U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   Form 10-KSB

(Mark One)

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

     For the fiscal year ended December 31, 2001

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

     For the transition period from ____________________ to ___________________

                Commission file number 000-33339

                               Nicklebys.com, Inc.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

                  Colorado                                   84-1494708
       -------------------------------                   -------------------
       (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                    Identification No.)

       12441 West 49th Avenue, Suite #1
            Wheat Ridge, Colorado                                      80033
   ----------------------------------------                         ----------
   (Address of principal executive offices)                         (Zip Code)

Issuer's telephone number (303) 425-0607

Securities registered under Section 12(b) of the Exchange Act:

                                                    Name of each exchange on
       Title of each class                              which registered

None
---------------------------------                -------------------------------

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

         Common Stock, $.0001 par value
         -----------------------------------------------------------
                                (Title of class)

<PAGE>




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

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

State issuer's revenues for its most recent fiscal year.  $532,125
                                                          --------

Of the 2,901,011 shares of voting stock of the registrant issued and outstanding
as of March 28, 2002, _______ shares are held by non-affiliates.  Because of the
absence of an established trading market for the voting stock, the registrant is
unable to  calculate  the  aggregate  market  value of the voting  stock held by
non-affiliates as of a specified date within the past 60 days.

Transitional Small Business Disclosure Format:  Yes      No  X
                                                   -----   -----


































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                                     PART I


Item 1.      Description of Business.

     (a)  Business Development.

     We were organized as a corporation  under the laws of the State of Colorado
on  January  13,  1999.  We have one  division,  artRx.com,  and two  100%-owned
subsidiaries,  including Nickleby's Auction Gallery Ltd. and Art Exchange,  Inc.
We are primarily engaged in the business of conducting  interactive  auctions of
our own inventory of fine art, antiques and collectibles over the Internet.  Our
web site is located at  http://www.nicklebys.com.  Despite our limited operating
                        ------------------------
history,  Nicklebys.com  was  recognized  in the November 1999 edition of Yahoo!
Internet Life Magazine with the Gold Star Site  designation  for the leading art
auction  site  on  the  Internet.  ArtRx.com,  whose  web  site  is  located  at
http://www.artRx.com,  makes our interactive  auction and other technologies and
--------------------
web  traffic  available  to other art  service  businesses  that  register  with
artRx.com as "trade affiliates."  "Trade affiliates" are companies,  such as art
galleries,  showrooms,  antique  dealers,  designers and art service  providers,
engaged in the art service  business that are registered with artRx.com to offer
and  sell  products  on the web site  located  at  http://www.artRx.com  via our
                                                   --------------------
interactive  auction and other  technologies.  Persons,  including companies and
individuals,   may  register  with  Nicklebys.com  or  artRx.com  as  "members."
"Members" are registered with  Nicklebys.com or artRx.com to bid on and purchase
merchandise   on  the  web  sites   located  at   http://www.nicklebys.com   and
                                                  ------------------------
http://www.artRx.com.   "Trade  affiliates"  are  automatically   registered  as
--------------------
"members."  We  conducted  live  auctions  in five  states of the United  States
through December 2001. We market and sell fine art, antiques and collectibles on
a retail basis from our showroom  located at 12441 West 49th Avenue,  Suite One,
Wheat Ridge, Colorado 80033. The showroom also houses our executive offices. Our
telephone  number is (303) 425-0607 and our facsimile  number is (303) 425-0545.
We realized sales and service  revenues of $532,125 and a net loss of $(257,702)
($(.09) per share of common stock) for the year ended December 31, 2001. For the
year ended December 31, 2000, we realized sales and service revenues of $656,965
and a net loss of $(186,007) ($.07 per share).

     Our objective is to become the leading online  retailer/broker of fine art,
antiques and collectibles. Key elements of our strategy include the following:

o    Offering  the  broadest  possible  selection  of  fine  art,  antiques  and
     collectibles available to our customers at competitive prices;

o    Delivering superior customer service and promoting repeat purchases through
     continuous enhancement of our technology, web site functionality and
     inventory;

o    Fostering  consumer  trust  and  satisfaction  through  services  including
     appraisal, authentication and money-back guarantee;

o    Continuing to maintain our  relationship  with eBay,  Inc.,  and developing
     relationships with other companies that can help grow our business; and




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o    Developing  and  promoting  various  artists  through one man shows held at
     retail galleries throughout the United States.

     Messrs.  Scott M. Thornock and Bruce A. Capra,  our two executive  officers
have,  personally,  and,  in Mr.  Capra's  case,  professionally,  approximately
twenty-eight  years of experience in dealing in all types of fine art,  antiques
and collectibles.  In order to become employed full time by  Nicklebys.com,  Mr.
Capra, our President and Chairman, resigned in March 1999 as the General Manager
and the Director of Sales,  Marketing and  Advertising for American Design Ltd.,
an Aurora, Colorado,  company with twelve retail outlets that specializes in the
publication,  auction and marketing of fine art.  Additionally,  Mr. Capra owned
and managed Nickleby's Auction Gallery, Arvada, Colorado, an auction liquidation
company  specializing in fine art,  antiques and  collectibles,  from March 1994
until our acquisition of Nickleby's Auction Gallery on January 15, 1999.

     On January 15,  1999,  we acquired all 5,100  outstanding  shares of common
stock of Nickleby's  Auction Gallery Ltd. then owned by Mr. Bruce A. Capra,  our
President  and  Chairman  and owner of  approximately  19.9% of our  outstanding
common stock.  The 5,100 shares of Nickleby's  Auction Gallery common stock that
we acquired from Mr. Capra  constituted 100% of the outstanding  common stock of
that  company.  We paid the sum of $47,832  for the  shares.  As a result of the
acquisition,  we obtained net assets  valued at $26,183,  including,  primarily,
Nickleby's Auction Gallery's customized web site and customer list; an inventory
of  fine  artworks;  the  right  to  use  the  names  "Nickleby's,"  "Nickleby's
International  Auctions" and "Nickleby's Auction Gallery";  and the domain names
http://www.nicklebys.com   and   http://www.forbidding.com.    We   assumed   no
------------------------         -------------------------
liabilities with respect to the Nickleby's Auction Gallery's acquisition. In the
consolidated  financial  statements  that  accompany  this  report,  goodwill of
$21,649 resulting from the transaction was charged to additional paid-in capital
because the acquisition was between related parties.

     On June 25, 1999, we entered into the Stock Purchase and Exchange Agreement
with Art Exchange,  Inc., Mr. Paul J. Zueger, a director,  and The Zueger Family
Trust  pursuant  to which we issued  600,000  shares to Mr.  Zueger and  400,000
shares to the trust in exchange for all 1,000,000  outstanding  shares of common
stock of Art  Exchange  owned by Mr.  Zueger and the  trust.  As a result of the
transaction,  we acquired assets,  including the non-exclusive  right to conduct
live  auctions  of fine art,  antiques  and  collectibles  consigned  to Gallery
Denver,  Inc.  (formerly Museum Auctions,  Ltd.), a Colorado  corporation  owned
solely by Mr.  Zueger;  the use of the assumed name "Museum  Auctions,  Ltd." in
Colorado; and all rights to Gallery Denver's "auction" customer mailing list. We
recorded  $600,000  in  goodwill  as a  result  of  the  transaction.  We  later
determined the fair value of the assets to be $-0- and, accordingly, at December
31, 1999, we recorded an impairment  write-down of $600,000. In the accompanying
consolidated  financial  statements,  we reported the impairment write-down as a
component  of  income  from  operations  before  income  taxes.  We  assumed  no
liabilities with respect to the acquisition of Art Exchange.  In connection with
the  acquisition,  Gallery Denver agreed to pay Art Exchange  sales  commissions
equivalent  to 25% of the aggregate  sales price of all consigned  goods sold by
Gallery Denver at live auctions conducted by Art Exchange after July 28, 1999.




                                        4
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     We sold a total of 1,149,913  shares of common stock for gross  proceeds of
$926,975  under Section 3(b) and Rule 504 of  Regulation D under the  Securities
Act of 1933 in two  tranches  from  January  through  June  1999 and from  March
through September 2000. The offering price of the shares of common stock sold in
the first  tranche of the offering was $.60 per share and the offering  price of
the shares sold in the second  tranche was $1.25.  See Part II, Item 4,  "Recent
Sales of  Unregistered  Securities,"  for a more detailed  description  of these
financings.

     On December 30, 1999,  fourteen  shareholders who owned 7,000,000 shares of
our common stock,  including our executive  officers/directors,  a director, two
former  directors and their donees,  returned a total of 5,350,000  shares to us
for  cancellation.  We did not purchase the shares and we paid no  consideration
for their return.  The shares were returned in order to make  Nicklebys.com more
attractive to prospective investors,  lenders, underwriters and other members of
the  investment  community  and to  maximize  value  per  share  for each of the
company's  then  shareholders.  Also,  on December  30, 1999,  we granted  these
current and former members of management,  one donee and two others, including a
shareholder and our special securities counsel,  options exercisable to purchase
a total of  2,130,000  shares at an  exercise  price of $.66 per  share  through
December 29, 2004. We granted the options to these persons in consideration  for
services performed for Nicklebys.com valued at a total of $221,520.

     See (b)  "Business  of  Issuer"  immediately  below  for a  description  of
Nicklebys.com's current operations and future proposed activities.

     (b)  Business of the Issuer.

Inventory of Fine Art, Antiques and Collectibles
------------------------------------------------

     Our web site on the Internet located at http://www.nicklebys.com features a
                                             ------------------------
wide variety of fine art, antiques and  collectibles.  At December 31, 2001, our
inventory was valued, at the lower of cost or market, at approximately $203,130.
These items are located at our showroom in Wheat Ridge,  Colorado,  and include,
as of the date of this report, the following:

     o    Antique maps;

     o    Italian oil paintings;

     o    Contemporary artworks;

     o    Modern masters;

     o    Original paintings;

     o    Antique art;

     o    Southwest art;

     o    Art books;


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<PAGE>




     o    Sculpture;

     o    Antiques/collectibles;

     o    Jewelry;

     o    Decorative art; and

     o    Wholesale items.

     Our antique maps include a collection of hand-colored, lithograph maps from
a textbook  titled  McNally's  System of Geography,  for Schools,  Academies and
Seminaries  that was published in 1866 by A.S. Barnes & Co. They include maps in
the National  Geographical  Series and the Monteith and  McNally's  Series.  The
Italian oil paintings comprise a collection of original, fine oil paintings from
six prominent,  contemporary,  Italian artists,  including Nino Morra,  Franchi,
Radolfo Tonin, Tino Rusconi,  Maria Luisa Liberti,  Antonio Iannicelli,  Giacomo
Natali, Raffandre,  Antonio Sannino, Farina, Flores, Antonio Gravina,  Ferruccio
Marinosci,  Temistocle Scola and Angelo Romby.  These artists represent a number
of Italian cities, including,  among others, Napoli, Venice, Naples and Bergamo.
Each piece comes with a  biography  of the artist,  a full color  photograph,  a
certificate of authenticity and an appraisal.

     Our inventory of contemporary works of art includes  serigraphs,  etchings,
lithographs,  mezzotints,  engravings and other  contemporary  artworks from the
1950's to the  present.  The artists  represented  include,  among many  others,
Alvar, Thomas McKnight,  Steve Bloom, Neal Doty, Robert Katona,  Peter Max, Bill
Mack,  G.H. Rothe,  Claude  Pissarro and Leroy Neiman.  Our collection of modern
masters is comprised of artworks, including woodcuts, serigraphs and pastels, by
four of the most  significant  artists of the 20th century,  including  Picasso,
Miro,  and Chagall,  Salvador Dali,  Claude  Pissarro,  Paule'mile  Pissarro and
Yaakov Agam. Our inventory of original  paintings  includes  oils,  acrylics and
watercolors  by  artists  throughout  the  world.  A few  of  the  many  artists
represented include Robert Katona, Alexander Sheversky, Katia Pissarro and Frank
Howell.

     The antique art inventory includes oil paintings,  etchings,  photogravure,
lithographs, drawings, engravings, collotypes, monoprints and other items dating
back to the 15th century by artists,  including,  among others,  Albrect  Durer,
Arthur  W.  Hall,  Henri  de  Toulouse  Lautrec,   Rembrandt,   Cora  Smith  and
Pierre-Auguste  Renoir.  Our southwest art collection  includes original oil and
acrylic paintings, lithographs,  serigraphs and bronze sculptures from prominent
Native American and southwest artists, including, but not limited to, Earl Biss,
Frank Howell,  Larry Fodor, B.C. Nowlin,  Frederick Remington and Robert Katona.
We offer new and used fine art books and catalogue  raisonne of works of art by,
among  others,   Fernando  Botero,   Edgar  Degas,  Eyvind  Earle,  John  Kelly,
Michelangelo,  Jean-Francois Millet,  Claude Monet, Leroy Neiman,  Rembrandt and
Vincent Van Gogh.

     Our new and antique sculpture  collection  includes bronze,  silver,  gold,
spelter and/or marble sculptures from traditional to avant garde by artists such
as Rincoulet,  Ed Dwight,  McCain, Mayer,  Villinas,  Erte, Frederick Remington,




                                        6
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Victor  Gutierrez,  Charles  Bragg and  Torriane.  Our  collection  of antiques,
artifacts and  collectibles  includes,  without  limitation,  lithographs,  silk
screens,  leaded windows,  busts, vases, urns, jars, plates, clocks,  furniture,
figurines,  carvings  and  pottery.  We offer a limited  selection of fine gold,
platinum, sterling silver, diamond and other jewelry, including rings, earrings,
bracelets and pendants.  Our decorative art pieces include,  primarily,  crystal
compotes, glassware, screens, figurines and vases. The "wholesale" items that we
offer include  limited edition prints,  posters and  reproductions  available at
wholesale prices from artists such as Larry Fodor, Earl Biss, G.H. Rothe, Robert
Katona, Louis Icart, Bill Mack and Maxfield Parrish.

     The sources for our  inventory  include,  among  others,  estates,  private
parties,  collectors  and  publishers.  We have sold a  limited  number of items
online that were consigned to us from the personal  collections of our executive
officers, including Messrs. Scott M. Thornock and Bruce A. Capra, and others. We
receive,  on average,  a listing fee in the amount of  approximately  20% of the
sale  price of each  item sold on  consignment  for  management  or  others.  We
realized  $1,403,  $15,178  and  $15,564 in listing  fees on  consignment  sales
totaling  $7,013,  $75,888 and $77,822,  respectively,  for Mr. Thornock for the
years ended December 31, 2001, 2000 and 1999, respectively.  We realized listing
fees of $125 on consignment  sales for Mr. Capra for the year ended December 31,
1999. Messrs.  Thornock and Capra paid us a listing fee of 20% of the sale price
of each  consigned  item at the end of the month in which the item was sold.  We
reimbursed Mr.  Thornock the sums of $5,610,  $60,980 and $74,112 for artwork he
purchased on our behalf for the 2001, 2000 and 1999 fiscal years, respectively.

Online Auctions
---------------

     As a small online/live  auction house, we are dedicated to serving the fine
art,  antique  and/or  collectible  enthusiast  with a wide  variety of products
featured on our web site located at http://www.nicklebys.com, expert information
                                    ------------------------
and superior customer service.  We seek to exceed the more limited selections of
products  offered by art  galleries,  art and/or  antique  brokers and  dealers,
antique stores, auction houses and others. We believe that we are able to exceed
the collections of many of these  traditional  stores because we are not limited
with respect to display and storage area. We strive to provide  customers with a
convenient,  one-stop shopping experience by providing an organized, logical and
customer-friendly  Internet  site  designed  in an  attractive  manner  so as to
capture and maintain the interest of most  visitors.  The site is organized such
that there are thirteen separate  "auction rooms." A high-resolution  photograph
of each available  item,  together with a detailed  description of the item, its
dimensions,  condition  and  availability,  a picture  and/or a biography of the
artist, the technology of production,  the mounting, whether the item is signed,
the identity and location of the publisher and other relevant  information,  are
displayed in each room.

     We  conduct an auction  online in each  auction  room in real time and on a
continuous basis;  i.e.,  twenty-four hours per day, seven days per week. At any
one time,  a minimum  of  approximately  400  items of fine  art,  antiques  and
collectibles  are available to be purchased by bidding in the auction  conducted
in each room. Each item is offered for bid, on average, for a period of seven to
fourteen  days.  Our  auction  site is  interactive.  Each bidder who desires to
purchase  an item is  required  to enter his bid online in the  manner  directed
under the caption  "Register." The bidder is notified if his bid is surpassed by


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the bid of another bidder,  and he is given  sufficient time to enter a new bid.
At any one time,  information  such as the highest bid and the time remaining to
bid, is available to all bidders and site  visitors.  Upon our acceptance of the
final bid, the highest bidder is notified of our acceptance of his bid. Detailed
instructions  are available on our site to enable the bidder to  consummate  the
purchase  transaction  with as much ease and simplicity as is possible.  Payment
arrangements  can be made  using  credit  cards  and  escrow  accounts.  We have
implemented  security  measures,  including,  among others,  layering,  locking,
encryption and firewalls, in order to secure, to our best ability as of the date
of this report, the commercial transactions conducted on our web site.

     We have an alliance with eBay, Inc., the largest existing auction house and
online retailer.  Since November 2000, we have been one of sixty-six dealers and
auction houses listed as "Premier  dealers" on the Premier home page listed as a
"Specialty  Site" on eBay's home page on the  Internet.  We have been  featured,
since December 2001, as one of eighteen  "Premier  auction house dealers" on the
"Premier" home page. This new status entitles us to reduce our listing fees from
$10 to $5 per item listed and take advantage of other benefits and resources.  A
detailed  description of our alliance with eBay appears below under "- Marketing
- eBay, Inc."

     We attract and retain customers by emphasizing the following key factors:

     Extensive Product Selection Enables One-Stop-Shopping. We provide consumers
     -----------------------------------------------------
with  one-stop-shopping  for their fine art, antique and collectible needs, with
delivery  direct to their door.  We offer a broad  selection of products that we
expect to transcend  the limited  selections of many art  galleries,  art and/or
antique brokers and dealers, antique stores, auction houses and others. However,
our  ability to provide a  selection  of products  that  exceeds  the  selection
offered by the aforementioned sellers is limited by the fact that we do not have
extensive  assets  and  we  have  realized  substantial  net  losses  since  our
inception.  Our online  business model enables us to aggregate a diverse product
selection that is not generally  found in a single retail outlet and dynamically
change our product mix to meet consumer needs and interests.

