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, 2000.        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)

         Issuer's Telephone Number, Including Area Code: (508) 791-6710
          (Securities registered pursuant to Section 12(b) of the Act)

                         Common Stock, $0.001 Par Value
                              (Title of each 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 is not  contained  on  this  Form,  and no  disclosure  will  be
contained,  to the best of the  registrant's  knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

State Issuer's revenues for its most recent fiscal year: $1,297,595.

As of May 1, 2001,  the  registrant  had  outstanding  56,626,655  shares of its
Common  Stock,  par value of $0.001,  its only class of voting  securities.  The
aggregate  market value of the shares of common stock of the registrant  held by
non-affiliates  on May 1,  2001  was  approximately  $2,257,061  based  upon the
average  over the counter  sales price of $.115 per share on such date (See Item
5).

                       DOCUMENTS INCORPORATED BY REFERENCE

No  documents  are  incorporated  by  reference  into this 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.........................................   3
Item 2.    Description of Property.........................................  13
Item 3.    Legal Proceedings...............................................  13
Item 4.    Submission of Matters to a Vote of Security Holders.............  15

                                     PART II

Item 5.    Market for Common Equity and Related Stockholder Matters......... 15
Item 6.    Management's Discussion and Analysis or Plan of Operation........ 16
Item 7.    Financial Statements............................................. 19
Item 8.    Changes In and Disagreements With Accountants on
           Accounting and Financial Disclosure.............................. 20

                                    PART III

Item 9.    Directors, Executive Officers, Promoters and Control Persons;
           Compliance with Section 16(a) of the Exchange Act...............  20
Item 10.   Executive Compensation..........................................  22
Item 11.   Security Ownership of Certain Beneficial
           Owners and Management...........................................  23
Item 12.   Certain Relationships and Related Transactions..................  23
Item 13.   Exhibits and Report on Form 8-K.................................  24
           Signatures......................................................  27


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                           FORWARD LOOKING STATEMENTS

         This Report (including  without limitation the Risk Factors included as
Exhibit  99.1)  may  contain  forward  looking   statements  under  the  federal
securities  laws.  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 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 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 our company in this 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. As used in this Report, unless the
context  otherwise  requires,  the term "Company"  refers to Sales OnLine Direct
Inc.,  a Delaware  corporation.  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. Information contained in the Company's websites shall not be deemed
to be a part of this  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.


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Item 1.  Description of Business.

                                    BUSINESS

History of the Company

         After its formation on August 9, 1995 as Rose  International  Ltd., our
company  acted  primarily as a  non-operating  holding  company  overseeing  the
operations of its subsidiaries and joint ventures.

         On  June 5,  1998,  the  Company  acquired  82.02%  of the  issued  and
outstanding  common stock of the Accord  Group,  Inc.,  a Delaware  corporation,
located in Port  Washington,  New York and on July 8, 1998,  changed its name to
Securities  Resolution Advisors,  Inc. ("SRAD").  Accord,  through its operating
subsidiary Securities Resolution Advisors, Inc., a New York corporation ("SRA"),
served members of the investing  community who had lost money due to the advice,
lack of fiduciary  responsibility or fraudulent  practices of brokers and broker
dealers.  The  acquisition  was accounted  for utilizing the purchase  method of
accounting,  wherein the assets of the company  were  recorded at fair value and
the operations of Accord have become the  historical  operations of the company.
The  company  issued  8,000,000  shares  common  stock to three  individuals  in
exchange  for  8,000,000  shares  (82.02%)  of the common  stock of  Accord.  In
December  1998,  as a  part  of a  restructuring,  SRA  became  a  wholly  owned
subsidiary of SRAD, and the company sold Accord,  which had no other assets, for
$40,000.

         On February 24, 1999,  the Company sold its then  existing  business to
Richard Singer,  the former president of the company and a principal  beneficial
owner of the common stock, in exchange for 8,000,000 shares of common stock, all
of which were  cancelled.  On  February  25,  1999,  the Company  purchased  the
outstanding common stock of Internet Auction, Inc., a Massachusetts  corporation
("Internet  Auction")  principally  from Gregory Rotman,  Richard  Rotman,  Marc
Stengel and Hannah Kramer, stockholders of Internet Auction. The purchase was in
exchange  for  the  issuance  to the  shareholders  of  Internet  Auction  of an
aggregate of 37,368,912 unregistered shares,  representing approximately 80%, of
our common stock.  At the time that the  transaction was agreed upon by the then
current  management  of the company,  the average  price of the common stock was
approximately  $.28 per share,  or a total value of  approximately  $10,463,295,
assuming no discounts for the restricted nature of the stock. As a result of the
transaction,  Internet Auction became a wholly-owned subsidiary of Sales Online,
the principal  shareholders  of Internet  Auction own  approximately  80% of our
issued and outstanding  common stock, and the principal business of Sales Online
became the  business of Internet  Auction.  After the  transaction,  the Company
changed its name to Sales Online Direct, Inc.

         In accordance with the transaction  agreement,  after the  transaction,
the Internet Auction shareholders were appointed to our Board of Directors,  and
the previously serving directors resigned from the Board.

         The following is a  description  of the  Company's  business  after the
transaction with Internet Auction and its evolution into its current business.

Our Business

         The Company's  primary  business is to maintain a collectibles  portal,
offering integrated information and services to the collectibles community,  and
to operate an online  auction  site that  provides a full range of  services  to
sellers and buyers.  A portal is an Internet  website that  enables

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visitors to search for and visit other related sites,  access  related  services
and obtain relevant data. 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.

         Currently,  substantially  all  (98%)  of the  Company's  revenues  are
derived  from  its  auction  services,  conducted  through  our  Rotman  Auction
operation.  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 merchandise, digital photography, fulfillment of
orders and the purchase and sale of authentic memorabilia.  The auctions consist
of  sports  and  non-sports  cards,   collectibles,   autographed  items,  movie
memorabilia  and more from the 1800's to the present  day.  This  division  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.  The Company also lists some
of  our   collectibles   inventory   for  sale  at   auction  on   eBay.com,   a
person-to-person  auction  service.  Merchandise  is also  auctioned  by  Rotman
Auction under  consignment-type  arrangements  with the public where the Company
receives a 15% fee that is paid to us from the final sale of the merchandise. Of
the revenues generated by the Company's Rotman Auction operations, approximately
96% are derived from sales of the Company's own inventory and  approximately  4%
are derived from sales of merchandise under consignment.

         The Company also designs, hosts and maintains client websites primarily
in the sports and collectibles  industry. Our software allows clients to operate
online  stores,  set prices and sell  directly  to online  shoppers.  To attract
collectors of sports memorabilia,  our websites include live sports scores, live
internet  chat rooms,  and a full  listing of stadiums  and arenas with  seating
charts,  directions,  team schedules,  addresses and telephone  numbers of major
league  professional  sports  teams.  We also offer  online  appraisals,  online
realized pricing and an online antiques and collectibles resource directory.

         Immediately  following  the  transaction  with  Internet  Auction,  our
mission was to offer a branded  network of  comprehensive  shopping  services to
buyers and sellers of collectibles.  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). We then decided to streamline our operations, clarify our business
model  and  focus  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.

         In order 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 site's database.  The Collecting  Exchange
also contains dealer and storefront  databases,  stadium and arena  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.  With the  installation  of the resource  area,  we had
completed the first phase of the Collecting Exchange.

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         In  November  2000,  we  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
CollectingChannel.com   is  an  online  and  broadcast   destination   targeting
consumers,  dealers and manufacturers in the collecting marketplace.  Television
is a particular type of broadcast media.  When we refer to "online and broadcast
destinations," consumers or viewers will be coming to the  CollectingChannel.com
to view the 19,000  minutes of video archives that we acquired.  Therefore,  the
Collecting  Channel  is not  only an  online  destination  for  content  such as
articles and news, but also a broadcast destination to view video archives.  The
consideration we paid for the acquired assets was 7,350,000  unregistered shares
of our common  stock,  valued at  $4,648,996,  and $300,000  worth of our common
stock  which is to be  registered.  On February  6, 2001,  the  Company  filed a
registration  statement on Form SB-2  covering  716,435  shares of common stock.
That registration statement has not been declared effective by the SEC.

         The Collecting  Channel features  extensive  coverage of all aspects of
collecting  from its eight  micro-channels  devoted to Antiques,  Entertainment,
Jewelry/Gems, Stamps/Coins, Collectibles,  Glass/Pottery, Toys/Dolls and Sports.
By  combining  our  Collecting  Exchange  portal  with  the  Collecting  Channel
information  libraries,  we have  created  a  comprehensive  collectibles  site,
offering  such  services 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 and available on the website.

         Our  new  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 service  and  amenities
consisting  primarily  of (1) the  collectibles  portal,  (2)  online  appraisal
services and (3) a research center.

         Portal. Visitors to our new website at "www.collectingchannel.com" will
be 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 to
our customers . 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.

         Research Center. Our research center enables users to obtain historical
pricing  information,  view actual images,  access experts on authentication and
visit websites  regarding the collectibles  articles they are  researching.  Our
site will allow 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  this site to provide  visitors  with the  research  tools to  complete
transactions based on the most accurate, verified material

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available.  The research  center enables users to validate the  authenticity  of
items by  researching  the  history  of a  particular  item and  validating  the
existence of that item. Further, to the extent that the user desires to validate
the  authenticity of that particular item, the user could trace the ownership of
the item or the previous sales history.  Authenticity  can further be determined
by  searching  dealer sites for similar  items or  communicating  directly  with
dealers  regarding  the  origin,  price,  and history of the item.  Finally,  by
enabling the user to verify prices of that item or other similar items, the user
will be able to obtain information necessary to strike a realistic bargain.

         Other  Amenities.  The website also  includes a shopping  area (cMart),
which  currently lists  approximately  1,000 items for sale, and 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.

         We expect to add  enhancements to our website by June 2001,  which will
include  improvements  to permit the search engine to obtain faster results with
greater accuracy. We have a license agreement in place with Verity, Inc. for the
software we need to improve the speed of the search engine.  We also plan to add
video archives and improve our selective  charting of historical  data for items
that are researched.

         We also are  working to  develop a global  auction  search and  bidding
platform to provide a  comprehensive,  categorized  and searchable  index of all
auction  sites for a  specific  item,  eliminating  the need to search  multiple
auction  sites.  Bidders  would be able to be notified  about the listing of new
items,   have  them  monitored  and   participate  on  multiple   auction  sites
simultaneously.  Sellers  would  be able to list  items  across  multiple  sites
simultaneously and will be able to better manage the selling process, working in
conjunction  with  auction  sites,  through the use of the  following  features:
auction and post-auction tracking;  scheduled postings for the listing of items;
customized listing templates,  inventory  management and cross auction postings.
We cannot yet anticipate how long it will take to implement these  features.  We
do not plan on  generating  revenue  from  purchases  made from the  information
gathered  by the auction  engine  search.  This  service is intended to increase
traffic to our site.

         As set forth above, we currently  generate  substantially  all (98%) of
our revenues from Rotman Auction. We are generating minimal revenue from website
hosting  and  the  appraisal  services  on  the  CollectingChannel.com.  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  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"
below.

         Our 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,        and
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.


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Industry Background

Growth of the Internet and the Web

         The Internet has emerged as a global medium enabling millions of people
worldwide to share information, communicate and conduct business electronically.
International  Data  Corporation  ("IDC") has  estimated  that the number of Web
users   worldwide  will  grow  from   approximately   142  million  in  1998  to
approximately  502  million by the end of 2003.  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.

Growth of the Collectibles and Online Auction Industries

         Sales  Online  serves  both  the   collectibles   and  online   auction
industries.  Collectibles Industry Report, 2000, published by Unity Marketing, a
collectible  industry  market  research firm,  recently  reported that the total
market of  collectors  grew to 40 million  adult  collectors in 1999, up from 37
million in the previous year. In Internet Collector Market: Latest Trends in How
Collectors  Are Using the  Internet,  Unity  Marketing  reveals that in the past
year, 17.5 million American  collectors used the Internet,  which is an increase
of 75% from  the 10  million  who had used it by the end of 1998.  Additionally,
Unity  Marketing  expects that the number of collectors that use the Internet to
increase by 50% by year-end 2001. Unity Marketing currently estimates that women
between the ages of 35 and 64, with a median age of 51,  encompass  the majority
of  collectors.  This  group is  projected  by the U.S.  Census  Bureau  to grow
approximately  12% from 1998 to 2005. Unity Marketing expects that growth in the
collectibles  industry  will be driven by the  increased  number of  middle-aged
female  collectors and higher spending habits of the baby boom  generation.  The
new  demographics  have  also  created  a shift  in  interest  from  traditional
collectibles to products that meet the demands of this generation of collectors.
Collectibles  Industry Report,  2000 reports that the two largest  categories of
collectibles, figurines and dolls, experienced a significant drop in sales. This
decrease in sales  suggests that  collectors  are  satisfying  their  collecting
passion with other type of collectibles.  In 1999,  collectible-type  ornaments,
boxes and musicals were the fastest growing product categories.

