned and warehoused by the Company, the Company
      is responsible for conducting the auction, billing the customer, shipping
      the merchandise to the customer, processing customer returns and
      collecting accounts receivable. The Company recognizes revenue upon
      verification of the credit card transaction and shipment of the
      merchandise, discharging all obligations of the Company with respect to
      the transaction.

      For sales of merchandise under consignment-type arrangements, the Company
      takes physical possession of the merchandise, but is not obligated to, and
      does not take title or ownership of merchandise. When an auction is
      completed, consigned merchandise that has been sold is shipped upon
      receipt of payment. The Company recognizes the net commission and service
      revenues relating to the consigned merchandise upon receipt of the gross
      sales proceeds and shipment of the merchandise. The Company then releases
      the net sales proceeds to the Consignor, discharging all obligations of
      the Company with respect to the transaction.

      The Company charges a fixed monthly amount for web hosting services. This
      revenue is recognized on a monthly basis as the services are provided.

      Appraisal revenues are recognized when the appraisal is delivered to the
      customer.

      Advertising revenues are recognized at the time the advertisement is
      initially displayed on the company's web site. Sponsorship revenues are
      recognized at the time that the related event is conducted.

Advertising Costs

      Advertising costs totaling approximately $88,700 in 2002 and $55,000 in
      2001, are charged to expense when incurred.

      Fair Value of Financial Instruments

      Cash and cash equivalents, accounts receivable, accounts payable and
      accrued expenses - The carrying amount of these financial instruments
      approximates fair value because of the short-term nature of these
      instruments.

      Notes payable - The carrying amount of these financial instruments
      approximates fair value as the interest rate approximates market rates.

      Convertible debt - The carrying amount of these financial instruments
      approximate fair value as the interest rates approximate market rates.

Concentrations of Credit Risk

      The Company's financial instruments that are exposed to concentrations of
      credit risk consist primarily of cash and cash equivalents and accounts
      receivable.

      Cash and cash equivalents - The Company places its cash and cash
      equivalents with high credit quality institutions. The Company had no cash
      deposits in excess of federal depository insurance limits at December 31,
      2002 and 2001.


                                      F-12
<PAGE>

      Accounts receivable - The Company maintains receivable balances with
      certain of its customers and typically does not require collateral. The
      Company reviews a customer's credit history before extending credit and
      establishes an allowance for doubtful accounts based upon periodic reviews
      of the credit risk of specific customers and other information, if
      necessary. Based on experience to date, potential credit losses are
      considered minimal.

Income Taxes

      Deferred tax asset and liabilities are recorded for temporary differences
      between the financial statement and tax bases of assets and liabilities
      using the enacted income tax rates expected to be in effect when the taxes
      are actually paid or recovered. A deferred tax asset is also recorded for
      net operating loss, capital loss and tax credit carry forwards to the
      extent their realization is more likely than not. The deferred tax expense
      for the period represents the change in the deferred tax asset or
      liability from the beginning to the end of the period.

Use of Estimates

      In preparing financial statements in conformity with generally accepted
      accounting principles, management is required to make estimates and
      assumptions that affect the amounts reported of assets and liabilities as
      of the date of the balance sheet and reported amounts of revenue and
      expenses during the reporting period. Material estimates that are
      particularly susceptible to significant change in the near term relate to
      inventories, intangible assets and deferred tax asset valuation. Although
      these estimates are based on management's knowledge of current events and
      actions, they may ultimately differ from actual results.

Stock Compensation Plans

      In December 2002, the FASB issued Statement of Financial Accounting
      Standards (SFAS) No. 148, "Accounting for Stock Based Compensation -
      Transition and Disclosure". SFAS No. 148 amends SFAS No. 123, "Accounting
      for Stock-Based Compensation" to provide alternative methods of transition
      for a voluntary change to the fair value based method of accounting for
      stock-based employee compensation. In addition, SFAS No. 148 amends the
      disclosure requirements of SFAS No. 123 to require prominent disclosures
      in both annual and interim financial statements about the method of
      accounting for stock-based employee compensation and the effect of the
      method used on reported results. SFAS No. 148 is effective for fiscal
      years ending after December 15, 2002. The adoption of SFAS No. 148 in 2002
      had no significant impact on the Company.