     Expert  Information.  Accompanying each piece featured on the web site is a
     -------------------
detailed  description  of the type of item, the title or caption of the item and
its  dimensions,  condition  and  availability.  If the piece is an original,  a
description of the original  work,  the technology of production,  the mounting,
whether the item is signed and the identity and  location of the  publisher  are
also  included.  Accompanying  each print  reproduction  is a description of the
paper on which it is printed  together with  information on whether the print is
signed or numbered. In this manner, we tightly integrate broad product selection
with highly relevant content, providing consumers with the information they need
to make informed purchase decisions.

     Superior  Shopping  Experience.  We believe  that we provide an  intuitive,
     ------------------------------
easy-to-use web site,  offering extensive product selection supported by tightly
integrated,   relevant  resource  information.   Each  product  presentation  is
supported by a high-resolution  photograph of the item available for sale on our
web site.

     Quality Customer  Service.  The typical online shopping  experience  begins
     -------------------------
with the search for products  that meet  specific  needs,  including  the online
ordering process and extends through product delivery and post-purchase support.




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We believe that the ability to accurately fulfill orders,  ship products quickly
to a customer's door or efficiently handle customer inquiries is as important to
customer  satisfaction as product selection.  As of the date of this report, our
in-house customer service  operation is limited to two employees,  one part time
and one full time.

     Money-Back   Guarantee   and  Guarantee  of   Authenticity.   Unlike  other
     ----------------------------------------------------------
competitors,  most of whose  inventory  is limited  exclusively  or primarily to
items offered on  consignment,  we guarantee the  authenticity  of each piece we
sell with a written  appraisal of the value of the item at the time of purchase.
Mr.  Capra is a  certified  personal  property  appraiser  and a  member  of the
Certified  Appraisers Guild of America. He examines each item sold to ensure its
authenticity and provide a written appraisal of value.  Furthermore,  we provide
each customer with a fourteen-day, money-back guarantee permitting the return of
the  item  within  fourteen  days if the  customer  is not  satisfied  with  its
genuineness or authenticity, or for any other reason.

     Our revenue from Internet  auctions  increased 57% from $186,834 in 1999 to
$293,314 in 2000 and decreased 5% from $293,314 for the year ended  December 31,
2000,  to $277,967 for the year ended  December 30, 2001.  Fifty-two per cent of
our business was  concentrated  in online  auctions in 2001 and, in 2000, 45% of
our  business  was derived from online  sales.  For the year ended  December 31,
2001, we generated 52% of our revenue from auctions conducted over the Internet,
as compared to 47.2% of our revenue  realized  from retail  sales and .8% of our
revenue derived from consignments to retail galleries.  Further,  the traffic on
our Internet site  decreased  significantly  during the year ended  December 31,
2001, as compared to the year ended December 31, 2000. We had 7,178,979 hits and
145,138 unique visitors to our web site during the year ended December 31, 2001,
in  comparison to  10,317,077  hits and 74,400  unique  visitors to our web site
during the year ended  December 31, 2000.  This  represents a decrease of 30% in
hits and an increase of 95% in unique  visitors.  The rate of repeat visitors to
our Internet site increased from 13.3% in 2000 to 13.6% in 2001. The duration of
each  visit and the number of pages  viewed per visit to our web site  decreased
from 2000 to 2001.  The average six minute and  twenty-four  second-duration  of
each visit and the average  thirty-one  pages viewed per visit in 2000 decreased
to an average three minute and forty-five  second-duration  of each visit and an
average   seven  pages  viewed  per  visit  in  2001.   The  above   results  of
Nicklebys.com's operations include the results of the operations of ArtRx.com, a
division of Nicklebys.com launched in March 2000.

ArtRx.com
---------

     ArtRx.com is a division of  Nicklebys.com  that we  established in order to
enable other art galleries,  showrooms,  antique dealers, designers, art service
providers and related  businesses to take advantage of our  interactive  auction
and  other  technologies  and web  traffic.  In  order to  register  as a "trade
affiliate" with  artRx.com,  a business must have a resale tax license and agree
to be bound by the  ArtRx.com  Affiliate  Agreement  and the  ArtRx.com  Terms &
Conditions  available  on the  artRx.com  web  site.  Registration  as a  "trade
affiliate"  with  artRx.com  entitles the  registrant  to take  advantage of the
following, among other, resources and benefits:

     o    Branded Internet showroom.  We set up a branded Internet showroom  for
each  trade  affiliate,  thus  permitting  it to  sell  items  online  and  hold
interactive  auctions  using  artRx.com  technology.  This enables online users,
including  artRx.com  registered  collectors,  to explore the trade  affiliate's
online showroom and immediately purchase items at any time of the day or night.


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     o    Electronic commerce capabilities.

     o    Interactive auction technology.

     o    Trade network.  Upon  a trade affiliate's  registering with artRx.com,
its customers can instantly  search the inventory of all other  artRx.com  trade
affiliates for desired items or services and acquire them at trade  pricing,  as
well as  connect  to  wholesale  suppliers.  Items can be listed for sale in the
trade  affiliate's  retail  showroom for auction  and/or in the trade network at
retail and/or trade pricing. Retail customers cannot access the trade pricing.

     o    Exclusive  customer  database.  The  trade  affiliate  can  acquire  a
database of names from those who register as  artRx.com  members at its showroom
or site.  This  database  is  shared  with us for use in  co-branding  marketing
efforts and can be "exported"  for mailing  purposes,  but is not release to any
third party.

     o    Marketing  campaigns.  See "- Marketing" below  for a  description  of
ongoing marketing  campaigns that we conduct to drive interested visitors to the
artRx.com web site. We also offer trade affiliates the opportunity to grow their
customer bases by participating in charity auctions,  e-mail marketing  programs
and featured  positions.  We give trade  affiliates  the  opportunity  to submit
articles that can be featured on our site with links to their showrooms.

     o    Inventory database system.

     o    Resources and discounted services.

     o    Online visitor tracking reports.

     The above features  available to an ArtRx.com trade  affiliate  benefit the
trade  affiliate  by  eliminating  the cost,  difficulty  and time  consumed  in
establishing and operating its own web site and drawing visitors to the site. By
developing a presence on the Internet, the trade affiliate can operate its daily
business more  effectively and cost  efficiently,  including  communicating  via
e-mail,  posting a digital  image in seconds for an  interested  client to view,
developing a customer  database with purchase  preferences,  offering more items
than fit in the trade affiliate's physical space and conducting sales activities
twenty-hour  hours per day. We develop the trade  affiliate's  Internet presence
with  a  unique   branded   showroom   and  web  address  at   artRx.com,   e.g.
www.artrx.com/galleryone.  Alternatively,  if the trade affiliate  already has a
------------------------
private  domain  on the  Internet,  we can  direct  it to or link  it  with  the
ArtRx.com  showroom so as to take  advantage of the artRx.com  capabilities  and
traffic.  In order to design and update the showroom,  the trade  affiliate need
only  complete  a  template  form for which no  advance  computer  knowledge  is
required.  The trade affiliate can change the look of its showroom in seconds by
choosing  a new  template  design  and  it can  make  unlimited  changes  to the
showroom,  pages  and items  twenty-four  hours per day.  We also  offer  custom
showroom design and building of showroom pages. We are  continuously  seeking to
add new features to enhance our technology  such as WAP technology to enable the
use of a cellular  telephone to access, bid and buy from artRx.com from a remote
location.  The trade  affiliate  benefits  from the traffic on the ArtRx.com web



                                       10
<PAGE>




site in the form of thousands of visitors each week and the marketing activities
that we conduct on an ongoing  basis to attract  more  visitors to the site.  We
also offer promotional opportunities from time-to-time to increase visits to the
trade  affiliates'  sites.  Trade  affiliates can also take advantage of special
opportunities  offered by  artRx.com  strategic  partners for shipping and other
services and access our database of information on art,  antiques,  collectibles
and art services.

     We charge  each trade  affiliate  a fee of $24.95  per month for  listing a
maximum  of 100  items.  For each  item in excess of 100,  the  company  pays an
additional  $.50 per item per  month.  In  addition,  we  receive  a  commission
equivalent  to seven  per cent of the sale  price of each  item  sold by a trade
affiliate on the ArtRx.com web site.

     As of the  date  of  this  report,  ArtRx.com  has  ten  trade  affiliates,
including   Posteralley.com,   an   affiliated   company,   dealing  in  art  or
collectibles.   These   companies   include  I   Brewster   &  Company   Gallery
(Philadelphia, Pennsylvania), Gallery One Denver (Denver, Colorado), Bittan Fine
Art (Valley  Village,  California),  Chabot Art Gallery (San Jose,  California),
Elegant Wonders (Scotts Valley,  California),  Bagster Books (Denver, Colorado),
Gold Star Jewelers (San Jose, California),  Masters Gallery (Denver,  Colorado),
Posteralley.com,  Inc. (Denver,  Colorado), Ship and More (Denver, Colorado) and
Stacy's Cards & Gifts (Denver, Colorado).  Additionally, there are 4,069 members
registered with ArtRx.com. Benefits of ArtRx.com membership include members-only
promotions and discounts, notification of special exhibits, auctions and events,
expert responses to member questions and a fourteen-day, money-back guarantee on
purchases.   Resources   accessible  by  members  include  framing,   restoring,
appraisals, price databases,  shipping, insurance,  financial services and links
to museums and interesting web sites.

The Internet and Electronic Commerce
------------------------------------

     The   Internet   has  become  an   increasingly   significant   medium  for
communication,  exchange of  information  and  commerce.  According  to the U.S.
Department  of  Commerce,  retail sales on the  Internet  increased  67% for the
quarter ended  December 31, 2000, as compared to the quarter ended  December 31,
1999. Nua Internet  Surveys  reports that the total number of people online grew
to 304 million in 2000, an increase of 78% over 1999. We believe this  increased
usage is because of a number of factors, including the following:

     o    A large installed base of personal computers;

     o    Advances in the speed of personal computers and modems;

     o    Easier and less expensive access to the Internet;

     o    Improvements in network security, infrastructure and bandwidth;

     o    A wider range of online offerings; and

     o    Growing consumer awareness of the benefits of online shopping.





                                       11
<PAGE>




However,  there are many risks  associated  with the  conduct of business on the
Internet, including, among others, security, viruses and fraud. While hacking is
a serious threat to electronic  commerce  companies such as  Nicklebys.com,  the
greatest threat to the security of our business  transactions on the Internet is
expected to arise from our own employees.  Nicklebys.com, like most other online
retailers,  intends to continuously  implement a wide range of hardware security
measures to offer network protection and business continuity.  Nevertheless,  we
believe that many companies lack the capital and/or customer demand to warrant a
sizeable  investment  in  electronic   security   protective   applications  and
technologies.  Further,  while many companies have a formal security policy,  we
believe that nearly all are far from adequate and very few companies educate all
members of staff,  conduct risk analysis on a regular basis and regularly assess
their software for security flaws.

     With the wide range of security flaws  inherent in the Internet,  we can be
expected  to be at a  serious  disadvantage,  as  compared  to our  competitors,
especially  with  regard to  electronic  commercial  transactions  if we fail to
protect or minimize the risks to Nicklebys.com from security threats.  While the
Internet  represents  a  new  and  highly  lucrative  market,  we  expect  to be
challenged by the necessity to become fully aware of new technologies so that we
can manage  the risks  associated  with  conducting  transactions  over the web.
Another  disadvantage to our conducting  business on the Internet is the lack of
physical representation enabling customers to inspect our merchandise in advance
of placing an order and obtaining  customer  services from  personnel  with whom
they are unable to  interact in person.  Because or this,  we are  committed  to
maintaining  a retail  showroom  where the type of customer  unable to develop a
comfort  level in the  absence of  physical  representation  can examine an item
prior to  purchase.  Nevertheless,  we will  likely  be  required  to deal  with
dissatisfied  customers  believing  that the item ordered  online differs in its
physical appearance from the photographic image viewed on the Internet.  Despite
the above-described  and other risks of online retailing,  we intend to focus on
this  method  of  displaying   and  retailing  our  inventory   because  of  the
significantly  reduced cost to us of maintaining a limited  retail  facility and
marketing staff.

Live Auctions
-------------

     We conducted  live  auctions of fine  artworks,  antiques and  collectibles
through  December  2001.  We have  continuously  reduced  the number of our live
auctions to coincide with our  increasing  focus on the display and marketing of
our  inventory  online.  We  terminated  live  auctions as part of our marketing
program in December 2001 because management determined that the auction revenues
were  inadequate to justify the cost of conducting  live auctions.  We conducted
only six live auctions in fiscal 2001, including three each in Denver, Colorado,
and San Jose, California,  as compared to twelve live auctions conducted in 2000
and eighteen live auctions held in 1999.

Retail Sales
------------

     In August 2000, we moved our retail showroom from 899 Broadway, Suite #200,
Denver,  Colorado  80203,  to 12441 West 49th  Avenue,  Suite One,  Wheat Ridge,
Colorado  80033.  We  exhibit  all  of the  items  of  fine  art,  antiques  and
collectibles   that  are  available  on  our  Internet  site  in  the  showroom.
Additionally,  we display certain pieces in the showroom and not on the Internet



                                       12
<PAGE>




if they are being held for a live  auction or if we believe  that the items will
command a  significantly  higher  price if they are held for a longer  period of
time.  Retail sales have declined since our inception  because of our increasing
emphasis on online sales.

     We have plans to establish  showrooms in major cities of the United  States
in addition to Denver, Colorado. Implementation of these plans is dependent upon
whether  we are  able to  raise  additional  funds  and/or  our  achievement  of
profitable operations. No such cities have been considered, targeted or selected
as of the date of this report.

Marketing
---------

     Our marketing strategy is designed to attract customers most likely to shop
online, convert browsers to buyers, meet or exceed customer expectations,  drive
repeat  purchases and build  enduring  brand equity.  In order to implement this
strategy, we have implemented an integrated marketing campaign that includes the
following:

     Advertising.  We design  our  advertising  to build  brand  equity,  create
     -----------
awareness and generate initial  purchases of fine art, antiques and collectibles
sold,  primarily,  in  online  auctions  on  our  web  site.  Depending  on  the
availability of funds, we use a mix of broadcast media, including:

     o    Trade journals;

     o    Local newspapers;

     o    Online banners, text links and e-mail newsletters; and

     o    Mailings of post cards to, among others,  interior  designers,  retail
purchasers and past participants in live auctions hosted by us.

     EBay,  Inc.  We have a  strategic  alliance  with eBay,  Inc.,  the largest
     ----------
existing  auction house and online  retailer.  Since November 2000, we have been
one of sixty-six  dealers and auction houses listed as "Premier  dealers" on the
"Premier"  home page  listed as a  "Specialty  Site" on eBay's  home page on the
Internet.  In order to be listed as a "Premier dealer" on the Premier home page,
the  listed  dealer or  auction  house  must  meet  certain  minimum  standards,
including,  among  others:  (i) a  minimum  three-year  business  history;  (ii)
recognition  by peers as an expert in the field;  and (iii) the  provision  of a
fourteen-day,  money-back  guarantee.  As of the date of this report, we average
eighty-three  pieces  listed  per month on eBay.  The items we list are not also
displayed on our web site.

     Our  agreement  with  eBay is  verbal,  with no  duration  and no  material
termination  provisions.  We pay eBay a listing fee of $10.00 per item listed in
the  Premier  section  on eBay  and a  commission  on the  sale  of  each  piece
equivalent to ten per cent of the sale price.  For items listed on eBay's "core"
pages,  we pay a  listing  fee in a range  from  $1.00 to  $9.99  per item and a
commission on the sale of each item equivalent to one and one-quarter to two and
one-quarter per cent of the sale price. We have realized $111,374 and $33,168 in



                                       13
<PAGE>




revenue from our strategic alliance with eBay during the year ended December 31,
2001,  and the  year  ended  December  31,  2000,  respectively.  These  amounts
represent  the gross sales price of  merchandise  sold on eBay during each year,
less the  total  listing  fees and sales  commissions  we paid eBay on a monthly
basis.  All  funds  received  for  items  sold on eBay  are  collected  from the
purchaser. We do not receive any funds from eBay for sales of merchandise listed
on eBay.

     Since  December  2001,  we have been  featured as one of eighteen  "Premier
auction house dealers" on the "Premier"  home page listed as a "Specialty  Site"
on the eBay home  page.  This new status is in  addition  to our  status,  since
November 2000, as a "Premier dealer" and entitles us,  commencing April 1, 2002,
to reduce our  listing  fees from $10 to $5 per item if we list a minimum of 400
pieces per month and take advantage of other benefits and resources, including a
retail  storefront  presence,  the  branding  and  the  look  and  feel  of  the
Nicklebys.com  web site on eBay and the  ability  of  visitors  to link back and
forth  between our site and eBay's  site.  Additionally,  as a "Premier  auction
house  dealer," we are  featured on the Premier  home page with a direct link to
our auction  listings and in the eBay newsletter every other month. In addition,
we have the  right to run up to four  promotions  on the eBay web site  that are
featured on the Premier home page and, in addition, on the eBay home and/or core
pages.

     Posteralley.com, Inc.  There is a link to Posteralley.com's web site on our
     ---------------------
home page on the Internet. Our marketing agreement with Posteralley.com provides
for us to receive a referral  fee of $.22 per web site "hit" or  "click-through"
generated  by a new  visitor  to  our  web  site  as a  result  of the  link  to
Posteralley.com's site on our home page. Because Messrs. Thornock and Capra, our
executive  officers,  directors  and  controlling  shareholders,  also  serve as
executive officers,  directors and controlling  shareholders of Posteralley.com,
the marketing agreement between us and  Posteralley.com  cannot be considered to
be  an  arm's-length   transaction.   We  realized  nominal  revenue  from  this
arrangement with Posteralley.com for the year ended December 31, 2001.

