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, 2001

                          Commission File No. 0-28720.

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

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

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

                                 (508) 753-0945
                 Issuer's Telephone Number, Including Area Code

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

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

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

                          Yes [X]      No [_]

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

State Issuer's revenues for its most recent fiscal year: $971,802.

The aggregate market value of the shares of common stock of the registrant held
by non-affiliates on March 1, 2002 was approximately $14,951,847 based upon the
average over the counter sales price of $.17 per share on such date (See Item
5).

As of March 1, 2002, the issuer had outstanding 108,333,204 shares of its Common
Stock, par value of $0.001, its only class of voting securities.

                       DOCUMENTS INCORPORATED BY REFERENCE

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


<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE

                                     PART I

Item 1.     Description of Business.........................................  2
Item 2.     Description of Property......................................... 11
Item 3.     Legal Proceedings............................................... 12
Item 4.     Submission of Matters to a Vote of Security Holders............. 12

                               PART II

Item 5.     Market for Common Equity and Related Stockholder Matters........ 12
Item 6.     Management's Discussion and Analysis or Plan of Operation....... 12
Item 7.     Financial Statements............................................ 16
Item 8.     Changes In and Disagreements With Accountants on
            Accounting and Financial Disclosure............................. 16

                              PART III

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

Signatures  ................................................................ 23


<PAGE>

FORWARD LOOKING STATEMENTS

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

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

                                     PART I

     Sales OnLine Direct, Inc. (the "Company") was incorporated in Delaware as
Rose International Ltd. on August 9, 1995. As used in this Annual 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. The Company has one subsidiary, Rotman Collectibles, Inc.
Information contained in the Company's websites shall not be deemed to be a part
of this Annual Report. The Company's principal executive offices are located at
4 Brussels Street, Worcester, Massachusetts 01610, and the Company's telephone
number is (508) 791-6710.

Item 1. Description of Business.

                                    BUSINESS

History of the Company

     After its formation on August 9, 1995 as Rose International Ltd., the
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


                                       2
<PAGE>

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 owned 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

     Our 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 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 that have
either economic or sentimental value, such as antiques, sports and entertainment
memorabilia, stamps, coins, figurines, dolls, collector plates, plush and die
cast toys, cottage/village reproductions and other decorative or limited edition
items that are intended for collecting and other memorabilia. Recently, we have
begun to offer a suite of online management tools to other online sellers, and
have expanded our online appraisal services.

     As of December 31, 2001, substantially all (89%) of our revenues are
derived from our 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. Most of the auctions
take place through eBay.com, a person-to-person auction service. Our auctions
consist of sports and non-sports cards, collectibles, 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. Most of these sales are
consummated through our website located at www.rotmanauction.com. We acquire
inventory in the ordinary course of our business from a number of various
companies and individuals and we generally turn around inventory on an average
of 14 days after we have purchased it. We also may acquire inventory through
acquisition of companies that own collectibles, or through the acquisition of
substantially all the assets of a company that holds collectibles. Merchandise
is also auctioned by Rotman Auction under consignment-type arrangements with the
public where we receive a 20% fee that is paid to us from the final sale of the
merchandise. Of the revenues generated by our Rotman Auction operations,
approximately 98% are derived from sales of our own inventory and approximately
2% are derived from sales of merchandise under consignment.

     In 2001, we began to increase our autograph signing activities under the
"Rotman Auction" name. The autograph signings occur at public and private
autograph signing events. We contract and pay the celebrities for their services
and supplying products for the event. We hosted celebrities such as Adam
Viniateri, Troy Brown, Johnny Damon,


                                       3
<PAGE>

Ray Bourque, Pete Rose, Paul Pierce, Trot Nixon, Brian Daubach, Sergei Samsonov,
Joe Thornton, Byron Dafoe, Derek Lowe, WWF's Chyna, Carl Everett, Shea
Hillenbrand and Alfonso Soriano.

     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. Originally, this was accomplished through our four main
business divisions: Rotman Auction, World Wide Collectors Digest (web design,
web hosting and sports and collectibles information), Internet Auction (an
online person-to-person auction site), and Internet Collectibles (a wholesale
and retail collectibles business that maintained a substantial inventory of
memorabilia). Later, we streamlined our operations, clarified our business model
and focused on the creation of a multi-faceted internet collectibles
marketplace. As a result, the inventory from Internet Collectibles was
consolidated into our Rotman Auction operation, and, because of intense
competition in the person-to-person auction market, we eventually eliminated
this form of auction service provided by the Internet Auction division.

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

     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 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. 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. Currently, visitors can view some video on
the CollectingChannel.com, but they do not have complete access to the full
video archive library yet.

     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 information from the Collecting Exchange with the Collecting
Channel portal, we have created a comprehensive collectibles site, offering
services such as web searching, broadcast services, appraisal and valuation
information, auction site sign-ins, price guides, shopping and classified ads.
The CollectingChannel has approximately 15,000 articles, 6,000 minutes of video,
and 150,000 items in the realized pricing database archived in various
collecting databases and available on the website. We paid for the acquired
assets with 7,350,000 unregistered shares of our common stock, valued at
$4,648,996, and $300,000 worth of our common stock which was to be registered.
In February 2002, the Company and CSEI settled claims made by the Company that
several assets that CSEI sold to us did not have clear title. As part of the
settlement, the Company received a call option to purchase 2,283,565 shares of
its common stock at a price of $.001 per share which may be assigned or
exercised anytime after April 14, 2002, and the Company is no longer required to
issue and register the $300,000 worth of its shares. Also as part of the
settlement, the Company obtained clear title to the assets.

     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.

     In November 2001, we acquired Rotman Collectibles, Inc., and merged it into
a company subsidiary. Rotman Collectibles was in the business of buying and
selling movie posters dated generally from the early 1940s through the early
1970s. As payment for the business of Rotman Collectibles, we issued a
$1,000,000 convertible note to Leslie Rotman, the sole stockholder of Rotman
Collectibles. The note was secured by a portion of our assets.


                                       4
<PAGE>

The purchase price was based upon an independent appraisal of the assets of
Rotman Collectibles, consisting exclusively of the movie posters. We did not
assume any known substantial liabilities of Rotman Collectibles. Pursuant to the
independent appraisal, the assets have an appraised value at retail
substantially higher than the principal amount of the note. During January 2002,
the note was converted into 23,916,378 shares of common stock of the Company.
The Company is required to file a Registration Statement with respect to the
shares. We expect that these movie posters will be sold at auction on eBay.com
and through Rotman Auction's storefront.

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

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

     AuctionInc. Software Suite; Website Design. AuctionInc. is a suite of
online management tools assisting businesses with e-commerce storefronts, order
processing, customer service, shipping solutions, inventory management, and
auction processing. The application was designed originally to reduce overhead
costs for Rotman Auction, but, based on its marketability, the Company is now
beginning to sell the application to other sellers. A seller's use of the
application reduces overhead and labor costs, and though its customer-friendly
setup, improves customer relations and increases sales.

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

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

     AIshop integrates a storefront system into the AI suite so that you get a
plethora of features with limited time and configuration. It also works directly
with the other modules, and each component can be added at any time by choosing
that option. This module offers a complete list of storefront and inventory
management tools to make selling online easier. This component includes
intelligent e-mail notifications (bulk and individual), flexible order
processing, inventory management, inventory bulk import/export, multi-level
categorization, customer management, automated personalized e-mail
notifications, shipping manifest integration, delivery tracking, an intelligent
search feature, and a secure site using SSL.

     The AI product line also offers a more robust and personalized storefront
system, AIcommerce, which is for smaller companies looking to distinguish
themselves from the rest of the "cookie cutter" style storefront systems. This
is a fully customized website that includes most of the features offered in the
other modules with other special programming and design.

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


                                       5
<PAGE>

     We also design, host and maintain 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. We charge a fixed monthly fee
for our web hosting services. For consulting services, our customers are billed
monthly at an hourly rate based on the number of hours of service performed for
the customer.

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

     Other Amenities. The CollectingChannel.com website also includes 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.

     In the past year we have made significant improvements to our websites by
optimizing our own proprietary software to permit the search engine to obtain
faster results with greater accuracy. By the end of 2002, plan to update our
video archives to include all old videos. Our users were not very receptive to
our beta test of the charting of historical data. The Company seeks a new
alternative to have in place by the end of 2002.

     As set forth above, we currently generate substantially all (89%) of our
revenues from Rotman Auction. Since the second quarter of 2001, we began
generating some 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," page 7.

     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, message boards and
other sports-related information.

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.
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.