      SFAS Nos. 123 and 148 encourage all entities to adopt a fair value based
      method of accounting for employee stock compensation plans, whereby
      compensation cost is measured at the grant date based on the value of the
      award and is recognized over the service period, which is usually the
      vesting period. However, they also allow an entity to continue to measure
      compensation cost for those plans using the intrinsic value based method
      of accounting prescribed by Accounting Principles Board Opinion No. 25, "
      Accounting for Stock Issued to Employees," whereby compensation cost is
      the excess, if any, of the quoted market price of the stock at the grant
      date (or other measurement date) over the amount an employee must pay to
      acquire the stock. Stock options issued under the Company's stock option
      plan typically have no intrinsic value at the grant date, and under
      Opinion No. 25 no compensation cost is recognized for them. The Company
      has elected to continue with the accounting methodology in Opinion No. 25
      and has provided pro forma disclosures, in accordance with SFAS No. 148,
      of net income and earnings per share as if the fair value based method of
      accounting had been applied.

Earnings Per Common Share

      Basic earnings per share represents income available to common
      stockholders divided by the weighted-average number of common shares
      outstanding during the period. Diluted earnings per share reflects
      additional common shares that would have been outstanding if dilutive
      potential common shares had been issued, as well as any adjustment to
      income that would result from the assumed issuance. Potential common


                                      F-13
<PAGE>

      shares that may be issued by the Company relate to convertible debt and
      outstanding stock options and warrants. The number of common shares that
      would be issued upon conversion of the convertible debt would have been
      107,269,846 as of December 31, 2002 and 156,356,088 as of December 31,
      2001. The number of common shares that would be included in the
      calculation of outstanding options and warrants is determined using the
      treasury stock method. The assumed conversion of outstanding dilutive
      stock options and warrants would increase the shares outstanding but would
      not require an adjustment of income as a result of the conversion. Stock
      options and warrants applicable to 642,250 shares and 937,000 shares at
      December 31, 2002 and 2001, respectively, have been excluded from the
      computation of diluted earnings per share, as have the common shares that
      would be issued upon conversion of the convertible debt, because they were
      antidilutive. Diluted earnings per share have not been presented as a
      result of the Company's net loss for each year.

Asset Impairment

      The Company adopted Financial Accounting Standards Board Statement No.
      144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
      (SFAS No. 144) effective January 1, 2002. In accordance with SFAS No. 144
      long lived assets to be held and used by the Company are reviewed to
      determine whether any events or changes in circumstances indicate that the
      carrying amount of the asset may not be recoverable. For long-lived assets
      to be held and used, the Company bases its evaluation on such economic
      benefits of the assets, any historical or future profitability
      measurements, as well as other external market conditions or factors that
      may be present. If such impairment indicators are present or other factors
      exist that indicate that the carrying amount of the asset may not be
      recoverable, the Company determines whether an impairment has occurred
      through the use of an undiscounted cash flow analysis of assets at the
      lowest level for which identifiable cash flow exist. If impairment has
      occurred, the Company recognizes a loss for the difference between the
      carrying amount and the estimated value of the asset. The fair value of
      the asset is measured using an estimate of discounted cash flow analysis.
      The adoption of SFAS No. 144 in 2002 had no significant impact on the
      Company.

Web Site and Software Development Costs

      The Company accounts for website development costs in accordance with the
      provisions of EITF 00-2, "Accounting for Web Site Development Costs"
      ("EITF 00-2"), which requires that costs incurred in planning,
      maintaining, and operating stages that do not add functionality to the
      site be charged to operations as incurred. External costs incurred in the
      site application and infrastructure development stage and graphic
      development are capitalized. During the years ended December 31, 2002 and
      2001, the Company capitalized approximately $322,000 and $167,000,
      respectively, of Web site development costs. Such capitalized costs are
      included in "Property and equipment."

Recent Accounting Pronouncements

      During 2002, the Financial Accounting Standards Board issued Statements of
      Financial Accounting Standards (SFAS) Nos. 145 "Rescission of FASB
      Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
      Technical Corrections", 146 "Accounting for Costs Associated with Exit or
      Disposal Activities" and 147 "Acquisitions of Certain Financial
      Institutions - an amendment of FASB Statements No. 72 and 144 and FASB
      Interpretation No. 9". The Company is not impacted by these statements and
      does not expect their implementation to have a material impact on the
      Company's financial statements.

