U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                                    ---------

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

     For the fiscal year ended: June 30, 2002

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

                        Commission file number: 000-28193


                        Legal Club of America Corporation
                 ----------------------------------------------
                 (Name of Small Business Issuer in its Charter)


            Colorado                                             84-1174969
---------------------------------                         ----------------------
  (State or other jurisdiction                                 (IRS Employer
of Incorporation or Organization)                         Identification Number)


          8551 West Sunrise Blvd,. Suite 105
                 Plantation, Florida                              33322
       ----------------------------------------                ----------
       (Address of Principal Executive Offices)                (Zip Code)

                                 (954) 267-0920
                           ---------------------------
                           (Issuer's Telephone Number)

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

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

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

Check whether the issuer (1) filed all the reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the last 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 the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ ]

The Registrant had $2.1 million in gross revenues for the fiscal year ended June
30, 2002.

The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant on September 26, 2002 was $1,353,432, based on
the average bid and asked price of the Common Stock on that date.

As of September 26, 2002, there were 24,518,668 shares of the Registrant's
Common Stock issued and outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None
<PAGE>

                  FORM 10-KSB FOR THE YEAR ENDED JUNE 30, 2002


                                Table of Contents
                                -----------------



                                                                            Page
                                                                            ----

PART I......................................................................  1
   Item 1.  Description of Business.........................................  1
   Item 2.  Description of Property.........................................  9
   Item 3.  Legal Proceedings...............................................  9
   Item 4.  Submission of Matters to a Vote of Security Holders............. 10



PART II..................................................................... 11
   Item 5.  Market for Common Equity and Related Stockholder Matters........ 11
   Item 6.  Management's Discussion and Analysis of Financial Condition
            and Results of Operations....................................... 14
   Item 7.  Financial Statements............................................ 22
   Item 8.  Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure........................................ 45



PART III.................................................................... 45
   Item 9.  Directors, Executive Officers, Promoters and Control Persons;
            Compliance with Section 16(a) of the Exchange Act............... 45
   Item 10. Executive Compensation.......................................... 46
   Item 11. Security Ownership of Certain Beneficial Owners and
            Management...................................................... 48
   Item 12. Certain Relationships and Related Transactions.................. 50
   Item 13. Exhibits and Reports on Form 8-K................................ 50

SIGNATURES.................................................................. 52

EXHIBITS.................................................................... 53









--------------------------------------------------------------------------------
     We own or have the rights to certain trade names and trademarks that we
                      use in conjunction with our services.
   This document also contains trade names and trademarks of other companies.

                                       ii
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PART I


Item 1.  Description of Business
         -----------------------


The Company

         Corporate History

Legal Club of America Corporation (the "Company") was formed in October 1998, as
a result of merging with and into Bird-Honomichl, Inc., a publicly traded,
inactive Colorado corporation. The Company has three wholly owned operating
subsidiaries, LegalClub.com, Inc. ("LCOA"), Einstein Computer Corp. ("ECC") and
Legal Club Financial Corp., d/b/a PeoplesChoice(TM) ("LCF" or "PeoplesChoice").
LCOA operates a national legal referral service, ECC sells personal computer
systems and accessories to employees at their workplace and LCF is a licensed
insurance agency that will be providing voluntary benefit portfolios to employer
groups. See "Recent Developments".

         Recent Developments

              New Marketing Initiatives

PeoplesChoice(TM). During the June 2002 quarter, PeoplesChoice began to broker
business to its insurance partners by securing agent of record letters ("AOR")
with employers that wish to provide voluntary benefit portfolios to their
employees. The AOR letters provide the Company exclusive access to employers
that want to provide their employees with voluntary benefits, including LCOA
products.

PeoplesChoice, a licensed insurance agency, will receive override commissions
for all insurance products written in the workplace where it is the agent of
record, adding commissions as a new source of revenue for the Company. LCOA's
legal plans will also be part of all voluntary benefit portfolios offered by
PeoplesChoice. PeoplesChoice will receive, on the average, commissions of
approximately 17.5% on premiums written and 70% of LCOA's legal plans written.
PeoplesChoice is responsible for interviewing and selecting suitable insurance
carriers, as well as overseeing the pre-enrollment communications, enrollment
methodologies and third party administration processes.

To date, PeoplesChoice has obtained two AOR letters. Its first AOR is from a
national human resources outsourcing corporation interested in providing a
complete voluntary benefits platform to its 750 corporate clients and their
307,000 employees. PeoplesChoice awarded this case to two large national
insurance companies that have historically been writing LCOA business. The
general agents ("GA") awarded the cases by the insurance carriers have agreed to
include LCOA products on all future employer group presentations external to
this case. All pre-enrollment communications were mailed in August, with
enrollment presentations currently being made at the employer groups. The
Company expects revenues from this case to first be realized in the March 2003
quarter.

PeoplesChoice second AOR is from a United Food and Commercial Workers Union
Local (the "Local"). This Local has approximately 8,000 union members in 16
corporations, which in total have approximately 100,000 employees. The Local's
president has approved the offering of PeoplesChoice voluntary benefits
portfolio to non-union employees in addition to union employees and is assisting
PeoplesChoice in obtaining AORs from each employer group to allow for the
presentation of the voluntary benefits portfolio to non-union employees. Through
August 2002, PeoplesChoice has received approval to offer the voluntary benefits
at one of the companies, with approximately 5,000 employees, 1,200 of them
non-union. Enrollments of the employer groups will begin October 2002. The
Company expects revenues from this case to first be realized in the March 2003
quarter.

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<PAGE>

The president of the Local has also introduced the PeoplesChoice concept to
several other union presidents representing approximately 270,000 union members.
As of August 2002, PeoplesChoice is attempting to secure AOR letters from each
of the local presidents.

LegalIQ. Legal IQ is a private label legal product recently developed by
Insurance IQ.com, an unaffiliated company. The initial phase of the program,
which is the solicitation and recruiting of agents to sell LegalIQ, has
generated over 10,000 agent responses, with 1,200 of the agents, or 12%, being
contracted to represent LegalIQ. The recruiting process will continue through
June 2003. The Company will receive membership fees for all Legal IQ business
written and will pay commissions to Insurance IQ.com. Through August 2002, 60
corporations have expressed interest in having LegalIQ be implemented as an
employee benefit. LegalIQ is contacting each employer group to set up
enrollments. Although the Company has received revenue from LegalIQ during the
September 2002 quarter, the revenue stream is expected to increase by the March
2003 quarter.

General Agency Agreement. In September 2002, the Company completed negotiations
and signed an agreement with a large national General Agent, subsidiary to a
national insurance company. The agreement covers (1) the GA contacting LCOA
corporate clients to process re-enrollments and introduce them to other
voluntary benefits through PeoplesChoice and (2) adding Legal Club products to
their insurance carrier's line of voluntary benefit products. The GA has 1,000
captured agents and approximately 14,000 corporate clients. The Company will
receive override commissions on all insurance premiums written through
PeoplesChoice, as well as membership fees on all Legal Club products sold
through the GA. Training for these programs began the second week of September
2002. The GA has been awarded 300 of Legal Club's corporate clients, whose
enrollments have declined in the past year, to contact them on LCOA's behalf for
re-enrollments. The GA was also awarded, through PeoplesChoice, a geographic
area of the human resources outsourcing company discussed above, and in
September began making presentations to employer groups to start enrolling LCOA
and its PeoplesChoice voluntary benefit platform.

              Cost Savings Initiatives

In addition to the new marketing programs that the Company implemented during
fiscal 2002, as discussed above, the Company also continued to focus on reducing
its cost of operations and initiated efforts to restructure its liabilities. The
Company reduced its operating expenses 33.4% during fiscal year 2002 and was
successful in restructuring a payable and the commissions due on the Series B
preferred stock, recognizing non-operating income aggregating $262,000. During
fiscal 2003, the Company plans to continue its endeavors to enhance its
financial position and plans to continue its efforts to restructure its balance
sheet, including the issuance of options to purchase common stock to executive
officers of the Company, in lieu of compensation voluntarily deferred by such
executives during fiscal 2000, 2001 and 2002.

              Gateway Litigation

ECC was formed for the purpose of selling computers to employees at the
worksite, using payroll deduction as the payment method. During its fiscal year
ended June 30, 2000, the Company entered into agreements with Gateway, Inc.
("Gateway") in connection with this program to facilitate the sale of computers
as a voluntary benefit at the worksite using payroll deduction. The Company
began delivering the computers to employees utilizing this methodology in
October 2000. In February 2001, Gateway ended its relationship with the Company
and the Company was forced to abandon its payroll deduction program. On July 13,
2001, ECC filed suit against Gateway in the U. S. District Court for the
Southern District of California in a case titled Einstein Computer Corp. vs.
Gateway, Inc., claiming damages in excess of $200 million. On August 7, 2002,
the U.S. District Court denied Gateway's motion to dismiss ECC's second amended
complaint brought against Gateway for breach of contract. The action will now
proceed against Gateway for breach of contract. On September 19, 2002, Gateway
and Gateway Companies, Inc. filed an answer to the second amended complaint, a
counterclaim for damages, and a demand for jury trial. The Company is in the
process of preparing its response. See Item 3., Legal Proceedings.

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<PAGE>

Business Segments

         LCOA

              General

LCOA operates a national legal referral service that provides its members
referrals to a network of over 20,000 attorneys located throughout the United
States, Puerto Rico, and the US Virgin Islands, who have contracted to provide
both individuals and small business owners with a variety of free or deeply
discounted legal services. Since its inception in 1998, the Company has
established a variety of legal plans (the "Plans") and built a substantial
internal infrastructure to administer large volume enrollments and a
diversified, marketing capability to enroll individuals and small business
owners on a national scale. LCOA pays commissions to its agents, screens, builds
and maintains the attorney network and markets the Plans to members

Membership revenues from LCOA for the fiscal years ended June 30, 2002 and 2001
were $2,052,000 and $3,312,000, respectively. See Part II. Item 6., Management's
Discussion and Analysis of Financial Condition and Results of Operations,
"Results of Operations".

The Plans provide a member with referrals to attorneys who have contracted to
provide referred members with free or discounted legal services ($75/hour versus
the national average for a partner attorney of $246 per hour in 2001), access to
LCOA's national attorney network and/or assistance in finding an attorney with a
particular specialty. Participating attorneys are free to exercise their own
independent professional judgment in deciding whether or not to accept any given
case referred to them. Upon enrollment, a participating attorney is immediately
assigned to members based upon location, requested areas of law, and spoken
language. LCOA does not provide any legal services, nor does it make any
payments to, or receive any payments from, the participating attorneys. LCOA
also does not underwrite, or provide, insurance. As such, LCOA does not have
certain limitations associated with legal insurance products. Any applicant who
is able to pay for a membership is accepted. There are no complicated forms to
be completed, no exclusions for pre-existing conditions, no waiting periods for
access to the services and no increases in premiums for over-use. Members have
immediate access to the nationwide network of participating attorneys.

Members pay LCOA a fee on an annual or monthly basis, depending on the nature of
their membership. Monthly fees range from $0.10 to $24.95, depending on the type
of membership. Discounted rates are offered to large groups or associations that
pay for their members to have a membership in the LCOA plans, as well as to
direct marketing companies that may resell LCOA products under private label
arrangements. Group discounts are also provided to employers that purchase the
LCOA plans on behalf of their employees. Membership in the Plans does not
entitle members to any specific benefits other than complete access to the
participating attorneys for discounted or free services. As of June 30, 2002,
there were approximately 243,000 active members. The bulk of these memberships
are attributed to large affinity programs for which LCOA receives substantially
less than the published annual membership rate.

Attorney Selection Process. LCOA personnel screen attorneys prior to acceptance
in the LCOA network. The attorneys must also agree to provide specified levels
of service, offer discounts to LCOA's members, and perform some routine legal
services without charge. To ensure that the attorney participating in the LCOA
Plans meet and maintain LCOA's qualification standards, LCOA has implemented an
attorney selection and evaluation process. Participating attorneys may establish
their own screening policies that may in some instances limit usage. All
attorneys must have a Martindale-Hubbell law directory ethical standard of "V"
(very high), and either an "A" (very high to preeminent) or "B" (high to very
high) legal ability rating if listed in this resource. Each attorney must
maintain an active license to practice law in the state in which he or she
practices, maintain good standing in his or her respective bar association or
licensing department, maintain professional liability insurance of at least
$100,000 per occurrence / $300,000 aggregate, and provide quarterly updates of
his or her personal practice information. On a quarterly basis, LCOA requests
and receives disciplinary history reports from the bar associations of every
state on each participating attorney in the network. LCOA also perform anonymous
professionalism testing of the attorneys in the LCOA network to ensure that they

                                        3
<PAGE>

are providing services that meet LCOA standards. In an effort to ensure that
LCOA matches an appropriate and qualified attorney to each member, LCOA
categorizes the attorneys based on geographic location, substantive practice
area, and foreign language skills. If the needs of our members change or they
are dissatisfied with the attorney we have recommended to them, they are
permitted to change attorneys as often as they desire.

The Company or LCOA receive no portion of the fees members pay to attorneys and,
LCOA or the Company pay no fees to the enrolled attorneys.

              Services

LCOA has developed services to provide consumers access to affordable legal
services. LCOA uses the worksite market as its primary distribution system for
its LCOA voluntary benefit Plans. The following are descriptions of the Plans
currently marketed.

Individual/Family Legal Plan. For a payment of up to $144 per year, the
Individual Legal Plan member receives referrals to attorneys who have agreed to
provide seven free services, including unlimited phone conversations, attorney
review of certain legal documents (six page maximum) and preparation of simple
wills. The individual also receives a deeply discounted flat fee schedule from
the participating attorneys for the most commonly used legal services such as
traffic defense ($89), Chapter 7 bankruptcy ($250), simple divorce ($210) and
real estate closings ($175). More importantly, the member receives an extremely
low hourly rate of just $75 for in or out of court legal representation, as well
as discounted contingency fees. This rate represents a substantial savings when
compared to the national average of $246 per hour for partner attorneys and $151
per hour for associates. The Individual Legal Plan covers the enrollee, his or
her spouse and any dependents age 23 or younger.

Small Business Legal Plan. For a payment of up to $299 per year, a small
business owner receives referrals to lawyers who have agreed to provide a number
of free services including ten initial collection letters per month,
thirty-minute face-to-face consultations for all new legal matters and review of
up to five 10-page documents each month. The cost of all other services are at a
low hourly rate of $89 for out of court representation and $109 for in court
representation. There is also a discount on all contingency-based legal matters.

              Marketing

LCOA markets its Plans through a combination of worksite enrollments, direct
marketing, affinity marketing and Internet marketing. The Company enters into
marketing agreements with large national insurance companies, many with worksite
marketing divisions. These insurance companies offer the LCOA Plans as their
exclusive legal services benefits. These carriers market benefit plans to
individuals and companies nationally, but may not have a legal services plan in
their portfolio of products. By forming alliances with, and paying commissions
to them, LCOA can benefit from their existing relationships and marketing
channels. Essentially, the sales forces of these entities have an added benefit
that they can offer, LCOA's Plans, as an additional benefit with their portfolio
of employee benefit options. LCOA believes that a legal services program is an
attractive benefit option offered by employers and is consistent with the
growing national trend towards voluntary benefit plans such as supplemental
life, health, vision and dental coverage. Typically, the Plan members make
monthly payments through automatic payroll deductions. LCOA does not pay any
compensation pursuant to these agreements other than commissions to certain
agents or companies when they sell LCOA services to an employer group or through
other marketing channels.

In several cases, LCOA enrolls employees / members through the PassivePlus(TM)
Enrollment Process. Under this method, employees or members of an organization
are enrolled in LCOA for a free 90-day trial. Upon the expiration of the free
trial period, the member may cancel his or her membership at no cost. If the
member does not cancel his or her membership, it automatically renews and is
paid through automatic payroll deductions. LCOA has also started selling
employer paid products that require 100% employee / member participation to
obtain a deeply discounted monthly membership fee from LCOA.

                                        4
<PAGE>

Direct marketing companies buy products and services from LCOA and then offer
them through direct marketing campaigns or as an addition to other products
solicitation. These programs can be private-labeled by the direct marketing
companies, but are administered and serviced by LCOA. The Company has developed
marketing relationships with direct marketing organizations, that enable LCOA to
increase its market penetration by offering its plans to large numbers of credit
card and bank customers in their member databases. During fiscal year 2002,
direct marketing business decreased substantially because the merchant services
industry has been negatively impacted by new, more stringent regulations. The
Company will continue its efforts to build relationships with direct marketing
organizations, when able.

Affinity marketing companies purchase LCOA products to include as an "add-on"
benefit with the products or services being offered by these organizations to
its members. These programs, which augment the Company's product distribution
channels, are administered and serviced by LCOA. Marketing relationships have
been developed with various national affinity marketing organizations.

LCOA's Web site, www.legalclub.com, features three distinct environments and
houses a vast resource of tools and services aimed at satisfying the legal needs
of the consumer, the legal professional, and the authorized agents who market
the LCOA's Plans. Our long-term Internet strategy will be to provide a solution
for the delivery of voluntary benefits to the workplace and to consumers at a
fraction of the cost of conventional methods.

              Competition

The market for the LCOA's legal products and services is evolving and growing
rapidly. Due to the country's economic climate, competition has not increased
significantly as fewer companies are able to sustain the financial burden of
creating and maintaining a national attorney network and regulatory compliance.
Also, there are significant barriers to entry to the legal referral services
market.

The main barrier to entry is the development and maintenance of a nationwide
attorney network. Newcomers to the legal program market will either have to
create their own national proprietary network of attorneys, which is expensive
to build and maintain, or they will be required to lease the same network all
the other competitors use. The majority of the 50 States provide a number of
different regulatory classifications for legal programs. The process of
receiving state approval prior to marketing in that State is both costly and
time consuming. Further, LCOA believes that the principal competitive factors
for companies seeking to enter the industry are brand recognition, ease of use
and accessibility, range of services, price, quality and reliability of services
and strength of marketing and distribution channels. The Company is also the
only company in the country that has not been designated as legal expense
insurer in any of the 50 States. Most of the competition entering the legal
programs market have their product classified as insurance and as such must
adhere to insurance regulations in the states the companies wish to do business.
This process makes it difficult to enter market segments because complying with
such regulations is both an administratively difficult and expensive task. The
Company believes it competes favorably in these areas.

Legal service plans are offered through various organizations and are
distinguishable based on various characteristics. These characteristics include
insurance vs. non insurance plans, whether there is a direct cost to the member,
whether there is a sponsor and, if so, whether there is a direct cost to the
sponsor, as well as the range and variety of services offered. According to the
Legal Plan Letter, the following are examples of the most commonly used plans:

         o    Member plans. These generally provide limited benefits on an
         automatic enrollment basis without any direct cost to the individual
         user. Labor unions, elder hotlines and the National Education
         Association are the largest sponsors of member plans.