                                       6
<PAGE>

Growth of the Collectibles and Online Auction Industries

     Sales Online serves both the collectibles and online auction industries.
Collectibles Industry Report, 2001 published by Unity Marketing, a collectible
industry market research firm, reported that the total household market of
collectors grew to 42.9 million collectors in 2000, up from 40 million in 1999
and 37 million in 1998. In the 2000 publication of How Collectors Are Using the
Internet, Unity Marketing revealed that, in 1999, 17.5 million American
collectors used the Internet, an increase of 75% from the 10 million who had
used it by the end of 1998. At that time, Unity Marketing expected that the
number of collectors who use the Internet to increase by 50% by year-end 2001.
Unity Marketing estimated 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 expected 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, 2001 reports that one of
the largest categories of collectibles, figurines, continues to experience a
significant drop in sales. This decrease in sales suggests that collectors are
satisfying their collecting passion with other type of collectibles.

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

Business Strategy

     We believe that the collectibles market will continue to grow as a result
of increased nostalgia for memorabilia, 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 CollectingChannel website to
accommodate these concerns for collectors and auction participants. However, in
order for collectors to have sellers to buy from, we have introduced the
AuctionInc. software suite of online tools to assist sellers. The success and
growth of these directives is based on the accomplishments and progress
experienced by Rotman Auction from the use of both these web properties.

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

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

     o    Increase the number of autograph signing events per calendar quarter
          while also increasing the quality of the celebrities;

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

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

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


                                       7
<PAGE>

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

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

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

     o    As we evolve into a membership-based site, we intend to provide
          unlimited search capability and access to our realized price guides to
          our members only. While visitors will still be permitted limited use
          of our research center, extensive searches and comprehensive pricing
          data will be available only to those who pay our monthly/annual
          membership fees. For example, we may permit visitors to search data
          that covers only the past 30 days; however, if a visitor wanted to
          obtain further historical pricing information, he or she would have to
          join the site and pay the membership fee to access this data. We hope
          to begin charging membership fees in 2002. We believe that our current
          number of unique visitors to the site represents approximately 25% of
          the number of visitors we will need to begin charging membership fees.

     We expect 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. 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.

     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. 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 has been designed to position the Company as the premier
collectibles site on the Internet. We target both traditional collectors as well
as the new generation of collectors (as previously described in "Industry
Background"). We target dealers, licensors, licensees, distributors and others
to host collectible pavilions and other e-commerce sites and storefronts.

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

     Our advertising to date has been 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" described in Exhibit 99.1. Therefore, we
have no guarantees and can provide no assurances, that our plans will be
successful.


                                       8
<PAGE>

Revenue Sources

     Following the transaction with Internet Auction on February 25, 1999, we
primarily generated revenue from sales of our purchased inventory and from fees
and commissions on sales of merchandise under consignment arrangements. We
charge a 15% to 20% fee for listing items on consignment. Currently, 89% of our
revenues are derived from our Rotman Auction operations. We also generate
revenue from web hosting, advertising, and sponsorship of websites. Of these
revenues, approximately 86% are attributable to sales of our purchased
inventory, 2% are attributable to fees and commissions generated on sales of
merchandise under consignment, and 12% from web hosting, advertising and
sponsorship of websites. However, we anticipate that future sources of revenue
generation will include sales from AuctionInc., "Ask the Appraiser"TM and
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 a music company were to purchase a
pavilion, it would host the only area on collectingchannel.com dealing with
music and music videos. In this pavilion, visitors would be able to research the
history of these items, the historical pricing of these collectibles, read
articles and communicate with experts on authentication. Visitors would also be
provided with referral links to the music company and other sites for purchase
of merchandise.

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

     In terms of services, we currently provide web hosting and online appraisal
services. To date, we have generated minimal revenues from these services, but
we expect that once we launch Aiship and create awareness of the AuctionInc.
product line, increase our advertising and marketing efforts, and once we enter
into partnerships for referrals of our appraisal services, we will generate
revenue and we may attract more visitors that will utilize these services on our
site. As discussed in "Business Strategy," page 7 we also expect to derive
revenues from membership fees charged for accessing certain aspects of the
Collecting Channel and fees from stores listing merchandise in our shopping
area. In addition to web hosting, we expect to increase revenues through the
development and design of third party websites. We have an interactive services
agreement with AOL Canada pursuant to which we handle the content and
maintenance of the website www.tartans.com (AOL keyword: clans) and we are
trying to capitalize on that agreement by promoting our products and services on
www.tartans.com by selling advertising space and company-owned product.

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

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

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 collectible companies, Collectors Universe, Shop
at Home and Tri-Star Productions; (ii) a number of indirect competitors that
specialize in electronic commerce or derive a substantial portion of their
revenue from electronic commerce, including Internet Shopping Network and AOL,
Shopping.com; and (iii) a variety of other companies that offer merchandise
similar to that of our Company but through physical auctions.


                                       9
<PAGE>

     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. 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, AuctionInc. software suite, 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. To protect our interest in our intellectual property,
we restrict access by others to our proprietary software.

     We believe that our products and other proprietary rights do not infringe
on the proprietary rights of third parties. However, 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. This 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. When we acquired the assets of the
Collecting Channel we were granted two perpetual licenses for the proprietary
software eCMS and we acquired the source codes for the software. eCMS is the
content management system primarily used by www.collectingchannel.com. We rely
on encryption and authentication technology licensed from VeriSign through an
online user agreement to provide the security and authentication necessary to
effect secure transmission of confidential information.

     We cannot make any assurances that these third-party technology licenses
will continue to be available to the Company on commercially reasonable terms.
Our inability to maintain or obtain upgrades to any of these technology licenses
could result in delays in completing our proprietary software enhancements and
new developments until


                                       10
<PAGE>

equivalent technology could be identified, licensed or developed and integrated.
Any of these delays would materially adversely affect our business, results of
operations and financial condition.

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

Research and Development

     Over the past 2 years we invested approximately $20,000 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.

     We invested $250,000 into the Collectingchannel.com website to improve and
enhance the current platform. We also spent $100,000 on the Ask the AppraiserTM
which is a module of the collectingchannel.com and we spent $20,000 on
infrastructure and equipment to improve performance and handle increased
traffic. The AuctionInc. product line is built on open-source technology, PHP.
We have invested thousands of hours coding the new software platform for launch
the end of the first quarter of 2002. We spent approximately $750,000 in labor
and $20,000 on equipment, building the AuctionInc. software. We spent $150,000
on improving the order-processing system for Rotman Auction in labor and $50,000
on accounting software.

Employees

     We currently employ 24 full-time personnel. We believe that our future
success will depend in part on our continued ability to attract, hire and retain
qualified personnel.

Government Regulation

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

Item 2. Description of Properties.

     Our corporate headquarters are located at 4 Brussels Street, Worcester,
Massachusetts 01610. Currently, we are tenants-at-will, but we are not required
to pay rent on the Brussels Street, Worcester location. In July, 1999, we leased
a second office located at 100 Painters Mill Road in Owings Mills, Maryland
21117 under a five year lease with a monthly rent of $7,494.67. In June 2000, we
moved the operations in the Maryland office to our corporate headquarters in
Worcester, Massachusetts. In December 2000, we vacated the premises and
attempted to release that space. We received a notice of eviction in February
2001 for non-payment of rent. On November 26, we were served with a Writ of
Summons for $95,272.12, plus 15% attorneys' fees and $4,763.60 in interest, for
failure to pay rent. We have recorded a potential liability of $100,000 in
connection with any future charges associated with the lease.


                                       11
<PAGE>

Item 3. Legal Proceedings.

     None.

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

     On November 19, 2001, the Company mailed a consent solicitation statement
to its stockholders with respect to an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of common stock from
100,000,000 to 350,000,000. The consent solicitation was completed on December
20, 2001. Holders representing 58,098,263 shares of common stock of the Company
(77.38% of all outstanding shares) voted in favor of the amendment; holders
representing 99,398 shares of common stock of the Company (.13%) voted against
the Amendment; and holders representing 3,300 shares of common stock of the
Company abstained from voting. The charter amendment was filed in Delaware and
declared effective on January 4, 2002.