Reclassifications

      Certain amounts in the 2001 financial statements have been reclassified to
      conform with the 2002 presentation with no affect on previously reported
      net income, loss per share, or accumulated deficit.

Note 4. Property and Equipment

At December 31, 2002 and 2001 property and equipment consisted of the following:


                                      F-14
<PAGE>

                                                  2002           2001
                                                  ----           ----

            Computer equipment and software   $   854,829    $   826,948
            Office furniture                       61,927         61,927
            Video and article archives            418,983        418,983
            Video equipment                       158,513        158,513
            Web site development cost             644,305        322,105
            Purchased software                     70,000         70,000
                                              -----------    -----------

                                              $ 2,208,557      1,858,476
            Accumulated depreciation           (1,300,772)      (721,545)
                                              -----------    -----------

                                              $   907,785    $ 1,136,931
                                              ===========    ===========

Depreciation and amortization expense of property and equipment for the years
ended December 31, 2002 and 2001 amounted to approximately $579,200 and
$445,400, respectively.

The Company uses office and warehouse facilities as a tenant at will in a
building leased by a related party. No rent has been charged during the years
ended December 31, 2002 and 2001.

Note 5. Other Intangible Assets

At December 31, 2002 and 2001 other intangible assets are comprised of the
following:

                                              2002           2001
                                              ----           ----

            Software licenses          $ 2,882,660    $ 2,882,660
            Patent pending                  16,000             --
            Domain names                    77,025         77,025
            Acquired web sites             762,301        762,301
            Customer and user lists        327,157        327,157
            Other                           30,763         30,763
                                       -----------    -----------

                                         4,095,906      4,079,906
            Accumulated amortization    (1,816,107)    (1,001,515)
                                       -----------    -----------

                                       $ 2,279,799    $ 3,078,391
                                       ===========    ===========

Amortization expense for other intangible assets for the years ended December
31, 2002 and 2001 amounted to approximately $814,600 and $814,100, respectively.

Note 6. Common Stock

Call Option Agreements

      In connection with the Settlement Agreement and Mutual Release with CSEI
      discussed in note 1, the Company was granted call options for 2,283,565
      unregistered common shares held by CSEI at an exercise price of $.001 per
      share. The call options expire on January 31, 2005.

Stock Options

      In June 1999, the Company's Board of Directors adopted the 1999 Stock
      Option Plan (the "1999 Plan") that provides for the issuance of options to
      directors, officers, employees and consultants of the Company to purchase
      up to 1,000,000 shares of the Company's common stock. Options granted
      under the plan may be either incentive stock options ("ISO") or
      nonqualified stock options ("NSO"). The 1999 Plan provides that each
      option be granted at a price determined by the Board of Directors on the
      date such option is granted and have a maximum option term of ten years.
      The options granted become exercisable during a period of


                                      F-15
<PAGE>

      time as specified by the Board of Directors at the date such option is
      granted. In July 1999, the Company granted an option to an employee to
      purchase 471,000 shares of common stock at $.01 per share. The option
      vests over a four-year period. The Company recorded unearned compensation
      of $757,848, based on the difference between the fair market value of the
      common stock at the grant date and the exercise price. The unearned
      compensation is being amortized over the vesting period of the option.
      Amortization expense related to unearned compensation amounted to $189,764
      for each of the years ended December 31, 2002 and 2001. In 1999, the
      Company also granted options to purchase 126,000 shares of common stock at
      the stock's fair value on the dates of grant.

      In October 2002, the Company's Board of Directors adopted the 2002 Stock
      Option Plan (the "2002 Plan") that provides for the issuance of options to
      directors, officers, employees and consultants of the Company to purchase
      up to 30,000,000 shares of the Company's common stock. Options granted
      under the plan may be either incentive stock options ("ISO") or
      nonqualified stock options ("NSO"). The 2002 Plan provides that each
      option be granted at a price determined by the Board of Directors on the
      date such option is granted and have a maximum option term of ten years.
      The options granted become exercisable during a period of time as
      specified by the Board of Directors at the date such option is granted.
      During 2002, the Company granted options to purchase a total of 25,000,000
      shares of common stock to its President, Chief Financial Officer, Chief
      Technology Officer and a Director at the stock's fair value on the date of
      grant.