     With the  formation  of  Posteralley.com  in July 1999,  we  abandoned  our
limited online sales of fine art posters.  However, we have offered,  and may in
the future offer, fine art posters obtained as part of a collection of fine art,
antiques and/or collectibles that may have been, or may be, identical or similar
to the posters that Posteralley.com  offers. To the extent that we sell products
that  Posteralley.com  currently offers,  there would be a conflict of interest.
The  simultaneous  offer of fine art  posters  and/or  other  products by us and
Posteralley.com  could  negatively  impact our ongoing  efforts to establish our
brand and  increase  our sales  and  revenues,  thus  negatively  impacting  our
operations and prospective shareholders.  Also, Mr. Scott M. Thornock, our Chief
Executive  Officer,  would benefit more from a sale on  Posteralley.com's,  than
our, web site because he has a larger equity interest in Posteralley.com.

Fulfillment and Distribution
----------------------------

     We  currently  fulfill all  customer  orders from our  facilities  in Wheat
Ridge, Colorado. We receive product,  primarily,  from estates, private parties,
collectors, original collections and other suppliers. Our two executive officers
pick products to fill customer  orders.  We presently  manually  update  product
availability  on our web site.  We pack the items on location at our offices and
then deliver them to UPS, the United  States  Postal  Service or other  shipping



                                       14
<PAGE>




company for  distribution  to consumers  anywhere in the United  States.  We are
committed to shipping accurate orders,  efficiently and effectively.  Mr. Capra,
our  President,  brings  to  Nicklebys.com  his  expertise  in  fulfillment  and
distribution  developed as a result of his experience with American  Design.  We
intend to establish a distribution  center in warehouse  space separate from our
offices at such time, if ever, as the demand for our fine artworks, antiques and
collectibles increases sufficiently.

Customer Service
----------------

     We believe that a high level of customer service and support is critical to
retaining and expanding our customer base. We have one part-time  employee whose
responsibilities  are  administrative  and  customer  support  in nature and one
full-time employee who assists with,  although his primary  responsibilities  do
not include, customer service and support. Additionally, Mr. Bruce A. Capra, our
President, is available via telephone,  generally,  from 8:30 a.m. to 4:30 p.m.,
Mountain Time, Monday to Friday, and can also be reached by e-mail or facsimile.
Presently,  we provide, by e-mail order and shipping confirmation (with tracking
numbers),  notification of customers regarding out-of-stock  situations and, for
those orders, frequent updating of customers on order status.

     We are dedicated to customer satisfaction. We deliver on this commitment in
a number of ways, including:

     o    Product  guarantee,  including a written appraisal of the value of the
item at the time of purchase  and a  fourteen-day  refund if the shipment is not
satisfactory;

     o    Customer  service  guarantee  of a  three-day  response  time  for all
inquiries;

     o    Privacy guarantee to use personal  information  exclusively to process
orders and not to sell, trade or rent the information to other companies; and

     o    Security  guarantee  ensuring  protection of personal  information and
compensation to consumers for the amount of their  liability,  up to $50, in the
unlikely event of unauthorized interception and use of their credit card.

Historically,  merchandise  returned  for  a  refund  within  fourteen  days  in
accordance with our product guarantee represents less than .01% of our net sales
revenue.  To date, we have incurred no liabilities  with respect to our customer
service guarantee,  privacy guarantee or security guarantee.  Our liability with
regard to our  product  guarantee  is  limited to the refund of the price of the
merchandise  purchased.  With  respect  to our  security  guarantee,  there is a
limitation of liability of $50 per incidence of  unauthorized  interception  and
use of a customer's  credit card. We do not believe that we would ever incur any
liability with regard to our customer service  guarantee.  Regarding the privacy
guarantee, we cannot envision a circumstance as a result of which we would incur
liability,  except in the event that a third party gained unauthorized access to
customer information through our web site, because we do not sell, trade or rent
our customers' personal information to other companies.  We could be at risk for



                                       15
<PAGE>





losses under our privacy guarantee if a third party gained  unauthorized  access
through our web site to customer information.

Technology and Network Operations
---------------------------------

     We have implemented services and systems for site management, searching and
customer  interaction.  Our  system has been  custom-designed  and  written  for
performance, reliability and scalability using software applications for:

     o    Displaying merchandise in an organized,  logical and customer-friendly
way;

     o    Accepting, verifying, organizing and managing customer orders;

     o    Notifying and updating customers of order status;

     o    Managing shipment of products; and

     o    Electronic -commerce.

     These  systems and services  employ a  combination  of our own  proprietary
technologies and commercially available, licensed technologies.  Our proprietary
technologies are embodied in software that is exclusively  owned and implemented
by  us.  We  have  a  non-exclusive  license  to use a  shopping  cart  commerce
application,  which has been  customized  for us. This commerce  application  is
integrated  with  our  custom   software,   enabling  a  fully  automated  order
fulfillment  process.  We realize many  benefits from the  integration  of these
systems, including:

     o    Tracking customer orders through the entire supply chain in real-time;

     o    Making rapid changes to processes such as a change in shipping policy;
and

     o    Efficiently expanding our infrastructure.

     Our  operating  system  is  RedHat  Linux 6.2 with  kernel  2.2.16  and our
software platform and architecture is integrated with Apache/1.3.12 Ben-SSL/1.41
(Unix)  mod_perl/1.24  web software  and database  software  mSQL  v2.0.11.  Our
production  system is  located  at our  offices in Wheat  Ridge,  Colorado,  and
provides  twenty-four-hour  engineering and monitoring  support.  We address the
goals of performance, reliability and scalability. Our objective is to have fast
download  times and make use of caching and load balancing at the web server and
application  level for optimal  performance.  We outsource  development  work to
outside  consultants.  Our web site is up and running  twenty-four  hours a day,
seven days a week.  We anticipate  that we will  continue to devote  significant
resources  to  product  development  in the  future as we add new  features  and
functionality to our web site.







                                       16
<PAGE>




Competition
-----------

     The secondary  market for fine art,  antiques and collectibles is intensely
competitive.  Competition  is expected  to  intensify  in the future,  which may
result in price  reductions,  fewer customer  orders,  reduced gross margins and
loss of  market  share.  We are aware of a number  of other  companies  that are
presently  retailing fine art,  antiques  and/or  collectibles  online.  Our two
closest  competitors  are  GalleryRow.com,  Reno,  Nevada,  and Ruby  Lane,  San
Francisco,  California.  We believe that there will be an  increasing  number of
online  retailers of fine art,  antiques and  collectibles of the types we offer
and, in the instance of certain reproductions, identical to the reproductions we
offer. Some of our competitors may be able to secure  merchandise from suppliers
on more favorable terms, fulfill customer orders more efficiently and adopt more
aggressive pricing or inventory availability policies than we can.

     We believe that the  following  are  principal  competitive  factors in our
market:

     o    Web site recognition;

     o    Inventory selection;

     o    Streamlined shopping experience;

     o    Reliability and speed of order shipment;

     o    Customer service;

     o    Speed and accessibility of web site;

     o    Convenience; and

     o    Price.

     The primary  difference between our web site and other online sites is that
the fine artworks,  antiques and collectibles we offer are sold,  primarily,  at
auction to the highest  bidder.  Further,  unlike many other  competitors  whose
inventory is limited  exclusively or primarily to items offered on  consignment,
we guarantee  the  authenticity  of each item and furnish the  purchaser  with a
written  appraisal  of the  value  of the  piece at the  time of  purchase.  Our
guarantee of authenticity is analogous to our product guarantee  described above
under "- Customer  Service."  Accordingly,  our  liability  with  respect to our
guarantee of  authenticity is limited to the refund of the purchase price of the
merchandise.  Historically,  merchandise  representing less than .01% of our net
sales revenue has been returned for a fourteen-day refund in accordance with our
product/authenticity  guarantee.  The  customer  we  target  is  the  dedicated,
discriminate  collector of fine art,  antiques and  collectibles  who values our
ability to guarantee the  authenticity of our products  because of the expertise
and experience of Mr. Bruce A. Capra,  our President and Chairman.  Accordingly,
we compete on the basis of our reputation  among customers as a quality provider
of products that are "100% money-back guaranteed, curated and appraised" and, to
a lesser extent, on the basis of price.



                                       17
<PAGE>




     Regarding  our division,  artRx.com,  there are other sites on the Internet
like  http://www.artRx.com  that promote businesses in the arts.  Included among
      --------------------
these   web   sites   are   http://www.eBay.com,   http://www.bCentral.com   and
                            -------------------    -----------------------
http://www.Yahoo.com.  We believe that our  artRx.com  package of benefits is as
--------------------
comprehensive  as the benefits  packages offered by the foregoing and all of our
other  competitors.  These benefits  include,  among others,  a branded showroom
where the company can choose the look and the pages that best fit its  business,
e-commerce  capabilities,   auction  technology,  more  items,  more  pages  and
unlimited changes to the showroom, an exclusive customer database, the artRx.com
trade network, an inventory database system and online visitor tracking reports.

     In addition to online  dealers,  we compete with a variety of  traditional,
store-based  retailers located both inside and outside the United States.  These
retailers  enable  customers  to see and feel  products  in a manner that is not
possible  over the Internet.  Many of these  competitors  have longer  operating
histories,  larger  customer  or  user  bases,  greater  brand  recognition  and
significantly greater financial, marketing and other resources than we do. These
companies  include  artists,  art  galleries,  art and/or  antique  brokers  and
dealers, antique stores, auction houses and liquidation companies. Many of these
companies  can  devote  substantially  more  resources  to web site and  systems
development than we can. In addition, larger, more well-established and financed
entities may acquire,  invest in or form joint ventures with online  competitors
as the use of the  Internet  and other  online  services  increases.  We hope to
minimize our weaknesses,  including,  among others, our limitations with respect
to personnel, technological, financial and other resources, through our focus on
the  Internet;  which  eliminates  the need for a sizeable  retail  facility and
marketing staff.

Intellectual Property
---------------------

     We rely on a combination  of trademark,  trade secret and copyright laws to
protect our intellectual property. These afford only limited protection. Despite
our efforts to protect our proprietary rights,  unauthorized persons may attempt
to copy  aspects of our web site,  including  the look and feel of our web site,
products  that we sell,  product  organization,  product  information  and sales
mechanics.  Unauthorized  persons may also attempt to obtain and use information
that we regard as  proprietary,  such as the technology  used to operate our web
site and our content.  We have not filed an application  to secure  registration
for our trademarks, such as "Nicklebys.com" and "artRx.com" in the United States
or any other country.  Any encroachment  upon our proprietary  information,  the
unauthorized  use of our  trademark,  the use of a similar  name by a  competing
company or a lawsuit  initiated  against us for the  infringement  upon  another
company's proprietary information or improper use of their trademark, may affect
our ability to create brand name  recognition,  cause customer  confusion and/or
have a detrimental effect on our business.  Litigation or proceedings before the
U.S.  Patent and Trademark  Office may be necessary in the future to enforce our
intellectual  property rights,  to protect our trade secrets and domain name and
to determine  the validity and scope of the  proprietary  rights of others.  Any
litigation or adverse proceeding could result in substantial costs and diversion
of  resources  and could  seriously  harm our business  and  operating  results.
Finally, with regard to our international operations, the laws of many countries
do not  protect our  proprietary  rights to as great an extent as do the laws of
the United States.



                                       18
<PAGE>




Government Regulation
---------------------

     We are not currently  subject to direct federal,  state or local regulation
other than regulations applicable to businesses generally or directly applicable
to retailing or electronic commerce.  To our knowledge,  no state law limits our
ability to receive bids and conduct sales in our online auctions. However, state
licensing  requirements and other laws and regulations may be adopted that limit
our ability to receive bids online and  otherwise  conduct sales in our Internet
auctions.  As the Internet becomes  increasingly  popular, it is possible that a
number of laws and  regulations  may be adopted  with  respect to the  Internet.
These  laws may  cover  issues  such as user  privacy,  freedom  of  expression,
pricing,  content and quality of products and services,  taxation,  advertising,
intellectual  property  rights and  security of  information.  Furthermore,  the
growth of  electronic  commerce may prompt  demand for more  stringent  consumer
protection laws.  Several states have proposed  legislation to limit the uses of
personal  user  information  gathered  online  or  require  online  services  to
establish  privacy  policies.  The Federal Trade  Commission  has also initiated
action  against  at least  one  online  service  regarding  the  manner in which
personal  information  is collected from users and provided to third persons and
has proposed regulations  restricting the collection and use of information from
minors  online.  We do not currently  provide  individual  personal  information
regarding our users to third persons and we currently do not identify registered
users by age. However, the adoption of additional privacy or consumer protection
laws could create uncertainty in usage of the Internet and reduce the demand for
our products and services or require us to redesign our web site.

     We are not certain how our business may be affected by the  application  of
existing  laws  governing  issues  such  as  property   ownership,   copyrights,
encryption and other intellectual property issues,  taxation,  libel, obscenity,
qualification  to do business and personal  privacy.  The vast majority of these
laws were adopted prior to the advent of the Internet.  As a result, they do not
contemplate   or  address  the  unique   issues  of  the  Internet  and  related
technologies.  Changes in laws  intended to address  these  issues  could create
uncertainty in the Internet  marketplace.  This uncertainty  could reduce demand
for our posters,  increase the cost of doing  business as a result of litigation
costs and/or increase service delivery costs.

Employees
---------

     As of the date of this report,  we employ four  individuals,  including two
full-time and two part-time employees. Our full-time personnel include Mr. Bruce
A.  Capra,   our  President  and  Chairman,   and  one  employee  whose  primary
responsibilities  include photography,  listing and shipping,  and our part-time
personnel  include Mr. Scott M. Thornock,  our Chief  Executive  Officer,  Chief
Financial  Officer  and  Secretary,  and  an   administrative/customer   service
employee.  Messrs.  Capra and Thornock serve in the identical positions with our
two wholly-owned  subsidiaries,  Nickleby's Auction Gallery and Art Exchange, in
which they serve with us. Mr. Capra, as a result of his experience and expertise
in dealing in art, antiques and collectibles,  and Mr. Thornock,  because of his
business management  experience and acumen, are both considered to be key to our
business  success.  We  would  have  difficulty  replacing  the  experience  and
expertise of either Mr. Capra or Mr. Thornock.




                                       19
<PAGE>




     For his services, Mr. Capra has received,  since March 1, 1999, a salary of
$60,000  per annum in  addition  to  medical  insurance  benefits  under a group
medical insurance  benefits plan. Mr. Thornock has received no cash compensation
for his  services  except  medical  insurance  benefits  under  the  group  plan
commencing March 1, 1999. No other cash compensation has been awarded to, earned
by or paid to either Mr. Capra or Mr.  Thornock since our  organization  for all
services each individual has performed in all capacities for  Nicklebys.com  and
its subsidiaries.  These compensation  arrangements are expected to continue for
the foreseeable future.

     Except  for Mr.  Capra,  who  devotes  full time to  Nicklebys.com  and its
subsidiaries, our executive officers and directors plan to devote only such time
to the business and affairs of  Nicklebys.com  and/or its  subsidiary  companies
that  each  deems  necessary.   Presently,   Mr.  Thornock   regularly   devotes
approximately   thirty   hours  per  month  to  the   business  and  affairs  of
Nicklebys.com,  Nickleby's  Auction Gallery and/or Art Exchange.  Mr. Thornock's
time commitment is not expected to increase for the foreseeable future.

     None of our employees is represented by a labor union.  We have never had a
strike or lockout and consider our employee relations to be good.


Item 2.      Description of Property.

     Our  executive  offices  and art  showroom  are  located at 12441 West 49th
Avenue,  Suite One,  Wheat Ridge,  Colorado  80033.  The facility,  a storefront
location  comprised  of  approximately  2,750  square  feet,  is leased  from an
unaffiliated  company at a base rental rate of $2,184 per month through December
31, 2001,  $2,410 through  December 31, 2002,  and $2,272  through  December 31,
2003, plus operating cost escalations. The term of the lease, which commenced on
November 1, 2000, terminates on December 31, 2003. Under the terms of the lease,
we  commenced  paying  rent on January 1, 2001,  and we paid no rent  during our
fiscal year ended  December  31,  2001.  The space is expected to be adequate to
meet our foreseeable future needs in the Denver, Colorado, metropolitan area. We
have not yet implemented  our plans to establish  showrooms in major U.S. cities
other than Denver,  Colorado.  Our  telephone  and  facsimile  numbers are (303)
425-0607 and (303) 425-0545,  respectively.  The telephone and facsimile numbers
for  Nickleby's  Auction  Gallery and Art  Exchange  are  identical  to those of
Nicklebys.com.


Item 3.      Legal Proceedings.

     From time to time,  we may be  involved  in  litigation  relating to claims
arising out of our ordinary  course of business.  As of the date of this report,
neither Nicklebys.com,  Nickleby's Auction Gallery nor Art Exchange knows of any
legal  proceedings to which any said company is a party or to which the property
of any said company is the subject that are pending,  threatened or contemplated
or any unsatisfied judgments against Nicklebys.com or its subsidiaries.




                                       20
<PAGE>




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

     No matter was submitted  during the fourth quarter of the fiscal year ended
December  31,  2001,  covered  by this  report,  to a vote of our  shareholders,
through our solicitation of proxies or otherwise.



                                     PART II


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

     (a)  Market Information, Holders and Dividends.

     (i)  Market Information.

     There has been no  established  public  trading market for the common stock
since our  inception on January 13,  1999.  We have  2,130,000  shares of common
stock subject to outstanding  options  exercisable to purchase  common stock. We
have  _________  shares of common stock that could be sold  pursuant to Rule 144
under the Securities Act of 1933.

     (ii) Holders.

     As of the date of this report,  we had  approximately  147  shareholders of
record of our 2,901,011 outstanding shares of common stock.

     (iii) Dividends.

     We have never paid or declared any dividends on our common stock and do not
anticipate paying cash dividends in the foreseeable future.

     (b)  Recent Sales of Unregistered Securities.

     On January 13,  1999,  we issued  2,000,000  shares of common  stock to Mr.
Bruce A. Capra,  1,860,000  shares of common stock to Mr. Scott M.  Thornock and
280,000 shares of common stock to Mr. Richard E. Capra. We issued the shares for
services performed by each individual in connection with our organization valued
at $2,000 in the case of Mr. Bruce A. Capra,  $1,860 in Mr.  Thornock's case and
$280 in Mr.  Richard E. Capra's case, at the rate of $.001 per share.  Mr. Bruce
A. Capra  returned  1,471,700  (73.6%) of his  2,000,000  shares,  Mr.  Thornock
returned  861,000  (46.3%)  of his  1,860,000  shares  and Mr.  Richard E. Capra
returned  214,000  (76.4%) of his  280,000  shares,  to us for  cancellation  on
December 30, 1999.  Messrs.  Bruce A. Capra and Thornock  serve as the executive
officers and two of the four directors of Nicklebys.com and own 19.9% and 18.1%,
respectively,  of our outstanding common stock. Mr. Richard E. Capra is a former
director and the owner of 1.3% of our outstanding common stock.




