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, 2001

[ ]  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)

                        1601 N. Harrison Pkwy., Suite 200
                                Sunrise, Florida                     33323
                   ------------------------------------------  -----------------
                    (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 $5.9 million in gross revenue for the fiscal year ended June
30, 2001.

The aggregate market value of the Common Stock held by non-affiliates of the
Registrant on September 28, 2001 was $1,647,169, based on the average bid and
asked price of the Common Stock on that date.

As of September 28, 2001, there were 20,845,594 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, 2001


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



                                                                           Page
                                                                           ----

PART I.......................................................................1
  Item 1.  Description of Business...........................................1
  Item 2.  Description of Property...........................................7
  Item 3.  Legal Proceedings.................................................8
  Item 4.  Submission of Matters to a Vote of Security Holders...............9



PART II......................................................................9
  Item 5.  Market for Common Equity and Related Stockholder Matters..........9
  Item 6.  Management's Discussion and Analysis of Financial Condition and
           Results of Operations............................................12
  Item 7.  Financial Statements.............................................17
  Item 8.  Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure.............................................37



PART III....................................................................37
   Item 9.  Directors, Executive Officers, Promoters and Control Persons;
  Compliance with Section 16(a) of the
        Exchange Act........................................................37
  Item 10. Executive Compensation...........................................38
  Item 11. Security Ownership of Certain Beneficial Owners and Management...40
  Item 12. Certain Relationships and Related Transactions...................42
  Item 13. Exhibits and Reports on Form 8-K.................................43

SIGNATURES..................................................................44

EXHIBITS....................................................................45





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                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
<PAGE>

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 two wholly-owned operating
subsidiaries, LegalClub.com, Inc. ("LCOA") and Einstein Computer Corp. ("ECC").
LCOA operates a national legal referral service and ECC sells personal computer
systems and accessories to employees at their workplace.

      Recent Developments

During the quarter ended June 30, 2000, the Company launched ECC, a wholly owned
subsidiary of the Company, formed for the purpose of selling personal computers
to employees at the worksite, allowing payroll deduction as the payment
methodology. The program was developed to take advantage of the Company's vast
distribution channels, including its network of independent agents. 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. ("Gateway") 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. ECC generated $2,580,000 of gross
revenue from sales of personal computers for the fiscal year ended June 30,
2001.

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 ECC. This matter is more fully
discussed in Part I, Item3., Legal Proceedings.

In September 2001, ECC entered into an agreement with MicronPC to sell their
computers as an authorized agent. ECC will sell these personal computers as a
voluntary benefit to employees at the employee's 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, as opposed to ECC's prior payroll deduction program. ECC
anticipates that it will begin marketing and selling personal computers under
this program in October 2001.

The Company was a party to a dispute with the Florida Department of Insurance
("FDOI") which tried to regulate the Company as a legal expense insurer. On
September 26, 2001 a decision was rendered by the First District Court of
Appeals ("FDCA") in which the FDCA found in the Company's favor and against the
FDOI. As a result of the ruling by the FDCA the Company may seek to
recover costs and expenses incurred to defend its position. The
FDOI has 15 days from the date of the FDCA's decision to ask the FDCA to
reconsider its decision. The FDOI may also seek discretionary review of the
decision by the Florida Supreme Court.

Business Overview

      LCOA

LCOA operates a national legal referral service that provides its members
referrals to a network of over 13,000 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

                                       1
<PAGE>

internal infrastructure to administer large volume enrollments and a
diversified, marketing capability to enroll individuals and small business
owners on a national scale. The Company has regional sales offices in Chicago
and New York.

Membership in a Plan provides 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 $284 per hour),
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 judgement 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. LOCA does not provide any legal services, nor does
it we 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.

LCOA pays commissions to its agents, screens, builds and maintains the attorney
network and markets the Plans to members. Members pay LCOA a fee on an annual or
monthly basis, depending on the nature of their membership. Monthly fees range
from less than $0.10 to $24.95, depending on the type of membership. Sometimes
discounted rates are offered to groups or organizations that offer memberships
in the Plans to their employees or members, as well as to direct marketing
companies who may resell LCOA product under private label arrangements.
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, 2001, there were approximately 334,000 members. The
bulk of these memberships are attributed to large affinity programs for which
LCOA receives substantially less than the published annual membership rate.