                                     PART II

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

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

     The following table sets forth the high and low bid prices for our common
stock as reported by OTCBB for the eight quarters ended December 31, 2001. 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            $2.406        $2.188
     Quarter ended June 30, 2000             $ .688        $ .625
     Quarter ended September 30, 2000        $ .375        $ .375
     Quarter ended December 31, 2000         $ .270        $ .220

     2000                                     High          Low
                                             ------        ------
     Quarter ended March 31, 2001            $ .220        $ .190
     Quarter ended June 30, 2001             $ .033        $ .029
     Quarter ended September 30, 2001        $ .013        $ .012
     Quarter ended December 31, 2001         $ .050        $ .033

     As of March 1, 2002, there were approximately 223 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

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

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

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 the website


                                       12
<PAGE>

www.CollectingChannel.com, and we acquired Rotman Collectibles, Inc. We plan to
converge our multiple sites into one integrated site in 2002. We also plan to
build other portals, some that will charge fees to access their services, and
others to leverage company-owned technology and websites. In 2001, we developed
"AuctionInc.," a suite of online management tools. We also began to sponsor more
autograph signing events in 2001. In the first quarter of 2002, we began to
offer "AuctionInc." to other online sellers, and we expanded our online
appraisal services.

Critical Accounting Policies

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

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

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

Results of Operations

     The following discussion compares our results of operations for the year
ended December 31, 2001, with those for the year ended December 31, 2000.

     Revenues. For the year ended December 31, 2001 revenues were approximately
$972,000, 88% 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 $837,000; gross sales of items on consignment totaled
approximately $97,000. Sales of our own product represented 79%, and sales of
consignment merchandise represented 9% of gross sales, but, because we only
receive a fee for sales on consignment, sales of our own product represented 86%
and sales on consignment represented 2% of our revenues. Web hosting,
advertising, and sponsorship revenues were approximately $119,000, representing
12% of our revenues.

     Our 2001 revenues reflect a decrease of approximately $326,000 or 25% from
the year ended December 31, 2001, in which revenues were $1,298,000. For the
year ended December 31, 2000, sales of our own product were approximately
$1,213,000 and sales of items on consignment were approximately $564,000. For
that year, sales of our own product represented 68% and sales of consignment
merchandise represented 32% of all sales, but sales of our own product
represented 93% and sales on consignment represented 7% of our revenues. There
were no web hosting, advertising, or sponsorship revenues for the year ended
December 31, 2000. The primary reason for the decrease in revenues was a
combination of lower sales of our Company owned product of approximately
$376,000, lower consignment sales of $467,000, from which we receive only a 15%
to 20% fee, or $70,000, offset by an increase in web hosting, advertising and
sponsorship revenues of $119,000.

     Gross profit from Company-owned product sales for the year ended December
31, 2001 was $161,000, which represents an increase of $336,000 from the year
ended December 31, 2000, which had a gross loss from Company-owned product sales
of $175,000. The Company generated commissions on consignment sales of $15,000
for the year ended December 31, 2001, compared to $85,000 in commissions on
consignment sales for the year ended December 31, 2000. The Company earned
$119,000 in web hosting, advertising, and sponsorship revenues for the year
ended December 31, 2001. There were no web hosting, advertising, and sponsorship
revenues for the prior year.

     The Company's total gross profit was $294,000 for the year ended December
31, 2001, compared to a gross loss of $91,000 for the year ended December 31,
2000, an increase of $384,000. The increase in gross profit is a result of
higher quality product and more selective purchasing, as well as revenues
generated from web hosting, advertising, and sponsorships.

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

     Operating Expenses. Total operating expenses for the year ended December
31, 2001 were approximately $3,785,000, compared to $3,849,000 for the
corresponding period in 2000.

     Sales, general and administrative ("SG&A") expenses for the year ended
December 31, 2001 were approximately $2,909,000, compared to $3,064,000 for the
year ended December 31, 2000. Administrative and non-technical payroll related
costs increased by $33,000 over the year ended December 31, 2000. Depreciation
and amortization increased by $801,000 principally due to the tangible and
intangible assets acquired in the transaction with CSEI. Professional fees
decreased by $333,000, primarily attributable to a decrease in costs associated
with the Company's ongoing litigation. Marketing and advertising costs,
primarily attributable to print and online marketing and advertising programs
designed to create brand awareness for the Company's online sites, decreased by
approximately $185,000. The Company continued to decrease its marketing expenses
in an effort to conserve cash.


                                       13
<PAGE>

Other SG&A expenses decreased by $382,000 principally due to lower lease
termination costs, travel related to litigation, and bad debts. The Company
received a commitment to an additional $1 million of financing from Augustine
Fund, L.P. This additional financing will enable the Company to increase our
marketing and advertising activities to attract more visitors to its websites.
See "Working Capital and Liquidity".

     Costs associated with planning, maintaining and operating the Company's
websites for the year ended December 31, 2001 increased approximately $91,000
from the year ended December 31, 2000. This increase is due primarily to
increases in payroll of $273,000, consulting fees of $22,000, and depreciation
of $66,000, offset by decreases in computer expenses of $141,000 and
professional fees of $115,000. During 2001, the Company outsourced less of this
work than it did during 2000.

     Interest expense. For the year ended December 31, 2001 the Company incurred
$900,000 in interest expense, including $588,000 associated with the issuance of
a $3,000,000 convertible note and warrants, and $296,000 associated with two
$1,000,000 convertible notes. For the year ended December 31, 2000, the Company
incurred $1,597,000 in interest expense charges associated with the $3,000,000
convertible note and warrants. See "Working Capital and Liquidity" below.

     Net Loss. The Company realized a loss for the year ended December 30, 2001
of $4,358,000, or ($.07) per share, compared to $5,493,000, or ($.11) per share
for the year ended December 31, 2000.

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

Assets

     At December 31, 2001, total assets of the Company were $5,584,000 compared
to $6,494,000 at December 31, 2000. The decrease was primarily due to
depreciation and amortization totaling $1,421,000 and the settlement of the CSEI
dispute of $300,000 (see Note 1 to the consolidated financial statements),
offset by an increase in inventory of $775,000. In November 2001, the Company
acquired $1,015,000 of inventory as part of the Rotman Collectibles acquisition.
In November 2000, the Company acquired the CSEI assets, consisting 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
consolidated 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 $48,000 at December 31, 2001, compared to
$103,000 at December 31, 2000. The Company had $97,000 of working capital at
December 31, 2001, compared to a deficit in working capital of $491,000 at
December 31, 2000.

     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 note is
convertible into common stock at a conversion price equal to the lesser of: (1)
110% of the lowest of the closing bid price for the common stock for the five
trading days prior to March 23, 2000, or (2) 75% of the average of the closing
bid price for the common stock for the five trading days immediately preceding
the conversion date. Had Augustine Fund, L.P. converted the note on March 23,
2000, Augustine Fund, L.P. would have received $4,000,000 in aggregate value of
the Company's common stock upon conversion. Because the debt was convertible at
the date of issuance, 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
Augustine Fund, L.P. and Delano Group Securities to purchase 300,000 and 100,000
shares of common stock, respectively. The purchase price per share of common
stock is $2.70, 120% of the lowest of the closing bid prices for the common
stock during the five trading days prior to the closing date. The warrants
expire on March 31, 2005.


                                       14
<PAGE>

         In addition, the Company entered into a Registration Rights Agreement
("Registration 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 the stock purchase warrants. Because the Registration
Statement was not declared effective by the SEC by December 15, 2000, the
applicable conversion percentage decreased to 50%. The Registration Agreement
was modified, in May 2001, effective as of January 1, 2001, and again on July
15, 2001 and August 30, 2001, and contains a provision that fixed the conversion
percentage at 73%. The Registration Statement became effective with the SEC on
September 7, 2001. Finally, as consideration for the January 1, 2001
modifications, the Company granted a security interest in all of its assets as
security for the Company's obligations under the $3,000,000 convertible note.
Under the terms of the $3,000,000 note, the note must be paid in full by March
31, 2002. However, on March 24, 2002, the Company and Augustine Fund, L.P.
executed a letter of understanding to forbear the note for up to 1 year. The
note will bear no interest, and the note will no longer be secured by the assets
of the Company. Augustine Fund, L.P. is also restricted with respect to trading
and conversions.

     On November 7, 2001, the Company issued another 8% convertible note to
Augustine Fund, L.P., in return for $1,000,000 in financing, of which $935,000
had been advanced as of December 31, 2001. The convertible note was issued on
substantially the same terms as the original convertible note. The new funding
was used to finance the Company's operations. The Company recently received a
commitment from Augustine Fund, L.P. to increase the permitted draw under this
note to $2,000,000.