      There were no options granted or exercised under any plans during 2001.

      An analysis of the activity in the 1999 and 2002 Plans is as follows:

                                                                 Weighted
                                                                  Average
                                                                 Exercise
                                                 Shares           Price
                                                 ------           -----
       Shares under option:

            Outstanding at January 1, 2001         557,000          .24
            Granted                                     --           --
            Exercised                                   --           --
            Expired/Cancelled                      (20,000)        1.42
                                                ----------
            Outstanding at December 31, 2001       537,000          .19
            Granted                             25,000,000          .04
            Exercised                             (294,750)         .01
            Expired/Cancelled                           --           --
                                                ----------
            Outstanding at December 31, 2002    25,242,250         $.04
                                               ===========
       Options exercisable at year end           1,745,575         $.07
                                               ===========

      Information pertaining to options outstanding at December 31, 2002 is as
      follows:

<TABLE>
<CAPTION>
                                        Options Outstanding                          Options Exercisable
                                        -------------------                          -------------------

                                           Weighted
                                            Average         Weighted                               Weighted
                                           Remaining         Average                                Average
     Range of              Number         Contractual       Exercise                Number         Exercise
  Exercise Prices        Outstanding         Life             Price               Exercisable        Price
  ---------------        -----------         ----             -----               -----------        -----
<S>                       <C>              <C>               <C>                   <C>              <C>
     $ .01                   176,250        6 years          $  .01                  146,875        $  .01
       .81                     9,000        6                   .81                    6,300           .81
      1.62                    57,000        6                  1.62                   42,400          1.62
       .04                25,000,000       10                   .04                1,550,000           .04
                          ----------                                               ---------
</TABLE>


                                      F-16
<PAGE>

Outstanding at end
of year                     25,242,250       $   .04       1,745,575     $  .07
                            ==========                     =========

      During July 1999, the Company's Board of Directors adopted, subject to
      stockholders' approval, the 1999 Omnibus Share Plan (the "Omnibus Plan")
      that provides for both incentive and non-qualified stock options, stock
      appreciation rights and other awards to directors, officers, and employees
      of the Company to purchase or receive up to 1,000,000 shares of the
      Company's stock. A committee of the Board of Directors ("Committee") which
      price may, in the discretion of the Committee, be less than 100% of the
      fair market value of the shares on the date of the grant. The options
      granted will have a maximum term of ten years and shall be exercisable
      during a period as specified by the Committee. There were no incentive
      options granted under the Omnibus Plan during 2002 or 2001.

      On February 1, 2001 the Company adopted the 2001 Non-Qualified Stock
      Option Plan (the "2001 Plan") and has filed Registration Statements on
      Form S-8 to register 40,000,000 shares of its common stock. Under the 2001
      Plan employees and consultants may elect to receive their gross
      compensation in the form of options to acquire the number of shares of the
      Company's common stock equal to their gross compensation divided by the
      fair value of the stock on the date of grant. During the year ended
      December 31, 2002 the Company granted options for 15,577,914 shares at
      various dates aggregating $1,350,582 under this plan, including options
      for 1,011,821 shares representing $116,910 of consulting fees to Steven
      Rotman, the father of Gregory and Richard Rotman. During the year ended
      December 31, 2001 the Company granted options for 21,526,987 shares at
      various dates aggregating $796,590 under this plan, including options for
      1,880,342 shares representing $40,000 of consulting fees to Steven Rotman,
      the father of Gregory and Richard Rotman. All options granted during the
      period were exercised.