Attorneys are screened by LCOA personnel prior to acceptance as participating
attorneys in the LCOA network. The attorneys must also agree to provide
specified levels of service, offer discounts to our members, and perform some
routine legal services without charge. Participating attorneys may establish
their own screening policies that may in some instances limit usage. While LCOA
monitors participating attorneys to assure their compliance with our policies,
it can not guarantee any level of service. As of June 30, 2001, we had over
13,000 participating attorneys. Membership revenues from LCOA for the fiscal
years ended June 30, 2001 and 2000 were $3,312,000 and $2,071,000, respectively.

      ECC

During the fiscal year ended June 30, 2001, ECC began selling computer systems
to employees at the worksite through payroll deduction. In this business line,
the Company sought to take advantage of its distribution capacity at the
worksite, principally through its system of independent agents and brokers.
Under the Gateway arrangement 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. ECC generated gross revenues from the sales of computers of $2,580,000,
for the fiscal year ended June 30, 2001.

As more fully discussed in Part 2, Item 6., Management's Discussion and
Analysis, the Company lost $2,102,000 and $4,519,000, during the fiscal years
ended June 30, 2001 and 2000, respectively.

                                       2
<PAGE>

Present Financial Matters

The Company has incurred losses since its formation and has not generated
sufficient cash to fund its operations. The Company requires additional capital
and increased cash flow to fund operations. See Part II, Item 6, Management's
Discussion and Analysis, "Liquidity and Capital Resources".

As a result of the events of September 11, 2001, the Company is unable to
predict the impact of an economic downturn, if any, on the Company's financial
condition or results of operations. As of September 27, 2001, there had been no
decline in the Company's membership revenues or client contracts as a result of
the terrorist attacks.

Services

The Company has developed services to provide consumers access to affordable
legal services. Using the same distribution network utilized by the Company in
the work-site market, the Company provides as a voluntary benefit, personal
computers and related financing to qualified employees.

      LCOA

LCOA receives monthly or annual membership fees
from members in exchange for providing access to participating attorneys. The
members pay discounted rates for services directly to the applicable attorney.
The Company receives no portion of the fees members pay to attorneys and no fees
are paid by LCOA or the Company to the enrolled attorneys. 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 receives also 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 $284 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.

Attorney Selection Process. To ensure that the attorney participating in our
Legal Club programs meet and maintain our qualification standards, we have
implemented an attorney selection and evaluation process. 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, we request and receive disciplinary
history reports from the bar associations of every state on each participating
attorney in the network. We also perform anonymous professionalism testing of
the attorneys in our network to ensure that they are providing services that
meet our standards. In an effort to ensure that we match an appropriate and
qualified attorney to each member, we categorize 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.

                                       3
<PAGE>

      ECC

ECC, was developed to market computer systems and accessories as a voluntary
benefit to employees at the their workplace utilizing payroll deduction as the
primary payment method. ECC takes advantage of the Company's distribution
network of independent agents to market computer systems to the estimated 48% of
American households without this technology. The marketing of computers is
intensely competitive, but ECC takes advantage of the Company's well-established
distribution system.

In announcing its formation and marketing relationships, ECC created a "first
mover status" in an industry that in 2000 had sales of 134.8 million units. The
Company utilizes its independent agent distribution network to offer computer
systems to employees, and in the future plans to offer the program through other
distribution channels to the consumer (See "Marketing"). LCOA has been
successfully marketing products to consumers since its inception, and it will
utilize this core competency to enable ECC to provide the much needed benefit of
an affordable, state of the art computer system.

In September 2001, ECC entered into an agreement with a brand name computer
manufacturer, to sell their computer systems and accessories. This program will
be marketed as a voluntary benefit to employees at their workplace, through
LCOA's distribution network of independent agents. Financing of the computer
systems will be through a finance company contracted by the computer
manufacturer that will extend credit directly to the employees. ECC will offer
three desktop and two laptop models, ranging in price from $1,150 to $2,500. The
systems may come with monitors, keyboard, speakers, mouse, 24/7 technical
support, on-site support, and one-year parts and labor warranty. Upgrades and
accessories will be made available as well.

Free internet access is provided through an agreement between ECC and Juno
Online Services, Inc.. The agreement provides ECC with a co-branded internet
portal. The portal will feature a "Legal Services" channel, linked to
Legalclub.com and an "Insurance Services" channel that will be linked to a menu
of insurance services provided by ECC's marketing partners. In addition, free
internet access CDs will be distributed by ECC, LCOA and certain marketing
partners in an effort to increase LCOA membership sales.