     Also on November 7, 2001, the Company issued a 6% convertible note in the
amount of $1,000,000 to Leslie Rotman (the "Rotman Note"), as the sole
stockholder of Rotman Collectibles, Inc., upon the merger of Rotman
Collectibles, Inc. into a subsidiary of the Company under the same name. Rotman
Collectibles, Inc. obtained a large collection of entertainment memorabilia in
connection with this transaction. In January 2002 the Rotman Note was converted
into 23,916,378 shares of common stock of the Company. Management believes that
sales from Rotman Collectibles, Inc. inventory will generate up to $1,000,000 in
the next 12 months. The Rotman Note was issued on substantially the same terms
as the original convertible note to Augustine Fund, L.P., except that the
interest rate is 6% rather than 8%, and the base price at which the note may be
converted into shares of common stock of the Company is 80%, rather than 73%.
Interest payments, payable in shares of common stock or cash, will begin March
31, 2002. The Augustine Fund note is secured by certain assets of the Company.
The Company is also required to file a new registration statement with respect
to the new convertible notes, or the shares issued upon conversion of the
convertible notes. Pursuant to a letter of understanding dated March 24, 2002, a
Registration Statement must be filed no later than April 10, 2003. After April
10, 2003, Augustine Fund, L.P. will be able to pay a lower conversion price if
we fail to file and register timely the Registration Statement.

     Had the two $1,000,000 convertible notes been converted on November 7,
2001, the holders would have received a total of approximately $2,620,000 in
aggregate value of the Company's common stock upon conversion. As a result, in
accordance with EITF 00-27, the intrinsic value of the beneficial conversion
feature of $620,000 will be charged to interest expense, with an offsetting
increase in additional paid in capital, over the two-year term of the related
notes. Since the Rotman note was fully converted in January 2002, substantially
all of the related beneficial conversion feature of $250,000 has been charged to
interest expense, with a corresponding increase in additional paid in capital
during 2001.

     The Company's independent auditors have issued a going concern opinion on
the Company's consolidated financial statements. Although we have increased our
gross margins from auctions during 2001, and anticipate that our suite of
management tools, called "AuctionInc." is expected to begin producing revenues
during the latter half of 2002, management believes that we do not have
sufficient cash to fund operations during the next 12 months. The Settlement
Agreement and Mutual Releases related to the CSEI assets provided us with call
options for approximately 2.3 million shares of common stock. We believe that
the assignment of these call options can generate between $500,000 and
$1,000,000 of cash during the year ending December 31, 2002. While we believe
that these plans will result in obtaining sufficient operating cash, there can
be no assurance that an assignment of the call options can be concluded on
reasonably acceptable terms. If these assignments are not so completed, we will
seek alternative sources of capital to support operations. Based upon current
cash positions, we need an infusion of between $500,000 to $1,000,000 of
additional capital to fund anticipated operating costs over the next 12 months.
If we do 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, 2002. On March 24, 2002, we entered into a letter of understanding with
Augustine Fund, L.P., where Augustine Fund, L.P. will provide financing, at the
Company's request, of up to an additional $1,000,000.


                                       15
<PAGE>

     Although the Company can offer no assurances in the long term, management
believes that the cost reductions, anticipated additional revenues, additional
financing, and anticipated option assignments will provide sufficient cash to
meet the Company's working capital requirements through the end of 2002. In
addition, the level of interest expense is not expected to continue at the same
levels as it has for the last two years since, by the end of the first quarter
of 2002, $1,000,000 of convertible debt will have been retired through the
issuance of common stock, and $3,000,000 of the convertible debt will be
non-interest bearing. The Company believes that future litigation costs will be
substantially less than those incurred over the past 2 years.

     However, the Company's ability to achieve positive cash flow and to become
profitable may be adversely affected as a result of a number of factors that
could thwart its efforts. These factors include the Company's inability to
successfully implement the Company's business and revenue model, the
collectibles community not accepting the services the Company offers, higher
costs than anticipated, the Company's inability to sell its products and
services to a sufficient number of customers, the Company's failure to attract
sufficient interest in and traffic to its sites, the Company's inability to
complete development of its sites, the failure of the Company's operating
systems, and the Company's inability to increase its revenues as rapidly as
anticipated. If the Company is not profitable, it will not be able to continue
its business operations.

Item 7. Financial Statements.

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

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

     Wolf & Company, P.C. is the Company's independent certified accountants and
have provided accounting and auditing services to the Company beginning with the
year ended December 31, 1999.


                                    PART III

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

Directors and Executive Officers

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

     Name              Age    Position
     ----              ---    --------
     Gregory Rotman*   35     Director, Chief Executive Officer
                              & President

     Richard Rotman*   31     Director, Chief Financial Officer, Vice President,
                              Treasurer & Secretary

     John Martin       36     Director, Chief Technology Officer &
                              Vice President

     Andrew Pilaro     32     Director
----------------------
*Gregory Rotman and Richard Rotman are brothers.


                                       16
<PAGE>

     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 as 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.

Section 16(a) Beneficial Ownership Reporting Compliance

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

     To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and representations that no other reports were
required, all Section 16(a) filing requirements applicable to its officers and
directors and to Gregory Rotman and Richard Rotman, who are beneficial owners of
more than 10% of the Company's stock, have been complied with for the period
which this Form 10-KSB relates, except John Martin, a Director, Chief Technology
Officer and Vice President of the Company, failed to file a Form 4 for the
months of November 2001 (19 transactions) and December 2001 (8 transactions).
These Form 4 transactions were reported by Mr. Martin instead on Form 5. It is
also unclear to the Company as to whether or not Marc Stengel, former director
and officer, has filed all required reports, and whether such reports were
timely, 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, 2001, 2000, and
1999. The Company did not pay any long-term compensation to the named officers.

                                       17
<PAGE>

                           Summary Compensation Table
<TABLE>
<CAPTION>
                                                          Annual Compensation    Long-Term Compensation
     --------------------------------------------------------------------------------------------------
     Name and                                  Fiscal                             Securities Underlying
     Principal Position(1)                    Year (1)            Salary                 Options
     --------------------------------------------------------------------------------------------------
<S>                                              <C>             <C>                    <C>
     Gregory P. Rotman                           2001            $ 74,704                  0
     President and Chief Executive               2000            $ 98,928                  0
     Officer                                     1999            $124,519                  0
     --------------------------------------------------------------------------------------------------
     Richard S. Rotman                           2001            $ 75,667                  0
     Chief Financial Officer and Vice            2000            $ 98,771                  0
     President and Secretary                     1999            $126,194                  0
     --------------------------------------------------------------------------------------------------
     John Martin                                 2001            $123,331(2)            117,500(2)
     Vice President and Chief                    2000            $ 90,154               117,500
     Technology Officer                          1999            $ 80,999                59,750
     --------------------------------------------------------------------------------------------------
</TABLE>

     (1)  Gregory P. Rotman and Richard S. Rotman assumed their positions as of
          February 25, 1999.

     (2)  Options are granted pursuant to the 1999 Non-Qualified Stock Option
          Plan. Salary includes cash value of options to purchase 3,164,183
          shares immediately exercised upon grant and paid in lieu of cash
          compensation.


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

                        OPTION GRANTS IN LAST FISCAL YEAR
                               (Individual Grants)
<TABLE>
<CAPTION>
                                                                    Percent of
                                                                      Total
                                                                     Options/
                                                   Number of           SARs
                                                   Securities       Granted to
                                                   Underlying       Employees        Exercise or
                                                    Options/        in Fiscal        Base Price        Expiration
                       Name                     SARs Granted (#)       Year            ($/Sh)             Date
    --------------------------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>              <C>                <C>
    Gregory Rotman, President and CEO                  0                 0%               N/A               NA
    --------------------------------------------------------------------------------------------------------------
    Richard Rotman, Vice President, CFO and
    Secretary                                          0                 0%               N/A              N/A
    --------------------------------------------------------------------------------------------------------------
    John Martin, Vice President and CTO              117,500           100%             $.001              (1)
                                                   3,164,183            16%             $.001              (2)
    --------------------------------------------------------------------------------------------------------------
</TABLE>

     (1)  Options expire 10 years from date of grant, with options to purchase
          29,375 granted each calendar quarter.

     (2)  All options granted were immediately exercised. Options were granted
          in lieu of cash salary.