                                       21
<PAGE>




     On January 13,  1999,  we issued  50,000  shares of common  stock to Cudd &
Associates,  our  special  securities  counsel,  for the  performance  of  legal
services valued at $500 ($.001 per share).  Cudd & Associates and Patricia Cudd,
Esq.,  sole  proprietor  of Cudd &  Associates,  together  own  125,000  shares,
representing 2.5%, of our outstanding common stock.

     On  January  14,  1999,  we  issued  860,000  shares  of  common  stock  to
Entrepreneur  Investments,  LLC, and 1,000,000 shares of common stock to 1st Net
Technologies,  Inc.,  respectively  (a  total  of  1,860,000  shares),  for each
company's  entering into an agreement to perform certain  services for us. These
actions were valued at $150,000 in Entrepreneur  Investments'  case and $392,000
in the case of 1st Net Technologies (a total of $542,000),  at the rate of $.001
per share.  Entrepreneur  Investments  returned  657,500  (76.5%) of its 860,000
shares,  and 1st Net Technologies  returned 764,500 (76.5%) of its shares, to us
for  cancellation  on December 30, 1999.  Entrepreneur  Investments  and 1st Net
Technologies own approximately  14.6% and approximately 4.7%,  respectively,  of
our outstanding common stock. Ownership of Entrepreneur Investments' and 1st Net
Technologies'  shares is  attributable  to Mr.  James H.  Watson,  Jr., a former
director,  because of his ownership of Entrepreneur Investments and positions as
an  executive  officer,   director  and  controlling   shareholder  of  1st  Net
Technologies.

     On June 25, 1999, we entered into the Stock Purchase and Exchange Agreement
with Art Exchange,  Inc., Mr. Paul J. Zueger, a director,  and The Zueger Family
Trust  pursuant  to which we issued  600,000  shares to Mr.  Zueger and  400,000
shares to the trust in exchange for all 1,000,000  outstanding  shares of common
stock of Art Exchange  owned by Mr. Zueger and the trust.  Mr.  Zueger  returned
276,948 (76.4%) of his 362,500 shares and the trust returned  429,752 (76.4%) of
its 562,500 shares,  to us for cancellation on December 30, 1999. As a result of
the  transaction,  we acquired  assets,  including  the  non-exclusive  right to
conduct  live  auctions of fine art,  antiques  and  collectibles  consigned  to
Gallery Denver,  Inc. (formerly Museum Auctions,  Ltd.), a Colorado  corporation
solely  owned by Mr.  Zueger;  the  right  to use the  assumed  name of  "Museum
Auctions,  Ltd.," in  Colorado;  and all  rights to Gallery  Denver's  "auction"
customer mailing list. In connection with the transaction, Gallery Denver agreed
to pay Art Exchange a commission  equivalent to 25% of the aggregate sales price
of all  consigned  goods sold at live  auctions  conducted  by Art  Exchange for
Gallery  Denver  after  July 28,  1999.  Mr.  Zueger  and the  trust  own  16.4%
(including the trust's shares) and 6.1%, respectively, of our outstanding common
stock.

     On December 30,  1999,  we granted Mr. Bruce A. Capra,  Mr.  Thornock,  Mr.
Richard E. Capra, Entrepreneur Investments, Mr. Zueger, the Zueger Family Trust,
Mr.  Mark  Crossen,   Patricia  Cudd,  Esq.,  and  Mark  Shaner,  Esq.,  options
exercisable to purchase 533,349 shares,  530,000 shares, 80,000 shares,  530,000
shares,  111,692 shares, 173,308 shares, 80,000 shares, 50,000 shares and 41,651
shares (a total of  2,130,000  shares),  at an exercise  price of $.66 per share
through December 29, 2004. We received services valued at a total of $221,520 in
consideration for granting the options to the above-named persons, as follows:

          o    Services valued at approximately $55,468 provided by Mr. Bruce A.
     Capra,  including  researching the Internet and demographics,  studying the
     feasibility  of conducting  an auction  online,  studying  various types of
     software,  including  Adobe  Photoshop,  Serif Desktop  Publishing  and the



                                       22
<PAGE>




     Olympus Digital Photography  program,  learning Basic software language and
     HTML,  meeting  with  suppliers  and vendors to  establish  prices and test
     marketing products on other web sites;

          o    Services valued at $55,120  provided by Mr.  Thornock,  including
     furnishing  advice  related to our formation,  capitalization  and business
     plan,  including  the amount of required  funding and the  recapitalization
     with Nickleby's Auction Gallery Ltd.; negotiating  contracts;  coordinating
     the efforts of  professionals,  including  legal  counsel  and  independent
     auditors;  developing  and  implementing  a marketing  plan and  strategies
     (including the expansion of distribution channels);  increasing the overall
     sophistication and capabilities of our web site,  improving  communications
     with  registrants  and developing and maintaining  strategic  relationships
     with other web sites and portals.

          o    Public   relations   services  valued  at  $55,120   provided  by
     Entrepreneur Investments;

          o    Services valued at approximately  $29,640 provided by Mr. Zueger,
     trustee of the Zueger Family Trust,  in promoting  Nicklebys.com  to retail
     galleries,  wholesalers, dealers and artists and acting as a liaison in the
     international art market based on his forty years of experience;

          o    Services  valued at $8,320  provided  by Mr.  Richard E. Capra in
     developing computer software for our Internet web site.

          o    Services  valued at $8,320  provided by Mr. Crossen in developing
     and writing a comprehensive business plan;

          o    Legal services valued at $5,200 provided by Patricia Cudd, Esq.;

          o    Legal services valued at $4,332 provided by Mark Shaner, Esq.;

     We issued 25,000  shares of common stock to James K. Kreutz,  Esq., on June
1, 2000,  for the  performance  of legal  services  valued at $31,250 ($1.25 per
share).

     On July 1, 2000, we issued a total of 23,138  shares,  at the rate of $1.25
per share, to the following  persons for various  services  performed for us, as
follows:

          o    15,000 shares to Touronds, LLC, a limited liability company owned
     by Mr. Ronald L. Carter, a former  director,  for web site hosting services
     valued at $18,750;

          o    4,000  shares to Mr. Tom Gooch for the  performance  of marketing
     services valued at $5,000;






                                       23
<PAGE>




          o    2,500 shares to Owl Screech,  Inc., a limited  liability  company
     owned by Mr. Brian S. Powell, a former  director,  for web site development
     services valued at $3,125; and

          o    1,638  shares to Lynott and  Associates  for the  performance  of
     public relations services valued at approximately $2,048.

     We issued 2,960 shares of common  stock to Mr.  Bradley  Exline on December
16,  2000,  for the purchase of a 1985 Ford van valued at  approximately  $3,700
($1.25 per share).

     With respect to the sales  described  above, we relied upon Section 4(2) of
the  Securities  Act of 1933 for  transactions  by an issuer not  involving  any
public offering, as an exemption from the registration requirements of Section 5
of the  Securities  Act of 1933. We did not use public  solicitation  or general
advertising  in  connection  with the  offering.  All of the  purchasers  of the
securities  had  a   pre-existing   personal  or  business   relationship   with
Nicklebys.com's  executive  officers.  All of the investors had enough knowledge
and experience in finance and business  matters to evaluate the risks and merits
of their investment.  The company made the determination that each purchaser was
a  sophisticated  investor with enough  knowledge and  experience in business to
evaluate  the risks and merits of the  investment.  Additionally,  each of these
persons had access to the kind of information normally provided in a prospectus.
Each purchaser represented in writing that he, she or it acquired the securities
for  investment  for  his,  her  or its  own  account  and  not  with a view  to
distribution.  Stop transfer  instructions  have been issued to  Nicklebys.com's
transfer agent with respect to the  securities,  and the transfer agent has been
instructed  to issue the  certificates  representing  the  securities  bearing a
restrictive investment legend. Each purchaser signed a written agreement stating
that the securities will not be sold except by registration under the Securities
Act of 1933 or pursuant to an exemption from registration.

     We issued and sold an aggregate  of  1,149,913  shares of common stock to a
total of 113 persons, for cash consideration  totaling $926,975 in two tranches,
from  January 4 to June 8, 1999,  and from March 19 to September  11, 2000.  The
offering  price of the shares of common  stock sold in the first  tranche of the
offering  was $.60 per share and the  offering  price of the shares  sold in the
second tranche was $1.25.  We made the sales in reliance upon the exemption from
registration  with the U.S.  Securities and Exchange  Commission  provided under
Rule 504 of  Regulation D under Section 3(b) of the  Securities  Act of 1933. No
underwriter was employed in connection with the offering and sale of the shares.
The facts we relied upon to make the Federal exemption available include,  among
others, the following:

     (i)  The aggregate  offering price for the offering of the shares of common
stock did not  exceed  $1,000,000,  less the  aggregate  offering  price for all
securities  sold  within  the twelve  months  before the start of and during the
offering in reliance on any exemption  under Section 3(b) of, or in violation of
Section 5(a) of, the Securities Act of 1933;

     (ii) We duly and timely  filed the  required  number of  manually  executed
originals  and  true  copies  of Form D with the U.S.  Securities  and  Exchange
Commission;





                                       24
<PAGE>




     (i)  We conducted no general solicitation or advertising in connection with
the offering of any of the shares; and

     (ii) The fact that Nicklebys.com has not been since its inception:

          (a)  Subject to the reporting  requirements  of Section 13 or 15(d) of
     the Securities Exchange Act of 1934;

          (b)  An  "investment  company"  within the  meaning of the  Investment
     Company Act of 1940; or

          (c)  A development  stage company that either has no specific business
     plan or purpose or has  indicated  that its business plan is to engage in a
     merger or acquisition with an unidentified  company or companies,  or other
     entity or person.

     The  persons who  purchased  our common  stock in the first  tranche of our
offering of common stock under Rule 504 of Regulation D are as follows: (1) Risa
Tina Aronowitz,  (2) Barry M. Bach, (3) Ralph Barnett, (4) Brett W. Bennett, (5)
James and Carol Brown, (6) Michael Bryant,  (7) Mary Ann Campbell,  (8) Bruce A.
Capra, (9) Richard E. and Lana K. Capra,  (10) Marilyn J. Caywood,  (11) Carolyn
S. Daniels,  (12) James J. DeLutes,  (13) Gary Cole Dunlap,  (14) Kirk J. Eberl,
(15)  Richard  M.  Engeman,  (16)  Mitchell  and Lenora  Erblich,  (17) J. Peter
Garthwaite,  (18)  William P.  Goodsman,  (19)  Douglas W.  Granger,  (20) Chris
Grevenon, (21) John Hyer, (22) David F. and Lisa L. Jones, (23) Steve Katz, (24)
Bradley Keech, (25) Michael Krause, (26) Ben Lee, (27) Chin Y. Lee, (28) Jeffery
H. and Jessica Lee, (29) Edward J. Martinez, (30) Mark D. and Linda A. Martinez,
(31) Stephen M. McKay,  (32)  Michael J. and Robbin M. Minkel,  (33) William and
Kyla Moore, (34) Walter J. Muensterman, (35) Matthew M. Nicholas, (36) Daniel A.
Nye,  (37) Robert E. and Wilma E. Nye,  (38)  Bradley R.  Parker,  (39) R. David
Preston,  (40) Kermit C. and Nancy F.  Rudolph,  (41)  Matthew C. and Jessica H.
Sanderson, (42) Paul A. and Beatrice R. Sauer, (43) Christopher P. Shannon, (44)
Carole A.  Sheller,  (45) Fred and Kathleen P. Spoerl,  (46) Mark A.  Tellinger,
(47) Diana M. Thornock,  (48) Roana  Thornock,  (49) Scott M. Thornock,  (50) C.
Edward Venerable,  (51) Cliff R. Venerable, (52) Darrell R. Warren, (53) Timothy
G. Warren,  (54) Karl White,  (55) Wayne F.J.  Yakes,  M.D.,  (56) Donald J. and
Katherine B. Zahorik, (57) Chris and Sarah J. Zueger and (58) Paul J. Zueger.

     The persons who  purchased  our common  stock in the second  tranche of our
offering of common stock under  Regulation D, Rule 504, are the  following:  (1)
Daniel R. Albright, (2) Artist Showcase, (3) Barney Margolis and Eileen Margolis
Trust, (4) Frederick V. and Jan Bass, (5) Clarice A. Bailey Revocable Trust, (6)
Rick and Cyndi Clark,  (7) Karli E. Cropp,  (8) Robert J. and Margaret A. Cropp,
(9)  Scott  Daharb,  (10)  Michael  Dieveney,  (11)  William  W.  Drucker,  (12)
E-commerce,  Inc.,  (13)  Richard  M. and  Angelika  M.  Engeman,  (14) David H.
Engleberg,  (15) Bradley Exline, (16) Darlene J. Exline, (17) J. Peter and Heidi
Garthwaite, (18) Douglas W. and Janet L. Granger, (19) Jeannine Hallenbeck, (20)
David R. Hanson,  (21) Mark D. Heverly,  (22) Arthur M. Hsi, (23) Gregory K. and
Barbara O. Ingalls, (24) JNT, Inc., (25) Ross W. and Julie K. King, (26) Allison
B. Klass,  (27) Bettina Klassen,  (28) Michael Krause,  (29) Cheryl Lucas,  (30)
John  McCloskey,  (31)  Stephen  M.  McKay,  (32)  Todd C.  Meier,  (33) Paul G.


                                       25
<PAGE>




Muransky, (34) Rick Neitenbach,  (35) Gary R. Nemmers, (36) Matthew M. Nicholas,
(37) Nycon  Resources  Inc.,  (38)  Daniel A. and Sandra L. Nye,  (39) Thomas R.
O'Donnell,  (40) Heidi L. Omtvedt, (41) Bradley R. and Brooke T. Parker, (42) R.
David Preston,  (43) Thomas K. Primus,  (44) Quantum  Machinery Sales Inc., (45)
Robert J. Ross,  (46) Albert G. and Karen L.  Scharer,  (47) Paula M.  Schleder,
(48) Betty S. Shelley,  (49) Gregory J. Simonds,  (50) Greg Skufca, (51) Florine
Slaten,  (52) Brent and Linda B. Smith,  (53) Ray T. and Peggy A. Sterner,  (54)
Survivor's  Trust of the Weinstock  Family  Trust,  (55) Arthur M. and L. Jeanne
Tanner,  (56) Michael Tanner,  (57) Mark A. Tellinger,  (58) The Arthur V. Adams
Trust,  (59) Paula J. Ungs, (60) John Wallrath,  (61) Karl White, (62) Wild West
Woodworking,  (63) Wintrade Financial LLC, (64) Wayne F.J. Yakes, M.D., and (65)
Tom Zinna.


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

     This discussion may contain  forward-looking  statements that involve risks
and  uncertainties.  Our actual results may differ  materially  from the results
discussed in these  forward-looking  statements.  We undertake no  obligation to
release  publicly  the  results  of  any  revisions  to  these   forward-looking
statements  to reflect  events or  circumstances  arising after the date of this
report.

General
-------

     We derive our revenue primarily from the conduct of interactive auctions of
our own  inventory of fine art,  antiques and  collectibles  over the  Internet.
ArtRx.com,  a  division  of  Nicklebys.com,  makes  Nicklebys.com's  interactive
auction and other  technologies  and web traffic  available to other art service
businesses that register with artRx.com as "trade affiliates." The proportion of
our revenues we derive from each of our online activities is as follows:

     o    Internet sales - 52%;

     o    ArtRx.com trade affiliate listing fees - .01%; and

     o    ArtRx.com sales commissions - .01%.

We also market and sell fine art,  antiques and  collectibles  to, among others,
galleries,  designers and antique dealers  nationwide on a retail basis from our
showroom located in Wheat Ridge, Colorado, and at selected art shows hosted with
other  retailers.  Retail  sales from our  showroom  and at  selected  art shows
account for approximately 47.2% of our revenues. Additionally, we promote unique
contemporary and antique artists by consignments to retail galleries  throughout
the United  States that,  in turn,  promote the artists to their  clientele.  We
derive  approximately .8% of our revenues from these  consignments.  We have two
inactive subsidiary corporations,  including Nickleby's Auction Gallery Ltd. and
Art Exchange, Inc.

During 2001,  ArtRx.com  generated  revenue and cost of revenue in the amount of
$3,865   and   ($3,938).   Additionally,    ArtRx.com   incurred   general   and
administrative, marketing, travel and hosting  expenses in the mount of $75,710,
resulting in a division loss of $75,783





                                       26
<PAGE>




Results of Operations
---------------------

Year Ended December 31, 2001, Versus Year Ended December 31, 2000
-----------------------------------------------------------------

     Our total sales and service revenues decreased 19% from $656,965 during the
year ended  December 31, 2000,  to $532,125  during the year ended  December 31,
2001.  We  realized  interest  income of $9,812  and  $22,105  in the year ended
December 31, 2001, and 2000, respectively. We attribute the sizeable decrease in
our total  sales and  service  revenues  to the  recessionary  business  climate
throughout the world. The revenues we anticipated from our artRx.com project did
not  materialize.  We have ten  "trade  affiliates,"  including  one  affiliated
company,  registered  with  artRx.com as of the date of this report and interest
has declined substantially since the initial launch of the site in March 2001.