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<PAGE>

         o    Employment Based Plans. These are generally offered by medium to
         large employers and can include legal referral and consultation.
         Enrollment types can be automatic or voluntary with varying costs to
         the member.

         o    Military Plans. These are automatic enrollment plans with no cost
         to the member.

LCOA's primary legal referral services competitors are insurance and member
plans, which include Pre-Paid Legal Services, Inc., the Hyatt Legal Plans (a
MetLife company), Omni-Law, and the ARAG plans (formerly known as Midwest Legal
Plans), among others. LCOA believes it competes favorably with Pre-Paid because
our services are not insurance products and thus not subject to insurance
regulation. Further, Pre-Paid is multi level marketed and has a strict plan
construction whereas the LCOA Plans are marketed in a variety of ways and can be
customized for each group's needs. See "Regulation" below.

The Hyatt and ARAG plans cover limited services for a limited number of hours of
service. The employee is responsible for paying for any additional time expended
at the attorney's regular hourly rates. Law Phone offers two programs; one
provides unlimited telephone consultations for a fee of $10.00 per month. The
second program is a legal insurance plan similar in scope to the Hyatt and ARAG
program. Limited in-person visitation and additional discounted visits are also
covered. The Signature Legal Plan is also an insurance product with coverage
that varies from state to state.

While LCOA competes with the various types of legal service providers, LCOA
feels that its service presents a number of important competitive advantages to
a potential member. There are no restrictions regarding eligibility and no
waiting period for access to the services. Once a member, there are no
limitations on usage or exclusions based on pre-existing conditions, and no
increase in the membership fees as a result of a high volume of usage of the
services by the member. Since LCOA does not reimburse or indemnify members for
their legal services, has no financial relationship with the participating
attorneys, and because revenues are based on initial and continuing membership
fees, increased usage by the members does not reduce LCOA's revenues or profits.
Also, by limiting its role to providing referral services, LCOA believes that it
materially reduces its exposure to any liabilities that may arise from or as a
result of services provided by participating attorneys. The company requires all
participating attorneys to maintain liability insurance for the benefit of its
members and also requires the attorneys to agree to indemnify the Company for
any actions arising from their rendering of legal services to LCOA Plan members.

         ECC

              General

ECC was developed to market computer systems and accessories as a voluntary
benefit to employees at the workplace utilizing payroll deduction as the primary
payment method. ECC utilized the Company's distribution network of independent
agents and brokers to market computer systems to the estimated 48% of American
households without this technology at that time. During the fiscal year ended
June 30, 2001, ECC sold approximately 1,700 personal computer systems to
employees at the worksite through payroll deduction. Under ECC's arrangement
with Gateway, employees were credit scored, and those who met creditworthiness
criteria were able to purchase a personal computer and pay for it through
payroll deductions over the term of the agreement, usually three years.

In February 2001, Gateway ended its relationship with the Company and ECC was
forced to abandon its payroll deduction program. See Gateway Litigation under
"Recent Developments" and Item 3., Legal Proceedings.

ECC generated gross revenues from the sales of computers of $2,580,000, for the
fiscal year ended June 30, 2001. See Part II. Item 6., Management's Discussion
and Analysis of Financial Condition and Results of Operations, "Results of
Operations".

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<PAGE>

In an effort to restart a program to sell personal computers at the worksites,
in September 2001, ECC entered into an agreement with a brand name computer
manufacturer, MicronPC, to sell, as an authorized agent, their personal
computers as a voluntary benefit to employees at the worksite. Under this
arrangement, the finance company contracted by the computer manufacturer would
finance the employee's computer purchase by underwriting and extending consumer
credit directly to the employee, as opposed to ECC's prior payroll deduction
program. To date this marketing program has generated no sales, and there can be
no assurance that this new arrangement will be successful in the future.
Management will continue to seek financial institutions willing to issue credit
to consumers and accept payment through payroll deduction. Without this vehicle,
management would have to reconsider the Company's ability to market personal
computers in the workplace.

              Services

ECC provided its customers with affordable, state of the art personal computer
systems to be paid through payroll deduction, as a voluntary benefit. ECC
offered two types of desktop personal computer systems that came complete with
monitor, keyboard, speakers, mouse and 24/7 technical support. The lower-price
personal computer systems provided a 1-year parts and services warranty. The
high-end systems provided 1-year on-site support, a 3-years parts and labor
warranty and free unlimited Internet access for one year.

              Marketing

ECC marketed its Gateway payroll deduction program through LCOA's distribution
network of agents and brokers as well as trade shows and advertising directed to
corporate human resources departments. These agents and brokers were trained by
the Company's marketing management and subsequently approach their corporate
clients with the Einstein concept. ECC paid commissions based upon each computer
sold through these agents and brokers.

              Competition

The competition for personal computer products and services market share is
intense, with many large, brand name companies vying for the consumer's computer
dollars. In the market segment that ECC has identified as its target market -
the worksite - several better capitalized companies such as PeoplePC and others
have been selling employer subsidized personal computers to employees. ECC
believes that its relationship with its distribution network is relatively
unique to this market segment. However, success in the worksite market may bring
better-financed competitors and manufacturers into direct competition with ECC
for its distribution system, as well as directly to the employers. Many of the
current and potential competitors have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
marketing and other resources than the Company. Such competitors may be able to
devote greater resources to the development, promotion and sale of products and
services.

         PeoplesChoice

              General

During the June 2002 quarter, PeoplesChoice began to broker business to its
insurance partners by securing AORs with employers that wish to provide
voluntary benefit portfolios to their employees. PeoplesChoice is responsible
for interviewing and selecting suitable insurance carriers, as well as
overseeing the pre-enrollment communications, enrollment methodologies and third
party administration processes. PeoplesChoice, a licensed insurance agency, will
receive override commissions for all insurance products written in the workplace
where it is the agent of record and LCOA's Plans will also be part of all such
voluntary benefit portfolios. Enrollment presentations at the worksites began in
September 2002. See PeoplesChoice under "Recent Developments".

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<PAGE>

Trademarks

The Company maintains numerous trademark registrations with the United States
Patent and Trademark Office, including the names of Legal Club of America(TM),
Einstein(TM) and PeoplesChoice(TM), as well as various logos and service marks.

Regulations

Since LCOA does not practice law, provide legal advice or provide any form of
legal services to its members, LCOA does not believe that it falls under the
purview of regulations governing attorneys. There is no fee sharing of any kind
between LCOA and the referral attorneys and there is no financial relationship
between LCOA and its participating attorneys. Attorneys participate in the
program voluntarily, exercise their own independent professional judgment when
seeing members and reviewing their cases, and remain bound by their State's
professional code of ethics and attorney regulations. In 1994 and 1995, the
predecessor Company received opinions from many State Bar Associations and
attorneys, which concur with the Company's position that attorney regulations do
not apply to LCOA's Plans. LCOA requires participating attorneys to comply with
applicable regulations and ethical codes and it performs monitoring procedures
to seek to ensure compliance.

From 1996 through 1998 the Company or its predecessor filed all quarterly
reports as required under Rule 4-7.8 of the Rules Regulating the Florida Bar. In
early 1999, The Florida Bar removed the Company from its list of private lawyer
referral services at the urging of the Florida Department of Insurance. The
Florida Bar issued an opinion to the Company that the Company's LCOA Plans do
not fall under the Rules Regulating the Florida Bar and such informative filings
are not required.

         Insurance Regulation

The Company does not believe that insurance regulations are applicable to its
LCOA operations. In 1994 and 1995, a predecessor Company received opinion
letters from numerous State Departments of Insurance concurring with this belief
since the Company does not reimburse or indemnify its members for any legal
expenses incurred. On occasion, a State may re-review the programs to be sure
that the Plans' operations have not changed.

In 1994, a predecessor company received an opinion letter from the Oregon
Insurance Department that its programs did not fall under the regulations of its
department. In 2000, at the urging of the Florida Department of Insurance, the
Oregon Insurance Division of the Department of Consumer and Business Services
("OID") conducted a re-review of LCOA's Plans. In July 2002, the Oregon Court of
Appeals determined that while LCOA is not selling insurance and is not a legal
expense insurer, that its legal programs still required registration within the
OID. LCOA is in the process of complying with such requirements. The Plans do
not need to change their current operations. The registration requirements are
administrative only.

The Company is not aware of any other states that are reviewing or re-reviewing
the Company's Plans regulations at this time.

Forward Looking Statements

This Annual Report on Form 10-KSB contains a number of forward-looking
statements, including, without limitation, statements referring to the Company's
goal to achieve revenue growth, continue to reduce its operating costs, continue
its restructuring activities and plans to introduce new initiatives and
processes.

Except for historical information contained herein, the matters discussed in
this report containing forward-looking statements fall within the meaning of
Section 27A of the Securities Act of 1933, as amended, (the "Securities Act"),
and Section 21E of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), that involve substantial risks and uncertainties.
Forward-looking statements are not based on historical facts, but rather reflect

                                        8
<PAGE>

the Company's current expectations concerning future results and events. These
forward looking statements can generally be identified by the use of words such
as "anticipate", "believe", "expect", "intend", "may", "plan", or similar words
or phrases. Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results or performance
of the Company to differ from any future results or performance expressed or
implied by these statements. More information about these risks, uncertainties
and other factors is set forth in Part II. Item 6, Management's Discussion and
Analysis of Financial Condition and Results of Operations, "Forward Looking
Statements".

Employees

The Company has a total of 22 full time employees. They are assigned as follows:
3 are in management, 5 are in sales and marketing, and 14 are in operations.
None of the employees belong to a union. We believe that our employee
relationships are excellent.


Item 2.  Description of Property
         -----------------------

In September 2001, the Company executed a new lease agreement, as amended
February 2002, for a term of five years and moved to its new corporate
headquarters at 8551 W. Sunrise Blvd., Suite 105, Plantation, FL 33322. The
Company currently occupies approximately 5,858 square feet of office space at an
annual base rent of $159,000, including common area expenses and sales tax,
escalating approximately 4.4% per year during the term of the lease. During the
year ended June 30, 2002, the Company closed its two regional sales offices
located in Chicago and New York.


Item 3.  Legal Proceedings
         -----------------

During the quarter ended June 30, 2000, the Company launched ECC, which was
formed for the purpose of selling computers to employees at the worksite,
allowing payroll deduction as the payment method. The Company began delivering
computers to employees utilizing this methodology in October 2000. In connection
with this program the Company entered into agreements with Gateway, Inc. to
facilitate the sale of computers as a voluntary benefit at the worksite using
payroll deduction. In February 2001, Gateway ended its relationship with the
Company and was forced to abandon its payroll deduction program. On July 13,
2001, ECC filed suit against Gateway in the U. S. District Court for the
Southern District of California in a case titled Einstein Computer Corp. vs.
Gateway, Inc., claiming damages in excess of $200 million. Among other things,
ECC asserts breach of contract and, alternatively, fraud, in connection with
Gateway's repudiation of its agreement with Einstein. On January 15, 2002, the
U.S. District Court dismissed ECC's first amended complaint with leave to amend,
for failure to state a claim for relief. On or before February 11, 2002, ECC
filed its second amended complaint. Gateway renewed its motion to dismiss the
Company's complaint and the briefing on this matter was completed. On August 7,
2002, the U.S. District Court dismissed with prejudice ECC's claim against
Gateway Inc, and Gateway Companies, Inc. for fraud but denied Gateway's motion
to dismiss ECC's second amended complaint brought against Gateway, Inc. for
breach of contract. The action now will proceed against Gateway, Inc. for breach
of contract. On September 19, 2002, Gateway, Inc. and Gateway Companies, Inc.
filed an answer to the second amended complaint, a counterclaim for damages, and
a demand for jury trial. The Company is in the process of preparing its
response.

On July 1, 2002, Legal Club of America Corporation, Legal Club Financial Corp,
Legalclub.com, Inc., and Einstein Computer Corp. filed a complaint in the
Circuit Court of the Seventeenth Judicial Circuit in Broward County, Florida
(the "Court") against Jason Krouse, Michael Samach, Select Benefit Partners
f/k/a Evolution Benefits and/or Evolution Technologies, and National Accident
Insurance Consultants, Inc. Jason Krouse is the former Executive Vice President
of Sales and Director of the Company and its subsidiaries. Michael Samach is the
former Chief Financial Officer of the Company and its subsidiaries. Both Mr.
Krouse and Mr. Samach simultaneously resigned from their respective positions
with the Company without notice on December 19, 2001. The complaint alleges
breach of employment agreement against both Mr. Krouse and Mr. Samach as well as

                                        9
<PAGE>

breach of contract against National Accident Insurance Consultants, Inc. It also
asserts numerous other claims against the various parties including tortuous
interference with advantageous business relationships, violations of the Florida
Uniform Trade Secrets Act, breaches of fiduciary duties, conspiracy to violate
the Florida Uniform Trade Secrets Act, and violations of non-competition
provisions. The Company is seeking both injunctive relief and damages including
attorney fees. In conjunction with the current litigation, in July 2002, the
Company took the position that no accrued compensation is due and owing to Mr.
Krouse or Mr. Samach. On September 10, 2002, Judge Andrews, presiding over the
proceedings, granted the defendants motion to dismiss, without prejudice, with
leave to amend in accordance with the Judge's directives. The Company will amend
its complaint and re-file it within the 20-day time period as set forth by the
Court. The parties have begun discovery in the matter.

In 1997, a predecessor company received a letter from the Florida Department of
Insurance ("FDOI") stating that the predecessor company should be regulated as a
legal expense insurer despite the FDOI's 1994 findings that the predecessor
company was not such an insurer. The Company contested this change of the FDOI's
position and received a favorable recommended order from the State of Florida
Division of Administrative Hearings concluding that; (1) the Company, as
currently conducting business, is not subject to regulation by the FDOI as a
legal expense insurer and (2) even if the FDOI found that it was a legal expense
insurer, that the Company would be exempt from any regulation due to the fact
that it is a lawyer referral service in accordance with the definitions set
forth by the Florida Bar Association. Not withstanding, the FDOI rejected both
conclusions of the Administrative Law Judge and ordered the Company to become
licensed as a legal expense insurer. The Company appealed this ruling, and a
three-judge panel for the First District Court of Appeals ("FDCA") heard this
appeal in March 2001. On September 26, 2001 a decision was rendered by the FDCA
in which the FDCA found in the Company's favor, and against the FDOI. On October
11, 2001, the FDOI filed a motion for rehearing en banc or in the alternative a
motion for rehearing with the FDCA. On November 8, 2001, the Company filed its
response to this motion urging FDCA to deny the FDOI's request. On November 21,
2001, the FDCA issued an order denying the FDOI motion for rehearing or
rehearing en banc and issued a mandate for the FDOI to issue a final order
consistent with its opinion. On January 11, 2002, the FDOI issued a final order
declaring that Legal Club of America is not selling legal expense insurance and
is not subject to regulation by the FDOI. On May 1, 2002, the Company filed a
motion with the Administrative Law Judge to recover a portion of its attorney
fees as per the agreement reached between the Company and the FDOI. In June
2002, the Company received from the FDOI reimbursement for certain costs
incurred.

In addition to the legal proceedings discussed above, the Company is exposed,
from time to time, to other claims, legal actions, and regulatory actions in the
normal course of business, some of which are initiated by the Company.
Management believes that any such additional outstanding issues will be resolved
without impairing the financial condition of the Company.


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

No matters were submitted to the vote of security holders of the Company during
the quarter ended June 30, 2002.

                                       10
<PAGE>

PART II


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

Market Price of Common Stock. The Company's Common Stock is traded on the NASD
OTC Bulletin Board under the symbol LEGL. The following table shows, for the
periods indicated, the bid quotations per share as reported on the NASD OTC
Bulletin Board.

                                                        Bid Prices
                                                    ------------------
                           Period                    High        Low
              --------------------------------      ------      ------

              Quarter Ended June 30, 2002           $ 0.10      $ 0.03

              Quarter Ended March 31, 2002            0.10        0.02

              Quarter Ended December 31, 2001         0.10        0.05

              Quarter Ended September 30, 2001        0.16        0.06

              Quarter Ended June 30, 2001             0.24        0.12

              Quarter Ended March 31, 2001            0.44        0.20

              Quarter Ended December 31, 2000         0.41        0.20

              Quarter Ended September 30, 2000        0.94        0.27

Such quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission. Such quotes are not necessarily representative of actual
transactions or of the value of the Company's securities, and are in all
likelihood not based upon any recognized criteria of securities valuation as
used in the investment banking community. At September 26, 2002, the closing
price of the Company's closing price $0.06.

As of August 31, 2002, there were 428 holders of record of the Company's common
stock and 24,518,668 shares issued and outstanding. As of the same date, there
ware 16,667 shares outstanding of the Company's Series A Preferred Stock held by
one entity and 2,160 shares outstanding of the Company's Series B Preferred
Stock held by 11 holders. Certain shares of common stock are held in "street"
name and may, therefore, be held by several beneficial owners.

Of the 24,518,668 shares of outstanding common stock, 16,617,247 shares are
"restricted" securities of the Company within the meaning of Rule 144(a)(3)
promulgated under the Securities Act of 1933, as amended. In general, under Rule
144, as currently in effect, subject to the satisfaction of certain other
conditions, a person, including an affiliate of the Company (in general, a
person who has a control relationship with the company) who has owned restricted
securities of common stock beneficially for at least one year is entitled to
sell, within any three-month period, that number of shares of a class of
securities that does not exceed the greater of (i) one percent (1%) of the
shares of that class then outstanding or, if the common stock is quoted on
NASDAQ, (ii) the average weekly trading volume of that class during the four
calendar weeks preceding such sale. A person who has not been an affiliate of
the company for at least the three months immediately preceding the sale and has
beneficially owned shares of common stock for at least two (2) years is entitled
to sell such shares under Rule 144 without regard to any of the limitations
described above. The holders of the Company's restricted securities became
eligible to sell under Rule 144 on May 2, 2000. Sales of eligible registered
securities have had a substantial adverse effect on the market price of the
Company's securities.

No prediction can be made as to the effect, if any, that future sales of shares
of common stock or the availability of common stock for future sale will have on
the market price of the common stock prevailing from time-to-time. Sales of
substantial amounts of common stock on the public market could adversely affect
the prevailing market price of the common stock.

                                       11
<PAGE>

Dividends. The Company has not paid any dividends to its shareholders for any
class of stock since its inception and does not anticipate paying any such
dividends in the foreseeable future. The payment of dividends may be made at the
discretion of the Board of Directors of the Company and will depend upon, among
other things, the Company's operations, its capital requirements, and its
overall financial condition.