                                       18
<PAGE>

         The following table sets forth certain information related to the
number of options exercised and the number and value of exercisable and
unexercisable options of the named executive officers as of December 31, 2001:

 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
                                     VALUES
<TABLE>
<CAPTION>
                                                                                Number of
                                                                               Securities            Value of
                                                                               Underlying           Unexercised
                                                                               Unexercised         In-The-Money
                                                                             Options/SARs at      Options/SARs at
                                                   Shares        Value         FY-End (#)           FY-End ($)
                                                Acquired on    Realized       Exercisable/         Exercisable/
                       Name                     Exercise (#)      ($)         Unexercisable        Unexercisable
    -------------------------------------------------------------------------------------------------------------
<S>                                              <C>           <C>               <C>                <C>
    Gregory Rotman, President and CEO                0            $0               0/0                 $0/$0
    -------------------------------------------------------------------------------------------------------------
    Richard Rotman, Vice President, CFO and
    Secretary                                        0            $0               0/0                 $0/$0
    -------------------------------------------------------------------------------------------------------------
    John Martin, Vice President and CTO          3,164,183     $115,067          294,750            $12,380(1)
    -------------------------------------------------------------------------------------------------------------
</TABLE>

     (1)  Based on closing price of $.042 on December 31, 2001.

     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 March 1, 2002 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                7.66%
     Richard Rotman               10,155,451                9.37%
     John Martin                   1,877,382(1)             1.73%
     Andrew Pilaro                    68,700(2)              .06%
     All directors and            20,410,538               18.83%
     officers as a group
     (4 individuals)
----------------------
(1)  All shares are held jointly with Mr. Martin's spouse. Includes 29,375
     options to purchase shares of our common stock exercisable within 60 days.

(2)  Includes 17,200 shares held indirectly as custodian for his minor sons.

     To the knowledge of Management, as of March 1, 2002, there are no persons
and/or companies who or which beneficially own, directly or indirectly, shares
carrying more than 5% of the voting rights attached to all outstanding shares of
the Company, other than Gregory Rotman and Richard Rotman, as set forth above,
and the following persons:

     Name and Address of         Number of Shares           % of
     Beneficial Owner           Beneficially Owned          Class
     ----------------           ------------------          -----
     Marc Stengel                  7,094,619(1)             6.54%
     3743 Birch Lane
     Owings Mills, MD 21117
-----------
(1)  Based solely upon the Form 4 filed with the SEC by Mr. Stengel on March 8,
     2002.


                                       19
<PAGE>

Item 12. Certain Relationships and Related Transactions.

     On March 7, 2000, the Company 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, the Company recorded accounts payable of
$50,000 and issued 200,000 shares of our common stock valued at $237,500 (based
on the Company's 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 a lawsuit we filed against Marc Stengel and others, described in item
3, the Company alleged that this acquisition was an undisclosed related party
transaction. This lawsuit has been settled.

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

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

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

     (a)  Exhibits.

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

   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 Exhibit 2.1 to
               Form 8-K 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)

     2.3       Agreement and Plan of Merger dated October 23, 2001, by and among
               the Company, Rotman Collectibles, Inc., and Leslie Rotman
               (incorporated by reference from Exhibit 2.1 to Form 8-K filed on
               November 21, 2001)

     3.1       Certificate of Incorporation, as amended on January 4, 2002*

     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)

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

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


                                       20
<PAGE>

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

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

     10.1      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.
               (incorporated by reference to Exhibit 10.4 to Form 10-KSB filed
               on May 11, 2001)

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

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

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

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

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

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

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

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

     10.13     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)

     10.14     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)

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

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

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

     23.1      Consent of Wolf & Company, P.C.*

     99.1      Risk Factors*

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


                                       21
<PAGE>

     (b)  Reports on Form 8-K.

     On October 31, 2001, the Company filed a Current Report on Form 8-K
pursuant to Item 5 (Other Events).

     On November 21, 2001, the Company filed a Current Report on Form 8-K
pursuant to Item 2 (Acquisition or Disposition of Assets) and Item 5 (Other
Events).



                                       22
<PAGE>


                                   SIGNATURES

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

                                       SALES ONLINE DIRECT, INC.


Date:  March 29, 2002                  By:     /s/ Gregory Rotman
                                       --------------------------------------
                                            Gregory Rotman, President

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


Date:  March 29, 2002                  /s/ Gregory Rotman
                                       --------------------------------------
                                       Gregory Rotman, President and Director


Date:  March 29, 2002                  /s/ Richard Rotman
                                       --------------------------------------
                                       Richard Rotman, Vice President,
                                       Treasurer, Secretary and Director


Date:  March 29, 2002                  /s/ John Martin
                                       --------------------------------------
                                       John Martin, Chief Technology Officer,
                                       Vice President and Director


Date:  March 29, 2002                  /s/ Andrew Pilaro
                                       --------------------------------------
                                       Andrew Pilaro, Director


                                       23
<PAGE>

                      Consolidated Financial Statements and
                              Report of Independent
                          Certified Public Accountants

                    Sales Online Direct, Inc. and Subsidiary
                           December 31, 2001 and 2000



                                      F-1
<PAGE>


                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                           DECEMBER 31, 2001 AND 2000
                        CONSOLIDATED FINANCIAL STATEMENTS


     AUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

     Consolidated Balance Sheets at December 31, 2001 and 2000.......       F-4

     Consolidated Statements of Operations
     Years ended December 31, 2001 and 2000..........................       F-5

     Consolidated Statements of Shareholders' Equity (Deficit)
     Years ended December 31, 2001 and 2000..........................       F-6

     Consolidated Statements of Cash Flows
     Years ended December 31, 2001 and 2000..........................   F-7-F-8

     Notes to Consolidated Financial Statements
     Years ended December 31, 2001 and 2000..........................  F-9-F-22



                                      F-2
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying consolidated balance sheets of Sales OnLine
Direct, Inc. and subsidiary as of December 31, 2001 and 2000, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our 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 consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Sales OnLine Direct,
Inc. and subsidiary as of December 31, 2001 and 2000 and the results of their
operations and their cash flows for years then ended in conformity with
accounting principles generally accepted in the United States of America.

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


/s/ Wolf & Company, P.C.


March 24, 2002
Boston, Massachusetts


                                      F-3
<PAGE>

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

<TABLE>
<CAPTION>
     ASSETS                                                                      2001              2000
                                                                                 ----              ----
<S>                                                                          <C>                     <C>
Current assets:
    Cash and cash equivalents                                                $     47,669      $    102,534
    Accounts receivable                                                            15,295              --
    Marketable securities                                                             121            17,196
    Inventory                                                                   1,160,810           385,973
    Prepaid expenses                                                               37,595           125,975
    Other current assets                                                           77,557            18,089
                                                                             ------------      ------------

       Total current assets                                                     1,339,047           649,767

Property and equipment, net                                                     1,136,931         1,490,247
Goodwill                                                                             --              26,797
Other intangible assets                                                         3,078,391         4,162,211
Debt financing costs, net                                                          30,000           165,000
                                                                             ------------      ------------

Total assets                                                                 $  5,584,369      $  6,494,022
                                                                             ============      ============

                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
    Accounts payable                                                         $    359,218      $    137,277
    Accrued expenses                                                              882,433         1,003,564
                                                                             ------------      ------------

       Total current liabilities                                                1,241,651         1,140,841
                                                                             ------------      ------------

Convertible debt                                                                4,544,968         2,737,196
                                                                             ------------      ------------

Temporary equity                                                                     --             237,500
                                                                             ------------      ------------

Stockholders' equity (deficit):
    Common stock, $.001 par value, 100,000,000 shares
     authorized; 79,683,494 and 54,763,281 shares issued
     and outstanding at December 31, 2001
     and 2000, respectively                                                        79,683            54,763
    Additional paid-in capital                                                 12,010,313        10,448,176
    Accumulated deficit                                                       (12,057,863)       (7,700,307)
    Unearned compensation                                                        (234,383)         (424,147)
                                                                             ------------      ------------

       Total stockholders' equity (deficit)                                      (202,250)        2,378,485
                                                                             ------------      ------------

Total liabilities and stockholders' equity (deficit)                         $  5,584,369      $  6,494,022
                                                                             ============      ============
</TABLE>

           See accompanying notes to consolidated financial statements


                                      F-4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                  2001               2000
                                                                                  ----               ----
<S>                                                                         <C>                 <C>
Revenues                                                                    $    971,802        $  1,297,595

Cost of revenues                                                                 678,275           1,388,455
                                                                            ------------        ------------

Gross profit (loss)                                                              293,527             (90,860)
                                                                            ------------        ------------

Operating expenses:
     Selling, general, and administrative expenses                             2,908,897           3,064,024
     Web site development costs                                                  876,480             785,406
                                                                            ------------        ------------

         Total operating expenses                                              3,785,377           3,849,430
                                                                            ------------        ------------

Loss from operations                                                          (3,491,850)         (3,940,290)
                                                                            ------------        ------------

Other income (expense):
     Interest expense                                                           (899,785)         (1,597,045)
     Other income                                                                 30,880              43,232
     Unrealized gain (loss) on marketable securities                              36,291             (40,132)
     Gain (loss) on sale of securities                                           (33,092)             41,099
                                                                            ------------        ------------