     We incurred a net loss of  $(257,702)  ($(.09)  per share)  during the year
ended  December 31, 2001,  as compared to a net loss of  $(186,007)  ($(.07) per
share)  during  the year  ended  December  310,  2000,  because  of the  factors
described below.  Cost of sales,  artwork and  collectibles,  decreased 26% from
$416,235 for the year ended  December  31, 2000,  to $309,210 for the year ended
December 31, 2001. Cost of sales,  related party,  increased from $4,112 for the
year ended December 31, 2000, to $10,381 for the year ended December 31, 2001, a
153% increase.  Sales and marketing expenses increased 17%, from $98,186 for the
year ended  December 31, 2000, to $114,724 for the year ended December 31, 2001.
This  increase  was the result of the  additional  expenditures  we  incurred in
connection with the marketing of the artRx.com project.  We incurred the bulk of
these expenditures to attend the Art Expo New York  International  Trade Show in
New  York  City,   New  York,  in  March  2001  for  the  purpose  of  launching
participation in the artRx.com program. These costs included,  among others, the
booth rental,  the  preparation  and printing of brochures  and other  marketing
literature,  travel and lodging.  General and administrative  expenses increased
1%, from  $288,619 to $291,278 for the year ended  December 31, 2000,  and 2001,
respectively.  General and administrative  expenses for 2000 include stock-based
compensation  for  management  consulting  services of $60,173.  The increase in
these  expenditures  was  attributable  to salary and other  costs  incurred  in
connection  with the  development  of the artRx.com  project.  Depreciation  and
amortization  increased  from $24,348 to $28,796 for the year ended December 31,
2000, and 2001, respectively,  an increase of 18%. In 2001, we increased our web
site  improvement and enhancement  activities,  on which we expended the sums of
$45,918  and  $33,329  during  the  year  ended  December  31,  2001  and  2000,
respectively, an increase of 38%.

Financial Condition and Liquidity
---------------------------------

     To date, Nicklebys.com has been funded through the sale of common stock for
gross proceeds of $926,975 under Section 3(b) and Rule 504 of Regulation D under
the  Securities  Act of 1933 in two  tranches  through  September  2000.  We had
$387,797 in working  capital as of December 31,  2001.  Our strategy in the near
future is to maintain a strong level of sales from  Nicklebys.com's  interactive
art auctions in order to support our  ArtRx.com  project.  Additionally  we have
implemented measures to reduce our operating expenses in order to counteract the
effects of declining  economic  conditions.  We believe that our future  success
will be the result of maintaining  Nicklebys.com's market share by our continued


                                       27
<PAGE>




emphasis on premiere  customer  service and a strong  product mix in combination
with revitalizing the interest of other art service businesses in registering on
artRx.com.

     As of December 31, 2001, we had total assets of $460,764,  including  total
current  assets  of  $413,622,  net  property  and  equipment  of  $27,378,  net
intangible  assets  of  $17,580  and  other  assets  of  $2,184.  We  had  total
liabilities  (current)  of $25,825 as of December  31,  2001.  We had a retained
deficit  of  $(4,832,162)  and  total  shareholders'  equity of  $434,939  as of
December 31, 2001.

     Net cash used in operating  activities  was  $(274,568)  for the year ended
December 31, 2001,  because of the net loss of  $(257,702)  incurred  during the
year, the increase in receivables  and other current assets of $(45,937) and the
decrease in accounts payable and other current  liabilities of $(2,600),  offset
by depreciation and amortization of $28,799 and a loss of $2,872 on the disposal
of an asset.  For the year ended  December 31, 2001,  net cash used in investing
activities was $(12,762) as a result of capital expenditures.  Cash decreased by
$(286,505), from $443,336 at the beginning of the year to $156,831 at the end of
the year, primarily, because of operating and investing activities.

Risks and Uncertainties
-----------------------

     We have a history of losses. Our accumulated deficit was $(4,832,162) as of
December  31,  2002.  Despite  the  cost-cutting  measures  that we  implemented
recently,  we have been  unable to  achieve  profitability.  We may be unable to
generate additional interest in our artRx.com project from the initial promising
interest levels at the time of the program's launch in March 2001.  Accordingly,
we expect our losses to  continue  in the  foreseeable  future.  We may never be
profitable  unless we succeed in  increasing  Nicklebys.com's  market  share and
revitalizing  the  artRx.com  project.  We plan to increase our market share and
revitalize the artRx.com division through additional  marketing  activities.  We
hope to increase  artRx.com's  exposure to potential  trade  affiliates  through
additional advertising, primarily. We have plans, at some time in the future, to
employ  marketing  personnel  for  this  purpose  and to  conduct  seminars  for
potential  trade  affiliates in order to  familiarize  them with the benefits of
artRx.com,  including our  interactive  auction and other  technologies  and web
traffic.  If sales from online art  auctions and retail sales fail to provide us
with the necessary  capital to increase our marketing and  advertising,  we will
seek to raise additional financing for these purposes.

Inflation
---------

     We believe that inflation has not had a material impact on our business.

Seasonality
-----------

     We do not believe that our business is seasonal.






                                       28
<PAGE>




Item 7.      Financial Statements.

     The  Consolidated   Financial   Statements  of  Nicklebys.com,   Inc.,  and
Nickleby's  Auction  Gallery  Ltd.  and Art  Exchange,  Inc.,  our  wholly-owned
subsidiaries,  the Notes to Consolidated  Financial Statements and the Report of
Independent  Accountants of Cordovano and Harvey,  P.C.,  independent  certified
public  accountants,  required  by this  Item 7.  commence  on page  F-1 and are
incorporated  herein by this reference.  The Consolidated  Financial  Statements
filed as part of this  Annual  Report on Form  10-KSB are listed in the Index to
Financial Statements below:

                                                                        Page
                                                                        ----

Report of Independent Accountants..................................      F-2

Consolidated Balance Sheet at December 31, 2001....................      F-3


Consolidated Statements of Operations for the years ended
  December 31, 2001, and 2000......................................      F-4

Consolidated Statement of Changes in Shareholders' Equity
  for the years ended December 31, 2001, and 2000..................      F-5

Consolidated Statements of Cash Flows for the years ended
  December 31, 2001, and 2000......................................      F-6

Notes to Consolidated Financial Statements.........................      F-7


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

     Neither  Nicklebys.com  nor its  subsidiary  companies  had an  independent
accountant  prior to the  retention of Cordovano  and Harvey,  P.C.,  201 Steele
Street, Suite #300, Denver,  Colorado 80206, in November 1999. There has been no
change in Nicklebys.com's or its subsidiaries' independent accountant during the
period commencing with the retention of Cordovano and Harvey,  P.C., through the
date of this report.













                                       29
<PAGE>





                                    PART III


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

Executive Officers and Directors
--------------------------------

     Set forth below are the names, ages,  positions with Nicklebys.com and each
of Nickleby's  Auction  Gallery and Art  Exchange,  100%-owned  subsidiaries  of
Nicklebys.com,  and business  experience of the executive officers and directors
of Nicklebys.com and its subsidiaries.

            Name               Age                      Position
--------------------------     ---      ----------------------------------------

Scott M. Thornock              42      Chief Executive Officer, Chief Financial
                                       Officer, Secretary and Director

Bruce A. Capra                 48      President and Chairman of the Board of
                                       Directors

Paul J. Zueger                 64      Director

Wayne F.J. Yakes, M.D.         48      Director

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

     *The above-named  individuals may be deemed to be "promoters" and "parents"
of  Nicklebys.com  and its  subsidiaries,  as those terms are defined  under the
General Rules and Regulations promulgated under the Securities Act of 1933.

General
-------

     Directors  hold  office  until the next annual  meeting of  Nicklebys.com's
shareholders  and  until  their  respective  successors  have been  elected  and
qualify.  Officers serve at the pleasure of the Board of Directors. Mr. Capra is
employed  full  time  by  Nicklebys.com  and  Mr.  Thornock   regularly  devotes
approximately   thirty   hours  per  month  to  the   business  and  affairs  of
Nicklebys.com,  Nickleby's Auction Gallery and/or Art Exchange.  Messrs.  Zueger
and  Yakes  devote  such  time  and  effort  to  the  business  and  affairs  of
Nicklebys.com  and/or its  subsidiaries  as may be  necessary  to perform  their
responsibilities as directors of the companies.  Set forth below under "Business
Experience"  is a description  of the business  experience of Messrs.  Thornock,
Capra, Zueger and Yakes.

Family Relationships
--------------------

     There are no family  relationships  between or among the executive officers
and directors of Nicklebys.com and its subsidiaries.





                                       30
<PAGE>




Business Experience
-------------------

     Scott M. Thornock has approximately fifteen years of experience in the real
     -----------------
estate  development  business and in the  management  of a number of private and
public,  start-up companies.  He has served as the Chief Executive Officer and a
director of  Nicklebys.com  since October 16, 2000,  and as the  President,  the
Chief Financial Officer,  the Secretary and a director of Nicklebys.com from the
date of our  inception on January 13,  1999,  through  October 16, 2000.  He has
served as the President, the Treasurer and a director of Posteralley.com,  Inc.,
Denver,  Colorado,  a small online  retailer and broker of fine art posters that
recently  applied  for  clearance  of  quotations  on its  common  stock  on the
Over-The-Counter Bulletin Board, since the company's inception on July 19, 1999.
He has been the sole  owner and  managing  member of  Paragon  Real  Estate  and
Development,   L.L.C.,   a  Denver,   Colorado-based   residential  real  estate
development,   brokerage  and  business   consulting  firm  that  has  performed
administrative  supervision,  financial management and other services for, among
others,  thirty-five  Colorado limited liability companies of which Mr. Thornock
has been the founder,  the manager and a member, since he founded the company in
March 1996. These  thirty-five  limited liability  companies,  including Paragon
Development  I-IV,  L.L.C.,   Paragon   Development  VI-XII,   L.L.C.,   Paragon
Development  XIV-XXXV,  L.L.C.,  32-5,  L.L.C., and Paragon Investment Group, I,
L.L.C.,  have raised capital from time-to-time over the past  approximately five
years for the purposes of acquiring,  developing,  constructing and/or brokering
multi-family,  residential properties located in Denver,  Boulder,  Longmont and
Vail, Colorado.  Twenty of these companies are operating currently. Mr. Thornock
has held a real estate  brokers  license in the State of Colorado since December
1995.  He received a Bachelor of Arts degree in history and a Masters  degree in
business management from the University of Colorado,  Boulder, Colorado, in 1982
and 1994, respectively.

     Bruce A. Capra has  served as the  Chairman  of the Board of  Directors  of
     --------------
Nicklebys.com  since its  inception  on January 13, 1999,  and as our  President
since October 16, 2000. He served as  Nicklebys.com's  Chief  Executive  Officer
from the date of our organization through October 16, 2000. Mr. Capra has served
as the Secretary and a director of Posteralley.com,  Inc., Denver,  Colorado,  a
small online  retailer and broker of fine art posters that is presently  engaged
in a public  securities  offering,  since its inception on July 19, 1999. He was
employed,  from 1988 until his  resignation  on  February  1999,  as the General
Manager and the  Director  of Sales,  Marketing  and  Advertising  for  American
Design, Ltd., an Aurora,  Colorado,  corporation specializing in the publication
of fine art that has twelve retail outlets  located in California,  Colorado and
New Mexico.  American  Design,  which is today  recognized as one of the largest
wholesale  fine  art  publishing  firms in the  United  States,  realized  gross
revenues of  approximately  $12,000,000  during its most recent fiscal year. Mr.
Capra served as the  President,  the Chief  Executive  Officer and a director of
Perseus Art Group,  Inc., a publicly-held  Colorado  corporation,  from June 26,
1998,  until his  resignation  from these positions with PAG on May 12, 1999. He
was the founder and served as the  President,  a director  and the sole owner of
Nickleby's  Auction  Gallery  Ltd.,  Arvada,  Colorado,  an auction  liquidation
company  specializing in fine art, antiques and collectibles,  from 1992 through
January 15, 1999, when we purchased the company. Mr. Capra founded and served as
the  President,  from 1981 until the sale of the business in 1988, of Image Tech
Inc., Denver,  Colorado,  a fine art serigraph printing company  specializing in
printing and publishing fine art and commercial  signage and, during Mr. Capra's


                                       31
<PAGE>




tenure,  printed  limited  edition  fine art  prints for  internationally  known
artists such as Andy Warhol, Roy Liechtenstein,  Earl Biss and others.  Prior to
that time,  from 1979 through 1982, he owned and operated The Mushroom  Gallery,
Ltd., an art gallery located in Denver,  Colorado.  Mr. Capra attended  Missouri
Auction School in 1988 and is a licensed auctioneer in the states of California,
Colorado,  Nevada and Texas. He is also a certified  personal property appraiser
and a member of the Certified Appraisers Guild of America.

     Paul J. Zueger has served as a director of  Nicklebys.com  since  September
     --------------
15, 1999.  Since 1972, Mr. Zueger has been the sole  shareholder,  the President
and  a  director  of  American  Design,   Ltd.,  Aurora,   Colorado,  a  company
specializing  in the  publication  of fine art that has  twelve  retail  outlets
located  in  California,  Colorado  and New  Mexico.  American  Design  is today
recognized  as one of the largest  wholesale  fine art  publishing  firms in the
United States.  Under the auspices of American Design, Mr. Zueger is responsible
for having developed a national direct sales force;  representing and publishing
the artworks of several leading artists;  and successfully  managing twelve fine
art galleries  located in three states.  In 1989,  Mr. Zueger founded and, since
that date, has served on the Board of Directors of The Synaptic  Corporation,  a
privately-held  biotechnology  company  with  offices in Aurora,  Colorado.  The
Synaptic  Corporation is engaged in the manufacture,  marketing and distribution
of a line of FDA-approved products that use patented electromedicine  techniques
in the treatment and management of acute and chronic pain.

     Wayne F.J.  Yakes,  M.D., has served as a director of  Nicklebys.com  since
     ------------------------
October 16, 2000.  Since 1986, Dr. Yakes has  specialized  in treating  vascular
malformations using endovascular  transcather techniques he pioneered in lieu of
open surgery. Since 1986, he has authored numerous medical articles and textbook
chapters on the subject.  In 1991,  he  established  the  Vascular  Malformation
Center at Swedish Medical Center, Englewood,  Colorado, the only organization of
its kind, to specialize in the diagnosis and management of vascular anomalies in
all anatomic locations.  Dr. Yakes presently serves as the Vice President of the
International  Society  for  the  Study  of  Vascular  Anomalies.  His  academic
appointments  include the University of Colorado Health Sciences Center (Denver,
Colorado),  the  University of Michigan  Medical  School (Ann Arbor,  Michigan),
Swedish Medical Center (Englewood,  Colorado), Porter Memorial Hospital (Denver,
Colorado),  and  Littleton  Hospital  (Littleton,  Colorado).  He has  served on
numerous hospital and national  committees during the past five years. Dr. Yakes
is a journal reviewer for the Journal of Vascular and Interventional  Radiology,
                              -------------------------------------------------
the American Journal of Roentgenology and Radiology.  He is a member of numerous
    ---------------------------------     ---------
societies,  including,  among others, the International Society for The Study of
Vascular Anomalies, the American Society of Neuroradiology, the American Society
of  Interventional  and  Therapeutic  Neuroradiology,  the World  Federation  of
Interventional and Therapeutic  Neroradiology,  and the Western Neroradiological
Society.  Dr.  Yakes  received  a  Bachelor  of Arts  degree  in 1975  from Rice
University,  Houston,  Texas.  He received an M.D. degree in 1979 from Creighton
University School of Medicine, Omaha, Nebraska.

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

     Section  16(a) of the  Securities  and  Exchange  Act of 1934  requires our
executive  officers  and  directors  and  persons  who own  more  than  10% of a


                                       32
<PAGE>




registered  class of our  equity  securities,  to file with the  Securities  and
Exchange  Commission  initial  statements  of beneficial  ownership,  reports of
changes in ownership and annual reports  concerning their  ownership,  of common
stock  and  other  equity  securities  of  Posteralley.com  on Forms 3, 4 and 5,
respectively.  Executive  officers,  directors and greater than 10% shareholders
are required by the Securities and Exchange Commission regulations to furnish us
with copies of all Section 16(a) reports they file.  To our  knowledge,  Messrs.
Thornock  and Capra,  our  executive  officers,  directors  and greater than 10%
beneficial  owners of our common stock,  have complied with Section 16(a) filing
requirements applicable to them during our fiscal year ended September 30, 2000.


Item 10.     Executive Compensation

     The following table sets forth  information  concerning the compensation of
our executive  officers,  including the dollar value of base salary and/or other
annual  compensation  earned,  and the  number of  securities  underlying  stock
options  granted,  during the 2001 and the 2000 fiscal years and the period from
our inception on January 13, 1999, through December 31, 1999.

<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

                                                                    Long Term Compensation
                                Annual Compensation                         Awards
                           ------------------------------    -----------------------------------
   (a)           (b)         (c)                 (d)             (e)                  (f)
 Name and                                    Other Annual     Restricted          Securities
 Principal                                   Compensation    Stock Award(s)       Underlying
 Position        Year      Salary($)             ($)             ($)            Options/SAR's(#)
------------------------------------------------------------------------------------------------

<S>              <C>         <C>               <C>              <C>                <C>
Scott M.         2001        $-0-              $2,554*          $-0-                  -0-
Thornock,        2000        $-0-              $2,554*          $-0-                  -0-
Chief            1999        $-0-              $2,128*          $-0-               530,000
Executive
Officer,
Chief
Financial
Officer and
Secretary

Bruce            2001        $60,000           $4,945*          $-0-                  -0-
A. Capra,        2000        $60,000           $4,945*          $-0-                  -0-
President        1999        $60,000           $4,121*          $-0-               533,349
and
Chairman
of the
Board of
Directors

------------------
</TABLE>



                                       33
<PAGE>




     *Represents  payments for coverage under a group medical insurance benefits
plan.

     The following table sets forth information  concerning the number of shares
of common  stock  underlying  exercisable  stock  options at fiacal  year-end on
December 31, 2001. No stock options have been  exercised  since our inception on
January 13, 1999.

               Aggregated Option/SAR Exercises in Last Fiscal Year
                          and FY-End Option/SAR Values

   (a)            (b)            (c)             (d)                (e)
                                              Number Of
                                             Securities           Value Of
                                             Underlying         Unexercised
                                             Unexercised        In-The-Money
                                           Options/SAR's At   Options/SARs At
                 Shares         Value         FY-End (#)          FY-End ($)
               Acquired On     Realized      Exercisable/       Exercisable/
    Name       Exercise (#)      ($)         Unexercisable     Unexercisable
--------------------------------------------------------------------------------

Scott M.           -0-          $-0-          530,000(1)          $-0-(2)
Thornock,
Chief
Executive
Officer,
Chief
Financial
Officer and
Secretary

Bruce              -0-          $-0-          533,349(1)          $-0-(2)
A. Capra,
President
and
Chairman
of the
Board of
Directors
------------------

     (1)  Exercisable.