         The online  auction  industry is also large and rapidly  growing and is
expected  to  become a  permanent  player  in  e-commerce.  The IDC,  in  Online
Auctions: The New E-Commerce Enabler,  explained how 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.


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Business Strategy

         We believe  that the  collectibles  market  will  continue to grow as a
result of  increased  nostalgia  for  memorabilia,  an  increase  in leisure and
disposable  income,  the  desirability  of  owning   collectibles  and  investor
confidence that  collectibles will appreciate in value. It is our view that this
growth in the Internet collectibles market is dependent upon the availability of
reliable   authentication  and  grading  services,   authoritative   information
necessary to value  collectibles and trading forums or venues that enable buyers
and sellers of collectibles to maximize the value of their collectibles. We have
therefore  designed our Collecting Channel website to accommodate these concerns
for collectors and auction participants.

         Our goal is to become the premier Internet  collectibles site. In order
to achieve this goal, we are planning steps to implement the following  business
strategy:

         o     Continue producing revenue from sales through Rotman Auction, but
               reducing  the number of  auctions  held per year  through  Rotman
               Auction and increasing the amount of collectibles  inventory sold
               on eBay in order to obtain higher profit  margins by reducing the
               costs of producing catalogs and advertising for our own auctions.
               Items we sell through eBay have a much  quicker  turnaround  time
               than those 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  volume  of  our  online  appraisals  through  more
               effective and efficient advertising and promotions;

         o     Sell  banner  advertising  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 hits than a banner placed throughout the
               site);

         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.

         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 expect that the above  approach  will provide us with the ability to
continue to produce  revenues  through our Rotman  Auction  operations  while we
begin growing our business  through the Collecting  Channel site. This will also
provide sufficient time for our website enhancements and development and testing
of the global  auction  search  engine.  During this  research  and  development
period, we expect to implement an innovative marketing and sales campaign.  This
campaign will focus on building our advertising and sponsorship  base as well as
implementing a more traditional media buying strategy.

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<PAGE>


         The  business  strategy  described  above is  intended  to enhance  our
opportunities in the collectibles 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 to this Form 10-KSB.  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.

         Our marketing  will be designed to position Sales Online as the premier
collectibles site on the Internet. We will target both traditional collectors as
well as the new generation of collectors  (as previously  described in "Industry
Background").  We will also 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 are
adopting this approach in our marketing campaign.

         Our advertising to date has been limited to very selective collectibles
trade  magazines.  We believe that by  advertising  in a broader  range of these
magazines that we will 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  and  collectibles  arena.  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.

         Although we believe  that this  marketing  strategy  will  attract more
users to our site, we have no 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"  included as Exhibit 99.1 to
this  Form  10-KSB.  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%  fee for  listing  items  on  consignment.  Currently,  98% of our
revenues  are derived from our Rotman  Auction  operations.  Of these  revenues,
approximately  96% are  attributable to sales of our purchased  inventory and 4%
are attributable to fees and commissions generated on sales of merchandise under
consignment.  However,  we anticipate that future sources of revenue  generation
will include advertising revenue and service revenue,  particularly  through the
sale  of  pavilion  spots  and  referral  links.   Pavilion  spots  are  company
sponsorships  that we will sell.  These  sponsorships  give companies  exclusive
storefront rights for their collectible  category.  For example, if Sony were to
purchase  a  pavilion,  it would  host the  only  area on  collectingchannel.com
dealing with music and music videos.  In the Sony  pavilion,


                                       9


<PAGE>

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 Sony 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 have
recently added appraisal  services.  To date, we have generated minimal revenues
from these services,  but we expect that once we secure additional financing and
can  increase  our  advertising  and  marketing  efforts,  we will  attract more
visitors that will utilize these services on our site.  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
throughout  this AOL  affiliate 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 will 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 achieve profitability.  There are a number of
factors  that may impact our plans and inhibit our success.  See "Risk  Factors"
included as Exhibit 99.1 to this Form 10-KSB.  Therefore,  we have no guarantees
and can provide no assurances, that our plans will be successful.

Competition

         The electronic  commerce market is 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 auction houses such as eBay, Amazon, ONSALE, uBID,
Yahoo! Auctions, First Auction, Surplus Auction, WebAuction and Insight Auction;
(ii) a number of indirect  competitors that specialize in electronic commerce or
derive  a  substantial  portion  of  their  revenue  from  electronic  commerce,


                                       10


<PAGE>


including  Internet Shopping Network,  AOL,  Shopping.com and Cendant Corp.; 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  new  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,  including
MySimon.com, Yahoo! Shopping and IWon.com.

         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
and provide  several  features and services to our consumers that are not easily
available.  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  still  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 and research center software  programs are proprietary.
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.

                                       11


<PAGE>


         To protect our  interest  in our  intellectual  property,  we also have
non-disclosure agreements with our employees and 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,  we are a recent
entrant  in the  sale  of  merchandise  on the  Internet,  and  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.
Such an assertion may require us to enter into royalty arrangements or result in
costly litigation.

         We  are  also  dependent  upon  existing   technology  related  to  our
operations that we license from third parties.  We license our portal and global
auction search  technology from Verity,  Inc. When we acquired the assets of the
Collecting  Channel we were granted two perpetual  licenses for the  proprietary
software  eCMS  and the  source  code.  This 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  such  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 18 months we  invested  approximately  $350,000  into the
Collecting  Exchange web site for design,  graphics,  labor and various software
components.  We licensed  Shopzone,  an e-commerce  software system, for $30,000
that will allow our merchant customers to create and manage their own storefront
on the web. An additional  $10,000 was paid to Breakthrough for the source code.
We spent $200,000 to design and install a highly  scalable,  reliable and secure
network/communications  infrastructure  to sustain our  anticipated  web traffic
going forward.  Other labor and consulting  fees amounted to $250,000 for system
security and integrity.

Employees

         We currently employ 18 full-time personnel.  We believe that our future
success will depend in part on ourcontinued 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



                                       12

<PAGE>

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 presently located at 4 Brussels Street,
Worcester,  Massachusetts  01610. We pay rent on the Brussels Street,  Worcester
location  and  another  office  in  Canton,   Massachusetts  in  the  amount  of
approximately  $2,500 per month on a  tenant-at-will  basis.  In July,  1999, we
leased under a second office  located at 100 Painters Mill Road in Owings Mills,
Maryland 21117 a five year lease with a monthly rent of $7,494.67. In June 2000,
we moved the operations in the Maryland office up to our corporate  headquarters
in Worcester, Massachusetts. In December 2000, we vacated the premises and since
that time have  attempted  to release  that space.  On  February  14,  2001,  we
received notice that we would be evicted on February 23, 2001 for non-payment of
rent and that we may be liable for to the extent any  subsequent  lease fails to
provide a rental equal to the rent payable under our lease.

Item 3.  Legal Proceedings.

         We are  currently  involved in a dispute  with Marc  Stengel and Hannah
Kramer,  each of whom is a  substantial  shareholder  of our  company,  and with
Whirlwind Collaborative Design, Inc. ("Whirl Wind") and Silesky Marketing, Inc.,
two entities affiliated with Marc Stengel. Mr. Stengel and Ms. Kramer are former
directors of the Company. Mr. Stengel is also a former officer and employee.

         The lawsuit was initially filed against Mr. Stengel alone in June 2000.
It remains  pending in the US District  Court for the  District of  Maryland.  A
First  Amended  Complaint  was  filed on  October  11,  2000,  which  added  the
defendants  other than Stengel  identified  above.  The First Amended  Complaint
seeks  rescission  of the  transactions  pursuant  to which Mr.  Stengel and Ms.
Kramer  obtained their  substantial  stock  interests in the company,  and seeks
damages   against   Mr.   Stengel   and  Ms.   Kramer,   in  both   cases,   for
misrepresentations  and  omissions  under the common law of fraud,  the Maryland
Securities Act and certain contractual warranties and representations. The First
Amended Complaint also seeks damages and remedies against Mr. Stengel for breach
of  his   contractual   duties  as  an   employee   of  the   company   and  for
misrepresentations  he made to the company  while acting as an  employee;  these
claims  relate to businesses  operated by Mr.  Stengel in  competition  with our
company and using our  company's  resources.  The First Amended  Complaint  also
seeks to recover  damages from Mr. Stengel and the two corporate  defendants for
conversion of certain of our assets,  resources and employee  services,  and for
unjust  enrichment.  All  defendants  have filed  answers  to the First  Amended
Complaint.  Mr. Stengel has filed a  counterclaim  seeking  damages  against the
Company for alleged  interference  with his ability to sell shares of our common
stock.  Whirl Wind has filed a counterclaim  against Sales Online for conversion
of a small quantity of computer equipment alleged to be owned by Whirl Wind.

         On or about June 16,  2000,  Marc  Stengel  commenced  an action in the
Delaware  Chancery  Court  pursuant  to  Section  225  of the  Delaware  General
Corporation  Law (the "Delaware 225 Action")  seeking a  determination  from the
Court that he was improperly removed as an officer and director of Sales Online,
should be  reinstated  as such,  and that Gregory  Rotman and Richard  Rotman

                                       13

<PAGE>


be ordered to dismiss the  Maryland  action.  The Delaware 225 Action was stayed
pending  the  outcome of a special  meeting of  shareholders,  discussed  below.
Following the results of that meeting,  we moved for summary  judgment and asked
that the  Delaware  225 Action be  dismissed.  Oral  argument on this motion was
presented on January 18, 2001. The Court granted our motion for summary judgment
and dismissed the Delaware 225 Action.  The Court concluded that (1) the special
meeting  of the  Company's  stockholders  held on  September  19,  2000 to elect
directors was authorized by the Company's bylaws and as a result,  the new board
was  properly  elected and had the  authority  to  terminate  Mr.  Stengel as an
officer; (2) Marc Stengel's  post-election  challenge to the special meeting was
barred by his own inequitable  conduct; and (3) his claim for back pay could not
be pursued in the Court of Chancery action.

         On July 20, 2000, in accordance  with our Amended and Restated  Bylaws,
Gregory  Rotman,  called a special  meeting  of the  stockholders  to be held on
September  19, 2000 for the election of  directors.  Gregory  Rotman and Richard
Rotman nominated  themselves,  Andrew Pilaro and John Martin for election to our
Board of  Directors  and  filed  soliciting  materials  with  the SEC.  No proxy
soliciting  materials  were filed by any other  party.  The  meeting was held on
September  19, 2000 and the  nominated  slate of  directors  were elected as our
Board of Directors.

         A special  Board of  Directors  meeting  was called by  Gregory  Rotman
immediately following the special meeting of stockholders on September 19, 2000.
At that  meeting,  the new Board  removed  Marc  Stengel  as an officer of Sales
Online,  formally  ratified and approved the initiation  and  prosecution of the
Maryland action against Marc Stengel and authorized Gregory Rotman, as president
and CEO to take all actions necessary to prosecute Sales Online's claims against
Marc Stengel and others.

         On or about October 3, 2000,  Mr.  Stengel  submitted to Sales Online a
demand  for  advancement  of certain  expenses  (including  attorneys'  fees) he
allegedly  incurred in connection with the Delaware 225 Actions and the Maryland
action.  In his  advancement  request,  Mr.  Stengel  claimed  to have  incurred
approximately  $96,800  in legal  expenses  in the  Delaware  225 Action and the
Maryland  action  through  August,  2000.  On October 20, 2000,  we notified Mr.
Stengel  that the  Board of  Directors  had  denied  Mr.  Stengel's  advancement
request.