      The Company applies Accounting Principles Board Opinion No. 25 and related
      interpretations in accounting for its stock option plans. Accordingly,
      compensation cost has been recognized only to the extent described above.
      Had compensation cost for the Company's stock option plan been determined
      based on the fair value at the grant dates for awards under the plan
      consistent with the method prescribed by FASB Statement No. 123, the
      Company's net income and earnings per share would have been adjusted to
      the pro forma amounts indicated below:

                                                    Years Ended December 31,
                                                    ------------------------
                                                      2002           2001
                                                      ----           ----
      Net loss
      As reported                                 $(3,531,365)   $(4,357,556)
      Stock based compensation cost,
        as reported (net of tax)                      189,764        189,764
      Stock based compensation cost
        that would have been included
        in the determination of net
        net income had the fair value
        method been applied (net of tax)             (247,727)      (215,368)
                                                  -----------    -----------
      Pro forma                                   $(3,589,328)   $(4,383,160)
                                                  ===========    ===========

      Basic loss per share as reported            $      (.03)   $      (.07)
      Stock based compensation cost,
        as reported (net of tax)                           --             --
      Stock based compensation cost that would
        have been included in the determination
       of net income had the fair value
        method been applied (net of tax)                   --             --
                                                  -----------    -----------
      Pro forma                                   $      (.03)   $      (.07)
                                                  ===========    ===========


                                      F-17
<PAGE>

Note 7. Income Taxes

There was no provision for income taxes for the years ended December 31, 2002
and 2001 due to the Company's net operating loss and its valuation reserve
against deferred income taxes.

The difference between the provision for income taxes from amounts computed by
applying the statutory federal income tax rate of 34% and the Company's
effective tax rate is due primarily to the net operating loss incurred by the
Company and the valuation reserve against the Company's deferred tax asset.

The tax effects of temporary differences and carry forwards that give rise to
deferred taxes are as follows:

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

      Federal net operating loss
        carry forwards                 $ 4,029,000    $ 3,541,000
      State net operating loss
        carry forwards                   1,126,000      1,094,000
      Stock-based compensation
        recognized for
        financial statement purposes            --        210,000
                                       -----------    -----------
                                         5,155,000      4,845,000

      Valuation reserve                 (5,155,000)    (4,845,000)
                                       -----------    -----------
      Net deferred tax asset           $        --    $        --
                                       ===========    ===========

The valuation reserve applicable to net deferred tax asset for the years ended
December 31, 2002 and 2001 is due to the likelihood of the deferred tax not
expected to be utilized.

At December 31, 2002, the Company has federal and state net operating loss carry
forwards of approximately $11,850,000 available to offset future taxable income.
The state carry-forwards will expire intermittently through 2007, while the
federal carry forwards will expire intermittently through 2022.

Note 8. Convertible Debt Financing

As of December 31, 2002 the company has issued $4,183,524 of convertible debt,
which is presented net of unamortized beneficial conversion discounts of
$405,147.

On March 23, 2000, the Company entered into a Securities Purchase Agreement (the
"Agreement"), whereby the Company sold an 8% convertible note in the amount of
$3,000,000 (the "Series A Note"), due in shares of common stock on March 31,
2002 to Augustine Fund, L.P. (the "Buyer"). The Series A Note, as most recently
modified on May 21, 2002, is convertible into common stock at a conversion price
equal to the lesser of: (1) $.375 per share, or (2) seventy-three percent (73%)
of the average of the closing bid price for the common stock for the five (5)
trading days immediately preceding the conversion date. In connection with the
agreement, the Company also issued warrants to the Buyer and Delano Group
Securities to purchase 300,000 and 100,000 shares of common stock, respectively.
The purchase price per share of common stock is equal to $2.70, one hundred and
twenty percent (120%) of the lowest of the closing bid prices for the common
stock during the five (5) trading days prior to the closing date. The warrants
will expire on March 31, 2005. A May 21, 2002 modification agreement extended
the maturity date of the note until September 30, 2002, provided for additional
ninety-day extensions, the second of which was exercised on December 31, 2002,
beyond that date until March 31, 2005, waived interest for periods after March
31, 2002, and released the

Company from all requirements to register any common shares issuable under the
note or to keep any existing registration statements effective. As of December
31, 2002 the outstanding balance of this note was $2,570,750,


                                      F-18
<PAGE>

since $429,250 had been converted into 5,782,436 shares of the Company's common
stock at conversion prices ranging from $.028 to $.236 per share during the year
ended December 31, 2002.