     (2)  Fair value as determined by our Board of Directors and accountant.






                                       34
<PAGE>




General
-------

     Since our  inception on January 13,  1999,  Mr.  Scott M.  Thornock,  Chief
Executive Officer, Chief Financial Officer and Secretary, has been employed part
time, and Mr. Bruce A. Capra,  President and Chairman of the Board of Directors,
has been a full-time  employee.  Mr. Thornock has received no cash  compensation
for his  services  except  medical  insurance  benefits  under  a group  medical
insurance  benefits plan commencing  March 1, 1999. For his services,  Mr. Capra
has  received a salary of $60,000  per annum in  addition  to medical  insurance
benefits  under the group plan since March 1, 1999.  No other cash  compensation
has  been  awarded  to,  earned  by or  paid  to  either  individual  since  our
organization for all services  rendered in all capacities to  Nicklebys.com  and
its subsidiaries.

     On January 13,  1999,  we issued  2,000,000  shares of common  stock to Mr.
Capra  and  1,860,000  shares  of  common  stock to Mr.  Thornock  for  services
performed by each  individual  in  connection  with our  organization  valued at
$2,000 in Mr.  Capra's case and $1,860 in Mr.  Thornock's  case,  at the rate of
$.001 per share. Mr. Capra returned 1,471,700 (73.6%) of his 2,000,000 shares of
common stock, and Mr. Thornock returned 861,000 (46.3%) of his 1,860,000 shares,
to us for  cancellation on December 30, 1999.  Further,  in lock-up  agreements,
Messrs.  Thornock  and Capra  agreed  not to sell or  otherwise  alienate  their
respective  453,300  shares and 439,000 shares for a period of two years through
December 29, 2001.

Stock Option Grants
-------------------

     On December 30, 1999, we granted Mr. Capra options  exercisable to purchase
453,300 shares of common stock, and Mr. Thornock options exercisable to purchase
530,000  shares of common stock,  at an exercise price of $.66 per share through
December  29,  2004.  See Part I, Item 7.  "Certain  Relationships  and  Related
Transactions,"  and Part II, Item 4. "Recent Sales of Unregistered  Securities,"
for a description of stock option grants to other directors and others.

Long-Term Incentive Plans
-------------------------

     We  do  not  provide  our  officers  or  employees   with  pension,   stock
appreciation rights, long-term incentive or other plans and have no intention of
implementing  any of these plans for the foreseeable  future.  The provisions of
these plans would be at the discretion of our Board of Directors.

Indemnification
---------------

     Under Colorado law and pursuant to our amended  Articles of  Incorporation,
we may indemnify  our officers and  directors  for various  expenses and damages
resulting from their acting in these capacities.  Insofar as indemnification for
liabilities  arising  under  the  Securities  Act of 1933  may be  permitted  to
officers or directors of  Nicklebys.com  pursuant to those  provisions,  we have
been  informed by our counsel that,  in the opinion of the U.S.  Securities  and
Exchange Commission,  this indemnification is against public policy as expressed
in the Securities Act of 1933, and is therefore unenforceable.




                                       35
<PAGE>




Compensation of Directors
-------------------------

     Our directors receive no compensation  pursuant to any standard arrangement
for their services as directors.


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

     The following table sets forth certain information  regarding the ownership
of our common stock as of March 28, 2002, by each shareholder  known by us to be
the  beneficial  owner of more than five per cent of our  outstanding  shares of
common  stock,  each  director of  Nicklebys.com  and its  subsidiaries  and all
executive  officers and directors of  Nicklebys.com  and its  subsidiaries  as a
group.  Under the  General  Rules and  Regulations  of the U.S.  Securities  and
Exchange Commission, a person is deemed to be the beneficial owner of a security
if the person has or shares the power to vote or direct the  voting,  or dispose
or direct the disposition,  of the security.  Each of the shareholders  named in
the table has sole  voting and  investment  power with  respect to the shares of
common stock beneficially owned.

                                                Shares            Percentage
                                             Beneficially             of
          Beneficial Owner                    Owned (1)            Class (2)
---------------------------------------    ----------------    ----------------

Bruce A. Capra (3) (4)                      1,002,316 (5)          19.92%
6343 Umber Circle
Golden, Colorado  80403

Scott M. Thornock (3) (4)                     909,316 (6)          18.07%
650 South Cherry Street, Suite #310
Denver, Colorado  80246

Entrepreneur Investments LLC (7)              732,500 (8)          14.56%
1869 West Littleton Boulevard
Littleton, Colorado  80120

The Zueger Family Trust (9)                   306,056 (10)          6.08%
3177 South Parker Road
Aurora, Colorado  80014

1st Net Technologies, Inc. (11)               235,500 (12)          4.68%
11415 West Bernardo Court, 2nd Floor
San Diego, California  92127

Paul J. Zueger (4)                            519,966 (13)         10.34%
3177 South Parker Road
Aurora, Colorado  80014




                                       36
<PAGE>




Wayne F.J. Yakes, M.D. (4)                     80,000               1.60%
1800 East Green Oaks Drive
Littleton, Colorado  80121

All executive officers and directors        2,511,598              49.91%
as a group (four persons)

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

     (1)  Under the General Rules and  Regulations  of the U.S.  Securities  and
Exchange Commission, a person is deemed to be the beneficial owner of a security
if that person has or shares the power to vote or direct the voting,  or dispose
or direct the  disposition,  of the  security.  A person is also  deemed to be a
beneficial  owner of any  securities  if that  person  has the right to  acquire
beneficial ownership of the securities within sixty days. Accordingly, more than
one person may be deemed to be a beneficial owner of the same securities. Unless
otherwise  indicated by footnote,  the named entities or  individuals  have sole
voting and investment power with respect to the shares of common stock they own.
Except for 1st Net  Technologies,  the number of shares shown includes shares of
common stock that may be issued upon exercise of outstanding stock options.

     (2)  Represents  the number of shares of common  stock  owned of record and
beneficially  by each  named  person  or group,  expressed  as a  percentage  of
5,031,011  shares of common  stock  outstanding  as of the date of this  report,
including  2,130,000  shares  issuable upon the exercise of outstanding  options
exercisable at an exercise price of $.66 per share through December 29, 2004.

     (3)  Executive  officer  of  Nicklebys.com  and its  subsidiary  companies,
including Nickleby's Auction Gallery and Art Exchange.

     (4)  Member  of  the  Board  of   Directors   of   Nicklebys.com   and  its
subsidiaries.

     (5)  Includes  533,349 shares of common stock issuable upon the exercise of
options  exercisable at an exercise price of $.66 per share through December 29,
2004.

     (6)  Includes  530,000 shares of common stock issuable upon the exercise of
options  exercisable at an exercise price of $.66 per share through December 29,
2004.

     (7)  Mr. James H. Watson,  Jr., a former director,  serves as the owner and
the general managing member of Entrepreneur Investments.

     (8)  Includes  530,000 shares of common stock issuable upon the exercise of
options  exercisable at an exercise price of $.66 per share through December 29,
2004. Because of Mr. Watson's ownership of Entrepreneur  Investments,  ownership
of the shares of common stock owned by Entrepreneur  Investments is attributable
to him under  the  General  Rules and  Regulations  of the U.S.  Securities  and
Exchange Commission.




                                       37
<PAGE>




     (9)  Mr. Paul J. Zueger, a director of Nicklebys.com, is the trustee of the
Zueger Family Trust.

     (10) Includes  173,308  shares  issuable  upon the  exercise  by The Zueger
Family  Trust of  options  exercisable  at an  exercise  price of $.66 per share
through  December 29, 2004.  Because of Mr. Zueger's  position as the trustee of
The Zueger  Family  Trust,  ownership of the shares of common stock owned by the
trust is attributable to him under the General Rules and Regulations of the U.S.
Securities and Exchange Commission.

     (11) Mr. James H. Watson, Jr., a former director,  is an executive officer,
a  director  and  a  controlling   shareholder  of  1st  Net   Technologies,   a
publicly-held Colorado corporation.

     (12) Because of Mr. Watson's control  positions with 1st Net  Technologies,
ownership of the shares owned by 1st Net  Technologies  is  attributable  to him
under  the  U.S.  Securities  and  Exchange   Commission's   General  Rules  and
Regulations.

     (13) Includes  285,000 shares of common stock issuable upon the exercise of
options  exercisable through December 29, 2004, at an exercise price of $.66 per
share,  including  111,692  shares  issuable to Mr.  Zueger and  173,308  shares
issuable to The Zueger Family Trust, and 132,748 shares owned by the trust.


Item 12.     Certain Relationships and Related Transactions.

     On January 13, 1999, we issued  2,000,000  shares,  1,860,000  shares,  and
280,000 shares, of common stock to Messrs. Bruce A. Capra, Scott M. Thornock and
Richard E. Capra,  respectively  (a total of  4,140,000  shares),  for  services
performed by each  individual  in  connection  with our  organization  valued at
$2,000, $1,860 and $280, respectively, at the rate of $.001 per share. Mr. Capra
returned  1,471,700  (73.6%) of his  2,000,000  shares,  Mr.  Thornock  returned
861,000  (46.3%)  of his  1,860,000  shares and Mr.  Richard  E. Capra  returned
214,000  (76.4%) of his 280,000 shares,  to us for  cancellation on December 30,
1999.  Also, on December 30, 1999, we granted Mr. Bruce A. Capra,  Mr.  Thornock
and Mr.  Richard E.  Capara  options  exercisable  to purchase  533,349  shares,
530,000 shares and 80,000 shares, respectively, through December 29, 2004, at an
exercise price of $.66 per share. Messrs.  Bruce A. Capra,  Thornock and Richard
E. Capra purchased 16,667 shares, 31,316 shares, and 8,333 shares, respectively,
for $9,400,  $18,790 and $5,000 in cash,  respectively  ($.60 per share), in the
first tranche of our offering of common stock pursuant to Rule 504 of Regulation
D under  Section  3(b) of the  Securities  Act of 1933  completed  in June 1999.
Messrs.  Bruce A. Capra and Thornock serve as our executive  officers and two of
our four  directors and own 19.9% and 18.1%,  respectively,  of our  outstanding
common stock.  Mr.  Richard E. Capra,  owner of 1.3% of our  outstanding  common
stock, resigned as a director in November 2000. On December 30, 1999, we entered
into lock-up  agreements  with Messrs.  Bruce A. Capra,  Thornock and Richard E.
Capra  providing  for each  individual  to refrain  from  selling  or  otherwise
alienating his respective 453,300 shares, 439,000 shares and 66,000 shares for a
period of two years through December 29, 2001.





                                       38
<PAGE>




     On January 14, 1999, we issued 860,000 shares of common stock and 1,000,000
shares  to  Entrepreneur  Investments,  LLC,  and  1st Net  Technologies,  Inc.,
respectively (a total of 1,860,000 shares),  for each company's entering into an
agreement to perform  services for us, which actions were valued at $150,000 and
$392,000,  respectively  (a total of $542,000),  at the rate of $.001 per share.
Entrepreneur  Investments  performed  public  relations  services,  and  1st Net
Technologies  performed  web site  design,  maintenance,  hosting and  marketing
services, for us for a one-year period through February 2000. We paid $50,000 in
cash to 1st Net Technologies  for its  Internet-related  services.  Entrepreneur
Investments  returned 657,500 (76.5%) of its 860,000 shares of common stock, and
1st Net Technologies returned 764,500 (76.5%) of its 1,000,000 shares, to us for
cancellation  on December 30,  1999.  Also,  on December  30,  1999,  we granted
Entrepreneur  Investments  options  exercisable  to purchase  530,000  shares of
Common Stock through  December 29, 2004, at an exercise price of $.66 per share.
Entrepreneur   Investments  and  1st  Net   Technologies  own  14.6%  and  4.7%,
respectively,  of  our  outstanding  common  stock.  Ownership  of  Entrepreneur
Investments'  and 1st Net  Technologies'  shares is attributable to Mr. James H.
Watson,  Jr.,  a former  director,  because  of his  ownership  of  Entrepreneur
Investments  and  positions as an executive  officer,  director and  controlling
shareholder  of 1st Net  Technologies.  On December  30,  1999,  we entered into
lock-up  agreements  with  Entrepreneur  Investments  and 1st  Net  Technologies
providing  for them to  refrain  from  selling  or  otherwise  alienating  their
respective  202,500  shares and 235,500 shares for a period of two years through
December 29, 2001.

     On January 15,  1999,  we acquired all 5,100  outstanding  shares of common
stock of Nickleby's  Auction Gallery Ltd. then owned by Mr. Bruce A. Capra,  our
President,  Chairman and owner of 19.9% of our outstanding common stock. We paid
the sum of $47,832 for the shares.  As a result of the acquisition,  we obtained
net assets valued at $26,183, including, primarily, Nickleby's Auction Gallery's
customized web site and customer list; an inventory of fine artworks;  the right
to  use  the  names  "Nickleby's,"   "Nickleby's   International  Auctions"  and
"Nickleby's Auction Gallery"; and the domain names  http://www.nicklebys.com and
                                                    ------------------------
http://www.forbidding.com.   In  the  consolidated   financial  statements  that
-------------------------
accompany this report,  goodwill of $21,649  resulting from the  transaction was
charged to  additional  paid-in  capital  because  the  acquisition  was between
related parties.

     On June 25, 1999, we entered into the Stock Purchase and Exchange Agreement
with Art Exchange,  Inc., Mr. Paul J. Zueger, a director,  and The Zueger Family
Trust  pursuant  to which we issued  600,000  shares to Mr.  Zueger and  400,000
shares to the trust in exchange for all 1,000,000  outstanding  shares of common
stock of Art  Exchange  owned by Mr.  Zueger and the  trust.  As a result of the
transaction,  we acquired assets,  including the non-exclusive  right to conduct
live  auctions  of fine art,  antiques  and  collectibles  consigned  to Gallery
Denver,  Inc.  (formerly Museum Auctions,  Ltd.), a Colorado  corporation  owned
solely by Mr.  Zueger;  the use of the assumed name "Museum  Auctions,  Ltd." in
Colorado; and all rights to Gallery Denver's "auction" customer mailing list. We
recorded  $600,000  in  goodwill  as a  result  of  the  transaction.  We  later
determined the fair value of the assets to be $-0- and, accordingly, at December
31, 1999, we recorded an impairment  write-down of $600,000. In the accompanying
consolidated  financial  statements,  we reported the impairment write-down as a
component of income from operations  before income taxes. In connection with the
acquisition,  Gallery  Denver  agreed  to pay  Art  Exchange  sales  commissions



                                       39
<PAGE>




equivalent  to 25% of the aggregate  sales price of all consigned  goods sold by
Gallery  Denver at live auctions  conducted by Art Exchange after July 28, 1999.
Mr. Zueger returned 276,948 (76.4%) of his 362,500 shares and the trust returned
429,752  (76.4%) of its 562,500 shares,  to us for  cancellation on December 30,
1999.  Also,  on December 30, 1999,  we granted Mr. Zueger and the trust options
exercisable  to purchase  111,692  shares and 173,308 shares (a total of 285,000
shares),  respectively,  through December 29, 2004, at an exercise price of $.66
per share. Mr. Zueger and the trust own 16.4% (including the trust's shares) and
6.1%,  respectively,  of our outstanding  common stock. On December 30, 1999, we
entered  into lock-up  agreements  with Mr.  Zueger and the Zueger  Family Trust
pursuant  to which each  person  agreed to  refrain  from  selling or  otherwise
alienating its  respective  85,552 shares and 132,748 shares for a period of two
years through December 29, 2001.

     Because of their present management positions with,  organizational efforts
on behalf of and/or percentage share ownership in, Nicklebys.com,  Messrs. Bruce
A. Capra,  Scott M.  Thornock,  James H. Watson,  Jr., and Paul J. Zueger may be
deemed to be "parents"  and  "promoters"  of  Nicklebys.com,  as those terms are
defined in the Securities Act of 1933 and the applicable  Rules and  Regulations
under the Securities Act of 1933. Because of these  relationships,  transactions
between and among the aforementioned individuals and us, such as Nicklebys.com's
sale of shares  and grant of options to each of them  and/or  entities  owned or
controlled by them as described above, should not be considered to have occurred
at arm's-length.

     On January 13,  1999,  we issued  50,000  shares of common  stock to Cudd &
Associates,  our  special  securities  counsel,  for the  performance  of  legal
services valued at $500 ($.001 per share).  The legal services performed by Cudd
& Associates included rendering legal advice in connection with the organization
of   Nicklebys.com   as  a  corporation  and  the  preparation  of  Articles  of
Incorporation,  Bylaws and minutes of our  corporate  proceedings.  We issued an
additional  25,000  shares of common stock to Cudd &  Associates  for $15,000 in
cash ($.60 per share) on February  26, 1999.  On December  30, 1999,  we granted
Patricia Cudd, Esq., sole proprietor of Cudd & Associates,  options  exercisable
to purchase  50,000 shares  through  December 29, 2004, at an exercise  price of
$.66 per share. Ms. Cudd, as the sole proprietor of Cudd & Associates, performed
legal  services,   including,   but  not  limited  to,  preparing  or  reviewing
miscellaneous correspondence, agreements, documents and minutes of and unanimous
written  consents to our corporate  proceedings  and furnishing  legal advice in
connection  with the  foregoing,  in  consideration  for the  grant of the stock
options. Cudd & Associates and Patricia Cudd, Esq., together own 125,000 shares,
representing approximately 2.5% of our outstanding common stock.

     We have sold a limited  number of items  online that were  consigned  to us
from the personal collections of our executive officers, including Messrs. Scott
M. Thornock and Bruce A. Capra, and others.  We receive,  on average,  a listing
fee in the  amount of  approximately  20% of the sale price of each item sold on
consignment for management or others. We realized $1,403, $15,178 and $15,564 in
listing  fees  on  consignment  sales  totaling  $7,013,  $75,888  and  $77,822,
respectively,  for Mr.  Thornock for the years ended December 31, 2001, 2000 and
1999,  respectively.  We realized listing fees of $125 on consignment  sales for
Mr. Capra for the year ended December 31, 1999. Messrs.  Thornock and Capra paid
us a listing fee of 20% of the sale price of each  consigned  item at the end of
the month in which the item was sold.  We  reimbursed  Mr.  Thornock the sums of
$5,610, $60,980 and $74,112 for artwork he purchased on our behalf for the 2001,
2000 and 1999 fiscal years, respectively.  We purchased inventory in the amounts
of $22,771 and $108,751 from American Design, an affiliated company,  during the
fiscal years ended 2001 and 2000. We recorded  revenue in the amounts of $17,278
and $6,527 and  related  cost of sales in the amounts of $10,381 and $4,112 from
sales  transactions  with  American  Design and  Posteralley.com,  an affiliated
company, during the years ended December 31, 2001 and 2000.
Item 13.     Exhibits and Reports on Form 8-K.