         On or about October 24, 2000,  Mr. Stengel filed a second action in the
Delaware  Court of  Chancery  pursuant to Section  145 of the  Delaware  General
Corporation  Law seeking a  determination  from the Court that he is entitled to
pursuant to our Bylaws to be advanced his expenses,  including  attorneys' fees,
incurred by him in  connection  with the  Delaware  225 Action and the  Maryland
Action (the "Delaware 145 Action").  Sales Online and Mr. Stengel each moved for
summary  judgment in the  Delaware  145 Action.  A hearing on the  Delaware  145
Action was held on January 2, 2001, at which time the Court of Chancery  granted
our motion for summary judgment and denied Mr. Stengel's motion. Mr. Stengel has
appealed this decision to the Delaware Supreme Court.

         On November 1, 2000,  we filed with the  Maryland  Court a Motion for a
Preliminary  Injunction  requesting  that the Court  enjoin Mr.  Stengel and Ms.
Kramer from selling,  attempting to sell, or otherwise disposing of their shares
of our stock pending  resolution of the merits of our claim for  rescission.  On
November  9,  2000,  Mr.  Stengel  filed  an  Opposition  to  our  Motion  for a
Preliminary Injunction. On November 9, 2000, Mr. Stengel also filed a Motion for
Preliminary  Injunction  requesting  that the Court (i)  order  Sales  Online to
instruct its transfer agent to implement and complete all measures  necessary to
sell his  restricted  stock in  compliance  with Rule 144 and (ii)

                                       14


<PAGE>


enjoin Sales Online from interfering with or preventing the sale of stock by Mr.
Stengel in accordance  with Rule 144. The District Court  conducted an extensive
evidentiary  hearing on both motions,  which  concluded on January 23, 2001. The
parties  briefed the issues and the Court heard final  arguments on February 22,
2001.  On March 19,  2001,  the Court (1) denied our motion for the  preliminary
injunction  against  Marc  Stengel and Hannah  Kramer,  (2) granted in part Marc
Stengel's  motion for a preliminary  injunction  insofar as we are enjoined from
interfering  with any sale of stock by Marc Stengel that  complies with SEC Rule
144, (3) determined that the evidence  supported a finding that Marc Stengel and
Hannah Kramer are acting in concert in the  disposition  of their shares and (4)
denied Marc Stengel's and Hannah Kramer's motions to dismiss our lawsuit against
them. The Court has scheduled the case for trial in December, 2001.

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

         None.

                                     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 twelve  quarters  ended  December 31,
2000. The quotations from the OTCBB reflect  inter-dealer  prices without retail
mark-up, mark-down, or commissions and may not represent actual transactions.

         2000                                     High                  Low
                                                  ----                  ---
         Quarter ended March 31, 2000             2 9/16               17/32
         Quarter ended June 30, 2000              2 7/32               21/32
         Quarter ended September 30, 2000          23/32                5/16
         Quarter ended December 31, 2000           33/64                7/32

         1999                                     High                  Low
                                                  ----                  ---
         Quarter ended March 31, 1999              2 1/2                 1/4
         Quarter ended June 30, 1999              8 3/16              1 1/16
         Quarter ended September 30, 1999         3 1/16              1 3/16
         Quarter ended December 31, 1999           1 3/8               13/32

         As of May 1, 2001,  there were  approximately  177 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



                                       15



<PAGE>



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

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

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, we have been working on the development
and technology of building portals. Our main focus was portal development in our
own industry of collectibles;  to that end, we acquired assets from ChannelSpace
Entertainment, Inc. ("CSEI") that include www.CollectingChannel.com.  We plan to
converge our multiple  sites into one  integrated  site in 2001. We also plan to
build other portals,  some that that will charge fees to access their  services,
and others to leverage company-owned technology and websites.

YEAR ENDED DECEMBER 31 , 2000

Results of Operations

         The following  discussion  compares our results of  operations  for the
year ended December 31, 2000, with those for the year ended December 31, 1999.

         Revenue. For the year ended December 31, 2000 revenue was approximately
$1,298,000,  98% 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  $1,211,000;  gross  sales  of  items  on
consignment totaled approximately $576,000, of which we received $86,000 as fees
for listing the merchandise. Sales of our own product represented 68%, and sales
of consignment merchandise represented 32%, of gross sales, but, because we only
receive a fee for sales on consignment, sales of our own product represented 93%
and sales on consignment represented 7% of our revenue.

         Our 2000 revenues reflect an increase of approximately  $295,000 or 29%
from the year ended December 31, 1999 in which revenue was  $1,003,000.  For the
year ended  December  31,  1999,  sales of our own  product  were  approximately
$890,000 and sales of items on consignment were approximately $754,000, of which
we  received  approximately  $113,000 as fees.  For that year,  sales of our own
product represented 54% and sales of consignment  merchandise represented 46% of
all sales, but sales of our own product represented 89% and sales on consignment
represented 11% of our revenue.

                                       16

<PAGE>



         The primary  reason for the increase in revenues is that we are focused
on selling higher end, more expensive  auction lots at a quicker  turnover rate.
More of our sales now  consist  of  product  owned by our  company  rather  than
consignment  sales.  Gross loss from Company  owned  product  sales for the year
ended December 31, 2000 was ($177,000),  which represents a decrease of $361,000
from the year ended December 31, 1999. In addition,  we generated commissions on
consignment  sales of $86,000,  resulting  in a total  gross loss of  ($91,000),
compared to $113,000 in commissions  on consignment  sales and a gross profit of
$297,000 for the year ended December 31, 1999. The decrease in gross profit is a
result of our attempt to achieve a higher  turnover of our  inventory by selling
more  products in bulk as well as a write down or  inventory  of $200,000 due to
excess quantities and changes in market conditions.

         While we plan to continue to enhance our web properties,  we will do so
gradually over time so that we minimize the need for capital  investment.  Until
the Collecting  Channel and our other web sites become revenue  generating,  our
revenues  will  continue to be derived  almost  entirely  from  Rotman  Auction,
particularly sales of our own product.  In the future, it is likely that we will
continue to focus more of our resources on our Rotman Auction.

         Operating  Expenses.  Operating expenses during the year ended December
31, 2000 were $3,849,000  compared to $2,460,000 for the year ended December 31,
1999. The increase in SG&A expenses includes an increase in professional fees of
$633,000,  which is primarily attributable to our ongoing litigation.  Marketing
and advertising  costs decreased by  approximately  $122,000 from the year ended
December 31, 1999.  Marketing expenses were primarily  attributable to print and
online marketing and advertising programs designed to create brand awareness for
our online sites.  We decreased our marketing  expenses in an effort to conserve
cash. We plan to seek  additional  financing that will enable us to increase our
marketing and  advertising  activities to attract more visitors to our websites.
See  "Working   Capital  and   Liquidity."   Costs   associated  with  planning,
maintaining,  and operating our web sites  increased  $133,000,  principally  in
payroll  costs.  This increase  includes an increase in option  compensation  of
$46,000,  as the year ended  December  31,  2000  contained a full year for this
expense  compared to a partial year in 1999.  Also,  in the last fiscal year, we
incurred  significant  expenses  relating to closing of our Maryland  office and
moving of our Internet  infrastructure  to  Massachusetts in June 2000 including
$146,000  in  connection  with the  termination  of the lease  for the  Maryland
office. In addition,  we made significant  investments in product development in
the  amount  of  approximately  $40,000  that  we  believe  are  required  to be
competitive and handle  increased  growth.  These expenses  included an advanced
internal order processing system, called SBT, for expediting orders and reducing
labor costs.  We also  invested  substantial  time in  evaluating an open source
storefront  system,  PHPShop,  for third party  hosting.  This has enabled us to
reduce labor and provide a better system to our customers.

         Administrative and non-technical payroll and related costs increased by
$129,000 over the year ended December 31, 1999.  Depreciation  and  amortization
increased by $431,000 due to intangible and tangible assets acquired principally
in the  transaction  with  CSEI and the fact that in 1999 the  Company  acquired
$664,000 of fixed assets on which there was only a partial year of depreciation,
compared  with a full year of  depreciation  on these  assets for the year ended
December 31, 2000. Travel and entertainment  expenses  increased by $110,000 due
to the travel  involved in (i) the  litigation  against Marc Stengel in Maryland
and (ii) the transaction with CSEI.

         Interest  expense.  For the year ended  December  31,  2000 we incurred
interest charges  associated with the issuance of a $3,000,000  convertible note
and warrants in the amount of

                                       17

<PAGE>


$1,597,000,  while no such charges were incurred in the year ended  December 31,
1999. See "Working Capital and Liquidity" below.

         Net Loss.  We realized a net loss for the year ended  December 30, 2000
of  $5,493,000,  or ($.11) per share  (which  includes  an  interest  expense of
$1,597,000 in connection  with the sale of the $3,000,000  convertible  note and
related  warrants),  compared  to  $2,183,000,  or ($.05) per share for the nine
months ended December 31, 1999.

         Inflation.  We believe that inflation has not had a material  effect of
its results of operations.

         Acquired Assets. At December 31, 2000, total assets of the company were
$6,494,000  compared to  $1,666,000  at December  31,  1999.  The  increase  was
primarily due to the acquisition of the CSEI assets. The assets acquired consist
principally  of software  licenses,  a video library,  a library of articles,  a
user  list, Domain names,  furniture,  and fixtures and equipment.  These assets
are carried in "property and  equipment"  and "Other  intangible  assets" in the
accompanying  financial  statements  at  values  determined  by  an  independent
valuation.  Management believes that the main components of the acquisition that
will   help   generate   revenues  in the   future   are  the   web   properties
(www.collectingchannel.com,     www.tartans.com     (AOL    keyword     'clan'),
www.maloneysonline.com)  and the Maloney's book. Most significantly,  management
places  significant value in the licenses to the electronic  content  management
software (ECMS) and source-code the company acquired.

Working Capital and Liquidity

         Cash and cash equivalents were  approximately  $103,000 at December 31,
2000, compared to $221,200 at December 31, 1999.

         On March 23, 2000,  we entered into a  Securities  Purchase  Agreement,
whereby we sold an 8% convertible  note in the amount of  $3,000,000,  due March
31, 2002 to Augustine Fund, L.P. The note is convertible  into common stock at a
conversion  price equal to the lesser of: (1) one hundred ten percent  (110%) of
the  lowest  of the  closing  bid price  for the  common  stock for the five (5)
trading days prior to March 23, 2000, or (2)  seventy-five  percent (75%) of the
average of the closing  bid price for the common  stock for the five (5) trading
days  immediately  preceding  the  conversion  date.  Because  the  registration
statement  (discussed  below) was not  declared  effective at December 31, 2000,
Augustine  Fund  would  have  received  $4,109,600  in  aggregate  value  of the
company's common stock upon the conversion of the $3,000,000  convertible  note.
As a  result,  the  intrinsic  value of the  beneficial  conversion  feature  of
$1,109,600 has been allocated to debt discount and additional  paid-in  capital.
Since the debt was  convertible  at the date of issuance,  the debt discount was
charged to earnings during the year ended December 31, 2000.

         In connection with the Securities  Purchase  Agreement,  we also issued
warrants  to the  Augustine  Fund,  L.P.  and Delano  Group  Securities,  LLC to
purchase 300,000 and 100,000 shares of common stock, respectively.  The purchase
price per share of  common  stock is equal to 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,  or $2.70 per share.  If the
warrants are exercised in full, we will receive gross  proceeds in the amount of
$1,080,000. The warrants expire on March 31, 2005.

                                       18
<PAGE>


         In addition,  we entered into a Registration Rights Agreement (modified
on  September  19,  2000),  pursuant  to which we agreed to file a  registration
statement  with the SEC by October  25,  2000  covering  the common  stock to be
issued upon the conversion of the convertible note and stock purchase  warrants.
If the registration statement was not declared effective by the SEC on or before
December 15, 2000,  then, with respect to any portion of the note not previously
converted into common stock, the applicable  conversion percentage will decrease
by two percent (2%) each thirty day period until the  registration  statement is
declared  effective  by the SEC. If the SEC has not  declared  the  registration
statement  effective  within  one year  after  March 23,  2000,  the  applicable
conversion   percentage  shall  be  fifty  percent  (50%).   Also,  because  the
registration  statement  was not effective on December 15, 2000, we are required
to pay  liquidating  damages equal to two (2%) of the purchase price of the note
and warrant for each thirty-day period until the registration  statement becomes
effective.  As of May 1, 2001, the registration  statement had not been declared
effective.