         Total other expense                                                    (865,706)         (1,552,846)
                                                                            ------------        ------------

Loss before income taxes                                                      (4,357,556)         (5,493,136)

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

Net loss                                                                    $ (4,357,556)       $ (5,493,136)
                                                                            ============        ============

Loss per share (Basic):
     Basic                                                                  $      (0.07)       $      (0.11)
                                                                            ============        ============

     Weighted average shares                                                  63,196,649          48,117,453
                                                                            ============        ============
</TABLE>

           See accompanying notes to consolidated financial statements


                                      F-5
<PAGE>


                    SALES ONLINE DIRECT, INC. AND SUBISDIARY
            CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>
                                               Common stock             Additional
                                       ----------------------------       Paid-in       Accumulated      Unearned
                                          Shares          Amount          Capital         deficit      Compensation        Total
                                       ------------    ------------    ------------    ------------    ------------    ------------
<S>                                      <C>           <C>             <C>             <C>             <C>             <C>
Balance, December 31, 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 warrants                           --              --           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

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

Reclassification of Temporary equity        200,000             200         237,300                                         237,500

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

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

Beneficial conversion discount                                              619,862                                         619,862

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

Issuance of stock options to
    employees for services               16,597,758          16,598         601,420                                         618,018

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

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

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

           See accompanying notes to consolidated financial statements


                                      F-6
<PAGE>


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

<TABLE>
<CAPTION>
                                                                              2001              2000
                                                                              ----              ----
<S>                                                                      <C>                <C>
Operating activities:
     Net loss                                                            $(4,357,556)       $(5,493,136)
     Adjustments to reconcile net loss to net
      cash used in operating activities
        Depreciation and amortization                                      1,421,325            524,499
        Amortization of unearned compensation                                189,764            189,764
        Amortization of debt discount                                        215,000            167,196
        Beneficial conversion feature                                        277,360          1,109,588
        Stock issued in payment of interest                                  177,698            125,588
        Stock options issued for compensation                                618,018             44,835
        Net gain on marketable securities                                     (3,118)              (967)
        Stock issued in payment of consultants                               178,572               --
        Loss on abandonment of property & equipment                           45,852             46,745
        Changes in assets and liabilities:
           Accounts receivable                                               (15,295)            48,682
           Inventory                                                         240,516            243,756
           Accounts payable                                                  221,941           (211,227)
           Accrued expenses                                                  152,825            622,081
           Other, net                                                         28,912            (59,836)
                                                                         -----------        -----------

              Net cash used in operating activities                         (608,186)        (2,642,432)
                                                                         -----------        -----------

Investing activities:
     Purchase of securities                                                     --             (401,203)
     Proceeds from sale of securities                                         20,193            384,974
     Acquisition of other intangible asset                                      --              (50,000)
     Cash received from Rotman Auction, Inc.                                  10,698               --
     Property and equipment additions                                       (168,244)          (227,206)
                                                                         -----------        -----------

              Net cash used in investing activities                         (137,353)          (293,435)
                                                                         -----------        -----------

Financing activities:
     Proceeds from assignment of stock call options                             --               87,188
     Net proceeds from convertible debt                                      935,274          2,300,000
     Proceeds from sale of warrants                                             --              430,000
     Payment of stock registration costs                                    (244,600)              --
                                                                         -----------        -----------

              Net cash provided by financing activities                      690,674          2,817,188
                                                                         -----------        -----------

Net decrease in cash and equivalents                                         (54,865)          (118,679)

Cash and equivalents, beginning                                              102,534            221,213
                                                                         -----------        -----------

Cash and equivalents, ending                                             $    47,669        $   102,534
                                                                         ===========        ===========
</TABLE>

           See accompanying notes to consolidated financial statements


                                      F-7
<PAGE>


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


                SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                                     2001               2000
                                                                                     ----               ----
<S>                                                                               <C>               <C>
Cash paid during the year for:

     Income taxes                                                                 $      --         $      --
                                                                                  ===========       ===========

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

      SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES

Merger of Rotman Collectibles, Inc. accounted for using the
     purchase method of accounting.  The assets were recorded at
     their fair value as follows:
       Cash received in the transaction                                           $    10,698       $      --
       Inventories                                                                $ 1,015,353       $      --
       Other liabilities assumed                                                  $   (26,044)      $      --
       Convertible debt issued                                                    $(1,000,000)      $      --
       Issuance of common stock                                                   $        (7)      $      --

Acquisition of Internet Collectible Awards for temporary equity
       Recorded as other intangible asset                                         $      --         $   237,500
       Reclassification of temporary
           equity to permanent equity                                             $   237,500       $      --

Acquisition of certain assets of ChannelSpace Entertainment, Inc.
     in 2000, and settlement agreement in 2001
       Property and equipment                                                     $   (30,300)      $   906,890
       Other intangible assets                                                    $  (269,700)      $ 4,042,106
       Accrued expenses (recorded) reversed                                       $   300,000       $  (300,000)
</TABLE>

           See accompanying notes to consolidated financial statements


                                      F-8
<PAGE>


                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


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
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 assets
acquired, a web site, has been allocated to other intangible assets. As
indicated in Note 11, the Company was involved in litigation. Subsequent to this
acquisition management obtained information that caused it to believe that,
unbeknownst to the Company, the beneficial owner of ICA was an officer and
significant shareholder of the Company at the time of the acquisition. As a
result of the litigation, the common stock issued in connection with this
transaction was recorded as temporary equity on the balance sheet. As a result
of the litigation settlement, this temporary equity has been reclassified to
shareholders' equity at December 31, 2001.

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,
and fixtures and equipment - had an estimated fair value of approximately
$4,974,000. The fair values of the individual assets acquired, and the
consideration paid, have been determined by independent appraisal. The excess of
the fair value of the assets acquired over the purchase price, approximately
$25,000, has been allocated pro-rata as a reduction of the fair values of the
intangible assets acquired.

On February 1, 2002 the Company entered into a Settlement Agreement and Mutual
Release regarding a variety of claims by both parties to the above transaction.
The settlement discharged the Company from the requirement to issue, and
register, the above mentioned 711,136 shares of common stock and granted to the
Company a call option for 2,283,565 shares of unregistered common stock held by
CSEI as discussed in Note 7. The $300,000 value of the 711,136 common shares has
been accounted for as additional amounts in excess of the fair value of the
assets acquired over the purchase price and has been allocated pro-rata as a
reduction of the intangible assets and property and equipment acquired.


                                      F-9
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


On November 7, 2001 the Company, through a subsidiary, Rotman Collectibles Inc.
(a Delaware Corporation), entered into a merger agreement with Rotman
Collectibles, Inc. (a Massachusetts Corporation) ("RCI"), a seller of movie
posters. In connection with this agreement the Company issued 100 common shares
in exchange for the outstanding common shares of RCI. The acquisition has been
accounted for under the purchase method of accounting. In addition, the Company
issued the Rotman convertible note discussed in Note 9 in the amount of
$1,000,000 in exchange of a convertible note previously issued by RCI. The sole
stockholder, director, and officer of RCI was Leslie Rotman, who is the mother
of Gregory and Richard Rotman, both of whom are executive officers and directors
of the Company.

Note 2. Management's Plans

The Company has continued to incur significant losses and has a limited
operating history. For the years ended December 31, 2001 and 2000 the Company
reported losses of $4,357,556 and $5,493,136, respectively.

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

We have increased gross margins from auctions during 2001. In addition, our
suite of management tools, called "AuctionInc." is expected to begin producing
revenues during the latter half of 2002.

The Settlement Agreement and Mutual Releases related to the CSEI assets
discussed in Note 1 provided us with call options for approximately 2.3 million
shares of common stock. We believe that the assignment of these call options can
generate between $500,000 and $1,000,000 of cash during the year ending December
31, 2002. While we believe that these plans will result in obtaining sufficient
operating cash, there can be no assurance that an assignment of the call options
can be concluded on reasonably acceptable terms. If these assignments are not so
completed, we will seek alternative sources of capital to support operations.
Based upon current cash positions, we need an infusion of between $500,000 and
$1,000,000 of additional capital to fund anticipated operating costs over the
next 12 months. If we do 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 2002. On March 24, 2002 we entered into a letter of
understanding with Augustine Fund, L.P. under which they will provide up to $1
million of additional financing.

Finally, we do not expect to incur the same level of legal costs in the long
term that we have sustained in the past two years as a result of the settlement
of most of our outstanding litigation in late 2001. In addition, the level of
interest expense is not expected to continue at the same levels as it has for
the last two years since, by the end of the first quarter of 2002, interest
charges associated with $4 million of convertible debt will end.