     (a)  The  exhibits  required  to be filed with this  Annual  Report on Form
10-KSB by Item 601 of  Regulation  S-B, as described in the  following  index of
exhibits, are incorporated herein by reference, as follows:





                                       40
<PAGE>




Item
Number                                 Description
------    ----------------------------------------------------------------------

3.1       Articles of Incorporation of  Nickleby's.com,  Inc., filed January 13,
          1999.  (Incorporated  herein  by  reference  to  Exhibit  3.1  to  the
          Registration  Statement on Form  10-SB/A,  File No.  000-33339,  filed
          November 14, 2001.)

3.2       Articles  of   Amendment   to  the   Articles  of   Incorporation   of
          Nickleby's.com,  Inc., filed January 25, 1999. (Incorporated herein by
          reference  to  Exhibit  3.2  to the  Registration  Statement  on  Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

3.3       Certificate of Correction of Nicklebys.com,  Inc. (Incorporated herein
          by  reference  to Exhibit 3.3 to the  Registration  Statement  on Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

3.4       Bylaws of  Nicklebys.com,  Inc.  (Incorporated  herein by reference to
          Exhibit 3.4 to the  Registration  Statement on Form 10-SB/A,  File No.
          000-33339, filed November 14, 2001.)

3.5       Articles of  Incorporation  of Nickleby's  Auction  Gallery Ltd. filed
          March 16,  1994.  (Incorporated  herein by reference to Exhibit 3.5 to
          the Registration Statement on Form 10-SB/A, File No. 000-33339,  filed
          November 14, 2001.)

3.6       Bylaws of  Nickleby's  Auction  Gallery Ltd.  (Incorporated  herein by
          reference  to  Exhibit  3.6  to the  Registration  Statement  on  Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

3.7       Articles of Incorporation  of Art Exchange,  Inc., filed June 3, 1999.
          (Incorporated  herein by reference to Exhibit 3.7 to the  Registration
          Statement on Form  10-SB/A,  File No.  000-33339,  filed  November 14,
          2001.)

3.8       Certificate of Correction of Art Exchange,  Inc.  (Incorporated herein
          by  reference  to Exhibit 3.8 to the  Registration  Statement  on Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

3.9       Bylaws of Art  Exchange,  Inc.  (Incorporated  herein by  reference to
          Exhibit 3.9 to the  Registration  Statement on Form 10-SB/A,  File No.
          000-33339, filed November 14, 2001.)

4.0       Form of  Stock  Certificate.  (Incorporated  herein  by  reference  to
          Exhibit 4.0 to the  Registration  Statement on Form 10-SB/A,  File No.
          000-33339, filed March 28, 2002.)






                                       41
<PAGE>




10.1      Internet  Marketing & Joint Venture  Agreement dated January 14, 1999,
          between  1st  Net   Technologies,   Inc.,  and   Nicklebys.com,   Inc.
          (Incorporated  herein by reference to Exhibit 10.1 to the Registration
          Statement on Form  10-SB/A,  File No.  000-33339,  filed  November 14,
          2001.)

10.2      Stock   Purchase   Agreement   dated   January   15,   1999,   between
          Nicklebys.com,  Inc., on the one hand, and Nickleby's  Auction Gallery
          Ltd., and Bruce A. Capra, on the other hand.  (Incorporated  herein by
          reference  to  Exhibit  10.2  to the  Registration  Statement  on Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

10.3      Consulting  Agreement  dated  February 1, 1999,  between  Entrepreneur
          Investments,  L.L.C., and Nicklebys.com,  Inc. (Incorporated herein by
          reference  to  Exhibit  10.3  to the  Registration  Statement  on Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

10.4      Asset  Purchase and Sale  Agreement  dated June 25, 1999,  between Art
          Exchange,  Inc., on the one hand, and Museum Auctions,  Ltd., and Paul
          J. Zueger The Zueger  Family Trust,  on the other hand.  (Incorporated
          herein by reference to Exhibit 10.4 to the  Registration  Statement on
          Form 10-SB/A, File No. 000-33339, filed November 14, 2001.)

10.5      Agreement for Auction Sales Commissions  dated June 25, 1999,  between
          Art Exchange,  Inc., and Museum Auctions, Ltd. (Incorporated herein by
          reference  to  Exhibit  10.5  to the  Registration  Statement  on Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

10.6      Stock  Purchase and Exchange  Agreement  dated June 28, 1999,  between
          Nicklebys.com,  Inc., on the one hand, and Art Exchange, Inc., Paul J.
          Zueger and The Zueger Family Trust,  on the other hand.  (Incorporated
          herein by reference to Exhibit 10.6 to the  Registration  Statement on
          Form 10-SB/A, File No. 000-33339, filed November 14, 2001.)

10.7      Internet   Marketing   Agreement  dated  December  29,  1999,  between
          Nicklebys.com, Inc., and Posteralley.com, Inc. (Incorporated herein by
          reference  to  Exhibit  10.7  to the  Registration  Statement  on Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

10.8      Lock-Up  Agreement  dated  December 30, 1999,  between  Nicklebys.com,
          Inc.,  and Bruce A. Capra,  Scott M. Thornock,  1st Net  Technologies,
          Inc., Entrepreneur Investments,  LLC, The Zueger Family Trust, Paul J.
          Zueger,  Richard E. Capra and March  Shaner.  (Incorporated  herein by
          reference  to  Exhibit  10.8  to the  Registration  Statement  on Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)







                                       42
<PAGE>




10.9      Stock Option Agreement dated December 30, 1999, between Nicklebys.com,
          Inc., and Bruce A. Capra. (Incorporated herein by reference to Exhibit
          10.9  to  the  Registration   Statement  on  Form  10-SB/A,  File  No.
          000-33339, filed November 14, 2001.)

10.10     Stock   Option   Agreement   dated   December   30,   1999,    between
          Nicklebys.com,  Inc., and Scott M. Thornock.  (Incorporated  herein by
          reference  to  Exhibit  10.10 to the  Registration  Statement  on Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

10.11     Stock   Option   Agreement   dated   December   30,   1999,    between
          Nicklebys.com,  Inc.,  and Richard E. Capra.  (Incorporated  herein by
          reference  to  Exhibit  10.11 to the  Registration  Statement  on Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

10.12     Stock   Option   Agreement   dated   December   30,   1999,    between
          Nicklebys.com,  Inc.,  and  Entrepreneur  Investments.   (Incorporated
          herein by reference to Exhibit 10.12 to the Registration  Statement on
          Form 10-SB/A, File No. 000-33339, filed November 14, 2001.)

10.13     Stock   Option   Agreement   dated   December   30,   1999,    between
          Nicklebys.com,  Inc.,  and Paul J.  Zueger.  (Incorporated  herein  by
          reference  to  Exhibit  10.13 to the  Registration  Statement  on Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

10.14     Stock   Option   Agreement   dated   December   30,   1999,    between
          Nicklebys.com, Inc., and the Zueger Family Trust. (Incorporated herein
          by reference to Exhibit  10.14 to the  Registration  Statement on Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

10.15     Stock   Option   Agreement   dated   December   30,   1999,    between
          Nicklebys.com,   Inc.,  and  Mark  Crossen.  (Incorporated  herein  by
          reference  to  Exhibit  10.15 to the  Registration  Statement  on Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

10.16     Stock   Option   Agreement   dated   December   30,   1999,    between
          Nicklebys.com,  Inc.,  and Mark K.  Shaner.  (Incorporated  herein  by
          reference  to  Exhibit  10.16 to the  Registration  Statement  on Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

10.17     Industrial Lease dated August 28, 2000,  between Ward West Properties,
          LLC,  and  Nicklebys.com,  Inc.  (Incorporated  herein by reference to
          Exhibit 10.17 to the Registration  Statement on Form 10-SB/A, File No.
          000-33339, filed November 14, 2001.)




                                       43
<PAGE>




10.18     Stock   Option   Agreement   dated   November   16,   2000,    between
          Nicklebys.com,  Inc.,  and  Patricia  Cudd.  (Incorporated  herein  by
          reference  to  Exhibit  10.18 to the  Registration  Statement  on Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

10.19     Consignment Agreement dated September 1, 2001, between  Nicklebys.com,
          Inc.,  and  Thomas H.  Akins  Company,  Inc.  (Incorporated  herein by
          reference  to  Exhibit  10.19 to the  Registration  Statement  on Form
          10-SB/A, File No. 000-33339, filed November 14, 2001.)

10.20     Agreement for Extension of  Consignment  Agreement  dated November 29,
          2001, between  Nicklebys.com,  Inc., and Thomas H. Akins Company, Inc.
          (Incorporated herein by reference to Exhibit 10.20 to the Registration
          Statement on Form  10-SB/A,  File No.  000-33339,  filed  November 14,
          2001.)

10.21     Affiliate  Agreement.  (Incorporated  herein by  reference  to Exhibit
          10.21  to  the  Registration  Statement  on  Form  10-SB/A,  File  No.
          000-33339, filed November 14, 2001.)

10.22     ArtRx.com  Terms &  Conditions.  (Incorporated  herein by reference to
          Exhibit 10.22 to the Registration  Statement on Form 10-SB/A, File No.
          000-33339, filed November 14, 2001.)


                                   SIGNATURES

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


                                          NICKLEBYS.COM, INC.



Date:  March 28, 2002                     By:              /s/ Scott M. Thornock
                                              ----------------------------------
                                              Scott M. Thornock, Chief Executive
                                              Officer, Chief Financial Officer
                                              and Secretary


     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 28, 2002                     By:              /s/ Scott M. Thornock
                                              ----------------------------------
                                              Scott M. Thornock, Chief Executive
                                              Officer, Chief Financial Officer,
                                              Secretary and Director



                                       44
<PAGE>




Date:  March 28, 2002                     By:                 /s/ Bruce A. Capra
                                              ----------------------------------
                                              Bruce A. Capra, President and
                                              Chairman of the Board of Directors











































                                       45
<PAGE>

















                               NICKLEBYS.COM, INC.

                        Consolidated Financial Statements
                (With Report of Independent Accountants Thereon)

                           December 31, 2001 and 2000

























                           Cordovano and Harvey, P.C.
                          Certified Public Accountants
                                Denver, Colorado


<PAGE>





                   Index to Consolidated Financial Statements


                                                                    Page
                                                                    ----

Report of independent accountants..............................      F-2

Consolidated balance sheet at December 31, 2001................      F-3

Consolidated statements of operations for the years ended
 December 31, 2001 and 2000....................................      F-4

Consolidated statement of changes in shareholders' equity
 for the years ended December 31, 2001 and 2000................      F-5

Consolidated statements of cash flows for the years ended
 December 31, 2001 and 2000....................................      F-6

Notes to consolidated financial Statements.....................      F-7



















                                       F-1
<PAGE>



     Cordovano and Harvey, P.C.               Certified Public Accountants
--------------------------------------------------------------------------------
                                              201 Steele Street
                                              Suite 300
                                              Denver, Colorado  80206
                                              (303) 329-0220 Phone
                                              (303) 316-7493 Fax
--------------------------------------------------------------------------------

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Shareholders of Nicklebys.com, Inc.:


We have audited the accompanying  consolidated  balance sheet of  Nicklebys.com,
Inc., a Colorado corporation,  and subsidiaries as of December 31, 2001, and the
related consolidated statements of operations,  changes in shareholders' equity,
and cash flows for each of the years in the two year period  then  ended.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Nicklebys.com,  Inc.
and  subsidiaries  as of December 31, 2001, and the results of their  operations
and their cash flows for each of the years in the two year  period then ended in
conformity with accounting principles generally accepted in the United States of
America.





Cordovano and Harvey, P.C.
Denver, Colorado
February 11, 2002














                                       F-2
<PAGE>



<TABLE>
<CAPTION>
                               NICKLEBYS.COM, INC.
                           CONSOLIDATED BALANCE SHEET

                                December 31, 2001


                                     ASSETS

Current assets:
<S>                                                                             <C>
     Cash................................................................       $    156,831
     Accounts receivable.................................................             46,591
     Accounts receivable, related party (Note 2).........................              4,533
     Merchandise inventories, at the lower of cost or market.............            203,130
     Prepaid expenses....................................................              2,537
                                                                                -------------
         Total current assets............................................            413,622


Property and equipment, net (Note 3).....................................             27,378
Intangible assets, net (Note 3)..........................................             17,580
Other assets.............................................................              2,184
                                                                                -------------
                                                                                $    460,764
                                                                                =============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable, trade.............................................       $     16,818
     Line of credit (Note 3).............................................                825
     Other accrued liabilities...........................................              8,182
                                                                                -------------
         Total current liabilities.......................................             25,825
                                                                                -------------

Shareholders' equity (Note 5):
     Preferred stock, par value $0.001; 3,000,000 shares authorized;
         -0- shares issued and outstanding...............................                  -
     Common stock, par value $0.0001; 30,000,000 shares authorized;
         2,901,011 shares issued and outstanding.........................                291
     Additional paid-in capital..........................................          5,160,210
     Outstanding common stock options-1,025,000..........................            106,600
     Retained deficit....................................................         (4,832,162)
                                                                                -------------
         Total shareholders' equity......................................            434,939
                                                                                -------------
                                                                                $    460,764
                                                                                =============
</TABLE>






              See accompanying summary of accounting policies and
                  notes to consolidated financial statements.
                                      F-3
<PAGE>



<TABLE>
<CAPTION>
                               NICKLEBYS.COM, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                                       For the Years Ended
                                                                                           December 31,
                                                                                ---------------------------------
                                                                                     2001              2000
                                                                                ---------------   ---------------
<S>                                                                             <C>               <C>
Sales and service revenues:
     Sales of artwork and collectables...................................       $     493,879     $     602,568
     Commission revenue..................................................              17,513            47,870
     Hosting fees........................................................               3,455                 -
     Sales revenue, related party (Note 2)...............................              17,278             6,527
                                                                                ---------------   ---------------
                                                                                      532,125           656,965

Operating expenses:
     Cost of sales, artwork and collectables.............................             309,210           416,235
     Cost of sales, related party (Note 2)...............................              10,381             4,112
     Sales and marketing.................................................             114,724            98,186
     Product development.................................................              45,918            33,329
     Depreciation and amortization.......................................              28,796            24,348
     General and administrative (including non-cash stock-based
         compensation of $-0- and $60,173) (Note 5)......................             291,278           288,619
                                                                                ---------------   ---------------
         Total operating expenses........................................             800,307           864,829
                                                                                ---------------   ---------------

         Loss from operations............................................            (268,182)         (207,864)

Other income (expense):
     Interest income.....................................................               9,812            22,105
     Other income........................................................                 724                 -
     Interest expense....................................................                 (56)             (248)
                                                                                ---------------   ---------------
         Net loss income before income taxes.............................            (257,702)         (186,007)
                                                                                ---------------   ---------------

Provision (benefit) for income taxes (Note 7)............................                   -                 -
                                                                                ---------------   ---------------
         Net loss........................................................       $    (257,702)    $    (186,007)
                                                                                ===============   ===============

Basic and diluted loss per share.........................................       $       (0.09)    $       (0.07)
                                                                                ===============   ===============
Weighted average common shares outstanding...............................           2,901,011         2,626,802
                                                                                ===============   ===============
</TABLE>










              See accompanying summary of accounting policies and
                  notes to consolidated financial statements.
                                      F-4
<PAGE>



<TABLE>
<CAPTION>
                               NICKLEBYS.COM, INC.
            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

                                                           Common Stock
                                                      ----------------------  Additional    Outstanding     Retained       Total
                                                        Nicklebys.com, Inc.     Paid-in    Common Stock     Earnings   Shareholders'
                                                        Shares       Amount     Capital       Options       (Deficit)      Equity
                                                      ----------   ---------  -----------  -------------  ------------  ------------

<S>                                                    <C>         <C>        <C>          <C>            <C>           <C>
     Balance, January 1, 2000.......................   2,484,333        248     4,665,550      106,600     (4,388,453)     383,945

Sale of common stock at $1.25 per share, pursuant to
     private offering memorandum, net of offering
     costs of $38,645 (Note 5)......................     365,580         37       430,793            -              -      430,830

Common stock issued in exchange for consulting
     services, valued at $1.25 per share (Note 5)...      48,138          5        60,168            -              -       60,173

Common stock issued in exchange for a delivery
     van, valued at $1.25 per share (Note 5)........       2,960          1         3,699            -              -        3,700

Net loss for the year ended December 31, 2000.......           -          -             -            -       (186,007)    (186,007)
                                                      ----------   ---------  -----------  -------------  ------------  ------------
     Balance, December 31, 2000.....................   2,901,011        291     5,160,210      106,600     (4,574,460)     692,641

Net loss for the year ended December 31, 2001.......           -          -             -            -       (257,702)    (257,702)
                                                      ----------   ---------  -----------  -------------  ------------  ------------
     Balance, December 31, 2001.....................   2,901,011   $    291   $ 5,160,210  $   106,600    $(4,832,162)  $  434,939
                                                      ==========   =========  ===========  =============  ============  ============
</TABLE>











              See accompanying summary of accounting policies and
                  notes to consolidated financial statements.
                                      F-5
<PAGE>



<TABLE>
<CAPTION>
                               NICKLEBYS.COM, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                              For the Years Ended
                                                                                  December 31,
                                                                       -----------------------------------
                                                                             2000               2000
                                                                       ----------------   ----------------
<S>                                                                    <C>                <C>
Cash flows from operating activities:
     Net loss....................................................      $     (257,702)    $     (186,007)
     Transactions not requiring cash:
         Loss on asset disposal..................................               2,872                  -
         Depreciation and amortization...........................              28,799             24,348
         Stock based compensation (Notes 5)......................                   -             60,173
     Changes in working capital items:
         (Increase) in receivables and other current assets......             (45,937)           (18,379)
     (Decrease) increase in accounts payable and other
           current liabilities...................................              (2,600)            (7,122)
                                                                       ----------------   ----------------
            Net cash used in operating activities................            (274,568)          (126,987)
                                                                       ----------------   ----------------

Cash flows from investing activities:
     Capital expenditures........................................             (12,762)           (53,224)
     Facility deposits...........................................                   -             (5,931)
                                                                       ----------------   ----------------
            Net cash used in investing activities................             (12,762)           (59,155)
                                                                       ----------------   ----------------

Cash flows from financing activities:
     Sale of common stock, net of offering costs.................                   -            430,829
     Net proceeds from line of credit............................                 825                  -
                                                                       ----------------   ----------------
            Net cash provided by financing activities............                 825            430,829
                                                                       ----------------   ----------------

            Net change in cash...................................            (286,505)           244,687

Cash, beginning of year..........................................             443,336            198,649
                                                                       ----------------   ----------------
            Cash, end of year....................................      $      156,831     $      443,336
                                                                       ================   ================

Supplemental disclosures of cash flow information:
     Cash paid during the period for:
         Interest................................................      $           56     $          248
                                                                       ================   ================
         Income taxes............................................      $            -     $            -
                                                                       ================   ================
</TABLE>








              See accompanying summary of accounting policies and
                  notes to consolidated financial statements.
                                      F-6
<PAGE>



                               NICKLEBYS.COM, INC.
                   Notes to Consolidated Financial Statements


(1)  NATURE OF OPERATIONS

     The Company
     -----------

     Nicklebys.com, Inc. (the "Company") was incorporated in Colorado in January
     1999. The Company  conducts live art auctions of its own inventory over the
     Internet and at designated sites throughout the United States. In addition,
     the Company  retails  artwork at its showroom in Wheat Ridge,  Colorado and
     sells  consignment  artwork  for  others.  In 2001 and 2000,  respectively,
     approximately  52  percent  and 45  percent of the  Company's  revenue  was
     concentrated in auctions conducted over the Internet.