On November 7, 2001, the Company entered into a Loan Agreement, whereby it
issued an 8% convertible note in the amount of $1,000,000, due November 7, 2003
(the "Series B Note") to Buyer. This note was modified on May 21, 2002 to, among
other things, allow the Company to borrow up to $2,000,000. The Series B Note,
as modified, is convertible into common stock at a conversion price equal to the
lesser of: (1) $.25 per share, or (2) seventy-three percent (73%) of the average
of the closing bid price for the common stock for the five (5) trading days
immediately preceding the conversion date. Based upon advances through December
31, 2002, had the Buyer converted the series B Note at issuance, Buyer would
have received $2,206,279 in aggregate value of the company's common stock upon
conversion of the convertible note. As a result, in accordance with EITF 00-27,
the intrinsic value of the beneficial conversion feature of $596,507 is being
charged to interest expense over the term of the related note. The beneficial
conversion feature that was charged to interest expense totaled $164,000 and
$27,360 in 2002 and 2001, respectively. The total beneficial conversion discount
related to this note has been recorded as an increase in additional paid in
capital and the unamortized portion as a reduction in the related note. In
addition, the Company entered into a Registration Rights Agreement whereby the
Company agreed to file a Registration Statement with the Securities and Exchange
Commission (SEC) within sixty (60) days of a request from the Buyer (Filing
Date), covering the common stock to be issued upon conversion of the Series B
Note. If this registration Statement is not declared effective by the SEC within
sixty (60) days of the filing date the conversion percentage shall decrease by
two percent (2%) for each month that the Registration Statement is not declared
effective. The May 21, 2002 modification extended the maturity date of the
Series B Note to November 7, 2004, provided the opportunity to extend the
maturity date to November 7, 2005, required that principal and interest be
payable in share of common stock, or cash, at the discretion of the Company, and
provided that any fees or expenses related to any registration of the common
stock will be borne equally by the Company and the Buyer, or entirely by the
Buyer in the case of a filing by Buyer and filed before April 10, 2003.

On November 7, 2001, the Company entered into a second Loan Agreement whereby it
issued a 6% convertible note, due November 7, 2003 (the "Rotman Note"), to
Leslie Rotman, pursuant to an Agreement and Plan of Merger dated October 23,
2001 (Note 1). The Rotman Note was converted into 23,916,378 shares of common
stock at conversion prices ranging from $.0298 to $.05152 per share in early
January 2002. Since the Rotman Note was fully converted in January 2002 the
related beneficial conversion feature of $250,000 has been charged to interest
expense.

Note 9. Notes Payable

At December 31, 2002 the Company was obligated on short-term notes payable to a
related party. The notes bear interest at 8% and are due in 2003.

Note 10. Issuance of Common Stock

During 2002 and 2001 the Company issued 3,054,556 and 3,193,126 shares of common
stock, respectively, in connection with the payment of approximately $260,600
and $177,700 of interest due on its convertible debt.

In addition, during 2002 and 2001 the Company issued 9,176,396 and 4,929,229
shares of common stock respectively, in connection with the payment of
approximately $859,500 and $178,600 of legal and consulting fees.

Note 11. Contingencies

The Company leased its former technology location under an operating lease
commencing on January 1, 2000 and expiring on December 31, 2004. Prior to
December 31, 2000, the Company abandoned this facility and ceased payments
required under the lease. During 2001, the landlord initiated an action seeking
approximately $115,000 in damages, interest and attorneys' fees. In December
2002, the Company entered into a settlement agreement of this matter under which
the Company agreed to pay a total of $10,000.


                                      F-19
<PAGE>

                                  EXHIBIT INDEX

    Exhibit No.   Description of Exhibits
    -----------   -----------------------
      3.1         Certificate of Incorporation, as amended (incorporated by
                  reference to Exhibit 3.1 to Form 10-KSB, filed on
                  April 1, 2002)

      3.2         Amended and Restated Bylaws (incorporated by reference to
                  Exhibit 3.2 to Form 10-KSB, filed on April 14, 2000)

      4.1         Specimen of certificate for Common Stock (incorporated by
                  reference to Exhibit 4.1 to Form SB-2/A filed on December 1,
                  2000)

      4.2         Convertible Note, dated November 7, 2001, issued to Leslie
                  Rotman pursuant to Agreement and Plan of Merger (incorporated
                  by reference from Exhibit 4.1 to Form 8-K filed on November
                  21, 2001)