         Our  independent  auditors have issued a going  concern  opinion on our
financial statements. Although we have increased revenue from our Rotman Auction
operations and reduced cost by (i) eliminating personnel and expenses related to
the auctions,  (ii)  eliminating our expenses  associated with the operations of
the Maryland  office by the closing of that office,  and (iii)  eliminating  the
salary that was paid to Mr.  Stengel,  management  believes that presently we do
not have  sufficient  cash to fund  operations  for the next 12  months.  We are
currently  in  discussions  for  obtaining  additional  financing  to  fund  our
operations  for  the  next  12  months  of  approximately  $1,500,000  upon  the
effectiveness of the Augustine registration statement. While management believes
that these discussions will result in the proposed  financings,  there can be no
assurances that the financings will be concluded on reasonably acceptable terms.
If the  financings  are not so  completed,  management  will be required to find
alternative  sources of capital to support our operations.  Based on our current
cash position,  we currently need an infusion of $750,000 of additional  capital
to fund our anticipated  marketing costs and operating expenses over the next 12
months.  If we do not receive this money, or at least an infusion of $50,000 per
month, then we will only be able to continue operations through the end of June.
In the long  term,  we  believe  that if we are  successful  in  concluding  the
litigation and having our Augustine  registration  statement declared effective.
we are likely to be  profitable by the end of the first quarter 2002 as a result
of our efforts in greatly decreasing expenses,  obtaining our needed capital and
increasing product sales. We do not expect to incur the same level of litigation
costs in the long term that we have  sustained  in the past year  because of the
substantial discovery and hearings conducted through December 2000.

Item 7.  Financial Statements.

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

                                       19

<PAGE>

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

         On February  15,  1999,  our former  Board of  Directors  approved  the
appointment  of  Stephen  P.  Higgins,  C.P.A.  ("Higgins")  as  Sales  Online's
independent  certified  public  accountants  to provide  accounting and auditing
services for Sales Online for the year ended December 31, 1998 and also approved
the dismissal of Guest & Company as Sales Online's independent auditors.

         Guest & Company's  report on the annual  financial  statements of Sales
Online for the prior  fiscal  years  ending  December  31, 1997 and 1996 did not
contain an adverse opinion or a disclaimer of opinion,  and was not qualified or
modified as to uncertainty,  audit scope or accounting principles.  In addition,
during the years ended December 31, 1997 and 1996 and for the subsequent interim
period  preceding the dismissal of Guest & Company,  there were no disagreements
between  the  Sales  Online  and  Guest & Company  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 Guest &
Company,  would have caused it to make  reference  to the subject  matter of the
disagreement in connection with its report on the annual financial statements of
Sales Online.

         On March  28,  2000,  our  Board of  Directors  formally  approved  the
termination of the accounting  services provided by Stephen P. Higgins,  C.P.A.,
as the Sales Online's  independent  auditors.  We had  previously,  on March 24,
2000,  engaged  Wolf & Company,  P.C. as Sales  Online's  independent  certified
accountants  to provide  accounting  and  auditing  services  for the year ended
December 31, 1999.

         Higgins' report on the annual financial  statements of Sales Online for
the prior  fiscal  year  ending  December  31,  1998 did not  contain an adverse
opinion or a  disclaimer  of opinion,  and was not  qualified  or modified as to
uncertainty,  audit scope or accounting principles. In addition, during the year
ended  December 31, 1998 and for the  subsequent  interim  period  preceding the
dismissal  of Higgins,  there were no  disagreements  between  Sales  Online and
Higgins 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 Higgins,  would have caused it to make reference to the
subject matter of the  disagreement  in connection with its report on the annual
financial statements of Sales Online.


                                    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:

                                       20

<PAGE>

  Name                Age    Position
  ----                ---    --------
  Gregory Rotman*     34     Director, Chief Executive Officer
                             & President

  Richard Rotman*     30     Director, Chief Financial Officer, Vice President,
                             Treasurer & Secretary

  John Martin         35     Director, Chief Technology Officer &
                             Vice President

  Andrew Pilaro       30     Director
----------------------
*Gregory Rotman and Richard Rotman are brothers.

         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.

         John Martin has served as a Director  and the Vice  President  of Sales
Online since  September 2000, and our Chief  Technology  Officer since May 2000.
From May 1999 until May 2000, he served as vice president-technology.  From June
1997 to May 1998,  Mr.  Martin was an instructor  at Clark  University  Computer
Career Institute. From August 1996 to May 1999, he served as a Software Engineer
with Sybase, Inc., a software development company.  From prior to 1995 to August
1996,  Mr.  Martin was the Senior  Programmer  at Presidax,  which  manufactures
barcoded labels and is a division of Avery  Dennison.  From prior to 1995 to May
1999, he was also a software consultant.

         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  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.


                                       21

<PAGE>


Compliance with Section 16(a)

         Section  16(a) of the  Securities  Exchange  Act of 1934  requires  the
Company's  directors and executive  officers,  and persons who own more than ten
percent of the Company's  outstanding  Common Stock to file with the  Securities
and Exchange  Commission (the "SEC") initial reports of ownership and reports of
changes  in  ownership  of  Common  Stock.  Such  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 Rotmanand 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.  The Company  believes that a Form 4 filing for
Hannah Kramer, a former director of the Company, covering sales made during July
2000 was not timely filed.  No filings  pursuant to Section 16(a) have been made
by Marc  Stengel,  a former  director and officer and a 10%  shareholder  of the
Company,  and it is unclear to the Company as to whether or not he had  effected
any transactions in the stock during the last fiscal year.

Item 10.          Executive Compensation

         The following table sets forth the  compensation of the Company's chief
executive  officer  and each  officer  whose  total cash  compensation  exceeded
$100,000,  for the last three  fiscal years ended  December  31, 2000,  1999 and
1998. The Company did not pay any long-term compensation to the named officers.

                           Summary Compensation Table

         Name and                            Fiscal
         Principal Position                  Year (1)                Salary

         Gregory P. Rotman                   2000(1)                $  98,928
           President and                     1999                   $ 124,519
           Chief Executive Officer           1998                   $       0

         Richard S. Rotman                   2000(1)                $  98,771
           Chief Financial Officer,          1999                   $ 126,194
           Vice President and Secretary      1997                   $       0

         Marc Stengel (2)                    2000(1)                $  41,803
           Executive Vice President          1999                   $ 126,194
                                             1998                   $       0
       ---------------
         (1) Gregory P. Rotman, Richard S. Rotman and Marc Stengel assumed their
positions as of February 25, 1999.

         (2) On June 7, 2000,  Marc Stengel was terminated as an employee of the
Company.



                                       22


<PAGE>


         None of the named executive officers  received,  holds or exercised any
options or stock appreciation  rights with respect to the Company's  securities,
and none of such persons The Company did not pay any long-term  compensation  to
the named officers.

         None of the  Company's  directors  receives any  compensation  from the
Company for serving as directors.

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

         To the knowledge of the management of Sales Online the following  table
set forth the beneficial ownership of our common stock as of May 1, 2001 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
Sales Online.

         Name and Address of       Number of Shares           % of
         Beneficial Owner          Beneficially Owned         Class
         ----------------          ------------------         -----
         Gregory Rotman               8,309,005                14.67%
         Richard Rotman              10,155,451                17.93%
         John Martin                    316,288 (1)                *
         Andrew Pilaro                   13,700                    *
         All directors and           18,794,444                33.05%
         officers as a group

       ---------------
*   Represents less than 1%

(1) Includes  236,000  currently  exercisable  options to purchase shares of our
common stock.

         To the  knowledge  of  Management  , as of May 1,  2001,  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 Sales Online,  other than Gregory  Rotman and Richard  Rotman,  as set
forth above, and the following persons:

 Name and Address of              Number of Shares           % of
 Beneficial Owner                 Beneficially Owned         Class
 ----------------                 ------------------         -----
 Marc Stengel                     12,925,119                 22.83%
 3743 Birch Lane
 Owings Mills, MD 21117

  Hannah Kramer                   5,139,337                   9.07%
  673 Korisa Drive
  Huntingdon Valley, PA 19006

Item 12.          Certain Relationships and Related Transactions.

         On February  25, 1999,  the Company  purchased  all of the  outstanding
common stock of Internet Auction,  Inc., a Massachusetts  corporation ("Internet
Auction"),  which was  wholly  owned by Gregory  Rotman,  Richard  Rotman,  Marc
Stengel and Hannah Kramer,  in exchange for the issuance to these individuals of
an aggregate of 36,928,912  shares,  representing  approximately  78.4%,  of our
common  stock.  As a result  of this  transaction,  the  principal  business  of
Internet Auction became the business of Sales Online and Gregory Rotman, Richard
Rotman,  Marc Stengel and Hannah  Kramer became  directors of Sales  Online.  We
believe that the stock for stock  transaction with Internet Auction was on terms
that were fair and  reasonable to our company and no less  favorable  than could
have been obtained by a third party.

                                       23

<PAGE>

         Following  the  transaction  with  Internet  Auction,  John  Martin was
granted  options to purchase  471,000  shares of our common stock at an exercise
price of $.01 per share, of which 236,000 are currently exercisable.  We granted
these  options to Mr. Martin as an incentive for joining our company and leaving
his  position as a software  engineer  with Sybase,  Inc., a prominent  software
development  company. As our Chief Technology Officer,  Mr. Martin has become an
integral  part of our  company's  operations  and we rely  very  heavily  on his
services. See "Risk Factors," included as Exhibit 99.1 to this Form 10-KSB.

         In September 1999, we purchased  certain computer  equipment,  Internet
research  technology  and coding  material for a purchase  price of $70,000 from
Timeline,  Inc., a corporation  owned by Gregory Rotman and Richard  Rotman.  We
believe that the terms of the  purchase  were fair and  reasonable  and on terms
that were fair and  reasonable to our company and no less  favorable  than could
have been obtained by an unaffiliated party.

         In February 1999 prior to the transaction with Internet Auction, Rotman
Productions,  an entity owned by Steven Rotman, the father of Gregory Rotman and
Richard Rotman, contributed an inventory of collectibles with an estimated value
of $629,000 to Internet  Auction.  The inventory was contributed in exchange for
236 shares of Internet Auction common stock (which in the transaction  converted
to 220,000 shares of our common stock) and additional  consideration  consisting
of a call option to purchase from a third party, Universal Funding Inc., 700,000
shares of our common  stock owned by  Universal  Funding,  Inc.,  at an exercise
price  of $.50  per  share,  subject  to the  closing  of the  Internet  Auction
transaction. These options were exercised by Steven Rotman. We believe that this
purchase of collectibles inventory was fair and reasonable to the company and on
terms no less favorable than could have been obtained by a third party.

         On  March  7,   2000,   we   acquired   Internet   Collectible   Awards
(www.collectiblenet.com),  an internet business that polls consumers and reports
on the best  Internet  collectibles  web sites in a variety  of  categories.  As
consideration  for the acquisition,  we recorded accounts payable of $50,000 and
issued 200,000 shares of our common stock valued at $237,500 (based on our stock
price at the date of acquisition).  At the time of the transaction,  we believed
this was purchase was made from an  unaffiliated  third party. In the lawsuit we
filed  against  Marc  Stengel and others  described  above,  we allege that this
acquisition was an undisclosed related party transaction.

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

          (a)  Exhibits.