Recent Sales of Unregistered Securities

Common Stock. During the year ended June 30, 2002, the Company issued 1,500,000
shares of common stock for $150,000, or $0.10 per share, in a private placement
to an accredited investor, and 555,000 shares of common stock were issued at
$0.1857 per share for a value of $103,000 through a capital markets investment
company. The Company also issued 250,000 shares of common stock to accredited
investors. These shares were issued as consideration for funds advanced by the
investors to securitize a letter of credit requirement associated with the
Einstein personal computer program. The value assigned to the shares of common
stock issued was $25,000, or $0.10 per share. These securities were issued to
private and institutional investors in reliance on Rule 506 of rules and
regulations promulgated under the Securities Act of 1933, as amended.

Convertible Debt. During the December 2001 quarter, the Company's outstanding
Convertible Notes dated September 2000 in the aggregate principal amount of
$192,000 and having a stated interest rate of 25%, were modified. The amended
Convertible Notes bear interest at 12% and the maturity of the Notes was
extended to December 31, 2002, from September 30, 2001. As part of the
modification, among other things, the note holders were issued shares of the
Company's common stock for no additional consideration. The value assigned to
the 368,074 shares of common stock issued was $37,000, or $0.10 per share. At
maturity, each note holder will have the option to convert the outstanding
balance of the principal and interest, into shares of the Company's common stock
at $0.25 per share. These securities were issued to private investors in
reliance on Rule 506 of rules and regulations promulgated under the Securities
Act of 1933, as amended.

Series B Convertible Preferred Stock. During the year ended June 30, 2002, a
holder of 10,000 shares of Series B Convertible Preferred Stock ("Series B
Stock") exercised the option to convert the shares to common stock. The Series B
Stock was converted into 1,000,000 shares of common stock at a conversion price
of $2.50 per share. The Series B Stock was sold during fiscal year 2000 to
private and institutional investors in reliance on Rule 506 of rules and
regulations promulgated under the Securities Act of 1933, as amended.

Warrants. As of June 30, 2002, immediately exercisable warrants to purchase
3,038,400 of the Company's common stock were outstanding. Following are some of
the terms of warrants granted during fiscal year 2002:

The Company issued warrants to purchase 6,025,000 shares of common stock, of
which 5,500,000 are contingently issuable, at exercise prices varying from $0.01
to $0.10 per share, with contractual lives of five to ten years. These warrants
were issued to non-employee investors and marketing partners as part of their
investment consideration. The exercise prices were arrived at through
arms-length negotiations with the warrant holders.

On May 28, 2002, the Company signed an agreement with a business partner whereby
Agent of Record letters would be obtained by the business partner on behalf of
PeoplesChoice. For each $100,000 of insurance premium written from such
referrals, the Company will issue the business partner warrants to purchase
22,000 shares of common stock at $0.01 per share. The issuance of the warrants
will be capped once the insurance premium level reaches $25,000,000, or
5,500,000 warrants, and their issuance is contingent on performance under the
agreement. The warrants shall have a term not to exceed ten years from date of
issuance. The value assigned to the 5,500,000 warrants that are contingently
issuable was $494,000, the fair market value of the Company's common stock on
the date the agreement was signed.

                                       12
<PAGE>

During the quarter ended March 31, 2002, the Company restructured commissions
payable on its Series B preferred stock totaling $194,000. As part of the
restructure, the Company issued the note holder warrants to purchase 300,000
shares of the common stock, at $0.04 per share. The warrants have a contractual
life of five years and were issued with an exercise price at the fair value of
the Company's common stock.

In January 2002, the Company issued warrants to purchase 225,000 shares of
common stock at $0.10 per share. The warrants have a contractual life of five
years and were issued with an exercise price at the fair value of the Company's
common stock.

Holders of the warrants have "piggyback" registration rights in which they are
entitled to include their shares in certain registration statements the Company
may file.

Sales of unregistered securities during the years ended June 30, 2001 and 2000
are incorporated herein by reference to the Company's Form 10-KSB for the year
ended June 30, 2001, filed with the Securities and Exchange Commission on
October 9, 2001.


<TABLE>
<CAPTION>
Equity Compensation Plan

----------------------------------------------------------------------------------------------
                            Number of Shares of
                             Common Stock to be      Weighted Average       Number of Options
                            Issued Upon Exercise     Exercise Price of     Remaining Available
      Plan Category            of Outstanding       Outstanding Options    for Future Issuance
                                   Options                                    under the Plan
----------------------------------------------------------------------------------------------
<S>                             <C>                        <C>                   <C>
Stock Option Plan
approved by shareholders        1,116,754(1)               $1.00                 883,246
----------------------------------------------------------------------------------------------
</TABLE>

--------------------
(1)  At June 30, 2002, there were 651,754 exercisable stock options under the
     Plan, with a weighted average price of $1.39.

                                       13
<PAGE>

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

Sources of Revenue and Related Costs
------------------------------------

The Company`s principal source of revenue is from LCOA legal plans' membership
fees. LCOA markets its products to employees at the worksite, through its
insurance carrier partners and their contracted insurance agents. LCOA also
markets its legal plans through affinity groups and direct marketing companies.
Members pay LCOA the membership fee on a monthly or annual basis, depending on
the nature of the membership. Monthly fees range from $0.10 to $24.95, depending
on the type of membership. Discounted rates are offered to large groups or
associations that pay for their members to have a membership in the LCOA plans,
as well as to direct marketing companies that may resell LCOA products under
private label arrangements. Group discounts are also provided to employers that
purchase the LCOA plans on behalf of their employees. Memberships in LCOA legal
plans are offered to employers as a voluntary benefit for employees at their
workplace using payroll withholding as the primary payment method. Membership
fees from affinity groups and direct marketing companies are paid on a
per-member, per-month basis. Membership fees are recognized in income ratably
over the related service period in accordance with the membership terms,
normally one year. Over 95% of membership fees are paid on a monthly basis.

The Company distributes its LCOA products through a network of independent
insurance agents and brokers. LCOA's commission program offers agents and
brokers commissions on the sales of its products. LCOA pays commissions to the
agents and brokers, based on the monthly payments received.

Revenue from ECC's computer system sales made during the year ended June 30,
2001, was recognized upon shipment of the product to the customer. Related cost
of sales was recognized based on the number of units shipped during the period.
ECC utilized the Company's network of independent insurance agents and brokers
to offer the personal computer program to employers as a voluntary benefit to
employees at their workplace. Commissions were paid to the agents and brokers
based on a fixed amount per unit sold.

Recent Events
-------------

During the year ended June 30, 2002, the Company continued developing marketing
and sales initiatives to increase LCOA revenues. The Company's efforts to
increase its direct marketing revenue have been negatively impacted by new, more
stringent regulations covering the merchant services industry. The Company will
continue to strive to negotiate new direct marketing contracts, when possible.
In January 2002, management made a commitment to return the Company to its core
business - providing LCOA plans through the worksite, its major market segment.
The Company has re-focused its marketing efforts to increase the penetration of
its LCOA products at the worksites and expand its services by providing employer
groups with voluntary benefits portfolios.

     New Marketing Initiatives

PeoplesChoice(TM). During the June 2002 quarter, Legal Club Financial Corp.
("LCF") d/b/a PeoplesChoice, a wholly owned subsidiary of the Company, began to
broker business to its insurance partners by securing agent of record letters
("AOR") with employers that wish to provide voluntary benefit portfolios to
their employees. The AOR letters provide the Company exclusive access to
employers that want to provide their employees with voluntary benefits,
including LCOA products.

PeoplesChoice, a licensed insurance agency, will receive override commissions
for all insurance products written in the workplace where it is the agent of
record, adding commissions as a new source of revenue for the Company. LCOA's
legal plans will also be part of all voluntary benefit portfolios offered by
PeoplesChoice. PeoplesChoice will receive, on the average, commissions of
approximately 17.5% on premiums written and 70% of LCOA's legal plans written.
PeoplesChoice is responsible for interviewing and selecting suitable insurance
carriers, as well as overseeing the pre-enrollment communications, enrollment
methodologies and third party administration processes.

                                       14
<PAGE>

To date, PeoplesChoice has obtained two AOR letters. Its first AOR is from a
national human resources outsourcing corporation interested in providing a
complete voluntary benefits platform to its 750 corporate clients and their
307,000 employees. PeoplesChoice awarded this case to two large national
insurance companies that have historically been writing LCOA business. The
general agents ("GA") awarded the cases by the insurance carriers have agreed to
include LCOA products on all future employer group presentations external to
this case. All pre-enrollment communications were mailed in August, with
enrollment presentations currently being made at the employer groups. The
Company expects revenues from this case to first be realized in the March 2003
quarter.

PeoplesChoice second AOR is from a United Food and Commercial Workers Union
Local (the "Local"). This Local has approximately 8,000 union members in 16
corporations, which in total have approximately 100,000 employees. The Local's
president has approved the offering of PeoplesChoice voluntary benefits
portfolio to non-union employees in addition to union employees and is assisting
PeoplesChoice in obtaining AORs from each employer group to allow for the
presentation of the voluntary benefits portfolio to non-union employees. Through
August 2002, PeoplesChoice has received approval to offer the voluntary benefits
at one of the companies, with approximately 5,000 employees, 1,200 of them
non-union. Enrollments of the employer groups will begin October 2002. The
Company expects revenues from this case to first be realized in the March 2003
quarter.

The president of the Local has also introduced the PeoplesChoice concept to
several other union presidents representing approximately 270,000 union members.
As of August 2002, PeoplesChoice is attempting to secure AOR letters from each
of the local presidents.

LegalIQ. Legal IQ is a private label legal product recently developed by
Insurance IQ.com, an unaffiliated company. The initial phase of the program,
which is the solicitation and recruiting of agents to sell LegalIQ, has
generated over 10,000 agent responses, with 1,200 of the agents, or 12%, being
contracted to represent LegalIQ. The recruiting process will continue through
June 2003. The Company will receive membership fees for all Legal IQ business
written and will pay commissions to Insurance IQ.com. Through August 2002, 60
corporations have expressed interest in having LegalIQ be implemented as an
employee benefit. LegalIQ is contacting each employer group to set up
enrollments. Although the Company has received revenue from LegalIQ during the
September 2002 quarter, the revenue stream is expected to increase by the March
2003 quarter.

General Agency Agreement. In September 2002, the Company completed negotiations
and signed an agreement with a large national General Agent, subsidiary to a
national insurance company. The agreement covers (1) the GA contacting LCOA
corporate clients to process re-enrollments and introduce them to other
voluntary benefits through PeoplesChoice and (2) adding LCOA products to their
insurance carrier's line of voluntary benefit products. The GA has 1,000
captured agents and approximately 14,000 corporate clients. The Company will
receive override commissions on all insurance premiums written through
PeoplesChoice, as well as membership fees on all LCOA products sold through the
GA. Training for these programs began the second week of September 2002. The GA
has been awarded 300 of LCOA's corporate clients, whose enrollments have
declined in the past year, to contact them on LCOA's behalf for re-enrollments.
The GA was also awarded, through PeoplesChoice, a geographic area of the human
resources outsourcing company discussed above, and in September 2002, began
making presentations to employer groups to start enrolling LCOA and its
PeoplesChoice voluntary benefit platform.

     LCOA Worksites

During the December 2001 quarter the Company increased its worksite client base
by adding ten national employer groups with over 2,000 employees each. Revenue
from these enrollments started to be recognized during the latter part of the
June 2002 quarter. Since January 2002, the Company has added five additional
national employer groups with over 2,000 employees each. Enrollments from these
companies were either processed during the June quarter or are currently being
processed. The Company expects that the revenue from the March quarter
enrollments will begin to be realized by the Company in the September 2002
quarter and the June quarter enrollments will begin to be realized in the March

                                       15
<PAGE>

2003 quarter. During the June 2002 quarter, LCOA's sales staff has also
initiated a re-enrollment campaign, primarily with small to mid-size Florida
based companies, and has already scheduled ten re-enrollments through November
2002

     Cost Savings Initiatives

In addition to the new marketing programs that the Company implemented during
fiscal 2002, as discussed above, the Company also continued to focus on reducing
its cost of operations and initiated efforts to restructure its liabilities. The
Company reduced its operating expenses 33.4% during fiscal year 2002 and was
successful in restructuring a payable and the commissions due on the Series B
preferred stock, recognizing non-operating income aggregating $262,000. During
fiscal 2003, the Company plans to continue its endeavors to enhance its
financial position and plans to continue its efforts to restructure its balance
sheet, including the issuance of options to purchase common stock to executive
officers of the Company in lieu of compensation voluntarily deferred by such
executives during fiscal 2000, 2001 and 2002.

     Gateway Litigation

ECC was formed for the purpose of selling computers to employees at the
worksite, using payroll deduction as the payment method. During its fiscal year
ended June 30, 2000, the Company entered into agreements with Gateway, Inc.
("Gateway") in connection with this program to facilitate the sale of computers
as a voluntary benefit at the worksite using payroll deduction. The Company
began delivering the computers to employees utilizing this methodology in
October 2000. In February 2001, Gateway ended its relationship with the Company
and the Company was forced to abandon its payroll deduction program. On July 13,
2001, ECC filed suit against Gateway in the U. S. District Court for the
Southern District of California in a case titled Einstein Computer Corp. vs.
Gateway, Inc., claiming damages in excess of $200 million. On August 7, 2002,
the U.S. District Court denied Gateway's motion to dismiss ECC's second amended
complaint brought against Gateway for breach of contract. The action will now
proceed against Gateway for breach of contract. On September 19, 2002, Gateway
and Gateway Companies, Inc. filed an answer to the second amended complaint, a
counterclaim for damages, and a demand for jury trial. The Company is in the
process of preparing its response. See Item 3., Legal Proceedings.


Results of Operations

Years Ended June 30, 2002 and 2001

The following table sets forth the results of operations for the years ended
June 30, 2002 and 2001, which are discussed in more detail below:

<TABLE>
<CAPTION>
                                                                   Change        Change
                                  2002             2001            Amount      Percentage
                              -----------      -----------      -----------
<S>                           <C>              <C>              <C>              <C>
Revenues
  LCOA membership fees        $ 2,052,000      $ 3,312,000      $(1,260,000)     (38.0)
  ECC PC sales                     54,000        2,580,000       (2,526,000)     (97.9)
                              -----------      -----------      -----------
Total revenues                  2,106,000        5,892,000       (3,786,000)     (64.3)
Operating income (loss)        (1,618,000)      (1,949,000)         331,000       17.0
Non operating income (loss)       298,000         (153,000)         451,000      294.8
                              -----------      -----------      -----------
  Net income (loss)           $(1,320,000)     $(2,102,000)     $   782,000       37.2
                              ===========      ===========      ===========

  Earnings (loss) per share
    Basic and fully diluted   $     (0.06)     $     (0.11)     $      0.05       45.5
                              ===========      ===========      ===========
</TABLE>

                                       16
<PAGE>

For the year ended June 30, 2002, the Company's operating loss decreased
$331,000, or 17%, compared with 2001, primarily as a result of a $4,117,000, or
52.5%, reduction in its operating expenses during the current fiscal year. The
decline in the Company's net loss of $782,000, or 37.2%, during fiscal 2002, was
attributable to non-recurring non-operating gains and income recorded in the
March and June quarters, as well as the reduction in operating expenses.

Revenue decreased $3,786,000, or 64.3%, to $2,106,000 in fiscal year 2002
compared with $5,892,000 in 2001. The reduction in sales of personal computers
by ECC contributed $2,526,000, or 66.7%, to the decline in revenue. LCOA revenue
decreased $1,260,00 or 38.0%, in fiscal year 2002 compared to the prior year.
This decrease was principally the result of lower direct marketing revenues.

The decrease in LCOA membership revenue during the year ended June 30, 2002,
compared to 2001, was the result of (1) a decrease in direct marketing sales of
$1,617,000, or 79.5%, to $416,000, compared with $2,033,000 in fiscal year 2001,
(2) a decrease in affinity sales of $144,000 or 49.0%, to $150,000 compared with
$294,000 in fiscal year 2001, offset in part by (3) an increase in worksite
sales of $501,000, or 50.9%, to $1,486,000, compared with $985,000 in the
comparable period in 2001.

The growth in worksite revenue was due to LCOA's worksite initiatives,
re-enrollments of current employer groups as well as from increased penetration
at the worksites. Direct marketing revenues declined because the Company (1)
discontinued its association with one large direct marketing company, (2) two
direct marketing organizations had difficulty maintaining their merchant
accounts as a result of more stringent regulations covering the merchant
services industry and (3) a national direct marketing corporation, with which
the Company does business, was acquired and has been restructuring its 2002
marketing strategy. As a result, LCOA business generated by this marketing
corporation has been reduced significantly. Although communication with the
direct marketing corporation indicates that LCOA will continue to be a part of
their future marketing plans, no new direct marketing initiatives have been put
in place to date.

Revenue from ECC's sales of Gateway computer systems and accessories totaled
$2,580,000 for the year ended June 30, 2001, which represented approximately
1,700 units, compared with $54,000 in fiscal year 2002. ECC began sales
operations in the quarter ended December 31, 2000. In February 2001, Gateway
ended its relationship with the Company. See Part I, Item 3., Legal Proceedings.

Cost of sales associated with sales of personal computers amounted to $54,000
during the year ended June 30, 2002, compared with $2,330,000 during the year
ended June 30, 2001, a decrease of 97.7%. Gross profit margin on sales was 14%
in fiscal 2001, excluding write-off of damaged inventory items not replaced by
Gateway under its agreement with the Company.

Operating expenses, excluding cost of sales, decreased $1,841,000, or 33.4%, to
$3,670,000 in fiscal year 2002 compared with $5,511,000 in the comparable period
in 2001. This decrease was the result of reductions in all major expense
categories, principally in employee compensation and benefits costs.

Compensation and employee benefits decreased $1,020,000, or 36.0%, to
$1,812,000, in fiscal year 2002, compared with $2,832,000 during the same period
in 2001. This reduction consists of primarily of (1) a reduction in per employee
costs and (2) bonuses amounting to $595,000 earned and accrued in 2001. As a
result of management's continuing efforts to lower the per-employee operational
costs associated with marketing, servicing, and administering customers, the
Company reduced compensation and employee benefits by $399,000 in fiscal 2002,
compared with 2001. LCOA reduced its staff approximately 37.8%, eliminating 14
full-time positions and cutting back on its use of contract labor, from levels
at May 1, 2001. The Company's average number of employees during fiscal 2002
decreased 27.7 % compared with fiscal 2001.

Advertising and marketing costs were $108,000 in the current fiscal year
compared with $196,000 in fiscal year 2001, a decrease of $88,000, or 44.9%. The
decrease is associated with a reduction in trade magazine advertising, lower
trade show participation and a decrease in public relations marketing.
Management curtailed these expenditures during fiscal 2002 while it refocused
its attention on increasing LCOA worksite revenue. During the March and June
2002 quarters, the Company recommenced its participation in trade shows.