      4.3         Convertible Note, dated November 7, 2001, issued to Augustine
                  Fund, L.P., pursuant to Loan Agreement (incorporated by
                  reference from Exhibit 4.2 to Form 8-K filed on November 21,
                  2001)

      4.4         Registration Rights Agreement, dated November 7, 2001, by and
                  between Leslie Rotman and the Company (incorporated by
                  reference from Exhibit 4.3 to Form 8-K filed on November 21,
                  2001)

      4.5         Registration Rights Agreement, dated November 7, 2001, by and
                  between Augustine Fund, L.P. and the Company (incorporated by
                  reference from Exhibit 4.4 to Form 8-K filed on November 21,
                  2001)

      10.2        1999 Stock Option Plan (incorporated by reference to Exhibit
                  10.2 to Form SB-2/A filed on December 1, 2000)

      10.3        1999 Omnibus Share Plan (incorporated by reference to Exhibit
                  10.3 to Form SB-2/A filed on December 1, 2000)

      10.4        Internet Data Center Services Agreement dated July 21, 1999
                  between the Registrant and Exodus Communications, Inc.
                  (incorporated by reference to Exhibit 10.4 to Form 10-KSB
                  filed on May 11, 2001)

      10.5        Securities Purchase Agreement dated March 23, 2000 between the
                  Registrant and Augustine Fund, L.P. (incorporated by reference
                  to Exhibit 10.2 to Form 10-KSB filed on April 14, 2000)

      10.6        Convertible Note dated March 23, 2000 issued to Augustine
                  Fund, LP pursuant to Securities Purchase Agreement
                  (incorporated by reference to Exhibit 10.3 to Form 10-KSB
                  filed on April 14, 2000)

      10.7        Warrant dated March 23, 2000 issued to Augustine Fund, LP
                  pursuant to Securities Purchase Agreement (incorporated by
                  reference to Exhibit 10.4 to Form 10-KSB filed on April 14,
                  2000)

      10.8        Registration Rights Agreement (incorporated by reference to
                  Exhibit 10.5 to Form 10-KSB filed on April 14, 2000)

      10.9        Escrow Agreement dated March 23, 2000 among the Registrant,
                  Augustine Fund, LP and H. Glenn Bagwell, Jr. pursuant to
                  Securities Purchase Agreement (incorporated by reference to
                  Exhibit 10.6 to Form 10-KSB filed on April 14, 2000)

      10.10       Warrant issued by the Registrant to Delano Group Securities,
                  LLC (incorporated by reference to Exhibit 10.7 to Form 10-KSB
                  filed on April 14, 2000).

      10.11       Modification Agreement dated September 19, 2000 between the
                  Registrant and Augustine Fund, LP (incorporated by reference
                  to Exhibit 4.7 to Form S-3 filed on October 25, 2000).

      10.12       Software License Agreements dated November 8, 2000 between the
                  Registrant and CSEI (incorporated by reference to Exhibit 10.1
                  to Form 8-K filed on November 22, 2000)

<PAGE>

      10.15       Loan Agreement, dated November 7, 2001, by and between
                  Augustine Fund, L.P. and the Company (incorporated by
                  reference from Exhibit 10.1 to Form 8-K filed on November 21,
                  2001)

      10.16       2001 Non-Qualified Stock Option Plan, as amended (incorporated
                  by reference from Exhibit 99.1 to Form S-8 filed on January
                  24, 2002)

      10.17       2002 Stock Option Plan*

      16.1        Letter regarding Change of Certifying Accountant (incorporated
                  by reference from Exhibit 16.2 to Form 8-K filed on February
                  3, 2003).

      21.1        Subsidiaries of the Registrant (included in Item I)*

      23.1        Consent of Carlin, Charron & Rosen, LLP*

      23.2        Consent of Wolf & Company, P.C. (incorporated by reference to
                  Exhibit 23.1 to Form 10-KSB, filed on April 1, 2002)

      99.1        Risk Factors*

      99.2        Certification of President and CFO pursuant to Section 906 of
                  the 2002 Sarbanes-Oxley Act*

----------
* filed herewith

                                       E-2