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

                                       24

<PAGE>


        Exhibit     Description of Exhibits
          No.       -----------------------
        -------

          2.1       Agreement and Plan of Reorganization  dated January 31, 1999
                    among the Registrant  and Gregory  Rotman,  Richard  Rotman,
                    Marc Stengel and Hannah Kramer.  (incorporated  by reference
                    from Form 8-K-File No. 0-28720, filed March 10, 1999)
          2.2       Asset  Purchase  Agreement  dated November 8, 2000 among the
                    Registrant,  CSEI and Discribe (incorporated by reference to
                    Exhibit 2.1 to Form 8-K filed on November 22, 2000)
          3.1       Certificate of  Incorporation,  as amended  (incorporated by
                    reference  to Exhibit  3.1 to Form  10-KSB,  filed April 14,
                    2000)
          3.2       Amended and Restated  Bylaws  (incorporated  by reference to
                    Exhibit 3.2 to Form 10-KSB, filed 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)
          10.1      Lease  Agreement,  dated July 26, 1999  between 100 Painters
                    Mill, LLC and the  Registrant  and First  Amendment to Lease
                    Agreement,   dated  December  31,  1999   (incorporated   by
                    reference  to Exhibit 10.5 to Form 10-KSB filed on April 14,
                    2000)
          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. *
          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)
          10.11     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)
          10.12     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)
          10.13     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)
          10.14     Escrow   Agreement   dated   November   8,  2000  among  the
                    Registrant,  CSEI,  and the escrow agent Olde Monmouth Stock
                    Transfer  Co.,  Inc.  (incorporated  by reference to Exhibit
                    10.2 to Form 8-K filed on November 22, 2000)


                                       25
<PAGE>

          10.15     Registration Rights Agreement dated November 8, 2000 between
                    the  Registrant  and  CSEI  (incorporated  by  reference  to
                    Exhibit 10.3 to Form 8-K filed on November 22, 2000)
          16.1      Letter  from  Guest  &  Company  on  change  in   certifying
                    accountant  (incorporated  by reference from Form 8-K, filed
                    on April 29, 1999)
          16.2      Letter  from  Stephen  P.  Higgins,   C.P.A.  on  change  in
                    certifying accountants  (incorporated by reference from Form
                    8-K/A, filed on March 31, 2000)
          21.1      Subsidiaries of the Registrant (included in Item I)*
          23.1      Consent of Wolf & Company, P.C.*
          99.1      Risk Factors*

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


          (b)  Reports on Form 8-K.

          On November 20, 2000, the Company filed a Report on Form 8-K reporting
the acquisition of certain assets of ChannelSpace Entertainment Inc.

                                       26

<PAGE>





                                   SIGNATURES


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.


                                         SALES ONLINE DIRECT INC.




Date: May 11, 2001                       By: /s/ Gregory Rotman
                                         ------------------------------------
                                             Gregory Rotman, President


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



Date: May 11, 2001                        /s/ Gregory Rotman
                                          --------------------------------------
                                          Gregory Rotman, President and Director



Date: May 11, 2001                        /s/ Richard Rotman
                                          --------------------------------------
                                          Richard Rotman, Vice President,
                                          Treasurer, Secretary and Director



Date: May 11, 2001                        /s/ John Martin
                                          --------------------------------------
                                          John Martin, Chief Technology Officer
                                          Vice President and Director



Date:  May 11, 2001                       /s/ Andrew Pilaro
                                          --------------------------------------
                                          Andrew Pilaro, Director




                                       27



<PAGE>



                            Financial Statements and
                              Report of Independent
                          Certified Public Accountants

                            Sales Online Direct, Inc.
                           December 31, 2000 and 1999



                                      F-1
<PAGE>





                           SALES ONLINE DIRECT, INC.
                           DECEMBER 31, 2000 AND 1999
                              FINANCIAL STATEMENTS

   AUDITED FINANCIAL STATEMENTS

   Independent Auditors' Report........................................     F-3

   Balance Sheet at December 31, 2000 and 1999.........................     F-4

   Statements of Operations
   Years ended December 31, 2000 and 1999..............................     F-5

   Statements of Changes in Stockholders' Equity
   Years ended December 31, 2000 and 1999..............................     F-6

   Statements of Cash Flows
   Years ended December 31, 2000 and 1999.............................. F-7-F-8

   Notes to Financial Statements
   Years ended December 31, 2000 and 1999..............................F-9-F-23

                                       F-2



<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, 2000 and 1999, and the related statements of operations,
changes in stockholders'  equity and cash flows for the years then ended.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

     In our opinion,  the financial statements referred to above present fairly,
in all material respects, the financial position of Sales OnLine Direct, Inc. as
of December  31, 2000 and 1999,  and the results of their  operations  and their
cash flows for the years then ended in  conformity  with  accounting  principles
generally accepted in the United States of America.

     The accompanying  financial statements have been prepared assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial statements,  the Company has incurred recurring losses from operations
and a working capital deficiency at December 31, 2000. These circumstances raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans in regard to these matter are also  described in Note 2. The
accompanying  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.



/s/Wolf & Company, P.C.


May 7, 2001
Boston, Massachusetts

                                       F-3



<PAGE>


<TABLE>
<CAPTION>
                            SALES ONLINE DIRECT, INC
                                  BALANCE SHEET
                                  DECEMBER 31,


                                                                                 2000                1999
                                                                                 ----                ----
                                     Assets
Current assets:
<S>                                                                        <C>                 <C>
   Cash and cash equivalents                                               $     102,534       $  221,213
   Accounts receivable                                                                --           48,682
   Marketable securities                                                          17,196               --
   Inventory                                                                     385,973          629,729
   Prepaid expenses                                                              125,975           72,992
   Other current assets                                                           18,089           11,236
                                                                           -------------       ----------
      Total current assets                                                       649,767          983,852

Property and equipment, net                                                    1,490,247          613,365
Goodwill                                                                          26,797           49,765
Other intangible assets                                                        4,162,211           18,667

Debt financing costs, net                                                        165,000               --
                                                                           -------------       ----------

        Total assets                                                           6,494,022       $1,665,649
                                                                           =============       ==========

                      Liabilities and stockholders' equity
Current liabilities:
   Accounts payable                                                        $     137,277       $  348,504
   Accrued expenses                                                            1,003,564           81,483
                                                                           -------------        ---------
      Total current liabilities                                                1,140,841          429,987
                                                                           -------------        ---------

Convertible Debt                                                               2,737,196               --

Commitments and Contingencies                                                         --               --

Temporary equity (200,000 shares of common stock, $.001 par value)               237,500               --

Stockholders' equity:
   Common stock, $.001 par value, 100,000,000 shares
      authorized; 54,763,281 and 46,711,140 shares issued and
      outstanding at December 31, 2000 and 1999, respectively                     54,763           46,711
   Additional paid-in capital                                                 10,448,176        4,010,033
   Accumulated deficit                                                        (7,700,307)      (2,207,171)
   Unearned compensation                                                        (424,147)        (613,911)
                                                                           -------------       ----------

      Total stockholders' equity                                               2,378,485        1,235,662
                                                                           -------------       ----------

        Total liabilities and stockholders' equity                         $   6,494,022       $1,665,649
                                                                           =============       ==========
</TABLE>

                 See accompanying notes to financial statements



                                      F-4


<PAGE>



                            SALES ONLINE DIRECT, INC.
                            STATEMENTS OF OPERATIONS
                            YEARS ENDED DECEMBER 31,

                                                       2000              1999
                                                       ----              ----

Revenues                                           $ 1,297,595      $ 1,003,200

Cost of revenues                                     1,388,455          706,488
                                                   -----------      -----------

         Gross profit (loss)                           (90,860)         296,712

Operating expenses

   Selling, general and administrative expenses      3,064,024        2,457,958
   Website development costs                           785,406          651,785
                                                   -----------       ----------

          Total operating expenses                   3,849,430        1,807,958
                                                   -----------       ----------

          Loss from operations                      (3,940,290)      (2,163,031)

Other income (expense)
   Interest expense                                 (1,597,045)              --
   Other income                                         43,232           92,701
   Unrealized loss on marketable securities            (40,132)              --
   Gain (loss) on sale of securities                    41,099         (112,710)
                                                   -----------       ----------

          Total other expense                       (1,552,846)         (20,009)
                                                   -----------       ----------

          Loss before income taxes                  (5,493,136)      (2,183,040)

Provision for taxes on income                               --               --
                                                   -----------       ----------

          Net loss                                 $(5,493,136)     $(2,183,040)
                                                   ===========      ===========

Loss per share (Basic)                             $     (0.11)     $     (0.05)
                                                   ===========      ===========

Weighted average shares                             48,117,453       45,277,812
                                                   ===========      ===========

                 See accompanying notes to financial statements


                                       F-5



<PAGE>

<TABLE>
<CAPTION>


                            SALES ONLINE DIRECT, INC.
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                                     Additional              Stock
                                                Common Stock           Paid-in   Accumulated Subscriptions   Unearned
                                             Shares      Amount        Capital      Deficit  Receivable    Compensation   Total
                                             ------      ------        -------      -------  ----------    ------------   -----

<S>                                       <C>           <C>            <C>         <C>       <C>        <C>               <C>
Balance, January 1, 1999                   37,368,912      37,369             -      (24,131)  (1,000)             -        12,238
Collection of stock subscriptions
    receivable                                      -           -             -            -    1,000              -         1,000
Contribution of assets of World
    Wide Collectors Digest                          -           -        33,229            -        -              -        33,229
Contribution of collectibles
    Inventories                                     -           -       769,764            -        -              -       769,764
Acquisition of Securities Resolution
    Advisors, Inc.                          9,342,228       9,342        (8,854)           -        -              -           488
Proceeds from assignment of options                 -           -     2,450,000            -        -              -     2,450,000
Compensatory stock options granted                  -           -       757,848            -        -       (757,848)            -
Amortization of stock-based
    compensation                                    -           -             -            -        -        143,937       143,937
Issuance of stock options to consultant
    for services                                    -           -         8,046            -        -              -         8,046
Net loss                                            -           -             -   (2,183,040)       -              -    (2,183,040)
                                           ----------     -------    ----------  -----------     ----      ---------    ----------
Balance, December 31, 1999                 46,711,140     $46,711    $4,010,033  $(2,207,171)       -      $(613,911)   $1,235,662
Acquisition of assets of
    ChannelSpace Entertainment, Inc.        7,530,000       7,530     4,641,466            -        -              -     4,648,996
Common stock issued in connection
with call option agreement                    110,000         110          (110)           -        -              -             -
Issuance of common stock to
    consultant for services                    35,000          35        44,800            -        -              -        44,835
Common stock issued in payment of
interest on convertible debt                  377,141         377       125,211            -        -              -       125,588
Proceeds from assignment of options                 -           -        87,188            -        -              -        87,188
Beneficial conversion discount                      -           -     1,109,588            -        -              -     1,109,588
Issuance of warrant                                 -           -       430,000            -        -              -       430,000
Amortization of stock-based compensation            -           -             -            -        -        189,764       189,764
Net loss                                            -           -             -   (5,493,136)       -              -    (5,493,136)
                                           ----------     -------   -----------  -----------    -----       --------    ----------
Balance, December 31, 2000                 54,763,281     $54,763   $10,448,176  $(7,700,307)   $   -      $(424,147)   $2,378,485
                                           ==========     =======   ===========   ==========    =====       ========    ==========

</TABLE>

                 See accompanying notes to financial statements


                                      F-6

<PAGE>


<TABLE>
<CAPTION>



                            SALES ONLINE DIRECT, INC
                            STATEMENT OF CASH FLOWS
                            YEARS ENDED DECEMBER 31,

                                                                                 2000                1999
                                                                                 ----                ----
Operating activities:
<S>                                                                         <C>                 <C>
   Net (loss)                                                               $  (5,493,136)      $  (2,183,040)
      Adjustments to reconcile net loss to net
        cash used in operating activities
           Depreciation and amortization                                          524,499              92,667
           Amortization of unearned compensation                                  189,764             143,937
           Amortization of debt discount                                          167,196                   -
           Beneficial conversion feature                                        1,109,588                   -
           Stock issued in payment of interest                                    125,588                   -
           Stock options issued for compensation                                   44,835               8,046
           Net gain on marketable securities                                         (967)            112,710
           Loss on abandonment of leasehold improvements                           46,745
           Changes in assets and liabilities:
              Accounts receivable                                                  48,682             (36,841)
              Inventory                                                           243,756             171,489
              Accounts payable                                                   (211,227)            218,144
              Accrued expenses                                                    622,081              76,483
              Income taxes payable                                                      -              (2,160)
              Other, net                                                          (59,836)            (95,358)
                                                                            -------------        ------------