                                       17
<PAGE>

Professional fees amounted to $242,000 in fiscal year 2002, compared with
$407,000 in the prior fiscal year, a decrease of $165,000, or 40.5%. The
decrease was attributable mainly to lower expenditures for legal services during
2002.

General and administrative expenses were $1,156,000 during fiscal 2002, a
decrease of $324,000, or 21.9%, compared with $1,480,000 during the same period
in 2001. This decrease was comprised principally of decreases in (1) postage
expense ($131,000), (2) printing costs ($118,000), (3) fulfillment costs
($59,000), (4) agent commissions ($70,000), and (5) travel and entertainment
($84,000). These decreases were partially offset by an increase in provision for
doubtful accounts ($148,000) as a result of the maturing of ECC's receivables
portfolio on sales of personal computers in fiscal 2001. The reduction in
postage, printing costs and fulfillment expenses were mainly attributable to the
decline in direct marketing enrollments by one of the Company's direct marketing
business partners for which fulfillment services were provided. Agent
commissions declined as a result of lower commissions on direct marketing
business ($125,000) and ECC commissions in 2001 on sales of personal computers
($56,000), partially offset by higher commissions generated on LCOA worksite
sales during fiscal year 2002 as a result of increased LCOA penetration at the
worksites as well as through re-enrollments of participating employer groups
($130,000).

During the year ended June 30, 2001, the Company incurred costs as part of a
settlement stipulation entered into between the Company and a former officer and
employee pursuant to which the Company issued 125,000 restricted shares of the
Company's common stock and continued to make payments in the amount of $6,700
per month through December 15, 2001. In fiscal year 2001, the Company also
issued 136,000 restricted shares of common stock in settlement of a dispute that
arose relating to a 1996 asset purchase agreement.

Occupancy expenses decreased $176,000, or 50.9%, to $170,000, during the year
ended June 30, 2002 from $346,000 during the comparable period in 2001. In
fiscal year 2002 the Company signed a new five-year lease agreement with the
same property management company that serviced the Sunrise location. Effective
March 2002, the Company moved its corporate headquarters to a smaller office
space, in its continuing efforts to control expenses, and has effectively
reduced its lease expense by approximately 44.0% over the next five years.
During fiscal 2002, the Company also closed two regional offices, contributing
approximately $24,000 to the reduction in occupancy expenses.

Depreciation and amortization expenses amounted to $182,000 in fiscal year 2002,
compared with $147,000 for the comparable period in 2001, an increase of
$35,000, or 23.8%. This increase was attributable to the acceleration of
amortization costs associated with software development costs incurred in fiscal
year 2001 to develop an operating platform for ECC's computer sales, as well as
a full year of amortization on these costs compared with fiscal year 2001. As a
result of Gateway ending its relationship with the Company in February 2001,
amortization of ECC's operating platform has been adjusted to be amortized over
the average remaining term of the ECC receivables.

Non operating income (loss), net, amounted to income of $298,000 for the year
ended June 30, 2002, compare with net expenses of $153,000 during the same
period in 2001.

Other income includes elimination of accrued expenses to related parties, gains
on debt restructured, miscellaneous income and interest income. During the June
2002 quarter, the Company eliminated $296,000 of accrued bonus for two former
executives who resigned in December 2001. In accordance with the bonus plan, the
Company's By-laws, and its practice regarding accrual of bonuses, executives
must be employed by the Company at the time the bonus is paid. Accordingly, the
former executive officers of the Company effectively forfeited their deferred
bonuses as a result of their resignations. During the March 2002 quarter, the
Company restructured previously recorded commissions due on its Series B
Preferred Stock and recorded $174,000 of gains on the restructuring. Fiscal year
2002 also includes miscellaneous income resulting from the elimination of an
$88,000 payable to a company that is no longer in business. Interest income
amounted to $328,000 during the fiscal year 2002,

                                       18
<PAGE>

compared with $230,000 for the comparable periods in 2001, an increase of 42.6%.
This increase in interest income in fiscal 2002 was attributable to the
recognition of interest for a whole year on the ECC receivables on sales of
personal computers, compared with six months during fiscal 2001.

Other expense includes interest expense and loss on the disposal of property and
equipment. Interest expense amounted to $571,000 for the year ended June 30,
2002 compared with $385,000 in 2001, an increase of $186,000, or 48.3%. Interest
costs associated with ECC's notes payable to finance computer sales accounted
for $177,000 of the increase, as a result of the recognition of interest costs
for a whole year during fiscal 2002 compared with six months in 2001. Fiscal
year 2002 included costs totaling $25,000 resulting from the issuance of 250,000
shares of common stock to accredited investors as consideration for funds
advanced by the investors to securitize a letter of credit requirement
associated with the Einstein personal computer program. The agreement with the
national computer manufacturer was not consummated and the money advanced by the
investors was returned. Fiscal year 2002 also included a $19,000 loss on the
disposal of property and equipment as a result of the Company's move to smaller
office space.


Liquidity and Capital Resources

The Company's principal sources of cash have historically been proceeds from
sales of equity and debt securities, LCOA membership revenues and collection of
receivables generated from sales of Gateway personal computers in fiscal year
2001.

The Company's liquidity and capital resources were negatively impacted in fiscal
year 2002 as a result of the loss of direct marketing revenue because of more
stringent merchant services regulations, and Gateway's ending of its
relationship with ECC for sales of personal computers through the worksites. The
loss of the Gateway relationship forced the Company to abandon its payroll
deduction program, and the Company has not been able to obtain the same payment
methodology with other vendors. As discussed in Recent Events, above, on August
7, 2002, the U.S. District Court denied Gateway's motion to dismiss ECC's second
amended complaint for damages in excess of $200 million, brought against Gateway
for breach of contract. The action will now proceed against Gateway for breach
of contract. On September 19, 2002, Gateway and Gateway Companies, Inc. filed an
answer to the second amended complaint, a counterclaim for damages, and a demand
for jury trial. The Company is in the process of preparing its response. See
Part I., Item 3., Legal Proceedings.

To curtail the loss of these liquidity sources, the Company has re-focused its
marketing efforts in increasing the penetration of its LCOA products at the
worksite and has started new initiatives to expand its services at worksites by
providing employer groups with voluntary benefits portfolios.

Cash and cash equivalents, excluding restricted cash, was $227,000 at June 30,
2002, compared with $39,000 at June 30, 2001.

Net cash provided by operating activities was $37,000 for the year ended June
30, 2002, an improvement of $433,000, compared with a usage of $396,000 during
the same period in 2001. The decrease in cash used in operations was
attributable to a $ 782,000 reduction in net loss and a $500,000 increase in
collections of accounts receivable, principally from ECC receivables. These
funds were applied to pay down $254,000 in accounts payable and reduce its other
current liabilities and accrued expenses $227,000.

Cash flows used for investing activities decreased $147,000 during the current
fiscal year, to $28,000, compared to 2001. This was due to higher acquisition of
software in 2001, primarily for ECC operations.

Cash flows provided by financing activities decreased $154,000 for the year
ended June 30, 2002. Repayments of debt and capital leases increased $25,000, to
$144,000 in 2002 compared with $119,000 in 2001. During the year ended June 30,
2002, the Company sold 555,000 shares of common stock through a capital markets

                                       19
<PAGE>

investment company for $0.30 per share. Proceeds on the sales, net of
commissions were $103,000, or $0.1857 per share. During the current year the
Company also sold 1,500,000 shares of common stock for cash totaling $150,000,
or $0.10 per share, in a private placement to an accredited investor. During
fiscal year 2001, the Company issued convertible debt and common stock
aggregating $385,000.

The Company is at present meeting its current obligations from its weekly cash
flows. However, due to insufficient cash generated from operations, the Company
currently does not have cash available to pay its previously incurred accounts
payable and other liabilities. Some of these previously incurred obligations are
being met on a week-to-week basis as cash becomes available. There can be no
assurances given that the Company's present flow of cash will be sufficient to
meet future obligations; however, the Company is, from time to time, able to
raise additional capital from sales of its common stock, as it did during the
March and June 2002 quarters. There can be no assurances given that the Company
will be able to raise additional capital. During the year, the Company also
initiated efforts to restructure its liabilities and was successful in
restructuring a payable and the commissions due on the Series B preferred stock
issuance. Additionally, the Company eliminated from its balance sheet and future
cash needs, accrued bonuses for two former executives, pursuant to their
resignations. The Company plans to continue its endeavors to restructure its
balance sheet in fiscal year 2003. There can be no assurance that the Company
will continue to be successful in its efforts to restructure its debt. As such,
if the Company is unsuccessful with its current revenue initiatives, cost
savings strategies and balance sheet restructuring, the Company's ability to
meet its future cash flows needs and its ability to continue as a going concern
would be in jeopardy.

The Company is committed to seek opportunities to continue expanding its
marketing initiatives to generate working capital through sales of its LCOA
products and Einstein personal computers. As discussed under "Recent Events",
the Company instituted various initiatives during the March and June 2002
quarters to increase LCOA revenues, among them is PeoplesChoice, which will
offer employer groups voluntary benefits portfolio for their employees, and an
agreement with a large national General Agent that will allow for increased
penetration of LCOA Plans at the worksite. Additionally, in an effort to restart
a program to sell personal computers at the worksites, in September 2001, ECC
entered into an agreement with a brand name computer manufacturer, MicronPC, to
sell, as an authorized agent, their personal computers as a voluntary benefit to
employees at the worksite. Under this arrangement, the finance company
contracted by the computer manufacturer would finance the employee's computer
purchase by underwriting and extending consumer credit directly to the employee,
as opposed to ECC's prior payroll deduction program. To date this marketing
program has generated no sales, and there can be no assurance that this new
arrangement will be successful in the future. Management will continue to seek
financial institutions willing to issue credit to consumers and accept payment
through payroll deduction. Without this vehicle, management would have to
reconsider the Company's ability to market personal computers in the workplace.

In addition to its expansion of marketing and sales initiatives, and its
endeavors to restructure the balance sheet, mentioned previously, the Company
has continued its cost savings initiatives during fiscal 2002, reducing its
operating expenses, excluding cost of sales, 33.4%. If the Company is
unsuccessful with its current marketing and sales initiatives expansion, expense
reductions and balance sheet restructuring, it could have an adverse impact on
the Company's future cash flows and results of operations.

For its long-term cash and liquidity needs, as market conditions allow, the
Company will also explore opportunities to raise additional working capital
through equity financing. In December 2001, the Company signed an agreement with
a capital markets investment company for the purchase of up to 3,500,000 shares
of the Company's common stock, for a period of 60 days at $0.30 per share. On
January 24, 2002, the investment company sold 500,000 shares of the Company's
common stock for $150,000, and on February 7, 2002 it sold an additional 55,000
shares for $16,500. In June 2002, the Company also sold 1,500,000 shares of
common stock for cash totaling $150,000, or $0.10 per share, to an accredited
investor. However, there can be no assurance that the Company will be able to
obtain additional equity financing in the future on terms acceptable to the
Company, or at all. Failure to obtain such capital could have an adverse impact
on the Company's future cash flows and results of operations.

                                       20
<PAGE>

Although the Company has received working capital loans from related parties,
there is no assurance that affiliated parties would be willing to make such
loans in the future. The Company's Chairman of the Board and Chief Executive
Officer, as well as a previous executive officer of the Company, have
subscription agreements aggregating $396,000. These subscription agreements,
which are dated December 1997, and the related accrued interest, at annual rate
of 6%, have been recorded by the Company in equity. The Company does not expect
the subscriptions receivable to be paid in the near future, although the CEO has
indicated the notes and accrued interest on the notes will be satisfied. The
collection of the subscriptions receivable from a previous executive officer is
presently being discussed.

The Company continues to be in default of certain of its debt agreements. The
amount of debt in default totaled $201,000 at June 30, 2002. These debt
agreements have various original maturities from 1998 through July 2000. Accrued
interest associated with the notes is also currently in default. As market
conditions allow, management will continue its attempt to convert the remaining
$127,000 principal amount of term loans to capital stock, at terms and
conditions, mutually agreed upon by the debt holder and the Company. However,
there is no assurance that the Company will be able to continue converting the
term loans at terms and conditions that will be mutually acceptable.
Additionally, the Company has asserted a common law right of set off against
Gateway and has not made payments to Gateway under a Note and Security Agreement
dated September 25, 2000. The Company is presently in litigation with Gateway
(see Part I, Item 3., Legal Proceedings), regarding its prior business
activities with Gateway. Counsel to the Company believes that it is probable
that Gateway will recover on the Note, but that it is too early in the
litigation to determine the amount of any recovery by ECC against Gateway.


Forward Looking Statements

The statements contained in this item, if not historical, are forward looking
statements and involve risks and uncertainties that could cause actual results
to differ materially from the financial results described in such forward
looking statements. These risks and uncertainties include, but are not limited
to the following factors: (a) changes in regulations in states where the Company
does business; (b) the effectiveness of the Company's marketing strategies to
significantly grow; (c) the ability of the Company to manage operations
effectively to service the growth; (d) the Company's ability to recruit and
retain key executives and personnel concurrent with its growth; (e) the ability
of the Company to obtain additional financing as required; (f) general
competitive conditions in the industry; (g) rapid technological changes; and (h)
changes in economic and world political conditions, including economic
consequences attributable to acts of war, terrorism or other events that may
adversely affect the operations of the Company, its business partners or
corporate clients. Therefore, forward-looking statements should not be relied
upon as a prediction of actual future results.

                                       21
<PAGE>

Item 7.  Financial Statements
         --------------------

The following consolidated financial statements are included in Item 7.

                                                                           Page
                                                                           ----

INDEPENDENT AUDITORS' REPORT                                                23

CONSOLIDATED FINANCIAL STATEMENTS

         Consolidated Balance Sheets as of June 30, 2002 and 2001           24

         Consolidated Statements of Operations for the Years Ended
         June 30, 2002 and 2001                                             25

         Consolidated Statements of Cash Flows for the Years Ended
         June 30, 2002 and 2001                                             26

         Consolidated Statements of Stockholders' Equity (Deficit)
         for the Years Ended June 30, 2002 and 2001                         27


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                               28 - 44

                                       22
<PAGE>

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------



To the Board of Directors of
Legal Club of America Corporation

We have audited the accompanying consolidated balance sheets of Legal Club of
America Corporation and its subsidiaries (collectively, the "Company") as of
June 30, 2002 and 2001, and the related consolidated statements of operations,
stockholders' deficit, and cash flows for the two years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
June 30, 2002 and 2001, and the results of its operations and its cash flows for
each of the two years then ended in conformity with accounting principles
generally accepted in the United States of America. .

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company's accumulated deficit and
continuing losses from operations raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.



/s/ Ahearn, Jasco + Company, P.A.

AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants

Pompano Beach, Florida
September 18, 2002

                                       23
<PAGE>

LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 AND JUNE 30, 2001


<TABLE>
<CAPTION>
                                                                                                         June 30,        June 30,
                                                                                                           2002            2001
                                                                                                       ------------    ------------

                                              ASSETS
                                              ------

<S>                                                                                                    <C>             <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                                            $    227,000    $     39,000
  Restricted cash                                                                                            40,000         110,000
  Accounts receivable, net of allowance for doubtful accounts of $229,000 at June 30, 2002 and
    $83,000 at June 30, 2001                                                                                971,000       1,005,000
  Inventory                                                                                                      --          54,000
  Other assets                                                                                               69,000         200,000
                                                                                                       ------------    ------------

        TOTAL CURRENT ASSETS                                                                              1,307,000       1,408,000

LONG -TERM ASSETS:
  Accounts receivable, net of allowance for doubtful accounts of $91,000 at June 30, 2002 and
    $99,000 at June 30, 2001                                                                                383,000       1,367,000
  Property and equipment, net                                                                               422,000         596,000
  Other assets                                                                                               12,000          16,000
                                                                                                       ------------    ------------

        TOTAL                                                                                          $  2,124,000    $  3,387,000
                                                                                                       ============    ============

                               LIABILITIES AND STOCKHOLDERS' DEFICIT
                               -------------------------------------

CURRENT LIABILITIES:
  Accounts payable                                                                                     $    628,000    $    824,000
  Accrued compensation and related expenses                                                                 470,000         304,000
  Accrued bonus                                                                                             299,000         595,000
  Current portion of long-term debt and capital leases                                                    2,804,000       1,988,000
  Interest payable                                                                                          817,000         415,000
  Accrued commissions on Series B preferred stock                                                                --         194,000
  Accrued legal settlement                                                                                       --          40,000
  Other accrued expenses and liabilities                                                                    166,000         248,000
                                                                                                       ------------    ------------

        TOTAL CURRENT LIABILITIES                                                                         5,184,000       4,608,000
                                                                                                       ------------    ------------

LONG-TERM DEBT AND CAPITAL LEASES, less current portion                                                     224,000       1,118,000
                                                                                                       ------------    ------------

TOTAL LIABILITIES                                                                                         5,408,000       5,726,000
                                                                                                       ------------    ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT:
  Preferred stock, $0.0001 par value; 1,000,000 shares authorized;
    40,000 shares designated Series A;  16,667, issued and outstanding at June 30, 2002 and 2001
    26,000 shares designated Series B;  2,160 outstanding at June 30, 2002 and 12,160 outstanding at
    at June 30, 2001                                                                                             --              --
  Common stock, $0.0001 par value; 50,000,000 shares authorized; 24,518,668 and 20,845,594
  shares issued and outstanding at June 30, 2002 and  2001, respectively                                      2,000           2,000
  Additional paid-in capital                                                                             12,887,000      11,994,000
  Deficit                                                                                               (15,175,000)    (13,855,000)
  Stock subscriptions, including interest receivable                                                       (504,000)       (480,000)
  Unearned premium commissions                                                                             (494,000)             --
                                                                                                       ------------    ------------

        STOCKHOLDERS' DEFICIT, NET                                                                       (3,284,000)     (2,339,000)
                                                                                                       ------------    ------------

        TOTAL                                                                                          $  2,124,000    $  3,387,000
                                                                                                       ============    ============
</TABLE>



See notes to the consolidated financial statements.