     The Company  conducts  its  business  through  Nicklebys.com,  Inc. and its
     ArtRx.com division. The Company has two inactive wholly owned subsidiaries,
     Nickleby's  Auction Gallery Ltd.  ("NAGL") and Art Exchange,  Inc. NAGL and
     Art Exchange,  Inc., were organized in Colorado on March 16, 1994 and March
     15, 1999, respectively.

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of consolidation
     ---------------------------

     The consolidated  financial  statements include the accounts of the Company
     and  its  wholly  owned   subsidiaries  (NAGL  and  AEI).  All  significant
     intercompany   accounts   and   transactions   have  been   eliminated   in
     consolidation.

     Use of estimates
     ----------------

     The  preparation of the financial  statements in conformity  with generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions that affect certain reported amounts of assets and liabilities;
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements;  and the  reported  amounts of revenues and expenses
     during the reporting period. Accordingly,  actual results could differ from
     those estimates.

     Loss per common share
     ---------------------

     The Company  computes net loss per share in  accordance  with  Statement of
     Financial  Accounting  Standards (SFAS) No. 128 "Earnings per Share." Under
     the  provisions  of SFAS No.  128,  basic net loss per share is computed by
     dividing the net loss  available to common  shareholders  for the period by
     the weighted average number of common shares outstanding during the period.
     Diluted net loss per share is computed by dividing  the net loss  available
     to common  shareholders  for the period by the weighted  average  number of
     common and common equivalent shares outstanding  during the period.  Common
     equivalent  shares,  consisting of common shares issuable upon the exercise
     of stock options,  are included in diluted net loss per share to the extent
     such  shares are  dilutive.  As of December  31, 2001 and 2000,  there were
     2,130,000 and 2,130,000  vested stock  options  outstanding,  respectively,
     which were  excluded  from the  calculation  of net loss per  share-diluted
     because they were antidilutive.

     Foreign Currency Transaction
     ----------------------------

     The  Company  uses US dollar as its  functional  currency  under  Financial
     Accounting Standards Board Statement No. 52, "Foreign Currency Translation"
     (FAS 52). The Company's  international  sales are  denominated in US dollar
     and all of its assets and  liabilities  are  denominated  in US dollar.  No
     foreign currency translation gains or losses have been recorded.



                                       F-7
<PAGE>



                               NICKLEBYS.COM, INC.
                   Notes to Consolidated Financial Statements


     Financial instruments and cash equivalents
     ------------------------------------------

     The Company's financial instruments including cash, accounts receivable and
     accounts payable are carried at cost, which  approximates  their fair value
     because of the  short-term  maturity of these  instruments.  For  financial
     accounting  purposes  and the  statement  of cash flows,  cash  equivalents
     include  all highly  liquid  debt  instruments  purchased  with an original
     maturity of three months or less.  However, at December 31, 2001 there were
     no cash equivalents.

     Concentration  of  credit  risk  arising  from cash  deposits  in excess of
     ---------------------------------------------------------------------------
     insured limits
     --------------

     The  Company  maintains  its cash  balances  in one  financial  institution
     located in Wheat Ridge,  Colorado.  The balances are insured by the Federal
     Deposit  Insurance  Corporation  up to $100,000.  At December 31, 2001, the
     Company's uninsured cash balances total $52,748.

     Valuation and Qualifying Accounts
     ---------------------------------

     The  Company  has  no  allowance   established  for  doubtful  accounts  as
     management considers all receivables to be fully collectible.

     Inventories
     -----------

     Inventories,  consisting of retail artwork and collectibles,  are stated at
     the lower of cost (using the specific identification method) or market.

     Property, equipment and depreciation
     ------------------------------------

     Property and  equipment are stated at cost less  accumulated  depreciation.
     Depreciation is provided using the straight-line  method over the estimated
     useful lives of the assets,  which is estimated to be three to seven years.
     Expenditures  for  repairs  and  maintenance  are  charged to expense  when
     incurred. Expenditures for major renewals and betterments, which extend the
     useful lives of existing equipment, are capitalized and depreciated.

     Upon  retirement or  disposition  of property and  equipment,  the cost and
     related  accumulated  depreciation  are removed  from the  accounts and any
     resulting  gain or loss is  recognized  in the  consolidated  statements of
     operations.

     Product development costs
     -------------------------

     Product  development  costs  include  expenses  incurred  by the Company to
     maintain,  monitor and manage the Company's website. The Company recognizes
     website  development  costs,  as  required  by  Emerging  Issues Task Force
     ("EITF") Issue No. 00-2, in accordance  with Statement of Position  ("SOP")
     98-1,  "Accounting for the Costs of Computer Software Developed or Obtained
     for Internal  Use." As such,  the Company  expenses all costs incurred that
     relate to the planning and post implementation phases of development. Costs
     incurred in the  development  phase are capitalized and recognized over the
     product's estimated useful life if the product is expected to have a useful
     life beyond one year.  Costs  associated with repair and maintenance of the
     existing site or the development of website content are included in product
     development expense in the accompanying consolidated financial statements.





                                       F-8
<PAGE>



                               NICKLEBYS.COM, INC.
                   Notes to Consolidated Financial Statements


     Intangible assets
     -----------------

     Intangible assets are amortized as follows:

          Capitalized website software.................... 3 years
          Mailing list.................................... 3 years

     Impairment of certain identifiable intangibles
     ----------------------------------------------

     The Company periodically  evaluates the carrying value of long-lived assets
     and  long-lived  assets to be disposed  of for  potential  impairment.  The
     Company considers  projected future operating results,  cash flows,  trends
     and other circumstances in making such estimates and evaluations.

     Revenue recognition
     -------------------

     Revenue is  recognized  when  earned.  The  Company's  revenue  recognition
     policies are in  compliance  with all  applicable  accounting  regulations,
     including  Securities and Exchange Commission Staff Accounting Bulletin No.
     101, Revenue Recognition, and Financial Accounting Standards Board Emerging
     Issues Task Force No. 99-19,  Reporting Revenue Gross as a Principal versus
     Net as an Agent.

     Gross  revenue  from retail  sales,  regular  and  Internet  auctions,  and
     consignment sales of the company's  inventory by third party, is recognized
     when the Company's  merchandise  inventory is sold and shipped or delivered
     to the customer.  The Company provides a 14-day money-back guarantee on all
     merchandise   sold.   Historical   returns  are  approximately  1  percent.
     Accordingly,   no  revenue  is  deferred  in  the  accompanying   financial
     statements.

     ArtRx.com  hosting fees are recognized  ratably over the contract period in
     accordance with the period in which the services are performed.

     Revenue  from   consulting   and  other  services  are  recognized  as  the
     consultation and other services are performed.

     In addition, the Company acts as an agent for artists and art galleries and
     sells  their   merchandise   consigned  to  the  Company.   For   consigned
     merchandise,  where the Company does not take title to the  inventory,  the
     Company recognizes net commission revenue at the time of sale.

     Stock-based compensation
     ------------------------

     The Company accounts for stock-based employee compensation  arrangements in
     accordance  with  Accounting  Principles  Board  ("APB")  Opinion  No.  25,
     "Accounting for Stock Issued to Employees" and complies with the disclosure
     provisions  of SFAS No. 123,  "Accounting  for  Stock-Based  Compensation."
     Under APB 25, compensation  expense is based on the difference,  if any, on
     the date of grant,  between the fair value of the  Company's  stock and the
     exercise price.  The Company  accounts for stock issued to non-employees in
     accordance  with the  provisions  of SFAS No. 123 and the Consensus on EITF
     Issue No. 96-18.







                                       F-9
<PAGE>



                               NICKLEBYS.COM, INC.
                   Notes to Consolidated Financial Statements


     Income taxes
     ------------

     The  Company  reports  income  taxes  in  accordance  with  SFAS  No.  109,
     "Accounting  for Income  Taxes",  which  requires the  liability  method in
     accounting for income taxes. Deferred tax assets and liabilities arise from
     the  difference  between  the tax  basis of an asset or  liability  and its
     reported  amount on the  financial  statements.  Deferred  tax  amounts are
     determined  by using the tax rates  expected to be in effect when the taxes
     will  actually be paid or refunds  received,  as provided  under  currently
     enacted law. Valuation  allowances are established when necessary to reduce
     the deferred tax assets to the amounts expected to be realized.  Income tax
     expense or benefit is the tax payable or refundable,  respectively, for the
     period  plus or minus the  change  during the  period in the  deferred  tax
     assets and liabilities.

     Segment Information
     -------------------

     In  accordance  with  Statement of Financial  Accounting  Standard No. 131,
     "Disclosure about Segments of an Enterprise and Related  Information",  the
     Company manages its business as one reportable operating segment. Net sales
     and long-lived  assets by geographic  areas and information  about products
     and services are included as enterprise-wide disclosures.

(3)  BALANCE SHEET COMPONENTS

     Property and equipment
     ----------------------

     Property and equipment at December 31, 2001,  stated at cost,  consisted of
     the following:

     Equipment.................................      $   38,276
     Vehicles..................................           3,700
     Software..................................           6,865
                                                     ------------
                                                         48,841
     Less accumulated depreciation and
       amortization............................         (21,463)
                                                     ------------
                                                     $   27,378
                                                     ============

     Intangible assets
     -----------------

     Intangible  assets at December 31, 2001,  stated at cost,  consisted of the
     following:

     Website software..........................      $   48,665
     Less accumulated amortization.............         (31,432)
                                                     ------------
                                                         17,233
                                                     ------------

     Mailing list..............................           2,500
     Less accumulated amortization.............          (2,153)
                                                     ------------
                                                            347
                                                     ------------
                                                     $   17,580
                                                     ============




                                      F-10
<PAGE>



                               NICKLEBYS.COM, INC.
                   Notes to Consolidated Financial Statements


     Line of Credit
     --------------

     The Company has a line of credit for $20,000,  of which  $19,175 was unused
     at December 31, 2001.  Advances made on the line of credit carry an average
     annual  interest  rate of 9.5% at  December  31,  2001 and may be  extended
     annually with the consent of the financial institution.  The line of credit
     is personally guaranteed by the President of the Company and secured by the
     Company's cash deposits at the financial institution.

(4)  RELATED PARTY TRANSACTIONS

     The Company  purchases  its  merchandise  inventory  from an officer and an
     affiliate in the normal course of business and  reimburses  the officer and
     the affiliate for certain Company expenses. The Company purchased inventory
     in the  amount of $5,610  and  $60,980  from the  officer,  and  $22,771and
     $108,751 from the affiliate during the years ended 2001 and 2000.

     The Company  conducts  business with its affiliates in the normal course of
     business.  The Company recorded revenue in the amount of $17,278 and $6,527
     and  related  cost of sales in the amount of $10,381  and $4,112 from sales
     transactions  with two affiliates  during the years ended December 31, 2001
     and 2000.

(5)  SHAREHOLDERS' EQUITY

     Preferred stock
     ---------------

     As provided in its Articles of  Incorporation,  the Company is  authorized,
     subject to  limitations  prescribed  by Colorado  law,  for the issuance of
     preferred  stock  in one or more  series  as  determined  by the  Board  of
     Directors.  Each series must  designate  the number of shares in the series
     and each share of a series must have identical rights of (1) dividend,  (2)
     redemption, (3) rights in liquidation,  (4) sinking fund provisions for the
     redemption of the shares, (5) terms of conversion and (6) voting rights. At
     December  31,  2001,   there  were  3,000,000  shares  of  preferred  stock
     authorized for issuance, and no shares issued and outstanding.

     Common stock
     ------------

     The Company is authorized to issue  30,000,000  shares of $0.0001 par value
     common  stock.  At  December  31,  2001,  2,901,011  shares were issued and
     outstanding.

     The Company  issued  2,960  shares of its common  stock in  exchange  for a
     delivery value valued at $3,700, during the year ended December 31, 2000.

     Private equity financings
     -------------------------

     The Company completed a round of private equity financings and sold 365,580
     shares of common  stock at $1.25 per  share in 2000.  The  financings  were
     exempt  from  registration  pursuant  to  Regulation  D,  Rule  504  of the
     Securities Act of 1933, as amended.  Proceeds were $430,830 (net of related
     costs).








                                      F-11
<PAGE>



                               NICKLEBYS.COM, INC.
                   Notes to Consolidated Financial Statements


     Stock-based compensation
     ------------------------

     In 2000,  the Company  issued 48,138 shares of its common stock in exchange
     for management  consulting  services performed in 2000. The transaction was
     accounted  for based on the fair  value of the  Company's  common  stock as
     determined  by the  board  of  directors  based on  contemporaneous  equity
     transactions and other analysis.  In 2000, the Company recorded stock-based
     compensation (general and administrative expense) for management consulting
     services of $60,173 in the accompanying consolidated financial statements.

     Stock Options
     -------------

     The Company has 2,130,000 options outstanding,  including 1,105,000 options
     issued  to  officers  and  employees  and  1,025,000   options   issued  to
     non-employees. A summary of the status of the Company's stock option awards
     as of December 31, 2001,  and the changes  during the years ended  December
     31, 2001 and 2000 is presented as follows:

<TABLE>
<CAPTION>
                                                                              Weighted     Weighted Avg
                                                              Number            Avg         Remaining
            Options                          Number        Exercisable    Exercise Price       Life
---------------------------------------------------------------------------------------------------------
<S>                                         <C>             <C>               <C>            <C>
Outstanding at January 1, 2000........      2,130,000       2,130,000         $0.66          4 years
Granted...............................              -
Exercised.............................              -
Cancelled.............................              -
                                          ------------
Outstanding at December 31, 2000......      2,130,000       2,130,000         $0.66          3 years
Granted...............................              -
Exercised.............................              -
Cancelled.............................              -
                                          ------------
Outstanding at December 31, 2001......      2,130,000       2,130,000         $0.66          2 years
                                          ============
</TABLE>


(6)  LEASING ARRANGEMENTS

     The Company maintains a showroom and conducts its administrative operations
     from  leased   premises   located  in  Wheat   Ridge,   Colorado   under  a
     non-cancelable  lease  expiring  December 31, 2003.  The lease provides for
     minimum  monthly  lease  payments  of $2,184 in 2001,  $2,410 in 2002,  and
     $2,272 in 2003 and includes  operating expense  escalations.  For the years
     ended  December  31, 2001 and 2000,  rent  expense was $28,956 and $31,443,
     respectively.  Minimum  annual lease payments for the next two years are as
     follows:

     2002............................................     $   28,920
     2003............................................     $   27,264









                                      F-12
<PAGE>



                               NICKLEBYS.COM, INC.
                   Notes to Consolidated Financial Statements


(7)  INCOME TAXES

     A reconciliation of U.S. statutory federal income tax rate to the effective
     rate is as follows for the years ended December 31, 2001 and 2000:

                                                              December 31
                                                      --------------------------
                                                          2001          2000
                                                      ------------  ------------

     U.S. statutory federal rate..................        34.00%        29.55%
     State income tax rate........................         3.14%         3.34%
     Net operating loss for which minimal tax
      benefit is currently available..............       -37.14%       -32.89%
                                                      ------------  ------------
                                                           0.00%         0.00%
                                                      ============  ============

     Income  taxes from  operations  for the years ended  December  31, 2001 and
     2000,  consisted  of the  following  components:  (1)  current  tax benefit
     resulting  from the net loss before  income  taxes,  and (2)  deferred  tax
     expense  resulting  from  the  valuation  allowance  recorded  against  the
     deferred  tax asset  (which is  substantially  comprised  of net  operating
     losses). The amount of valuation allowance,  which approximates the current
     tax benefit,  for the years ended  December 31, 2001 and 2000 were $201,728
     and $61,182,  respectively. Net operating loss carryforwards will expire in
     2021.

     The  valuation  allowance  will  be  evaluated  at the  end of  each  year,
     considering  positive and negative evidence about whether the asset will be
     realized.  At that time, the allowance will either be increased or reduced;
     reduction  could result in the  complete  elimination  of the  allowance if
     positive evidence  indicates that the value of the deferred tax asset is no
     longer impaired and the allowance is no longer required.

     Should the Company undergo an ownership  change,  as defined in Section 382
     of the  Internal  Revenue  Code,  the  Company's  tax  net  operating  loss
     carryforwards generated prior to the ownership change will be subject to an
     annual  limitation  that  could  reduce or defer the  utilization  of those
     losses.












                                      F-13