                  Net cash used in operating activities                        (2,642,432)         (1,493,923)
                                                                            -------------        ------------
Investing activities:
   Purchase of securities                                                        (401,203)         (3,247,091)
   Proceeds from sale of securities                                               384,974           3,134,381
   Acquisition of other intangible asset                                          (50,000)                  -
   Cash received from Rotman Auction, Inc. acquisition                                  -               9,864
   Cash received from Securities Resolution Advisors, Inc. acquisition                  -                 488
   Property and equipment additions                                              (227,206)           (633,506)
                                                                            -------------       -------------
                  Net cash used in investing activities                          (293,435)           (735,864)
                                                                            -------------       -------------
Financing activities:
   Proceeds from assignment of common stock call options                           87,188           2,450,000
   Net proceeds from convertible debt                                           2,300,000                   -
   Proceeds from sale of warrants                                                 430,000                   -
   Proceeds from stock subscriptions                                                    -               1,000
                                                                            -------------       -------------

                  Net cash provided by financing activities                     2,817,188           2,451,000
                                                                            -------------       -------------
Net increase (decrease)  in cash and equivalents                                 (118,679)            221,213
Cash and equivalents, beginning                                                   221,213                   -
                                                                            -------------       -------------
Cash and equivalents, ending                                                $     102,534       $     221,213
                                                                            =============       =============
</TABLE>

                 See accompanying notes to financial statements


                                       F-7



<PAGE>

<TABLE>
<CAPTION>

                            SALES ONLINE DIRECT, INC
                      STATEMENTS OF CASH FLOWS (continued)
                            YEARS ENDED DECEMBER 31

               SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

                                                                                 2000           1999
                                                                                 ----           ----

Cash paid during the period for:
<S>                                                                         <C>              <C>
   Income taxes                                                             $         -      $    2,432
                                                                            ===========      ==========

   Interest                                                                 $         -      $        -
                                                                            ===========      ==========

                     SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Contributions of inventories                                                $         -      $  769,764
                                                                            ===========      ==========

Contribution of the net assets of World Wide Collectors Digest, Inc. were
   recorded at their fair values as follows:
      Due from shareholder                                                  $         -      $    2,737
      Other current assets                                                            -           1,000
      Property and equipment                                                          -          29,877
      Liabilities assumed                                                             -            (385)
      Additional paid-in capital                                                      -          33,229


Merger of Rotman Auction, Inc. accounted for utilizing the purchase
   method of accounting.  The assets were recorded at their fair values
   as follows:
      Cash received in the transaction                                                -           9,864
      Accounts receivable                                                             -          11,841
      Inventory                                                                       -          31,454
      Due from affiliate                                                              -          10,919
      Other current assets                                                            -           7,115
      Property and equipment                                                          -           1,697
      Due to shareholder                                                              -         (11,820)
      Other liabilities assumed                                                       -        (129,975)
      Goodwill                                                                        -          68,905


Acquisition of Internet Collectible Awards for stock
   Recorded as other intangible asset                                       $   237,500
Acquisition of certain assets of ChannelSpace Entertainment, Inc.
         Property and equipment                                             $   906,890
         Other intangible assets                                            $ 4,042,106
         Accrued expenses recorded                                          $  (300,000)

                 See accompanying notes to financial statements

</TABLE>

                                       F-8



<PAGE>



Note 1.   Organization

On February 25, 1999,  Securities  Resolution Advisors,  Inc. ("SRAD") purchased
all of the  outstanding  common  stock  of  Internet  Auction,  Inc.  ("Internet
Auction").  The  acquisition  was  made  pursuant  to an  Agreement  and Plan of
Reorganization  (the  "Agreement")  dated  January 31, 1999 between SRAD and the
principal shareholders ("IA Shareholders") of Internet Auction.  Pursuant to the
Agreement,  SRAD  acquired the  business  and all of the issued and  outstanding
shares of the capital stock of Internet  Auction in exchange for the issuance to
the  IA  Shareholders  of  an  aggregate  of  37,368,912  shares,   representing
approximately  80%, of SRAD's issued and  outstanding  common stock,  and SRAD's
principal  business became the business of Internet Auction.  In accordance with
the Agreement,  after the transaction  described above, the IA Shareholders were
appointed  to  SRAD's  Board of  Directors  and  became  officers  of SRAD.  The
previously serving directors resigned from the Board. SRAD subsequently  changed
its name to Sales OnLine Direct, Inc. (the "Company").

For accounting  purposes,  the  transaction  described  above is considered,  in
substance,  a capital  transaction  rather  than a business  combination.  It is
equivalent  to the  issuance  of common  stock by  Internet  Auction for the net
assets  of the  Company,  accompanied  by a  recapitalization.  This  accounting
treatment is identical to that resulting from a reverse acquisition, except that
no  goodwill  or other  intangible  asset had been  recorded.  Accordingly,  the
accompanying financial statements reflect the acquisition by Internet Auction of
the net assets of the Company  and the  recapitalization  of Internet  Auction's
common stock based on the exchange ratio in the Agreement.

On March 7, 2000,  the Company  acquired  Internet  Collectible  Awards  ("ICA")
(www.collectiblenet.com),  an internet business that polls consumers and reports
on the best  Internet  collectibles  Web sites in a variety  of  categories.  As
consideration  for the  acquisition,  the Company  recorded  accounts payable of
$50,000  and issued  200,000  shares of the  Company's  common  stock  valued at
$237,500  (based on the Company's stock price at the date of  acquisition).  The
value of these  shares is included  in  temporary  equity due to the  litigation
discussed  below.  The  acquisition  has been  accounted  for under the purchase
method of accounting.  The excess of the purchase price, $287,500, over the fair
value of the of the assets  acquired,  a web site,  has been  allocated to other
intangible  assets.  As  indicated  in Note  12,  the  Company  is  involved  in
litigation.  Subsequent to this acquisition management obtained information that
caused it to believe,  unbeknownst to the Company,  the beneficial  owner of ICA
was an officer and director and  significant  shareholder  of the Company at the
time of the  acquisition.  Upon  resolution  of the  litigation,  any  necessary
accounting adjustments will be made.

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
based upon the average  closing bid price of the stock on the five  trading days
prior to  February  6,  2001,  the date of filing  the  registration  statement.
Included in accrued  expenses at December  31, 2000 is $300,000  related to this
transaction.  The assets acquired - consisting principally of software licenses,
a video library,  a library of articles,  a user list, Domain names,  furniture,
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 market
value of the assets acquired over the purchase price, approximately $25,000, has
been allocated pro-rata to the intangible assets acquired.


                                       F-9
<PAGE>


                            SALES ONLINE DIRECT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999



Note 2.  Management's Plans

The Company  has  incurred  significant  losses for the last two years and has a
limited  operating  history.  For the years ended December 31, 2000 and 1999 the
Company reported losses of $5,493,136 and $2,183,040, respectively. In addition,
at December 31, 2000, the Company had negative working capital of $491,074.

To date we have met our cash needs from the proceeds of the convertible debt and
related warrants and the assignment of call options discussed in Note 7.

The  Company has  increased  revenue  from  auctions  and  reduced  costs by (i)
eliminating personnel and expenses related to the auctions,  (ii) eliminated our
expenses  associated  with the  operations  of the  Maryland  office,  and (iii)
eliminated the salary that was paid to a former officer.

Management is currently in  discussions to obtain  additional  financing to fund
operations  for the  next 12  months  with  approximately  $1,500,000  upon  the
effectiveness of the Augustine registration statement. While management believes
that these discussions will result in obtaining the proposed  financings,  there
can be no assurances that they will be concluded on reasonably acceptable terms.
If the financings are not so completed, management will seek alternative sources
of capital to support operations.  Based on current cash positions,  the Company
needs  an  infusion  of  $750,000  of  additional  capital  to fund  anticipated
marketing  costs and operating  expenses over the next 12 months.  If management
does not  receive  this  capital,  or at least an infusion of $50,000 per month,
then the  Company  will only be able to continue  operations  through the end of
June.

Finally,  the Company  does not expect to incur the same level of legal costs in
the long term that it has sustained in the past year because of the  substantial
discovery and hearings conducted through December 2000 for the litigation.

Although  there can be no assurances,  the Company  believes that the above cost
reductions and  anticipated  financings will be sufficient to meet the Company's
working capital requirements through the end of 2001.


Note 3.   Summary Of Significant Accounting Policies

Basis of presentation

The accompanying  1999 financial  statements  reflect the operations of Internet
Auction since January 1, 1999 and those of Rotman Auction Inc.  (Rotman Auction)
and the assets of World Wide Collectors Digest,  Inc. ("WWCD") for periods after
February 25, 1999,  the date of the merger between  Internet  Auction and Rotman
Auction,  the acquisition of the WWCD assets, and the capital  transactions with
SRAD.  Prior to the  transaction  described  above  the  business  conducted  by
Internet Auction was through three related  companies:  Internet Auction and its
Internet Collectibles division,  Rotman Auction and WWCD. In anticipation of the
transaction with the Company, the companies and the assets of WWCD were combined
and their operations integrated as follows:


                                      F-10

<PAGE>


Summary of Significant Accounting Policies (continued)

     Auction  operations,   generating  approximately  98%  of  revenues,  which
     include:

          A full  service  auction  house  providing a full range of services to
          sellers  and  buyers   including  live  online  bidding,   consignment
          services,  authentication of merchandise,  digital photography as well
          as purchases and sales of authentic memorabilia.

          A person-to-person auction site offering sellers a vehicle for listing
          items for sale and allows buyers to bid on items of interest.

          Buying, warehousing, distribution, marketing and selling collectibles.
          Internet Collectibles  maintains inventory of memorabilia with popular
          and historical significance that allows customers to directly purchase
          the  memorabilia  without the  competition  from bidders in an auction
          format.

     Web hosting service:

          An e-commerce  website for dealers in the collectibles  community that
          designs,  hosts,  and maintains  dealer websites  allowing  clients to
          create  online  storefronts,  set prices,  and sell directly to online
          shoppers.

Inventory Purchase Agreements

          On  February  12,  1999,   Internet  Auction  acquired   collectibles,
          collectors  items and memorabilia  from Rotman  Production,  a related
          party,  with an  estimated  fair value of  approximately  $629,000  in
          exchange  for  236  shares  of the  Internet  Auction's  common  stock
          received  from a stockholder  of Internet  Auction.  In addition,  the
          seller was assigned the right to acquire 700,000 option shares of SRAD
          common stock from Universal Funding, Inc. at $.50 per share. (see Note
          7).

          On  February  25,  1999,   Internet  Auction  acquired   collectibles,
          collectors  items and memorabilia  from Kim Stengel,  a related party,
          with an estimated value of approximately  $140,000 in exchange for 236
          shares  of  the  Internet  Auction's  common  stock  received  from  a
          stockholder of Internet Auction.

Purchase of Assets of World Wide Collectors Digest, Inc.

          On February 25, 1999,  Internet Auction acquired the assets of WWCD, a
          related party,  with an estimated  value of  approximately  $34,000 in
          exchange for 3,835 shares of Internet  Auction's common stock received
          from a stockholder of Internet Auction.

Merger with Rotman Auction, Inc.

          Effective  February  25,  1999,  Internet  Auction  merged with Rotman
          Auction, a related party. Under the terms of the merger agreement, the
          shareholder  of Rotman  received 870 shares of the Internet  Auction's
          common  stock  in  exchange  for  the  Rotman   shares  owned  by  the
          shareholder.  Internet  Auction was the surviving  corporation  in the
          merger.   The  merger  was  recorded  using  the  purchase  method  of
          accounting.  The  operations  of Rotman are included in the  financial
          statements from the date of merger.



                                       F-11



<PAGE>


                            SALES ONLINE DIRECT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999



Summary Of Significant Accounting Policies (continued)

          In connection with the acquisition, the Company recognized goodwill in
          the amount of  $68,905.  Amortization  of  goodwill  for 2000 and 1999
          amounted to $22,968 and $19,140, respectively.

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.

Inventory

          Inventory  consists of collectible  merchandise for sale and is 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,  2000 the  Company  has  provided a $200,000
          reserve.

Property and Equipment

          Property and  equipment are stated at cost.  Depreciation  is computed
          using the double  declining  balance method over the estimated  useful
          life  of  5  years.   Leasehold   improvements   are  amortized  on  a
          straight-line  basis over the shorter of the estimated  useful life of
          the asset or the term of the related lease.

Goodwill

          Goodwill is being amortized on a straight-line basis over an estimated
          useful life of three years.

Other Intangible Assets

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

Debt Financing Costs

          Debt financing costs are being amortized on a straight-line basis over
          the life of the related debt, two years.