                                       24
<PAGE>

LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2002 AND 2001


<TABLE>
<CAPTION>
                                                           2002            2001
                                                       ------------    ------------

<S>                                                    <C>             <C>
REVENUES:
   Membership fee income
      Worksites and consumers                          $  1,486,000    $    985,000
      Direct marketing                                      416,000       2,033,000
      Affinity                                              150,000         294,000
                                                       ------------    ------------
   Total membership fee income                            2,052,000       3,312,000
   Sales                                                     54,000       2,580,000
                                                       ------------    ------------

      TOTAL REVENUES                                      2,106,000       5,892,000
                                                       ------------    ------------

COSTS AND OPERATING EXPENSES:
   Cost of sales                                             54,000       2,330,000
   Compensation and employee benefits                     1,812,000       2,832,000
   Advertising and marketing                                108,000         196,000
   Professional fees                                        242,000         407,000
   Office, administrative, and general                    1,156,000       1,480,000
   Legal Settlement                                              --         103,000
   Occupancy                                                170,000         346,000
   Depreciation and amortization                            182,000         147,000
                                                       ------------    ------------

      TOTAL COSTS AND OPERATING EXPENSES                  3,724,000       7,841,000
                                                       ------------    ------------

      LOSS FROM OPERATIONS                               (1,618,000)     (1,949,000)
                                                       ------------    ------------

OTHER INCOME (EXPENSE):
   Interest income                                          328,000         230,000
   Miscellaneous income                                      90,000           2,000
   Elimination of accrued expense to related parties        296,000              --
   Gain on debt restructured                                174,000              --
                                                       ------------    ------------
 Total other income                                         888,000         232,000
                                                       ------------    ------------

   Interest expense and other finance charges              (571,000)       (385,000)
   Loss on disposal of property and equipment               (19,000)             --
                                                       ------------    ------------
 Total other expense                                       (590,000)       (385,000)
                                                       ------------    ------------

      OTHER, NET                                            298,000        (153,000)
                                                       ------------    ------------

LOSS BEFORE INCOME TAX BENEFIT                           (1,320,000)     (2,102,000)
INCOME TAX BENEFIT                                               --              --
                                                       ------------    ------------

      NET LOSS                                         $ (1,320,000)   $ (2,102,000)
                                                       ============    ============


LOSS PER COMMON SHARE:

   Basic and Diluted                                   $      (0.06)   $      (0.11)
                                                       ============    ============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

   Basic and Diluted                                     21,793,030      19,684,694
                                                       ============    ============
</TABLE>



See notes to the consolidated financial statements.

                                       25
<PAGE>

LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                                                       2002           2001
                                                                                                   -----------    -----------
<S>                                                                                                <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                                        $(1,320,000)   $(2,102,000)
   Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
      Depreciation and amortization                                                                    182,000        147,000
      Provision for doubtful accounts                                                                  283,000        135,000
      Amortization of debt discount                                                                     26,000          8,000
      Loss on disposal of property and equipment                                                        19,000             --
      Interest due from shareholders                                                                   (24,000)       (24,000)
      Fair value of shares issued to investors for securitizing letter of credit                        25,000             --
      Gain on debt restructured                                                                       (174,000)            --
      Elimination of accrued expense to related parties                                               (296,000)            --
      Elimination of a payable to a company that is no longer in business                              (89,000)            --
      Warrants issued for services and settlements                                                      78,000             --
      Legal settlements                                                                                     --        103,000
      Common stock issued for services performed with convertible debt issuance                             --         19,000
      Changes in certain assets and liabilities:
         Accounts receivable                                                                           735,000        235,000
         Inventory                                                                                      54,000        (54,000)
         Other assets                                                                                  136,000       (100,000)
         Accounts payable                                                                              (99,000)       155,000
         Accrued compensation and related expenses                                                     166,000         88,000
         Accrual bonus                                                                                      --        595,000
         Interest payable                                                                              455,000        292,000
         Other accrued expenses and liabilities                                                       (120,000)       107,000
                                                                                                   -----------    -----------

         NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                            37,000       (396,000)
                                                                                                   -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITY:
         Purchase of property and equipment                                                            (28,000)      (175,000)
                                                                                                   -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Repayments of long-term debt and capital leases                                                    (144,000)      (119,000)
   Issuances of common stock                                                                           253,000        193,000
   Restricted cash                                                                                      70,000         67,000
   Proceeds from long-term debt                                                                             --        192,000
                                                                                                   -----------    -----------

         NET CASH PROVIDED BY FINANCING ACTIVITIES                                                     179,000        333,000
                                                                                                   -----------    -----------

         NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                          188,000       (238,000)

CASH AND CASH EQUIVALENTS, beginning of year                                                            39,000        277,000
                                                                                                   -----------    -----------

CASH AND CASH EQUIVALENTS, end of year                                                             $   227,000    $    39,000
                                                                                                   ===========    ===========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the period for:
      Interest                                                                                     $    14,000    $    19,000
                                                                                                   ===========    ===========
      Income taxes                                                                                 $        --    $        --
                                                                                                   ===========    ===========


SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

   Fair value of common shares issued to Convertible Note holders for modifying and
      extending the agreement                                                                      $    37,000             --
   Fair value of warrants issued on debt restructured                                                    6,000             --
   Conversion of 10,000 shares of Series B Preferred Stock into 1,000,000 shares of Common Stock     2,500,000             --
   Fair value of contingently issuable warrants based on sales production performance                  494,000             --
   Note and Security Agreement collaterilized by subsidiary's accounts receivable
      and inventory                                                                                         --    $ 2,303,000
   Convertible debt warrants                                                                                --         14,000
   Conversion of 11,111 shares of Series A Preferred Stock into 1,111,112 shares of Common Stock            --      1,000,000
   Issuance of common stock in settlement of litigations                                                    --         56,000
   Issuance of common stock for convertible debt issuance services                                          --         19,000
</TABLE>



See notes to the consolidated financial statements.

                                       26
<PAGE>

<TABLE>
<CAPTION>
                                      LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                                          FOR THE YEARS ENDED JUNE 30, 2002 AND 2001


                                                                                     Series A                      Series B
                                                        Common         Series A      Preferred       Series B      Preferred
                                          Common       Stock, at      Preferred      Stock, at      Preferred      Stock, at
                                          Shares       par value        Shares       par value        Shares       par value
                                       ------------   ------------   ------------   ------------   ------------   ------------

<S>                                      <C>          <C>                  <C>      <C>                  <C>      <C>
STOCKHOLDERS' DEFICIT, July 1, 2000      19,011,594   $      2,000         27,778   $         --         12,160   $         --

Issuance of common stock for cash           385,000
Issuance of common stock for
  convertible debt issuance services         76,800
Conversion of Series A preferred
  stock                                   1,111,200                       (11,111)
Issuance of common stock in
  settlement of litigations                 261,000
Fair value of warrants issued as
  part of convertible debt
Accrued interest on subscription
  agreements
Net loss
                                       ------------   ------------   ------------   ------------   ------------   ------------

STOCKHOLDERS' DEFICIT, June 30, 2001     20,845,594          2,000         16,667             --         12,160             --

Issuance of common stock for cash         2,055,000
Issuance of common stock to
  convertible debt holders for
  modification of notes                     368,074
Issuance of common stock for funds
  advanced to securitize letter of
  credit                                    250,000
Conversion of Series B preferred
  stock                                   1,000,000                                                     (10,000)
Fair value of 5,500,000 warrants
  issueable upon attainment of
  sales production
Fair value of warrants issued for
  services and settlements
Accrued interest on subscription
  agreements
Net loss
                                       ------------   ------------   ------------   ------------   ------------   ------------
STOCKHOLDERS' DEFICIT, June 30, 2002     24,518,668   $      2,000         16,667   $         --          2,160   $         --
                                       ============   ============   ============   ============   ============   ============
</TABLE>



<TABLE>
<CAPTION>
                                        Additional                      Stock         Unearned        Total
                                         Paid-in                     Subscriptions    Premium      Stockholders'
                                         Capital        Deficit       Receivable     Commissions     Deficit
                                       ------------   ------------   ------------   ------------   ------------

<S>                                    <C>            <C>            <C>            <C>            <C>
STOCKHOLDERS' DEFICIT, July 1, 2000    $ 11,712,000   $(11,753,000)  $   (456,000)  $         --   $   (495,000)

Issuance of common stock for cash           193,000                                                     193,000
Issuance of common stock for
  convertible debt issuance services         19,000                                                      19,000
Conversion of Series A preferred
  stock
Issuance of common stock in
  settlement of litigations                  56,000                                                      56,000
Fair value of warrants issued as
  part of convertible debt                   14,000                                                      14,000
Accrued interest on subscription
  agreements                                                              (24,000)                      (24,000)
Net loss                                                (2,102,000)                                  (2,102,000)
                                       ------------   ------------   ------------   ------------   ------------

STOCKHOLDERS' DEFICIT, June 30, 2001     11,994,000    (13,855,000)      (480,000)            --     (2,339,000)

Issuance of common stock for cash           253,000                                                     253,000
Issuance of common stock to
  convertible debt holders for
  modification of notes                      37,000                                                      37,000
Issuance of common stock for funds
  advanced to securitize letter of
  credit                                     25,000                                                      25,000
Conversion of Series B preferred
  stock                                          --                                                          --
Fair value of 5,500,000 warrants
  issueable upon attainment of
  sales production                          494,000                                     (494,000)            --
Fair value of warrants issued for
  services and settlements                   84,000                                                      84,000
Accrued interest on subscription
  agreements                                                              (24,000)                      (24,000)
Net loss                                                (1,320,000)                                  (1,320,000)
                                       ------------   ------------   ------------   ------------   ------------
STOCKHOLDERS' DEFICIT, June 30, 2002   $ 12,887,000   $(15,175,000)  $   (504,000)  $   (494,000)  $ (3,284,000)
                                       ============   ============   ============   ============   ============
</TABLE>



See notes to the consolidated financial statements.

                                             27
<PAGE>

                     LEGAL CLUB OF AMERICA AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001


NOTE 1 - MERGER, ORGANIZATION & SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------

Merger
------

Legal Club of America Corporation resulted from the merger of And Justice for
All, Inc. (d/b/a Legal Club of America) and Bird-Honomichl, Inc. ("BHI") on
October 16, 1998.

Legal Club of America Corporation and its subsidiaries are collectively referred
to as the "Company".


Organization
------------

Legal Club of America, ("LCOA"), a division of the Company, offers memberships
that provide a broad range of services to its subscribers. LCOA has established
a network of over 20,000 attorneys in all 50 states, Puerto Rico and the US
Virgin Islands, who have contracted to provide both individuals and small
business owners with a variety of free and deeply discounted legal services.
Membership provides a subscriber with access to LCOA's attorney network and /or
assistance in finding an attorney with a particular specialty. The assigned
attorney is paid directly by the subscriber. LCOA receives fees for membership,
pays commissions to its agents, builds and maintains its attorney network, and
markets its plan to prospective new members.

Legal Club Financial Corp., ("LCF" or d/b/a "PeoplesChoice") a wholly owned
subsidiary of the Company, began to broker business to its insurance partners
during the June 2002 quarter, by securing agent of record letters ("AOR"). The
AOR letters provide the Company exclusive access to employers that wish to
provide their employees with voluntary benefits, including LCOA products. LCF, a
licensed insurance agency, is responsible for interviewing and selecting
suitable insurance carriers, as well as overseeing the pre-enrollment
communications, enrollment methodologies and third party administration
processes for the employer groups.

Einstein Computer Corp. ("ECC"), a wholly owned subsidiary of the Company, was
formed for the purpose of selling computers to employees at the worksite,
allowing payroll deduction as the payment methodology. The program was developed
to take advantage of the Company's distribution channels, including its network
of independent agents. The packages offered allow the participating worksite
employee to obtain a computer system, including software, 24 hours/7 days a week
technical support, on site service and free internet access. The Company began
selling and delivering computers to employees utilizing this methodology in
October 2000 in accordance with an agreement with Gateway, Inc. ("Gateway"). In
February 2001, Gateway ended its relationship with the Company and ECC was
forced to abandon its payroll deduction program. On July 13, 2001, ECC, filed
suit against Gateway in the U. S. District Court for the Southern District of
California in a case titled Einstein Computer Corp. vs. Gateway, Inc., claiming
damages in excess of $200 million. Among other things, ECC asserts breach of
contract and, alternatively, fraud in connection with Gateway's repudiation of
its agreement with Einstein. See Note 11. In September 2001, ECC entered into a
new agreement with MicronPC, as an authorized agent, to sell their personal
computers as a voluntary benefit to employees at the worksite. Under this
arrangement, the finance company contracted by the computer manufacturer will
finance the employee's computer purchase by extending consumer credit directly
to the employee, not by payroll deduction, as in the previous program. ECC began
marketing this program in November 2001 and began presentations at worksites in
the March 2002 quarter. There have been no sales during the March and June 2002
quarters under this program, and there can be no assurance that the Company's
arrangement with the computer manufacturer will achieve the market penetration,

                                       28
<PAGE>

sales volume and success that the Gateway payroll deduction plan could have
achieved. As such, ECC is pursuing financial institutions that would allow
employees to purchase the personal computers using payroll deduction as the
payment methodology.

Going Concern Considerations. The Company's financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of
business. The Company has incurred cumulative losses since inception, has funded
operations through investor capital, and has yet to generate sufficient revenues
from its operating activities to cover its expenses. In addition, the Company is
in default on certain of its debt agreements. Management recognizes that the
Company must attain profitable operations or obtain additional capital resources
to enable it to continue in business. Management plans to obtain operating
capital through revenue growth and expense reductions, and continue obtaining
additional capital through the sale and issuance of equity and debt securities,
if possible. The realization of assets and satisfaction of liabilities in the
normal course of business is dependent upon the Company's raising additional
capital and ultimately reaching profitable operations. However, no assurances
can be given that the Company will be successful in these activities. See Note
6. Should any of these events not occur, the accompanying financial statement
will be materially affected.

Significant Accounting Policies
-------------------------------

Basis of Presentation. The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
balances and transactions have been eliminated.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the 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.
Actual results could differ from those estimates.

Cash and Cash Equivalents. Cash and cash equivalents include highly liquid
investments purchased with an original maturity of three months or less. At
times, cash balances may be held at financial institutions in excess of
federally insured limits.

Restricted Cash. At June 30, 2002, the Company had escrow deposits of $40,000 as
collateral on an outstanding letter of credit relating to the Company's
corporate office space lease. The letter of credit has a one-year renewable
term. The funds are invested in a certificate of deposit and have been
classified on the balance sheet as restricted cash. At June 30, 2001, the
Company had escrow deposits of $110,000 as collateral on outstanding letters of
credit, renewable annually, relating to the Company's office space lease and
equipment leases. During fiscal year 2002, $18,000 of escrowed deposits relating
to the Company's corporate office space lease was released upon the Company's
move to its present location. These funds became available to the Company for
working capital. During the June 2002 quarter, the Company negotiated the
prepayment of a $27,000 capital lease on its telephone system equipment.
Escrowed funds, amounting to $52,000, that was securitizing a letter of credit
on the equipment, were released and used to payoff the lease. The remaining
funds became available to the Company for working capital.

Property and Equipment. Property and equipment are stated at cost. Depreciation
and amortization, which includes the amortization of assets recorded under
capital leases, are computed using the straight-line method over the estimated
useful lives of the assets or remaining terms of the capital leases.
Expenditures for routine maintenance and repairs are charged to expense as
incurred.

Fair Value of Financial Instruments. Cash, short-term receivables, and accounts
payable and accrued liabilities are reflected in the balance sheet at historical
cost, which approximates fair value because of the short-term maturity of those
instruments. The recorded amount of long-term receivables approximates fair

                                       29
<PAGE>

value, as the interest rate approximates current market rates. The fair value of
the Company's debt, except for the term loans, approximates their fair value.
The term loans, which are in default, are not subject to fair value estimation
because of their past due status.

Revenue Recognition and Credit Risks. Membership revenue from services provided
to employees at the worksite is recognized in the period services are provided
to the employees in these groups. A reserve is provided for management's
estimate of uncollectible fees from employees. Revenues from all other
customer-based services are recognized in the period the services are provided.

Sales revenue from computer systems during the year ended June 30, 2001, was
recorded upon shipment of the product to the customer. Cost of sales was
recognized based on the number of units shipped during the period.

Management analyzes and adjusts the allowances for doubtful accounts based on
estimated accounts receivable collectibility. Provisions for estimated credit
losses are recorded in the financial statements. LCOA memberships, for which
payments are not received within a predetermined number of days, generally 90
days, are generally reserved while collection efforts continue, and are normally
written off after 180 days. Personal computer sales' accounts receivable are
collected from employees at worksites in monthly installments over a period of
thirty-six months. The Company identifies loans in the personal computer
portfolio as impaired and places them on a cash (nonaccrual) basis when it is
determined that the payment of interest or principal is doubtful of collection,
or when interest and principal are past due 90 days or more. Any interest
accrued is reversed and charged against current earnings, and interest is
thereafter included in earnings only to the extent actually received in cash.
When there is doubt as to the ultimate collectibility of the principal, all
interest and principal received thereafter is applied to reduce the balance of
the loan. The Company reserve on all impaired loans, to the extent the principal
is judged to be uncollectible.

Advertising and Marketing. The costs of advertising, promotion, and marketing
programs are charged to operations in the year incurred. Expenses for these
programs totaled $108,000 and $196,000 for the years ended June 30, 2002 and
2001, respectively.

Income Taxes. The Company accounts for income taxes in accordance with the
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences,
operating loss carryforwards, and tax credit carryforwards, and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.

Earnings (Loss) Per Share. The Company accounts for Earnings (Loss) Per Share in
accordance with the provisions of SFAS No. 128, "Earnings Per Share", which
requires companies with complex capital structures or common stock equivalents
to present both basic and diluted earnings per share (EPS). Basic EPS is
calculated by dividing net income attributable to common stock by the weighted
average number of common shares outstanding during the period. Diluted EPS is
calculated by dividing net income available to common shareholders by the
weighted average number of common shares and common stock equivalents. Common
equivalent shares are excluded from the computation in periods in which they
have an anti-dilutive effect. The Company's common equivalent shares include the
Series A convertible preferred stock, Series B convertible preferred stock,
stock options and warrants. The Company uses the treasury stock method to
calculate the impact of outstanding stock options and warrants. Stock options
and warrants for which the exercise price exceeds the average market price over
the period have an anti-dilutive effect on EPS and, accordingly, are excluded
from the calculations. See Note 8.

                                       30
<PAGE>

Stock Based Compensation. The Company accounts for its employee stock based
compensation plan under the provisions of the Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued Employees" and discloses the
general and pro-forma financial information required by SFAS No. 123,
"Accounting for Stock-Based Compensation". See Note 6. For transactions with
other than employees, in which services were performed in exchange for stock,
the transactions are recorded on the basis of the fair value of the services
received or the fair value of the equity instrument issued, whichever is more
readily measurable.

Statement of Comprehensive Income. The Company has adopted SFAS No. 130,
"Reporting Comprehensive Income". A statement of comprehensive income is not
included in the financial statements, as the Company has no items of other
comprehensive income.

Accounting for Derivative Instruments and Hedging Activities. The Company has
adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", which requires companies to recognize all derivatives on the
balance sheet as either assets or liabilities measured at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
Through June 30, 2002, the Company has not entered into hedging activities nor
has it invested in derivative instruments.

Segment Reporting. The Company has adopted SFAS No. 131,"Disclosure about
Segments of an Enterprise and Related Information", which establishes annual and
interim reporting standards for a company's operating segments. Under SFAS No.
131, the Company's operations are defined as consisting of two operating
segments. See Note 10.