Although there can be no assurances, the Company believes that the above cost
reductions, anticipated additional revenues, additional financing, and
anticipated option assignments will be sufficient to meet the Company's working
capital requirements through the end of 2002.

Note 3. Summary Of Significant Accounting Policies

Nature of operations

     The Company's 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. In addition, the Company provides website hosting
     services.

Principles of consolidation

     The accompanying financial statements include the accounts of Sales Online
     Direct, Inc and its wholly-owned subsidiary, Rotman Collectibles, Inc. from
     November 2, 2001 (inception) through December 31, 2001.


                                      F-10
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


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, 2001 and 2000 the Company has provided for reserves totaling $190,000
     and $200,000, respectively.

Property and Equipment

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

Goodwill

     Goodwill was 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.

Revenue Recognition

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

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

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


                                      F-11
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


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

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

Advertising Costs

     Advertising costs totaling approximately $55,000 in 2001 and $237,000 in
     2000, 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 valuation. Although
     these estimates are based on management's knowledge of current events and
     actions, they may ultimately differ from actual results.

Stock Compensation Plans

     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 156,356,088 as of December 31, 2001 and
     16,438,356 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


                                      F-12
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


     adjustment of income as a result of the conversion. Stock options and
     warrants applicable to 937,000 shares and 957,000 shares at December 31,
     2001 and 2000, respectively, have been excluded from the computation of
     diluted earnings per share, as have the common shares that would be issued
     upon conversion of the convertible debt, because they were antidilutive.
     Diluted earnings per share have not been presented as a result of the
     Company's net loss for each year.

Asset Impairment

     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 flow analysis.

Web Site Development Costs

     The Company accounts for website development costs in accordance with the
     provisions of EITF 00-2, "Accounting for Web Site Development Costs" ("EITF
     00-2"), which requires that costs incurred in planning, maintaining, and
     operating stages that do not add functionality to the site be charged to
     operations as incurred. External costs incurred in the site application and
     infrastructure development stage and graphic development are capitalized.
     During the years ended December 31, 2001 and 2000, the Company capitalized
     approximately $167,000 and $155,000, respectively, of Web site development
     costs. Such capitalized costs are included in "Property and equipment."

Recent Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standard (SFAS) No. 141 "Business Combinations" and
     SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires
     that all business combinations initiated after June 30, 2001 be accounted
     for under the purchase method of accounting and addresses the initial
     recognition and measurement of goodwill and other intangible assets
     acquired in a business combination. SFAS No. 142 addresses the initial
     recognition and measurement of intangible assets acquired outside of a
     business combination and the accounting for goodwill and other intangible
     assets subsequent to acquisition. SFAS No. 142 provides that intangible
     assets with finite lives be amortized and that goodwill and intangible
     assets with indefinite lives not be amortized, but rather be tested at
     least annually for impairment. The Company is required to adopt SFAS Nos.
     141 and 142 on January 1, 2002.

     In October 2001, the Financial Accounting Standards Board issued SFAS No.
     144, "Accounting for the Impairment or Disposal of Long-Lived Assets". This
     pronouncement supersedes SFAS No. 121.

     The Company is required to adopt SFAS Nos. 141, 142, and 144 on January 1,
     2002. Adoption of these standards is not expected to have a material
     adverse affect on the Company's financial statements.

     In October 2001, the Financial Accounting Standards Board also issued SFAS
     No. 143, "Accounting for Asset Retirement Obligations". The Company does
     not hold any assets affected by this statement and it is not expected to
     have a material impact on the Company's financial statements.


                                      F-13
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


Note 4. Property and Equipment

At December 31, 2001 and 2000 property and equipment consisted of the following:

                                                     2001               2000
                                                     ----               ----

          Computer equipment and software        $   826,948       $   825,583
          Office Furniture                            61,927           120,000
          Video and article archives                 418,983           449,283
          Video equipment                            158,513           158,513
          Web site development costs                 322,105           155,226
          Purchased software                          70,000            70,000
                                                 -----------       -----------
                                                   1,858,476         1,778,605
          Accumulated depreciation                  (721,545)         (288,358)
                                                 -----------       -----------

                                                 $ 1,136,931       $ 1,490,247
                                                 ===========       ===========

Depreciation and amortization expense of property and equipment for the years
ended December 31, 2001 and 2000 amounted to $445,408 and $210,469,
respectively.

The Company uses office and warehouse facilities as a tenant at will in a
building leased by a related party. No rent has been charged during the years
ended December 31, 2001 and 2000.

Rent expense for the year ended December 31, 2000 totaled $99,277.

Note 5. Other Intangible Assets

At December 31, 2001 and 2000 other intangible assets are comprised of the
following:

                                                     2001               2000
                                                     ----               ----

          Software licenses                      $ 2,882,660       $ 3,091,760
          Domain Names                                77,025            77,025
          Acquired Web Sites                         762,301           796,801
          Customer and User lists                    327,157           350,857
          Other                                       30,763            33,163
                                                 -----------       -----------

                                                   4,079,906         4,349,606
          Accumulated amortization                (1,001,515)         (187,395)
                                                 -----------       -----------

                                                 $ 3,078,391       $ 4,162,211
                                                 ===========       ===========

Amortization expense for other intangible assets for the years ended December
31, 2001 and 2000 amounted to $814,120 and $186,062, respectively.

Note 6. Accrued Expenses

At December 31, 2001 and 2000 accrued expenses are comprised of the following:

                                                     2001               2000
                                                     ----               ----

          General operating expenses             $   118,472       $    92,171
          Professional fees                          485,356           421,721
          Common shares to be issued
             in connection with CSEI
             transaction (Note 1)                         --           300,000
          Lease termination costs                    100,000           100,000
          Interest                                   178,605            89,672
                                                 -----------       -----------

          Total                                  $   882,433         1,003,564
                                                 ===========       ===========


                                      F-14
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


Note 7. Common Stock

Call Option Agreements

     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.

     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, all of which expired on
     February 25, 2001.

     In connection with the Settlement Agreement and Mutual Release with CSEI
     discussed in note 1, the Company was granted call options for 2,283,565
     unregistered common shares held by CSEI at an exercise price of $.001 per
     share. The call options are not exercisable until April 14, 2002 and expire
     on January 31, 2005.

Stock Options

     In June 1999, the Company's Board of Directors adopted the 1999 Stock
     Option Plan (the "1999 Plan") which provides for the issuance of options to
     directors, officers, employees and consultants of the Company to purchase
     up to 1,000,000 shares of the Company's common stock.

     Options granted under the plan may be either incentive stock options
     ("ISO") or nonqualified stock options ("NSO").

     The 1999 Plan provides that each option be granted at a price determined by
     the Board of Directors on the date such option is granted and have a
     maximum option term of ten years. The options granted become exercisable
     during a period of time as specified by the Board of Directors at the date
     such option is granted.

     In July 1999, the Company granted an option to an employee to purchase
     471,000 shares of common stock at $.01 per share. The option vests over a
     four-year period. The Company recorded unearned compensation of $757,848,
     based on the difference between the fair market value of the common stock
     at the grant date and the exercise price. The unearned compensation is
     being amortized over the vesting period of the option. Amortization expense
     related to unearned compensation amounted to $189,764 for each of the years
     ended December 31, 2001 and 2000.

     In 1999, the Company also granted options to purchase 126,000 shares of
     common stock at the stock's fair value on the dates of grant.

     There were no options granted or exercised under the plan in 2001 or 2000.


                                      F-15
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 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, 2000           579,000       $    .29
                Granted                                       --             --
                Exercised                                     --             --
                Expired/Cancelled                        (22,000)          1.63
                                                         -------

                Outstanding at December 31, 2000         557,000       $    .24
                Granted                                       --             --
                Exercised                                     --             --
                Expired/Cancelled                        (20,000)          1.42
                                                         -------

                Outstanding at December 31, 2001         537,000       $   0.19
                                                         =======

          Options exercisable at year end                356,575       $   .128
                                                         =======

     Information pertaining to options outstanding at December 31, 2001 is as
follows:

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

                                          Weighted
                                           Average          Weighted                           Weighted
                                          Remaining          Average                           Average
     Range of             Number         Contractual        Exercise           Number          Exercise
  Exercise Prices       Outstanding         Life              Price          Exercisable        Price
  ---------------       -----------         ----              -----          -----------        -----
<S>                       <C>              <C>              <C>                <C>            <C>
     $ .010               471,000          7 years          $ 0.010            324,125        $  0.010
       .812                 9,000          7                  0.812              4,050           0.812
      1.625                57,000          7                  1.625             28,400           1.625
                         --------                                              -------

Outstanding at end
of year                   537,000                           $ 0.195            356,575        $  0.128
                          =======                                              =======
</TABLE>

     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 2001 or 2000.