                                       F-12



<PAGE>


                            SALES ONLINE DIRECT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999



Summary Of Significant Accounting Policies (continued)

Revenue Recognition

          The Company generates revenue on sales of its purchased  inventory and
          from fees and  commissions on sales of merchandise  under  consignment
          type arrangements.

          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
          merchandise  returns and collecting accounts  receivable.  The Company
          recognizes the gross sales amount as 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  to  or  ownership  of  the
          merchandise. When an auction is completed, consigned merchandise which
          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.

Advertising Costs

          Advertising costs totaling approximately $237,000 in 2000 and $346,000
          in 1999, are charged to expense when incurred.

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 inventory,  intangible assets and deferred tax
          asset  valuations.  Although these estimates are based on management's
          knowledge of current events and actions,  they may  ultimately  differ
          from actual results.



                                       F-13



<PAGE>


                            SALES ONLINE DIRECT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999



Summary Of Significant Accounting Policies (continued)

Stock Compensation Plans

          Statement  of  Financial   Accounting   Standards  ("SFAS")  No.  123,
          "Accounting for Stock-Based  Compensation," encourages 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, it also
          allows 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, as a result, has provided pro forma disclosures of net income and
          earnings per share and other  disclosures,  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
          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 16,438,356  shares as of December 31, 2000. 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 957,000  shares and 579,000
          shares at December 31, 2000 and 1999, 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.


                                       F-14



<PAGE>


                            SALES ONLINE DIRECT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999



Summary Of Significant Accounting Policies (continued)

Asset Impairment

          In accordance  with SFAS No. 121,  "Accounting  for the  Impairment of
          Long-Lived  Assets and for Long-Lived  Assets to be Disposed Of," 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 impairment  indicators as the nature of the assets,
          the future 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 low analysis.

Web Site Development Costs

          The Company has adopted,  effective January 1, 2000, 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 year ended December 31, 2000,
          the Company capitalized approximately $155,200 of Web site development
          costs.   Such   capitalized   costs  are  included  in  "Property  and
          equipment".

          Had the Company  applied  EITF 00-2 in 1999,  on a pro forma basis the
          net loss would have been  reduced by $75,437,  which would have had no
          effect on earnings per share.

Recent Accounting Pronouncements

          In June 1998, the FASB issued SFAS No. 133,  Accounting for Derivative
          Instruments and Hedging  Activities,  which the Company is required to
          adopt effective January 1, 2001. SFAS No. 133 will require the Company
          to record all  dervatives  on the  balance  sheet at fair  value.  The
          Company does not have any derivative instruments, nor does the Company
          engage in any hedging activities.  Consequently,  the adoption of SFAS
          133 is not  expected  to have an  impact  on the  Company's  financial
          position or results of its operations.

Reclassifications

          Certain   amounts  in  the  1999   financial   statements   have  been
          reclassified to conform with the 2000  presentation  with no effect on
          previously reported net loss, loss per share, or accumulated deficit.


                                       F-15



<PAGE>


                            SALES ONLINE DIRECT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999



Note 4.   Property and Equipment

At December 31, 2000 and 1999 property and equipment consisted of the following:

                                                   2000               1999
                                                   ----               ----

             Computer equipment and software    $  825,583         $ 518,434
             Office Furniture                      120,000            56,075
             Leasehold Improvements                      -            54,995
             Video and article archives            449,283                 -
             Video equipment                       158,513                 -
             Web site development costs            155,226                 -
             Purchased software                     70,000            70,000
                                                ----------         ---------
                                                 1,778,605           699,504
             Accumulated depreciation             (288,358)          (86,139)
                                                ----------         ---------

                                                $1,490,247         $ 613,365
                                                ==========         =========

Depreciation  and  amortization  expense of property and equipment for the years
ended   December  31,  2000  and  1999   amounted  to  $210,469  and  $  72,194,
respectively.

The Company  leases 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. The Company is currently negotiating a settlement with
the landlord and has recorded an estimated  liability of $100,000 in  connection
with any future charges associated with the lease. This expense,  along with the
net book value of the  related  leasehold  improvements,  has been  included  in
selling,  general and administrative  expenses in the accompanying  statement of
operations.

The Company leases offices and warehouse facilities for approximately $2,500 per
month on a tenant-at-will basis.

Rent expense for the years ended December 31, 2000 and 1999 totaled $99,277 and
$29,265, respectively.

Note 5.   Other Intangible Assets

At  December  31, 200 and 1999 other  intangible  assets  are  comprised  of the
following:

                                                   2000                1999
                                                   ----                ----

             Software licenses                  $3,091,760         $       -
             Domain Names                           77,025            20,000
             Acquired Web Sites                    796,801                 -
             Customer and User lists               350,857                 -
             Other                                  33,163                 -
                                                ----------         ---------

                                                 4,349,606            20,000
             Accumulated amortization             (187,395)           (1,333)
                                                ----------         ---------

                                                $4,162,211         $  18,667
                                                ==========         =========



                                       F-16


<PAGE>

                            SALES ONLINE DIRECT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


Note 6.   Accrued Expenses

At December 31, 2000 and 1999 accrued expenses are comprised of the following:

                                               2000              1999
                                               ----              ----

            General Oeprating expenses   $    92,171           $35,013
            Professional fees                421,721            46,470
            Common shares to be issued
             in connection with CSEI
             transaction (Note 1)            300,000                --
            Lease termination costs          100,000                --
            Interest                          89,672                --
                                          ----------           -------
            Total                         $1,003,564           $81,483
                                          ==========           =======

Note 7.   Common Stock

Call Option Agreement

     In connection with the agreement described in Note 1, on February 25, 1999,
     SRAD  entered  into a  Call  Option  Agreement  ("Option  Agreement")  with
     Universal  Funding,  Inc.  ("Universal"),  a  shareholder  of  SRAD  and  a
     beneficial  owner of 3,000,000  shares of SRAD's  common  stock.  Under the
     Agreement,  Universal  agreed to grant  certain  options to SRAD to acquire
     2,000,000  shares of SRAD's  common stock owned by  Universal.  The options
     consist of 1,000,000 shares at $.50 per share exercisable  through February
     25,  2000 and  1,000,000  shares  at $.75  per  share  exercisable  through
     February  25,  2001.  The  exercise  price was  reduced  to $.375 per share
     through April 30, 1999.

     In addition,  the Company  assigned  options to purchase  160,000 shares of
     stock from Universal to Richard Singer,  the former  President of SRAD, for
     services  rendered to SRAD in connection  with the  acquisition of Internet
     Auction, Inc. These services were provided to SRAD prior to the date of the
     acquisition  of Internet  Auction,  Inc.  and,  as a result,  have not been
     reflected in the financial statements of the acquirer, Sales Online Direct,
     Inc. Also, the Company assigned options to purchase 700,000 shares of stock
     from Universal in connection with the  acquisition of certain  inventories,
     resulting  in an increase in  additional  paid in capital of  approximately
     $629,000 which  represents the fair value of the  inventories  contributed.
     (See Note 3).

     In April 1999, the Company  assigned  options to purchase 500,000 shares of
     stock from  Universal to certain  individuals  in exchange for  $2,450,000,
     which was added to the paid-in capital of the Company.

     In March 2000, the Company  assigned  options to purchase 142,500 shares of
     stock from Universal to certain individuals in exchange for $87,188,  which
     was added to the paid in capital of the Company.

     At December 31, 2000, the Company had a balance of 497,500 shares remaining
     under the agreement with an exercise price of $.75. These remaining options
     expired on February 25, 2001.

                                      F-17

<PAGE>

                           SALES ONLINE DIRECT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


Stock Options

     In June 1999,  the  Company's  Board of  Directors  adopted  the 1999 Stock
     Option Plan (the "1999 Plan") which provided 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 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 is exercisable
     over a four-year  period.  The Company  recorded  unearned  compensation of
     $757,848,  based on the  difference  between  the fair  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 and $143,937
     for the years ended December 31, 2000 and 1999, respectively.

     There were no options  granted  under the plan in 2000.

     An analysis of the activity in the 1999 Plan is as follows:

                                                                      Weighted
                                                                       Average
                                                                      Exercise
                                                      Shares            Price
                                                      ------            -----

        Shares under option:

         Outstanding at January 1, 1999                    -         $      -
         Granted                                     597,000             0.33
         Exercised                                         -                -
         Expired/Cancelled                           (18,000)            1.63
                                                    --------

         Outstanding at December 31, 1999            579,000              .29
         Granted                                           -                -
         Exercised                                         -                -
         Expired/Cancelled                           (22,000)            1.63
                                                    --------

         Outstanding at December 31, 2000            557,000             0.24
                                                    --------

        Options exercisable at year end              227,575         $   0.15
                                                    ========

     Weighted average fair value of
       options granted during the year
                  1999                                 $1.62         $   0.33
                                                    ========         ========
                  2000                                     -         $      -
                                                    ========         ========


                                      F-18

<PAGE>
                           SALES ONLINE DIRECT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


         Information pertaining to options outstanding at December 31, 2000 is
as follows:

                 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
  ---------------    -----------   -----------  --------   ----------- ---------

     $    .01         471,000       8 years       $0.010    206,625      0.010
          .812         14,000       8              0.812      2,550      0.812
         1.625         72,000       8              1.625     18,400      1,625
                     --------                               -------

Outstanding at end
of year               557,000                     $0.240    227,575     $0.150
                      =======                               =======

     During July 1999,  the  Company's  Board of Directors  adopted,  subject to
     stockholders'  approval,  the 1999 Omnibus Share Plan (the "Omnibus  Plan")
     which 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")
     establishes  the option  price at the time each  option is  granted,  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 1999.

     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,
                                             ------------------------
                                            2000                    1999
                                            ----                    ----

         Loss
                  As reported          $ (5,493,136)             $(2,183,040)
                  Pro forma            $ (5,518,862)             $(2,197,613)

         Basic loss per share
                  As reported          $      (0.11)             $     (0.05)
                  Pro forma            $      (0.11)             $     (0.05)


                                      F-19

<PAGE>

                           SALES ONLINE DIRECT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes  option-pricing model with the following weighted-average
     assumptions:

                                           Years Ended December 31,

                                            2000              1999
                                            ----              ----


         Expected life                       N/A             4 years
         Risk-free interest rate             N/A             6.00%
         Dividend yield                      N/A             None
         Volatility                          N/A             254%

Note 8.   Income Taxes

There was no provision  for income  taxes for the years ended  December 31, 2000
and 1999 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:

                                                              2000        1999
                                                              ----        ----

         Federal net operating loss carry forwards       $2,257,000     625,000
         State net operating loss carry forwards            699,000     195,000
         Stock-based compensation recognized for
         financial statement purposes                       136,000      60,000
                                                         ----------   ---------

                                                          3,092,000     880,000

         Valuation reserve                               (3,092,000)   (880,000)
                                                         ----------   ---------

         Net deferred tax asset                         $        -    $       -
                                                        ===========   =========

The valuation  reserve  applicable to net deferred tax asset for the years ended
December  31, 2000 and 1999 is due to the  likelihood  of the  deferred  tax not
expected to be utilized.

At December 31, 2000, the Company has federal and state net operating loss carry
forwards of approximately  $7,350,000  available to offset future taxable income
which will expire in 2020.

Note 9.   Related Party Transaction

During  September 1999, the Company  purchased  certain  computer  equipment and
internet   research   technology  and  coding   material  from  Timeline,   Inc.
("Timeline")  in the amount of $70,000.  Timeline is a related  party,  owned by
Gregory Rotman and Richard Rotman, officers of the Company.  See Note 3.

                                      F-20

<PAGE>

                           SALES ONLINE DIRECT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999



Note 10.   Convertible Debt Financing

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, due March 31, 2002 to Augustine Fund, L.P. (the "Buyer").

The note is  convertible  into common stock at a  conversion  price equal to the
lesser of: (1) one hundred  ten percent  (110%) of the lowest of the closing bid
price for the  common  stock for the five (5)  trading  days  prior to March 23,
2000, or (2) seventy-five  percent (75%) of the average of the closing bid price
for the common stock for the five (5) trading  days  immediately  preceding  the
conversion date.

Had the  Buyer  converted  the note on March 23,  2000,  the  Buyer  would  have
received  $4,000,000 in aggregate  value of the company's  common stock upon the
conversion of the $3,000,000  convertible note. As a result, the intrinsic value
of the beneficial conversion feature of $ 1,000,000 has been charged to interest
expense with an offsetting increase in additional paid in capital during 2000.