Accounting Pronouncements Adopted by the Company during Fiscal Year 2002. In
June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations", SFAS No. 142, "Goodwill and Other Intangible Assets"
and SFAS No. 143, "Accounting for Asset Retirement Obligations". SFAS No. 141
requires that business combinations initiated after June 30, 2001 be accounted
for under the purchase method of accounting. Pooling of interest method is no
longer permitted. SFAS No. 142 continues to require the recognition of goodwill
and other intangibles as assets, but amortization of these assets is no longer
permitted. In place of amortization, goodwill and other intangibles must be
tested at least annually for impairment using a fair value based method. SFAS
No.143 addresses financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets, and the associated asset
retirement costs. This statement requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred, at fair market value, with the associated asset retirement costs
capitalized as part of the carrying value of the long-lived asset. During the
year ended June 30, 2002, the Company adopted the provisions of these
statements, which as of June 30, 2002, do not have a material impact on the
Company's financial position, results of operations or cash flows.

Recent Accounting Pronouncements. In August 2001, SFAS No. 144, "Impairment of
Long Lived Assets" was issued. SFAS 144 requires that assets held for sale be
stated at the lower of their fair values or carrying amount, and depreciation is
no longer recognized. In addition, more dispositions will qualify for
discontinued operations treatment in the consolidated statement of operations.
Implementation of SFAS 144 is required for fiscal years beginning after December
31, 2001.

In April 2002, the Financial Accounting Standards Board issued SFAS No. 145,
"Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No.
13, and Technical Corrections". SFAS 145 was issued to eliminate inconsistencies
between the required accounting for sale-leaseback transactions and the
accounting for certain lease modifications that have the economic effects of
sale-leaseback transactions.

In June 2002, the Financial Accounting Standards Board issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities". SFAS 146
requires companies to recognize costs associated with exit or disposal
activities when incurred, instead of at the date of a commitment to an exit or

                                       31
<PAGE>

disposal plan. Costs covered by this statement include lease termination,
certain employee severance costs associated with a restructuring, discontinued
operation, plant closing or other exit or disposal activity. SFAS 146 is to be
applied to exit or disposal activities started after December 31, 2002.

The Company is currently evaluating these statements but does not expect that
they will have a material impact on the Company's financial position, results of
operations, or cash flows.

Reclassification. Certain prior year amounts have been reclassified in the
financial statements to conform with current year presentation.


NOTE 2 - ACCOUNTS RECEIVABLE, NET
---------------------------------

Accounts receivable, net, consists of the following at June 30, 2002 and 2001:

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

         Current
            Accounts receivable                  $1,200,000      $1,088,000
            Allowance for doubtful accounts        (229,000)        (83,000)
                                                 ----------      ----------
                                                 $  971,000      $1,005,000
                                                 ==========      ==========

         Long-term
            Accounts receivable                  $  474,000      $1,466,000
            Allowance for doubtful accounts         (91,000)        (99,000)
                                                 ----------      ----------
                                                 $  383,000      $1,367,000
                                                 ==========      ==========

At June 30, 2002, the Company's accounts receivable were comprised of $121,000
relating to LCOA memberships and $1,553,000 relating to sales of personal
computers by ECC. At June 30, 2001, the Company's accounts receivable were
comprised of $270,000 relating to LCOA memberships and $2,284,000 related to
sales of personal computers by ECC.

In September 2000, ECC entered into agreements with Gateway to distribute and
finance computer systems manufactured by Gateway, through ECC's distribution
channels to employees at the worksites. In February 2001, Gateway ended its
relationship with the Company, and ECC was forced to abandon its payroll
deduction program. Participating worksite employees pay for the computer systems
through automatic payroll deduction, over a specified period of time. ECC's
receivables collateralize borrowings under a Note and Security agreement with
Gateway. See Notes 4 and 11.

                                       32
<PAGE>

NOTE 3 - PROPERTY AND EQUIPMENT, NET
------------------------------------

Property and equipment consists of the following at June 30, 2002 and 2001:

                                             2002           2001
                                          ---------      ---------
   Office equipment                       $ 183,000      $ 195,000
   Computer equipment                       193,000        193,000
   Computer software                        471,000        473,000
   Leasehold improvements                    26,000         22,000
                                          ---------      ---------
         Total cost                         873,000        883,000
   Less: Accumulated depreciation           451,000        287,000
                                          ---------      ---------
         Property and equipment, net      $ 422,000      $ 596,000
                                          =========      =========

Depreciation and amortization expense, which includes capital lease
amortization, totaled $182,000 and $147,000 for the years ended June 30, 2002
and 2001, respectively. During the year ended June 30, 2002, the Company
wrote-off property and equipment, net totaling $19,000 as a result of moving its
corporate headquarters to a smaller office space.

During the year ended June 30, 2000, the Company entered into lease agreements
classified as capital leases to lease certain office and computer equipment.
Assets under capital leases at June 30, 2002 are included above as follows:

                  Office Equipment                  $  54,000
                  Computer Equipment                   73,000
                                                    ---------
                                                      127,000
                  Accumulated amortization             73,000
                                                    ---------
                                                    $  54,000
                                                    =========

                                       33
<PAGE>

NOTE 4 - LONG-TERM OBLIGATIONS
------------------------------

At June 30, 2002 and 2001, long-term debt and capital leases consist of the
following:

<TABLE>
<CAPTION>
                                                                  2002               2001
                                                               ----------         ----------
<S>                                                            <C>                <C>
  Term loans with various original maturity dates through
  1998. Interest rates range from 12% to 15% plus an
  additional interest payment of 20% of the principal
  amount at maturity. Interest only is payable monthly
  during the terms of the loans                                $  127,000         $  127,000

  Term loans from a shareholder with interest rates of 9%
  and 12%, with original maturity dates on or before July          40,000             40,000
  2000.

  Capital leases, with imputed interest rates ranging from
  9% to 22%, maturing at various dates through July 2003           31,000            108,000

  Term loan from a shareholder bearing interest at 7%,             34,000             37,000
  originally due April 2000

  Note agreement discounted at 4.75%, payable in monthly           19,000                 --
  installments through February 2004

  Note and Security Agreement bearing interest at 15.5%,
  maturing September 2003                                       2,545,000          2,545,000

  Notes refinanced during fiscal years 2001 and 2002:

  12% Convertible Notes due December 2002                         229,000            190,000

  15% Term loans, payable in monthly installments through
  December 2001                                                        --             59,000

  9% Term loan from a shareholder, maturing September
  2003                                                              3,000                 --
                                                               ----------         ----------
       Total long-term obligations                              3,028,000          3,106,000
           Less: Current portion (1)                            2,804,000          1,988,000
                                                               ----------         ----------

           Long-term obligations                               $  224,000         $1,118,000
                                                               ==========         ==========
</TABLE>
--------------------
(1) The current portion of long-term debt as of June 30, 2001, has been adjusted
    to properly reflect the maturity date of the 15% Note and Security
    Agreement.

On September 25, 2000, the Company entered into a Note and Security agreement
with Gateway to finance the purchase of computer systems by its ECC subsidiary.
This Note matures on September 24, 2003 and bears interest at a rate of 15.5%
per annum. Outstanding borrowings under this agreement are collateralized by
ECC's accounts receivable. Payments under this Note are to be made to Gateway
from the monthly installment payments collected on ECC's accounts receivable.
Proceeds are to be applied first to interest due on the Note and then to
principal. The Company has asserted a common law right of set off against
Gateway, therefore, these payments are not being made and are not being
escrowed. The Company is presently in litigation with Gateway (see Note 11),
regarding its prior business activities with Gateway. Counsel to the Company

                                       34
<PAGE>

believes that it is probable that Gateway will recover on the Note, but that it
is too early in the litigation to determine the amount of any recovery by ECC
against Gateway.

During the quarter ended September 30, 2000, the Company issued $192,000 of
unsecured Convertible Notes in a private placement to accredited investors. The
notes had a stated coupon rate of 25% and matured September 30, 2001. The
Company issued five-year warrants to the note holders, for no additional
consideration, to acquire one share of the Company's common stock for each $2.00
invested in the Convertible Notes, at an exercise price of $0.25 per share. The
value assigned for accounting purposes to the 96,000 warrants issued was
$10,000. This amount has been included in additional paid-in capital and the
$10,000 was accreted to interest expense over the term of the original notes.
During the December 2001 quarter, the Convertible Notes agreement was modified.
The amended Convertible Notes bear interest at 12% and mature December 31, 2002.
As part of the modification, among other things, the note holders were issued
shares of the Company's common stock for no additional consideration. The value
assigned to the 368,074 shares of common stock issued was $37,000, or $0.10 per
share, the fair value of the common stock on date of issuance. This amount has
been included in additional paid-in capital and as a reduction of the
Convertible Notes, with the $37,000 being accreted to interest expense over the
term of the notes. At maturity, each note holder will have the option to convert
the outstanding balance of the principal and interest, into shares of the
Company's common stock at $0.25 per share.

During the quarter ended March 31, 2002, the Company restructured commissions
payable on its Series B preferred stock totaling $194,000. The Company issued a
two-year $24,000 note agreement and 300,000 warrants as replacement for the
commissions payable. The notes, which are non-interest bearing, have been
discounted at current prime to be accreted to expense over the two-year period.
The Company issued five-year warrants to the note holder to acquire shares of
the Company's common stock, at an exercise price of $0.04 per share, the fair
value of the common stock on date of issuance. The value assigned for accounting
purposes to the 300,000 warrants issued was $6,000. This amount has been
included in additional paid-in capital.

During the June 2002 quarter, the Company negotiated the prepayment of a $27,000
capital lease on its telephone system equipment. Escrowed funds, amounting to
$52,000, that was securitizing a letter of credit on the equipment, were
released and used to payoff the lease. The remaining funds became available to
the Company for working capital.

The total principal amount of Term Loans, as presented above, is due within one
year or is in default with respect to certain principal and interest payments
and accordingly, all has been classified as current. Some Term Loans have been
refinanced and are presented separately under refinanced loans. The 15% Term
Loans refinanced in 2001 for $59,000, were paid off by February 2002.

Interest expense for the years ended June 30, 2002 and 2001 totaled $571,000 and
$385,000, respectively.

Maturities of capital lease obligations subsequent to June 30, 2002 are as
follows:

                  Years Ending June 30,
         ---------------------------------------
                          2003                         $ 32,000
                          2004                            1,000
                                                       --------
         Total minimum lease payments                    33,000
         Less amounts representing interest               2,000
                                                       --------
         Present value of minimum lease
         payments                                      $ 31,000
                                                       ========

                                       35
<PAGE>

NOTE 5 - INCOME TAXES
---------------------

A summary of the provision for income taxes for the years ended June 30, 2002
and 2001 is as follows:

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

 Currently payable                                 $       --        $       --
 Deferred tax benefit                                (462,000)         (736,000)
 Less: Valuation allowance                            462,000           736,000
                                                   ----------        ----------

          Provision for income taxes               $       --        $       --
                                                   ==========        ==========

The Company's deferred tax asset at June 30, 2002, and 2001 consist of the
following:

<TABLE>
<CAPTION>
                                                                  2002           2001
                                                              -----------    -----------
<S>                                                           <C>            <C>
  Deferred tax asset:
 Available federal and state net operating loss carryover     $ 4,644,000    $ 4,182,000
    Less: Valuation allowance                                  (4,644,000)    (4,182,000)
                                                              -----------    -----------

                                                              $        --    $        --
                                                              ===========    ===========
</TABLE>

There are no significant deferred tax liabilities. The Company has used an
estimated combined federal and state effective tax rate of 35% for all deferred
tax computations.

The Company has recorded a valuation allowance in accordance with the provisions
of SFAS No. 109 to reflect the estimated amount of deferred tax assets that may
not be realized. In assessing the ability to realize deferred tax assets,
management considers whether it is more likely than not that some portion or all
of the deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible.

At June 30, 2002, the Company has tax net operating losses carryforwards (NOLs)
of approximately $11,833,000 expiring beginning 2011. All deferred taxes created
by NOLs are offset in their entirety by a deferred tax asset valuation
allowance. Certain provisions of the tax law may limit the net operating loss
carryforwards available for use in any given year in the event of a significant
change in ownership interest. There have already been significant changes in
stock ownership; however, management believes that an ownership change has not
yet occurred which would cause the net operating loss carryover to be limited.


NOTE 6 - CAPITAL STOCK
----------------------

The Company's authorized capital stock at June 30, 2002 consisted of 1,000,000
shares of preferred stock and 50,000,000 shares of common stock, at a par value
of $0.0001 per share. The Board of Directors has the authority to issue the
preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions of the preferred stock, including dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series or the designation of any series, without further vote or action by
the shareholders. The issuance of preferred stock with voting and conversion
rights may adversely affect the voting power of the holders of common stock,
including the loss of voting control to others.

                                       36
<PAGE>

Preferred Stock
---------------

In fiscal year 1999, the Company designated 40,000 of the preferred shares as
"Series A Convertible Preferred Stock" (Series A stock) and issued a total of
27,778 shares of Series A stock for a cash payment of $2,500,000. In March 2001,
holders of 11,111 shares of Series A stock exercised their option to convert
their shares to Common Stock. The Series A stock was converted into 1,111,200
shares of common stock at a conversion price of $0.90 per share.

In fiscal year 2000, the Company designated 26,000 of the preferred shares as
"Series B Convertible Preferred Stock" (Series B stock) and issued a total of
12,160 shares of Series B stock through a private placement-offering memorandum
for gross proceeds of $3,040,000. During the fiscal year ended June 30, 2002,
10,000 shares of Series B stock were converted to Common Stock. The Series B
stock was converted into 1,000,000 shares of Common Stock at a conversion price
of $2.50 per share.

Common Stock
------------

In June 2002, the Company issued 1,500,000 shares of common stock. for cash
totaling $150,000, or $0.10 per share, in a private placement to an accredited
investor.

In December 2001, the Company signed an agreement with a capital markets
investment company for the purchase of up to 3,500,000 shares of the Company's
common stock, for a period of 60 days. During the quarter ended March 31, 2002,
the Company sold 555,000 shares of common stock through the capital markets
investment company for $0.30 per share. Proceeds on the sales, net of
commissions, were $103,000, or $0.1857 per share. The agreement with the capital
markets investment company expired in February 2002.

On October 1, 2001, the Company issued 250,000 shares of common stock to
accredited investors. The shares were issued as consideration for funds advanced
by the investors to securitize a letter of credit requirement associated with
the ECC personal computer program. The value assigned to the shares of common
stock issued was $25,000, or $0.10 per share, the fair value of the stock on
date of issuance. The agreement with the national computer manufacturer was not
consummated and the money advanced by the investors was returned.

During the year ended June 30, 2001, the Company issued 385,000 shares of common
stock for $193,000, or $0.50 per share, in private placements to accredited
investors and 76,800 shares of common stock were issued for $19,000, or $0.25
per share as payment for commissions due. In April 2001, as part of a settlement
stipulation entered into between the Company and a former officer and employee,
the Company issued 125,000 restricted shares of the Company's common stock. The
Company also issued 136,000 shares of common stock during the year ended June
30, 2001, in settlement of a dispute that arose relating to a 1996 asset
purchase agreement. These securities were valued at $56,000.

Convertible Debt
----------------

During the quarter ended September 30, 2000, the Company issued $192,000 of
unsecured Convertible Notes in a private placement to accredited investors. The
Notes had a stated coupon rate of 25% and matured September 30, 2001. The Notes
were convertible after one year into Common Stock at $0.25 per share. The
Company issued five-year warrants to the note holders, for no additional
consideration, to acquire one share of the Company's common stock for each $2.00
invested in the Convertible Notes, at an exercise price of $0.25 per share (see
Warrants below). During the December 2001 quarter, the Convertible Notes
agreement was modified. The amended Convertible Notes bear interest at 12% and
mature December 31, 2002. As part of the modification, among other things, the
note holders were issued shares of the Company's common stock for no additional
consideration. The value assigned to the 368,074 shares of common stock issued
was $37,000, or $0.10 per share, the fair value of the common stock on date of

                                       37
<PAGE>

issuance. This amount has been included in additional paid-in capital and as a
reduction of the Convertible Notes, with the $37,000 being accreted to interest
expense over the term of the notes. At maturity, each note holder will have the
option to convert the outstanding balance of the principal and interest, into
shares of the Company's common stock at $0.25 per share.

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

In 1997, the Company established a stock option plan (the "1997 Plan") to issue
nonqualified stock options and incentive stock options to key employees and
directors. The 1997 Plan expires on October 31, 2007. The Company authorized and
reserved 2,000,000 shares of its common stock for this Plan. In October 2000,
the Compensation Committee of the Board of Directors approved an amendment to
the 1997 Plan, to increase to 4,000,000, from 2,000,000, the number of
authorized and reserved shares of the Company's common stock, pending
shareholders' approval. No shareholders' approval will be sought to increase the
number of reserved shares for the 1997 Plan. At June 30, 2002, there were
1,116.754 outstanding options and 883,246 reserved for future grants. Options
are issued at prices not less than the market value at date of grant.
Outstanding options, until fully vested, are contingent upon continued service.

The Company's stock option activity is summarized as follows:

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

  Outstanding at June 30, 2000           1,412,523            $1.52
                                        ----------

      Granted                            1,845,000             0.30
      Cancelled / forfeited               (987,500)           (0.88)
                                        ----------

  Outstanding at June 30, 2001           2,270,023             0.81

      Cancelled / forfeited             (1,153,269)           (0.62)
                                        ----------

  Outstanding at June 30, 2002           1,116,754            $1.00
                                        ==========            =====

  Exercisable at June 30, 2002             651,754            $1.39
                                        ==========            =====

As required by SFAS No. 123, pro forma information regarding results of
operations and earnings per share have been determined as if the Company had
accounted for its stock option plan under the fair value method of that
statement. The fair value for the options was estimated at the date of grant
using a Black-Scholes options pricing model with the following weighted-average
assumptions for the years ended June 30, 2002 and 2001:

Option Value Information                   2002            2001
                                          ------          ------
  Fair value per option (1)               $ 0.09          $ 0.19
  Valuation assumptions (2)
    Expected option term (years)             7.5             7.7
    Expected volatility                     85.0%           83.0%
    Expected dividend yield                   --%             --%
    Risk-free interest rate                  6.0%            6.0%

--------------------
(1)  Weighted average option grants during each period
(2)  Estimated using Black-Scholes option pricing model

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly

                                       38
<PAGE>

subjective assumptions including the expected stock price volatility. Because
the Company's stock options have characteristics different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its stock
options.