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

     The Company applies Accounting Principles Board Opinion No. 25 and related
     interpretations in accounting for its stock option plans. Accordingly,
     compensation cost has been recognized only to the extent described above.
     Had compensation cost for the Company's stock option plan been determined


                                      F-16
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


     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,
                                                   ------------------------
                                                     2001            2000
                                                     ----            ----
         Loss
               As reported                     $ (4,357,556)   $ (5,493,136)
               Pro forma                       $ (4,483,160)   $ (5,518,862)

         Basic loss per share
               As reported                            $(.07)         $(0.11)
               Pro forma                              $(.07)         $(0.11)

Note 8. Income Taxes

There was no provision for income taxes for the years ended December 31, 2001
and 2000 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:

                                                     2001             2000
                                                     ----             ----

          Federal net operating loss
             carry forwards                      $ 3,541,000      $ 2,257,000
          State net operating loss
             carry forwards                        1,094,000          699,000
          Stock-based compensation
             recognized for
             financial statement
             purposes                                210,000          136,000
                                                 -----------      -----------

                                                   4,845,000        3,092,000

          Valuation reserve                       (4,845,000)      (3,092,000)
                                                 -----------      -----------

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

The valuation reserve applicable to net deferred tax asset for the years ended
December 31, 2001 and 2000 is due to the likelihood of the deferred tax not
expected to be utilized.

At December 31, 2001, the Company has federal and state net operating loss carry
forwards of approximately $7,665,000 available to offset future taxable income
that will expire through 2021.

Note 9. Convertible Debt Financing

As of December 31, 2001 the company has issued $4,935,274 of convertible debt,
which is presented net of unamortized beneficial conversion discounts of
approximately $342,500.

On March 23, 2000, the Company entered into a Securities Purchase Agreement (the
"Agreement"), whereby the Company sold an 8% convertible note in the amount of
$3,000,000 (the "Series A Note"), due in shares of common stock on March 31,
2002 to Augustine Fund, L.P. (the "Buyer"). On November 7, 2001, the Company
entered into Loan Agreements, whereby it issued an 8% convertible note in the
amount of $1,000,000, due November 7, 2003


                                      F-17
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


(the "Series B Note") to Buyer and a 6% convertible note, due November 7, 2003
(the "Rotman Note"), to Leslie Rotman, pursuant to an Agreement and Plan of
Merger dated October 23, 2001 (Note 1). As of December 31, 2001 only $935,274
had been advanced under the Series B Note.

The Series A 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
the date of issuance, 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.

The Series B Note is convertible into common stock at a conversion price equal
to seventy three percent (73%) of the average of the closing bid price for the
common stock for the five (5) trading days immediately preceding the conversion
date

The Rotman Note is convertible into common stock at a conversion price equal to
eighty percent (80%) of the average of the closing bid price for the common
stock for the five (5) trading days immediately preceding the conversion date.
In January 2002, the Rotman Note was completely converted into 23,916,378 shares
of common stock at conversion prices ranging from $.0298 to $.05152 per share.

Had the Buyer converted the Series A 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. Since the debt was
convertible at the date of issuance, 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.

Had the Buyer and Leslie Rotman converted the Series B Note and the Rotman Note
at issuance they would have received $2,619,863 in aggregate value of the
company's common stock upon conversion of the convertible notes. As a result, in
accordance with EITF 00-27, the intrinsic value of the beneficial conversion
feature of $619,863 will be charged to interest expense over the two-year term
of the related notes. The total beneficial conversion discounts related to these
Notes have been recorded as an increase in additional paid in capital and the
unamortized portions as a reduction of the related Notes. Since the Rotman Note
was fully converted in January 2002 substantially all of the related beneficial
conversion feature of $250,000 has been charged to interest expense during 2001.

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,
recorded as a debt discount, is being amortized over two years, the term of the
related convertible debt.

The Company entered into a Registration Rights Agreement in connection with the
Series A Note, 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. This Registration Rights Agreement was
modified in May 2001, effective as of January 1, 2001, and in July and August
2001, and contains provisions that decrease the conversion percentage to 73%
because the Registration Statement was not declared effective by the SEC by
December 15, 2000. The Registration Statement was declared effective by the SEC
on September 7, 2001. As consideration for the January 1, 2001 modifications,
the Company granted a security interest in all of its assets as security of the
Company's obligations under the Agreement.

In addition, the Company entered into a Registration Rights Agreements whereby
the Company agreed to file a Registration Statement with the Securities and
Exchange Commission (SEC), on or before May 6, 2002, covering the common stock
to be issued upon the conversion of the Series B and Rotman notes. The Company
will pay all fees and expenses related to registration of the common stock.
Estimated fees and expenses to be incurred in connection with these agreements
in the amount of $25,000 have been accrued during the year ended December 31,
2001.

If the Registration Statement is not declared effective by the SEC on or before
July 5, 2002, then, upon written notice from the Lenders, with respect to any
portion of the notes not previously converted into common stock, the


                                      F-18
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


applicable conversion percentage will decrease by two percent (2%) each thirty
day period beginning August 4, 2002 until the Registration Statement is declared
effective by the SEC. If the SEC has not declared the Registration Statement
effective within one year after November 7, 2001, the applicable conversion
percentage shall be fifty percent (50%) with respect to the Series B Note and
70% with respect to the Rotman Note.

Note 10. Issuance of Common Stock

During 2001 and 2000 the Company issued 3,193,126 and 377,141 shares of common
stock, respectively, in connection with the payment of $177,698 and $125,588 of
interest due on its Series A convertible debt.

In February, 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, in February 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.

Note 11. Litigation

Stengel litigation:

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

The Company sought rescission of the transactions pursuant to which Stengel and
Kramer obtained their substantial stock interests in the Company, damages
against them for misrepresentations and omissions, and 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.

In October 2001 the Company and the defendants entered into a Settlement
Agreement (Agreement). Under the Agreement, the parties dismissed, with
prejudice, all actions in exchange for mutual releases in connection with all
acts or omissions prior to October 23, 2001.

Maryland lease:

The Company leased its former technology location under an operating lease
commencing on January 1, 2000 and expiring on December 31, 2004. Prior to
December 31, 2000, the Company abandoned this facility and ceased payments
required under the lease. During 2001, the landlord initiated an action seeking
approximately $115,000 in damages, interest and attorneys' fees. The Company is
currently negotiating a settlement with the landlord and has recorded an
estimated liability of $100,000 in connection with this matter. This expense,
along with the write off of the net book value of the related leasehold
improvements, has been included in selling, general and administrative expenses
in the accompanying statement of operations.

Note 12. Subsequent Events

In December 2001 the shareholders of the company approved an increase in
authorized common shares from 100,000,000 to 350,000,000. Amended and Restated
Articles of Incorporation reflecting this change were submitted to the Delaware
Secretary of State, and were approved, on January 7, 2002.

On March 24, 2002 the Company and Augustine Fund, L.P. (Buyer) signed a letter
of understanding with respect to a forbearance of the full payment of the Series
A Note discussed in note 9. The letter of understanding extends settlement of
the Series A Note until June 27, 2002, provides for additional ninety day
extensions beyond that date until March 24, 2003, waives interest for periods
after March 31, 2002 on the Series A Note, and commits Buyer to providing
additional convertible financing in the amount of $1 million on terms identical
to those in the Series B


                                      F-19
<PAGE>

                    SALES ONLINE DIRECT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


Note. In addition, the letter of understanding extends the filing date of the
Registration Rights Agreement with respect to the Series B Note to April 10,
2003.



                                      F-20
<PAGE>


                                  EXHIBIT INDEX

   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 Exhibit 2.1 to
               Form 8-K 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)

     2.3       Agreement and Plan of Merger dated October 23, 2001, by and among
               the Company, Rotman Collectibles, Inc., and Leslie Rotman
               (incorporated by reference from Exhibit 2.1 to Form 8-K filed on
               November 21, 2001)

     3.1       Certificate of Incorporation, as amended on January 4, 2002*

     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)

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

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

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

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

     10.1      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.
               (incorporated by reference to Exhibit 10.4 to Form 10-KSB filed
               on May 11, 2001)

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

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

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

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

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

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


<PAGE>

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

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

     10.13     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)

     10.14     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)

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

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

     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