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
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,  which expire on March 31, 2005,  have been valued based upon the
Black-Scholes  option-pricing  model at  $430,000.  The value of the warrants is
being amortized over two years, the term of the related convertible debt.

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), on or  before October 25, 2000,  covering the common
stock to be  issued  upon  the  conversion  of the  convertible  note and  stock
purchase warrants.  The Registration Rights Agreement contains a provision which
decreases  the  conversion  percentage  by two percent  (2%) for each thirty day
period after December 15, 2000 that the  Registration  Statement is not declared
effective by the SEC, as well as cash penalties,  as liquidating damages,  equal
to two percent (2%) for each thirty day period beyond that date.

As of December  31, 2000 the SEC had not  declared  the  Registration  Statement
effective.  Consequently,  the  Company  has  recorded  $30,000  in  liquidating
damages,  as additional  interest  expense,  during the year ended  December 31,
2000. In addition, the applicable conversion percentage has been reduced to 73%,
and the  additional  intrinsic  value of the  beneficial  conversion  feature of
$109,588 has been charged to interest  expense  with an  offsetting  increase in
additional paid in capital during 2000.

The  Registration  Statement  was not  declared  effective  by March  23,  2001;
accordingly  the  applicable  conversion  percentage  became 50% resulting in an
additional intrinsic value of the beneficial conversion feature of $1,890,412 as
of March 23, 2001.  The Company is in discussions regarding the possible
renegotiation of the terms of the convertible debt.

All fees and expenses related to the registration of the common stock will be
paid by the Company.

                                      F-21

<PAGE>

                            SALES ONLINE DIRECT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

Note 11.   Issuance of Common Stock

On February 17, 2000,  the Company  issued  75,000 shares of its common stock to
Universal  Funding,  Inc. for payment of certain fees due in connection with the
granting of the common  stock call options and  temporary  reduction of the call
option  exercise  price.  In addition,  the Company  issued 35,000 shares of its
common stock to an investment consultant for service rendered in connection with
the common stock option grant transactions.

Also, on February 17, 2000, the Company issued 35,000 shares to a consultant for
services  rendered in the first quarter of 2000.  The value of the common shares
at the date of issuance of the shares described above was $1.28 per share.

The Company issued 377,141 shares of Common Stock in connection with the payment
of $125,588 of interest due on its convertible debt.

Note 12.   Litigation

The Company is currently involved in a dispute with Marc Stengel ("Stengel") and
Hannah  Kramer  ("Kramer"),  each of whom is a  substantial  shareholder  of the
Company,  and with  Whirlwind  Collaborative  Design,  Inc.  ("Whirl  Wind") and
Silesky  Marketing,  Inc.  ("Siletsky"),  two entities  affiliated with Stengel.
Stengel and Ms.  Kramer are former  directors of the Company.  Stengel is also a
former officer and employee.

The lawsuit was initially  filed against  Stengel alone in June 2000. It remains
pending in the US District  Court for the District of Maryland.  A First Amended
Complaint was filed on October 11, 2000,  which added the defendants  other than
Stengel  identified  above. The First Amended  Complaint seeks rescission of the
transactions  pursuant to which Stengel and Kramer  obtained  their  substantial
stock interests in the Company, and seeks damages against Stengel and Kramer, in
both cases, for  misrepresentations and omissions under the common law of fraud,
the   Maryland   Securities   Act  and  certain   contractual   warranties   and
representations.  The First  Amended  Complaint  also seeks damages and remedies
against  Stengel  for breach of his  contractual  duties as an  employee  of the
Company and for  misrepresentations  he made to the Company  while  acting as an
employee;  these claims relate to businesses  operated by Stengel in competition
with the Company and using the Company's resources.  The First Amended Complaint
also seeks to recover damages from Stengel and the two corporate  defendants for
conversion of certain of Company assets,  resources and employee  services,  and
for unjust  enrichment.  All defendants  have filed answers to the First Amended
Complaint.  Stengel has filed a counterclaim seeking damages against the Company
for alleged  interference  with his ability to sell shares of our common  stock.
Whirl Wind has filed a  counterclaim  against  Sales Online for  conversion of a
small quantity of computer equipment alleged to be owned by Whirl Wind.

On or about June 16, 2000,  Stengel commenced an action in the Delaware Chancery
Court  pursuant  to Section 225 of the  Delaware  General  Corporation  Law (the
"Delaware  225  Action")  seeking a  determination  from the  Court  that he was
improperly  removed  as an  officer  and  director  of the  Company,  should  be
reinstated  as such,  and that Gregory  Rotman and Richard  Rotman be ordered to
dismiss the Maryland  action.  The  Delaware  225 Action was stayed  pending the
outcome of a special  meeting of  shareholders  discussed  below.  Following the
results of that meeting,  the Company moved for summary  judgment and asked that
the Delaware 225 Action be dismissed. Oral argument on this motion was presented
on January 18, 2001. The Court granted the Company's motion for summary judgment
and dismissed the Delaware 225 Action.  The Court concluded that (1) the special

                                      F-22

<PAGE>

                            SALES ONLINE DIRECT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


meeting of stockholders held on September 19, 2000 to elect directors (discussed
below) was authorized by the Company's bylaws and as a result, the new board was
properly elected and had the authority to terminate  Stengel as an officer;  (2)
Stengel's  post-election  challenge to the special meeting was barred by his own
inequitable  conduct; and (3) his claim for back pay could not be pursued in the
Court of Chancery action.

On July 20, 2000, in accordance with the Company's  Amended and Restated Bylaws,
Gregory  Rotman,  called a special  meeting  of the  stockholders  to be held on
September  19, 2000 for the election of  directors.  Gregory  Rotman and Richard
Rotman nominated  themselves,  Andrew Pilaro and John Martin for election to the
Board of  Directors  and  filed  soliciting  materials  with  the SEC.  No proxy
soliciting  materials  were filed by any other  party.  The  meeting was held on
September  19,  2000 and the  nominated  slate of  directors  was elected as the
Company's Board of Directors.

A special Board of Directors  meeting was called by Gregory  Rotman  immediately
following  the special  meeting of  stockholders  on September 19, 2000. At that
meeting,  the new Board removed  Stengel as an officer of the Company,  formally
ratified and approved the  initiation  and  prosecution  of the Maryland  action
against Stengel and authorized  Gregory Rotman, as president and CEO to take all
actions  necessary to prosecute the Company's  claims against Stengel and others
and  authorized  the  reimbursement  of  approximately  $75,000 of the  Rotmans'
expenses in connection with the aforementioned solicitation.

On or about  October  3, 2000,  Stengel  submitted  to the  Company a demand for
advancement  of  certain  expenses  (including  attorneys'  fees)  he  allegedly
incurred in connection with the Delaware 225 Action and the Maryland action.  In
his advancement request,  Stengel claimed to have incurred approximately $96,800
in legal  expenses in the Delaware 225 Action and the  Maryland  action  through
August,  2000. On October 20, 2000, the Company  notified Stengel that the Board
of Directors had denied his advancement request.

On or about  October 24,  2000,  Stengel  filed a second  action in the Delaware
Court of Chancery  pursuant to Section 145 of the Delaware  General  Corporation
Law seeking a determination from the Court that he is entitled,  pursuant to the
Company's  Bylaws,  to be advanced  his  expenses,  including  attorneys'  fees,
incurred by him in  connection  with the  Delaware  225 Action and the  Maryland
Action (the  "Delaware  145  Action").  The  Company and Stengel  each moved for
summary  judgment in the  Delaware  145 Action.  A hearing on the  Delaware  145
Action was held on January 2, 2001, at which time the Court of Chancery  granted
the Company's motion for summary judgment and denied Stengel's  motion.  Stengel
has appealed this decision to the Delaware Supreme Court.

On November 1, 2000,  the Company  filed with the Maryland  Court a Motion for a
Preliminary  Injunction requesting that the Court enjoin Stengel and Kramer from
selling,  attempting  to sell,  or  otherwise  disposing  of their shares of the
company's stock pending resolution of the merits of our claim for rescission. On
November 9, 2000,  Stengel  filed an  Opposition to our Motion for a Preliminary
Injunction.  On November 9, 2000,  Stengel  also filed a Motion for  Preliminary
Injunction  requesting  that the Court (i) order the  Company  to  instruct  its
transfer  agent to implement  and  complete  all measures  necessary to sell his
restricted  stock in  compliance  with Rule 144 and (ii) enjoin the Company from
interfering  with or preventing the sale of stock by. Stengel in accordance with
Rule 144. The District Court conducted an extensive  evidentiary hearing on both
motions, which concluded on January 23, 2001. The parties briefed the issues and
the Court heard final  arguments on February 22,  2001.  On March 19, 2001,  the
Court (1) denied the Company's  motion for the  preliminary  injunction  against
Stengel  and  Kramer,  (2) granted in part  Stengel's  motion for a  preliminary
injunction  insofar as the Company is enjoined from interfering with any sale of
stock by  Stengel  that  complies  with SEC Rule 144,  (3)  determined  that the
evidence  supported a finding  that  Stengel and Kramer are acting in concert in
the  disposition of their shares and (4) denied Stengel and Kramer's  motions to
dismiss the Company's lawsuit against them. The Court has scheduled the case for
trial in December, 2001.

                                      F-23
<PAGE>

                            SALES ONLINE DIRECT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999



The  Company  is  unable to  predict  the  ultimate  outcome  of the  litigation
described  above.  The  Company's  financial   statements  do  not  include  any
adjustments related to these matters.

Note 13.   Subsequent Event

On February 1, 2001,  the Company  adopted the 2001  Non-Qualified  Stock Option
Plan  (the  "2001  Plan")  and  filed a  Registration  Statement  on Form S-8 to
register 3,000,000 shares of its common stock. Under the 2001 Plan employees 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 at $.001 per share.
As of April 1, 2001 approximately  566,500 shares have been issued in connection
with this plan.

                                      F-24

<PAGE>



                                  EXHIBIT INDEX

Exhibit                    Description of Exhibits
  No.

2.3       Agreement and Plan of Reorganization  dated January 31, 1999 among the
          Registrant and Gregory Rotman, Richard Rotman, Marc Stengel and Hannah
          Kramer.  (incorporated  by reference  from Form 8-K-File No.  0-28720,
          filed March 10, 1999)
2.4       Asset Purchase  Agreement dated November 8, 2000 among the Registrant,
          CSEI and  Discribe  (incorporated  by reference to Exhibit 2.1 to Form
          8-K filed on November 22, 2000)
3.1       Certificate of Incorporation, as amended (incorporated by reference to
          Exhibit 3.1 to Form 10-KSB, filed April 14, 2000)
3.2       Amended and Restated Bylaws  (incorporated by reference to Exhibit 3.2
          to Form 10-KSB, filed 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)
10.1      Lease  Agreement,  dated July 26, 1999 between 100 Painters  Mill, LLC
          and the  Registrant  and First  Amendment  to Lease  Agreement,  dated
          December 31, 1999  (incorporated  by reference to Exhibit 10.5 to Form
          10-KSB filed on April 14, 2000)
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. *
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)
10.11     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).

<PAGE>



10.12     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).
10.13     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)
10.14     Escrow  Agreement dated November 8, 2000 among the  Registrant,  CSEI,
          and  the  escrow  agent  Olde  Monmouth   Stock   Transfer  Co.,  Inc.
          (incorporated  by  reference  to  Exhibit  10.2 to Form  8-K  filed on
          November 22, 2000)
10.15     Registration  Rights  Agreement  dated  November  8, 2000  between the
          Registrant and CSEI (incorporated by reference to Exhibit 10.3 to Form
          8-K filed on November 22, 2000)
16.1      Letter  from  Guest &  Company  on  change  in  certifying  accountant
          (incorporated by reference from Form 8-K, filed on April 29, 1999)
16.2      Letter  from  Stephen  P.  Higgins,  C.P.A.  on change  in  certifying
          accountants (incorporated by reference from Form 8-K/A, filed on March
          31, 2000)
21.1      Subsidiaries of the Registrant (included in Item I)*
23.1      Consent of Wolf & Company, P.C.*
99.1      Risk Factors*
---------------
     * filed herewith

                                      E-2

<PAGE>