For purposes of pro forma disclosures, the estimated fair value of the stock
options is amortized to expense over the options' vesting period. The Company's
net loss and net loss per share would have increased to the pro forma amounts
for the years ended June 30, 2002 and 2001, as follows:


                                                  2002                2001
                                              -----------         -----------
Net loss:
  As reported                                 $(1,320,000)        $(2,102,000)
  Pro forma                                    (1,363,000)         (2,165,000)
Net loss per share (basic and diluted)

  As reported                                 $     (0.06)        $     (0.11)
  Pro forma                                         (0.06)              (0.12)

The pro forma effect on net income is not necessarily representative of the
effect in future years because it does not take in consideration the future
granting of stock options, since future pro forma compensation expense may be
allocated over the periods in which options become exercisable, and new option
awards may be granted each year.

Warrants
--------

2002
----

On May 28, 2002, the Company signed an agreement with a business partner whereby
AORs would be obtained by the business partner on behalf of LCF. Insurance
commissions to be received by LCF from such contracted referrals are to be split
50/50 between LCF and the business partner. In addition, for each $100,000 of
insurance premium written from such referrals, the Company will issue the
business partner warrants to purchase 22,000 shares of common stock at $0.01 per
share. The issuance of the warrants will be capped once the insurance premium
level reaches $25,000,000, or 5,500,000 warrants, and their issuance is
contingent on performance under the agreement. The warrants shall have a term
not to exceed ten years from date of issuance. The value assigned for accounting
purposes to the 5,500,000 warrants that are contingently issuable was $494,000,
which is based on the fair market value of the Company's common stock the date
the agreement was signed. This amount was included in additional paid-in capital
and as a reduction to equity through Unearned Premium Commissions. As the
warrants are issued, when earned, the related valuation will be expensed and
equity will be credited for the same amount.

During the quarter ended March 31, 2002, the Company restructured commissions
payable on its Series B preferred stock totaling $194,000. The Company issued a
two-year $24,000 note agreement and 300,000 warrants as replacement for the
commissions payable. The Company issued the five-year warrants to the note
holder to acquire shares of the Company's common stock, at an exercise price of
$0.04 per share, the fair value of the common stock on date of grant. The value
assigned for accounting purposes to the 300,000 warrants issued was $6,000. This
amount has been included in additional paid-in capital.

In January 2002, the Company issued former employees warrants to purchase a
total of 150,000 shares of common stock at $0.10 per share, the fair market
value on date of grant. The value assigned for accounting purposes to the
150,000 warrants issued was $9,000. This amount has been included in additional
paid-in capital. Also in January 2002, the Company issued to a business partner
warrants to purchase 75,000 shares of common stock at $0.10 per share, the fair

                                       39
<PAGE>

market value on date of grant. The value assigned for accounting purposes to the
75,000 warrants issued was $4,000. This amount has been included in additional
paid-in capital. The warrants have a contractual life of five years and were
issued with an exercise price at the fair value of the Company's common stock.

2001
----

In April 2001, the Company issued warrants to purchase 50,000 shares of common
stock at $2.00 per share. These warrants were issued in settlement of a dispute
that arose relating to a 1996 asset purchase agreement. The warrants have a
contractual life of five years and were issued with an exercise price above the
fair value of the Company's common stock. The value assigned for accounting
purposes to the 50,000 warrants issued was $4,000. This amount has been included
in additional paid-in capital.

In January 2001, the Company, issued warrants to business partners to purchase
50,000 shares of common stock at $0.25. The warrants have contractual lives of
five years and were issued with an exercise price at the fair value of the
Company's common stock. The value assigned for accounting purposes to the 50,000
warrants issued was $6,000. This amount has been included in paid in capital.

In November 2000, the Company, issued warrants to business partners to purchase
170,000 shares of common stock at $0.33 per share. The warrants have contractual
lives of five years and were issued with an exercise price at the fair value of
the Company's common stock. The value assigned for accounting purposes to the
170,000 warrants issued was $20,000. This amount has been included in paid in
capital. Also in November 2000, the Company, issued warrants to directors to
purchase 75,000 shares of common stock at $0.33 per share. The warrants have
contractual lives of five years and were issued with an exercise price at the
fair value of the Company's common stock.

In October 2000, the Company issued to a former officer warrants to purchase
200,000 shares of common stock at $0.35 per share. The value assigned for
accounting purposes to the 200,000 warrants issued was $35,000. This amount has
been included in paid in capital. The warrants have a contractual life of five
years and were issued with an exercise price above the fair value of the
Company's common stock.

In September 2000, the Company raised capital through a private placement of
Convertible Notes to accredited investors (see Capital Stock above and Note 4).
The Convertible Notes included issuance of five-year warrants to the note
holders, for no additional consideration, to acquire one share of the Company's
common stock for each $2.00 invested in the Convertible Notes, or 96,000
warrants, at an exercise price of $0.25 per share. The value assigned for
accounting purposes to the 96,000 warrants issued was $10,000. This amount was
included in additional paid-in capital and the $10,000 was accreted to interest
expense over the term of the original notes. Brokers who participated in the
private placement, were entitled to receive warrants to purchase 10% of the
common stock underlying the notes placed by the broker, or 76,800 warrants, at
$0.25 per share. .

In August 2000, the Company issued to marketing partners, warrants to purchase
200,000 shares of common stock with exercise prices varying from $0.50 to $3.00
per share, at and above the fair value of the Company's common stock in August
2000. The warrants had contractual lives of one to six years and the exercise of
the warrants was contingent on sales production targets. The business partners
did not meet their production targets for years one and two, and accordingly the
Company has voided these warrants.

                                       40
<PAGE>

NOTE 7 - PENSION PLAN
---------------------

The Company has a 401(k) profit sharing plan (the "Plan") covering substantially
all of its employees. Under the Plan, employees are eligible to participate
after completion of three months of service and reaching 21 years of age or
older. The Company matches employee contributions at a rate of 25% of the
contribution, up to a maximum of 6% of the employee's salary. Company
contributions to the plan are vested over five years at a rate of 20% per year.
Contributions by the Company for the years ended June 30, 2002 and 2001 were
$3,000 and $8,000, respectively.


NOTE 8 - NET LOSS PER COMMON SHARE
----------------------------------

For the years ended June 30, 2002 and 2001, basic and diluted weighted average
common shares include only average common shares outstanding since the Company
incurred losses during these periods and any common share equivalents would be
anti-dilutive. A reconciliation of the number of common shares shown as
outstanding in the consolidated financial statements with the number of shares
used in the computation of weighted average common shares outstanding is as
follows:

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

         Common shares outstanding               24,518,668    20,845,594
         Effect of weighting                     (2,725,638)   (1,160,900)
                                                 ----------    ----------
         Weighted average common shares
         outstanding                             21,793,030    19,684,694
                                                 ==========    ==========

Common stock equivalents that would dilute basic earnings per share in the
future, but were not included in the computation of diluted earnings per share
because of their anti-dilutive effect, include the following at June 30th each
year:

                                                    2002          2001
                                                 ----------    ----------
         Common stock options                     1,116,754     2,270,023
         Series A convertible preferred stock.    1,666,600     1,666,600
         Series B convertible preferred stock       216,000     1,216,000
         Convertible debt                           972,296       384,000
         Warrants relating to issuance of-
           Common stock                           1,050,000     1,050,000
           Series B preferred                       395,600       395,600
           Convertible notes                        172,800       172,800
           Other                                  1,420,000     1,095,000


NOTE 9 - RELATED PARTY TRANSACTIONS
-----------------------------------

In December 1997, the Company issued 1,200,000 shares of its common stock to
three existing shareholders in exchange for subscription agreements totaling
$396,000. The subscription agreements bear interest at 6%. On June 30, 1999, the
subscription agreement of one of the shareholders was assumed by another
shareholder, along with the ownership of the common shares, and the accrued
interest obligation. Accrued interest due from the shareholders amounted to
$108,000 and $84,000, respectively, at June 30, 2002 and 2001, with the balance
due from shareholders for the subscription obligation, including accrued
interest receivable, totaling $504,000 and $480,000, at June 30, 2002 and 2001,
respectively.

See Note 4 for description of term loans due shareholders. Interest expense on
the term loans was $7,000 for each of the years ended June 30, 2002 and 2001,
respectively.

                                       41
<PAGE>

In December 2000, the Compensation Committee of the Company's Board of Directors
approved, effective January 1, 2001, an amendment to the employment agreement
for the Chief Executive Officer of the Company. The amendment to the employment
agreement has a three-year term. The compensation increase under the 2001
employment agreement and a previous employment agreement were accrued during the
period of service and were included in accrued compensation on the related
period balance sheets. Accrued compensation due the executive amounted to
$180,000 and $108,000, respectively, at June 30, 2002 and 2001.

During fiscal year 2002, the Compensation Committee approved, effective January
1, 2002, an employment agreement for the Chief Financial Officer of the Company.
The employment agreement has a three-year term. A merit increase received in
fiscal year 2001 was accrued during the period of service and was included in
accrued compensation on the related period balance sheets. Accrued compensation
due the executive amounted to $25,000 and $14,000, respectively, at June 30,
2002 and 2001.

In accordance with the Company's 2001 Executive Bonus Plan adopted by the Board
of Directors on March 20, 2001, with the Company's By-laws, and its practice
regarding accrual of bonuses, executives must be employed by the Company at the
time the bonus is paid. Accordingly, two former executive officers of the
Company effectively forfeited their deferred bonuses as a result of their
resignations in December 2001 and the Company eliminated $296,000 of related
accrued bonus during fiscal year 2002.


NOTE 10 - BUSINESS SEGMENT INFORMATION
--------------------------------------

As of June 30, 2002, the Company is organized into two reportable operating
segments, Legal Club ("LCOA") and Einstein ("ECC"), each of which operates in a
single line of business. Einstein's sales began in fiscal year 2001. See Note 1,
Organization and Note 11, Legal Proceedings.


                                                                 Consolidated
                                      LCOA            ECC            Total
                                  -----------     -----------     -----------
Revenues
  2002                            $ 2,052,000     $    54,000     $ 2,106,000
  2001                              3,312,000       2,580,000       5,892,000

Operating  Loss
  2002                             (1,272,000)       (346,000)     (1,618,000)
  2001                             (1,810,000)       (139,000)     (1,949,000)

Segment Assets
  2002                                743,000       1,381,000       2,124,000
  2001                                903,000       2,484,000       3,387,000

Depreciation and Amortization
  2002                                134,000          48,000         182,000
  2001                                119,000          28,000         147,000

                                       42
<PAGE>

NOTE 11 - COMMITMENTS AND CONTINGENCIES
---------------------------------------

(a) Operating Lease Commitments
-------------------------------

At June 30, 2002, the Company had an operating lease commitment of approximately
$807,000 relating to leased space for its corporate office, which lease expires
February 2007.

Future annual lease payments under this non-cancelable operating lease are as
follows:

                     Twelve Months
                    Ending June 30,
                    ---------------
                          2003                    $ 161,000
                          2004                      169,000
                          2005                      176,000
                          2006                      183,000
                          2007                      118,000
                                                  ---------

                                                  $ 807,000
                                                  =========

Payments under operating lease contracts were approximately $157,000 and
$311,000 for the years ended June 30, 2002 and 2001, respectively.

(b) Letter of Credit
--------------------

At June 30, 2002, the Company had a letter of credit totaling $40,000, relating
to the Company's office space lease. The letter of credit is collateralized by
deposits held in escrow at a financial institution, and has one-year renewable
terms. Management does not expect that any claims will be made against the
financial instrument and therefore expects no material losses to result from
this off-balance-sheet instrument. At June 30, 2001, the Company had escrow
deposits of $110,000 as collateral on outstanding letters of credit, renewable
annually, relating to the Company's office space lease and equipment leases.
During fiscal year 2002, $18,000 of escrowed deposits relating to the office
space lease was released upon the Company's move to its present location. The
Company also negotiated the prepayment of a $27,000 capital lease on its
telephone system equipment in fiscal year 2002. Escrowed funds, amounting to
$52,000, that was securitizing a letter of credit on the equipment, were
released and used to payoff the lease.

(c) Legal Proceedings
---------------------

During the quarter ended June 30, 2000, the Company launched ECC, which was
formed for the purpose of selling computers to employees at the worksite,
allowing payroll deduction as the payment method. The Company began delivering
computers to employees utilizing this methodology in October 2000. In connection
with this program the Company entered into agreements with Gateway, Inc. to
facilitate the sale of computers as a voluntary benefit at the worksite using
payroll deduction. In February 2001, Gateway ended its relationship with the
Company and was forced to abandon its payroll deduction program. On July 13,
2001, ECC filed suit against Gateway in the U. S. District Court for the
Southern District of California in a case titled Einstein Computer Corp. vs.
Gateway, Inc., claiming damages in excess of $200 million. Among other things,
ECC asserts breach of contract and, alternatively, fraud, in connection with
Gateway's repudiation of its agreement with Einstein. On January 15, 2002, the
U.S. District Court dismissed ECC's first amended complaint with leave to amend,
for failure to state a claim for relief. On or before February 11, 2002, ECC
filed its second amended complaint. Gateway renewed its motion to dismiss the
Company's complaint and the briefing on this matter was completed. On August 7,
2002, the U.S. District Court dismissed with prejudice ECC's claim against
Gateway Inc, and Gateway Companies, Inc. for fraud but denied Gateway's motion
to dismiss ECC's second amended complaint brought against Gateway, Inc. for
breach of contract. The action now will proceed against Gateway, Inc. for breach

                                       43
<PAGE>

of contract. On September 19, 2002, Gateway, Inc. and Gateway Companies, Inc.
filed an answer to the second amended complaint, a counterclaim for damages, and
a demand for jury trial. The Company is in the process of preparing its
response.

In 1997, a predecessor company received a letter from the Florida Department of
Insurance ("FDOI") stating that the predecessor company should be regulated as a
legal expense insurer despite the FDOI's 1994 findings that the predecessor
company was not such an insurer. The Company contested this change of the FDOI's
position and received a favorable recommended order from the State of Florida
Division of Administrative Hearings concluding that; (1) the Company, as
currently conducting business, is not subject to regulation by the FDOI as a
legal expense insurer and (2) even if the FDOI found that it was a legal expense
insurer, that the Company would be exempt from any regulation due to the fact
that it is a lawyer referral service in accordance with the definitions set
forth by the Florida Bar Association. Not withstanding, the FDOI rejected both
conclusions of the Administrative Law Judge and ordered the Company to become
licensed as a legal expense insurer. The Company appealed this ruling, and a
three-judge panel for the First District Court of Appeals ("FDCA") heard this
appeal in March 2001. On September 26, 2001 a decision was rendered by the FDCA
in which the FDCA found in the Company's favor, and against the FDOI. On October
11, 2001, the FDOI filed a motion for rehearing en banc or in the alternative a
motion for rehearing with the FDCA. On November 8, 2001, the Company filed its
response to this motion urging FDCA to deny the FDOI's request. On November 21,
2001, the FDCA issued an order denying the FDOI motion for rehearing or
rehearing en banc and issued a mandate for the FDOI to issue a final order
consistent with its opinion. On January 11, 2002, the FDOI issued a final order
declaring that Legal Club of America is not selling legal expense insurance and
is not subject to regulation by the FDOI. On May 1, 2002, the Company filed a
motion with the Administrative Law Judge to recover a portion of its attorney
fees as per the agreement reached between the Company and the FDOI. In June
2002, the Company received from the FDOI reimbursement for certain costs
incurred.

In addition to the legal proceedings discussed above, the Company is exposed,
from time to time, to other claims, legal actions, and regulatory actions in the
normal course of business, some of which are initiated by the Company.
Management believes that any such additional outstanding issues will be resolved
without impairing the financial condition of the Company.


NOTE 12 - SUBSEQUENT EVENT
--------------------------

On July 1, 2002, Legal Club of America Corporation, Legal Club Financial Corp,
Legalclub.com, Inc., and Einstein Computer Corp. filed a complaint in the
Circuit Court of the Seventeenth Judicial Circuit in Broward County, Florida
(the "Court") against Jason Krouse, Michael Samach, Select Benefit Partners
f/k/a Evolution Benefits and/or Evolution Technologies, and National Accident
Insurance Consultants, Inc. Jason Krouse is the former Executive Vice President
of Sales and Director of the Company and its subsidiaries. Michael Samach is the
former Chief Financial Officer of the Company and its subsidiaries. Both Mr.
Krouse and Mr. Samach simultaneously resigned from their respective positions
with the Company without notice on December 19, 2001. The complaint alleges
breach of employment agreement against both Mr. Krouse and Mr. Samach as well as
breach of contract against National Accident Insurance Consultants, Inc. It also
asserts numerous other claims against the various parties including tortuous
interference with advantageous business relationships, violations of the Florida
Uniform Trade Secrets Act, breaches of fiduciary duties, conspiracy to violate
the Florida Uniform Trade Secrets Act, and violations of non-competition
provisions. The Company is seeking both injunctive relief and damages including
attorney fees. In conjunction with the current litigation, in July 2002, the
Company took the position that no accrued compensation is due and owing to Mr.
Krouse or Mr. Samach. On September 10, 2002, Judge Andrews, presiding over the
proceedings, granted the defendants motion to dismiss, without prejudice, with
leave to amend in accordance with the Judge's directives. The Company will amend
its complaint and re-file it within the 20-day time period as set forth by the
Court. The parties have begun discovery in the matter.

                                       44
<PAGE>

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

None.



PART III

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

The following table sets forth the names and positions held with respect to each
Director and Executive Officer:

Name of Officer/Director       Positions with Company
----------------------------   -------------------------------------------------

Brett Merl..................   Chief Executive Officer and Chairman of the Board

Elvie Lamar Weber...........   Chief Financial Officer

Matt Cohen..................   Director



Brett Merl, 40, has served as the Company's Chief Executive Officer and Chairman
of the Board since October 1999. From January 1999 to October 1999, Mr. Merl
served as the Company's President, Chief Executive Officer and Director. From
January 1997 to January 1999, Mr. Merl served as the Company's Chief Executive
Officer. From February 1996 to December 1996, he served in various capacities
for the Company. From December 1989 to January 1996, Mr. Merl was Vice President
of Bernstein Zimmerman Financial, Inc., an insurance agency specializing in
group benefits and pension planning. Mr. Merl holds a B.S. degree in Marketing
from Long Island University.

Elvie Lamar Weber, CPA, 57, began serving as the Company's Chief Financial
Officer in January 2002. From November 1999 to December 2001, Ms. Weber served
as the Company's Controller. From September 1995 to October 1999, Ms. Weber was
a senior financial analyst for Knight Ridder, Inc., the second-largest newspaper
publisher in the nation. From 1990 to August 1995, Ms. Weber served as vice
president-financial reporting for American Savings of Florida, FSB, a federal
savings bank. Ms. Weber is a Certified Public Accountant and holds an M.A.
degree in Management from Central Michigan University and a B.B.A., Accounting
degree from the University of Miami.

Matt Cohen, 44, has served as a Director since September 1999 and became a
member of the Audit and Compensation Committees of the Company's Board of
Directors in December 2000. Mr. Cohen became Chairman of the Audit and
Compensation Committees in August 2001. Mr. Cohen has been the chief financial
officer of Life Imaging Corporation, a provider of diagnostic services, since
July 2002. From September 1999 until June 2002, Mr. Cohen was chief financial
officer for Interactive Technologies.com, Inc., a benefit and services company.
From July 1997 to August 1999, Mr. Cohen served as the Company's Chief Financial
Officer. From 1988 until July 1997, Mr. Cohen served as vice president and chief
financial officer of Standard Brands of America, a retailer of consumer
electronics and appliances. Mr. Cohen also serves on the Board of Directors of
Interactive Technologies.com Ltd. and UBuy.com. Mr. Cohen has a B.B.A. degree in
Accounting from New Platz State University.

On December 19, 2001, Jason Krouse, the Company's then Executive Vice President
of Sales and a director, and Michael Samach, the Company's then Chief Financial
Officer, resigned their respective positions with the Company. Ronald G. Agypt,
Director and Chairman of the Compensation and Audit Committees of the Company's
Board of Directors resigned his positions with the Company on August 8, 2001.

                                       45
<PAGE>

The Company's Bylaws provide that the Directors of the Company hold office until
the next annual meeting of stockholders or until their successors are elected
and qualified. The Company did not hold an annual meeting of shareholders for
fiscal year 2001. The Company intends to have an annual meeting of shareholders
in 2002.

         Section 16(a) Beneficial Ownership Reporting Compliance

The Exchange Act requires that the Company's executive officers, directors and
persons owning ten percent or more of its common stock file reports of ownership
and changes in ownership of the Company's equity securities with the Securities
and Exchange Commission (SEC) and furnish the Company with copies of such
reports. To the Company's knowledge, based solely on its review of the copies
furnished to the Company and written or oral representations that no other
reports were required, the Company believes that its director and executive
officers complied during fiscal 2002 with the reporting requirements of Section
16 (a) of the Securities and Exchange Act of 1934, with the exception of Elvie
Lamar Weber, the Company's Chief Financial Officer, who filed late with respect
to the Initial Statement of Beneficial Ownership. The report was filed with the
Securities and Exchange Commission on September 20, 2002. The late filing was
due to an administrative oversight.


Item 10. Executive Compensation
         ----------------------

The following table sets forth a three-year history of the annual and long-term
compensation awarded to, earned by or paid by the Company to each person serving
as Chief Executive Officer during the year ended June 30, 2002, and executive
officers who received compensation of at least $100,000 during fiscal 2002, 2001
and 2000.

See following page.

                                       46
<PAGE>

<TABLE>
<CAPTION>
Summary Compensation Table

------------------------------------------------------------------------------------------------------------------------------------
                                                 Annual Compensation                     Long-term Compensation
                                    ----------------------------------------------------------------------------------
                                                                                           Awards             Payouts
                                                                                 -------------------------------------

                                                                                  Restricted    Securities     LTIP      All Other
          Name and                                                 Other Annual      Stock      Underlying    Payouts   Compensation
     Principal Position       Year      Salary          Bonus      Compensation     Award(s)   Options/SARs     ($)         ($)
             (a)               (b)      ($) (c)        ($) (d)        ($) (e)       ($) (f)       (#) (g)       (h)       (i) (9)
------------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>    <C>            <C>              <C>           <C>            <C>           <C>       <C>
 Brett Merl,
 Chairman of the Board        2002   $262,500 (3)   $     --         $  9,000      $     --            --       --        $     --
 and Chief Executive
 Officer
------------------------------------------------------------------------------------------------------------------------------------
                              2001    237,500 (4)    245,490 (7)     $  9,000            --       350,000       --           1,662
------------------------------------------------------------------------------------------------------------------------------------
                              2000    186,346 (5)         --            8,942            --            --       --           2,296
------------------------------------------------------------------------------------------------------------------------------------
 Elvie Lamar Weber,
 Chief Financial Officer (1)  2002    117,500 (3)         --            7,800            --            --       --              --
------------------------------------------------------------------------------------------------------------------------------------
                              2001     92,833 (4)     35,719 (7)        3,300            --       150,000       --              --
------------------------------------------------------------------------------------------------------------------------------------
                              2000     50,923             --               --            --       100,000       --              --
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
 Michael Samach, Chief        2002     67,500 (6)         --            4,500            --            --       --              --
 Financial Officer (2)
------------------------------------------------------------------------------------------------------------------------------------
                              2001    135,000 (6)         -- (8)        9,000            --       350,000       --              --
------------------------------------------------------------------------------------------------------------------------------------
                              2000    100,212             --            6,346            --       300,000       --              --
------------------------------------------------------------------------------------------------------------------------------------
 Jason Krouse, Executive      2002     44,984 (6)         --            3,600            --            --       --              --
 Vice President, Sales (2)
------------------------------------------------------------------------------------------------------------------------------------
                              2001    118,558 (6)         -- (8)        7,200            --       350,000       --           1,494
------------------------------------------------------------------------------------------------------------------------------------
                              2000     95,536          1,500            7,154            --            --       --             659
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

--------------------
(1)  Elvie Lamar Weber began serving as the Company's Chief Financial Officer on
     January 1, 2002.
(2)  Michael Samach and Jason Krouse resigned their respective positions with
     the Company on December 19, 2001.
(3)  Includes compensation for Brett Merl and Elvie Lamar Weber of $94,038 and
     $10,750, respectively, voluntarily deferred due to insufficient working
     capital.
(4)  Includes compensation for Brett Merl and Elvie Lamar Weber of $87,500 and
     $14,333, respectively, voluntarily deferred due to insufficient working
     capital.
(5)  Includes $37,500 of compensation voluntarily deferred by the named
     executive.
(6)  In conjunction with the Company's current litigation, in July 2002, the
     Company took the position that no accrued compensation is due and owing to
     Mr. Samach or Mr. Krouse. Accordingly, previously deferred compensation
     through the date of resignation is not included above. See Part I., Item
     3., Legal Proceedings.
(7)  Bonuses voluntarily deferred by the named executives due to insufficient
     working capital.
(8)  In accordance with the Company's 2001 Executive Bonus Plan, the Company's
     By-laws, and its practice regarding accrual of bonuses, executives must be
     employed by the Company at the time the bonus is paid. Accordingly, Mr.
     Samach and Mr. Krouse effectively forfeited their deferred bonuses as a
     result of their resignations in December 2001.
(9)  Represents amounts contributed to the account of the named executive
     officer under the Company's 401(k) Plan.  The Company also provides health
     and dental programs which are available to all employees.


Long-Term Incentive Program

The Company's long-term incentive program consists of its 1997 Employee Stock
Option Plan. Under the terms of the Plan the Compensation Committee of the
Company's Board of Directors may grant executive officers and other key

                                       47
<PAGE>

employees options to purchase shares of the Company's common stock at the fair
market value at the option grant date. There were no options granted during
fiscal 2002. As of the date hereof, options to acquire 1,116,754 shares of
common stock are outstanding, at a weighted average price of $1.00 per share.

Option Grants in Last Fiscal Year

No options were granted in fiscal 2002

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                                   Number of Securities      Value of Unexercised In-
                                                                  Underlying Unexercised       the-Money Options at
                                                                  Options at Year-End (#)        Year-End ($) (1)
----------------------------------------------------------------------------------------------------------------------
       Name            Shares Acquired     Value                        Exercisable/               Exercisable/
                         on Exercise      Realized                     Unexercisable              Unexercisable
                             (#)            ($)
----------------------------------------------------------------------------------------------------------------------
<S>                          <C>             <C>                      <C>                            <C>
 Brett Merl                  --              --                       315,423/116,667                $0 / $0
----------------------------------------------------------------------------------------------------------------------
 Elvie Lamar Weber           --              --                       166,667/ 83,333                $0 / $0
----------------------------------------------------------------------------------------------------------------------
 Michael Samach (2)          --              --                            --                        $0 / $0
----------------------------------------------------------------------------------------------------------------------
 Jason Krouse (2)            --              --                            --                        $0 / $0
----------------------------------------------------------------------------------------------------------------------
 Matt Cohen                  --              --                        67,164/ 0                     $0 / $0
----------------------------------------------------------------------------------------------------------------------
</TABLE>

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

(1)  The year-end values represent the difference between (a) the fair market
     value of the Company's common stock underlying the options at June 30, 2002
     (bid price of $0.08) and (b) the exercise prices of the options.
     "In-the-money" means that the fair market value of the underlying stock is
     greater than the option's exercise price on the valuation date, June 30,
     2002. No options were on the money at June 30, 2002.

(2)  Mr. Samach and Mr. Krouse resigned their respective positions with the
     Company on December 19, 2001. None of Mr. Samach's and Mr. Krouse's options
     were exercised and all of them were cancelled upon termination of
     employment.


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

The following table sets forth, as of August 31, 2002, the beneficial ownership
of the Company's Common Stock by Directors and nominees for director, by each of
the executive officers named in the Summary Compensation Table and all executive
officers and directors as a group, and by each person known by the Company to be
the beneficial owner of five percent or more of each class of our Common Stock.
Unless otherwise indicated, the Company believes that the beneficial owner has
sole voting and investment power over such shares.

<TABLE>
<CAPTION>
                                                                   Number of Shares                       Percentage
         Directors and Executive Officers             Beneficially Owned of Designated Class (1)   Ownership of Class (1)(2)
---------------------------------------------------   ------------------------------------------   -------------------------

<S>                                                        <C>                                               <C>
Brett Merl, Chairman, Chief Executive Officer and          2,276,888 shares common stock (3)                 7.3%
Director

Elvie Lamar Weber, Chief Financial Officer                 166,667 shares of common stock (4)                0.5%

Matt Cohen, Director                                       92,164 shares common stock (5)                    0.3%
</TABLE>

                                       48
<PAGE>

<TABLE>
<CAPTION>
                                                                   Number of Shares                       Percentage
         Directors and Executive Officers             Beneficially Owned of Designated Class (1)   Ownership of Class (1)(2)
---------------------------------------------------   ------------------------------------------   -------------------------

<S>                                                        <C>                                               <C>
All Executive Officers and Directors as a group - 3        2,535,719 shares common stock                     8.1%
persons

              Other Beneficial Owners
---------------------------------------------------

Walter Villeger                                            2,500,000 shares common stock                     8.0%
Hurdnerstr. 10
Postfach 1474
CH-8640 Hurden,
Switzerland

Storie Partners L.P.
c/o Howard, Rice, Newmerovski, Canady, Falk &              16,667 shares of Series A Convertible             5.6%
Rabkin                                                     Preferred Stock (6)
Three Embarcadero, 7th Floor,
San Francisco, CA 94111-4065                               1,000 shares of Series B Convertible
                                                           Preferred Stock (6)
</TABLE>


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

     (1)  Includes the amount of common stock the beneficial owner has the right
          to acquire within 60 days from options, warrants or similar rights.

     (2)  Calculation of total number of shares of outstanding common stock of
          the Company is made on the basis of an assumed conversion or exercise
          of all instruments exercisable to purchase or convertible into common
          stock within 60 days, that are held by the Company's directors,
          officers, and 10% or more stockholders, including the Series A
          Convertible Preferred Stock, the Series B Convertible Preferred Stock
          and the Convertible Notes.

     (3)  Includes 315,423 common shares issuable upon the exercise of vested
          options.

     (4)  Represents the right to acquire 166,667 common shares issuable upon
          the exercise of vested options

     (5)  Includes the right to acquire 67,164 common shares issuable upon the
          exercise of vested options, and 25,000 warrants for common stock.

     (6)  Holding consists of 16,667 shares of Series A Convertible Preferred
          Stock, which are convertible into 1,666,770 shares of common stock;
          and 1,000 shares of Series B Convertible Preferred Stock, which are
          convertible into 100,000 shares of common stock. If both the Series A
          and Series B preferred stocks are converted, these shares would
          represent 5.6% of the common stock, on a fully diluted basis.


Executive Employment and Severance Agreements

The Company entered into an employment agreement with Brett Merl, effective as
of July 1, 1997, that provides for him to serve as the Company's Chief Executive
Officer. In December 2000, the Compensation Committee of the Board of Directors
approved an amendment to the employment agreement, effective January 1, 2001.
The employment agreement, as amended, has a term of three years, with an initial
annual base salary of $250,000, thereafter to be increased annually by 10% of
his base salary. Under the employment agreement, Mr. Merl also receives all
standard Company employee benefits, including participation in the Company's
stock option plan. The agreement also provides for participation in the
Company's executive bonus plan, as approved by the Board of Directors. In the
event of the termination of Mr. Merl's employment without "cause", as the term
is defined in his agreement, he will be entitled to receive salary for three
years, including earned and unpaid compensation deferred through the date of
termination, health and dental benefits for one year following termination and a
pro-rata portion of any annual bonus with respect to the fiscal year in which
such termination occurs. In the event the termination is due to a "change in
control", as defined in the agreement, Mr. Merl is entitled to receive a lump
sum cash payment equal to three times his annual salary, and employee benefits
coverage for a period of one year. Mr. Merl is also entitled to the same
settlement if after the change in control the Company terminates his employment
or he resigns, within 180 days of the effective change in control, because of
reduction in his position, salary or benefits.

                                       49
<PAGE>

The Company entered into an employment agreement with Elvie Lamar Weber,
effective as of January 1, 2002, that provides for her to serve as the Company's
Chief Financial Officer, as approved by the Company's Board of Directors. The
employment agreement has a term of three years, with an initial annual base
salary of $135,000, thereafter to be increased annually by 10% of base salary.
The agreement also provides that effective with the filing of the Company's Form
10-KSB for the year ended June 30, 2002, Ms. Weber shall receive a grant of
options to purchase 1.0 million shares of the Company's common stock with the
following vesting schedule: 200,000 options upon the filing of the Company's
Form 10-KSB for the year ended June 30, 2002; 300,000 options one year from the
effective date of the employment agreement; and 500,000 options two years from
the effective date of the employment agreement. Ms. Weber also receives all
standard Company employee benefits, including participation in the Company's
stock option plan. The agreement also provides for participation in the
Company's executive bonus plan, as approved by the Board of Directors. In the
event of the termination of Ms. Weber's employment without "cause", as the term
is defined in her agreement, she will be entitled to receive (i) the greater of
salary for 6 months or the amount due under the remainder of the then current
year's contract, including earned and unpaid compensation deferred through the
date of termination, (ii) health and dental benefits for one year following
termination, (iii) a pro-rata portion of any annual bonus with respect to the
fiscal year in which such termination occurs (iv) and immediate vesting of all
stock options granted through date of termination. In the event the termination
is due to a "change in control", as defined in the agreement, Ms. Weber is
entitled to receive a lump sum cash payment equal to one times her annual
salary, and employee benefits coverage for a period of one year, if after the
change in control the Company terminates Ms. Weber's employment.


Item 12. Certain Relationships and Related Transactions
         ----------------------------------------------

On December 16, 1997, Brett Merl subscribed for and was issued Company Common
Stock in exchange for promissory notes amounting to $264,000, with an annual
interest rate of 6%. The notes are due December 31, 2003, with the interest
accrued thereon due December 31, 2010.

On December 16, 1997, Jason Krouse, a former executive officer and director,
subscribed for and was issued Company Common Stock in exchange for a $132,000
promissory note, with an annual interest rate of 6%. The note is due December
31, 2003, with the interest accrued thereon due December 31, 2010. Mr. Krouse
extended the Company a loan on October 27, 1999, in the amount of $50,000,
bearing interest at a rate of 7% per annum and maturing on April 26, 2000. At
June 30, 2002, $34,000 was outstanding on the loan.

                                       50
<PAGE>

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

(a) Exhibits

3(i)a.   Articles of Amendment to the Articles of Incorporation of Bird
         Honomichl, Inc., dated November 20, 1998, are incorporated by reference
         to the Company's Form 10-SB filed November 18, 1999, are incorporated
         by reference to the Company's Form 10-KSB for the year ended June 30,
         2000, filed November 28, 2000.

3(i)b.   Articles of Amendment to Articles of Incorporation of Legal Club of
         America Corporation, dated December 30, 1999, are incorporated by
         reference to the Company's Form 10-KSB for the year ended June 30,
         2000, filed November 28, 2000.

3(ii)    Amended and Restated By-laws of Legal Club of America Corporation,
         dated March 1, 1999, are incorporated by reference to the Company's
         Form 10-SB filed November 18, 1999.

4(a)     1997 Stock Option Plan, incorporated by reference to the Company's Form
         10-SB filed November 18, 1999.

4(b)     Form of Warrants, incorporated by reference to the Company's Form 10-SB
         filed November 18, 1999.

10(a)    Employment Agreement for Elvie Lamar Weber, Effective as of January 1,
         2002, is filed herein.

10(b)    Second Amendment to Lease Agreement dated September 2001 with ACP
         Office I LLC, is included herein.

10(c)    Marketing Agreement with Protective Life Insurance Corporation,
         incorporated by reference to the Company's Form 10-SB filed November
         18, 1999.

10(d)    Lease Agreement, September 2001 with ACP Office I LLC, is incorporated
         by reference to the Company's Form 10-KSB for the year ended June 30,
         2001, filed October 9, 2001.

11       Statement re Computation of Per Share Earnings is incorporated by
         reference to Part I., Item 7. Financial Statements, Note 8, Net Loss
         per Share.

21       Subsidiaries of the Registrant is filed herein.

99(a)    Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section
         1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
         2002.

99(b)    Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section
         1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
         2002.

(b) Reports on Form 8-K

There were no reports on Form 8-K filed during the quarter ended June 30, 2002.

                                       51
<PAGE>

SIGNATURES


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

                                  LEGAL CLUB OF AMERICA CORPORATION


Dated: September 27, 2002         By: /s/ BRETT MERL
                                      ------------------------------------------
                                      Brett Merl
                                      Chairman and Chief Executive Officer


In accordance with the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated



Dated: September 27, 2002         By: /s/ BRETT MERL
                                      ------------------------------------------
                                      Brett Merl
                                      Chairman and Chief Executive Officer


Dated: September 27, 2002         By: /s/ ELVIE LAMAR WEBER
                                      ------------------------------------------
                                      Elvie Lamar Weber, Chief Financial Officer
                                      (Chief Accounting Officer)


Dated: September 27, 2002         By: /s/ MATT COHEN
                                      ------------------------------------------
                                      Matt Cohen, Director

                                       52
<PAGE>

                           Exhibits Table of Contents
                           --------------------------

Exhibit No.       Description
-----------       -----------

   10(a)          Employment Agreement for Elvie Lamar Weber effective as of
                  January 1, 2002
   10(b)          Second Amendment to Lease Agreement
   21             Subsidiaries of Registrant
   99(a)          Certification by Chief Executive Officer Pursuant to 18 U.S.C.
                  Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002
   99(b)          Certification by Chief Financial Officer Pursuant to 18 U.S.C.
                  Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002

                                       53