Marketing

      LCOA

The Company markets its LCOA products through a combination of worksite
enrollments, direct marketing, affinity marketing. internet marketing and
previously, infomercials. In June 1999, the Company entered into marketing
agreements with Worksite Solutions, Inc., the worksite marketing unit of AON
Corporation and with Transamerica Assurance Company, the worksite marketing unit
of Transamerica Life Companies. Under these and similar agreements with Century
Business Systems and Trustmark/National Worksite Benefits, these companies offer
the Legal Club Plans as their exclusive legal services benefits. These entities
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. We believe
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 our
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 Legal Club 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 the Company.

                                       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, such as Protective
Life Corporation, Shoppers Rewards and Forum, and has recently entered into
agreements with West Corporation and Consumers Benefits Services. These direct
marketing relationships enable LCOA to increase its market penetration by
offering its plans to large numbers of credit card and bank customers in their
member databases.

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 affinity marketing organizations, such as SCI
Management Corporation and UICI Marketing, Inc.

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.

      ECC.

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

Competition

      LCOA

The market for the Company's legal products and services is evolving and growing
rapidly. Competition can be expected to intensify as the market grows and the
need for legal services increases. The market for sales of personal computers is
extremely competitive, with intense price competition, declining margins and
industry consolidation.

There are generally few significant barriers to entry to the legal referral
services market. The main barrier to entry is the development of a nationwide
attorney network. 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, the Company 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 believes it
competes favorably in most of 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.

                                       5
<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.

The Company's primary legal referral services competitors are insurance and
member plans, which include Pre-Paid Legal Services, Inc., the Hyatt Legal
Plans, and the ARAG plans (formerly known as Midwest Legal Plans), among others
Although, Pre-Paid Legal Services is the dominant competitor, LCOA believes it
competes favorably with Pre-Paid because our services are not insurance products
and thus not subject to insurance regulation. 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 plans 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 the LCOA competes with the various types of legal service providers listed
above, it feels that the LCOA's 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 or exclusions based on pre-existing conditions,
and no increase in our membership fees as a result of a high volume of usage of
the services by the member. Since services are not set up to provide insurance,
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, the 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.

      ECC.

The competition for ECC's products and services is intense, with many large,
brand name companies vying for the consumer's computer dollars. Additionally, in
the market that the Company has identified as its target market - the worksite -
several better capitalized companies such as PeoplePC and others are selling
employer subsidized computers to employees. ECC believes that its relationship
with its distribution network is new to this marketplace and relatively unique.
However, success in this marketplace may bring better financed competitors and
manufacturers into direct competition with the Company for its distribution
system, as well as directly to the employers.

Trademarks

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

Regulation

      Legal Regulation

Since the Company does not practice law or provide legal advice to its members,
the Company does not believe that it falls under the purview of regulations
governing attorneys. There is no fee sharing of any kind between the Company and
the referral attorney. Nor do we believe that any of our services are in
conflict with any regulations affecting lawyers. The Company has not, however,
sought a legal opinion from an attorney regarding whether our services are in
conflict with any bar association rules or regulations. The Company requires
participating attorneys to comply with applicable regulations and ethical codes
and it performs monitoring procedures to seek to ensure compliance.

                                       6
<PAGE>

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. Since
that time, the Company has not been required by the Florida Bar to file any
reports.

      Insurance Regulation

The Company does not believe that insurance regulations are applicable to its
LCOA operations.

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 Department'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) our 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 the Company was a
legal expense insurer, that it would be exempt from any regulation due to the
fact that the Company is a lawyer referral service in accordance with the
definitions set forth by the Florida Bar Association. Subsequently, the FDOI
rejected both conclusions of the Administrative Law Judge and ordered the
Company to become licensed as a legal expense insurer anyway. The Company
appealed this ruling, and a three-judge panel in 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. As a result of the favorable ruling by the FDCA,
the Company may seek to recover costs and expenses incurred to defend its
position. The FDOI has 15 days from the date of the FDCA's decision to ask the
FDCA to reconsider its decision. The FDOI may also seek discretionary review of
the decision by the Florida Supreme Court.

Employees

The Company has a total of 28 full time employees. They are assigned as follows:
4 are in management, 5 are in sales and marketing, and 19 are in operations.
None of the employees belong to a union. We believe that our employee
relationships are excellent.


Item 2.     Description of Property

The Company currently occupies approximately 14,186 square feet of office space
in Sunrise, Florida. The lease commenced on July 1, 1999, and is for a term of
seven years. The total payment for the remainder of the lease in effect at June
30, 2001 is approximately $1,483,000. As of June 30, 2001, we also had two
regional sales offices located in Chicago and New York. There is only one
employee in each regional sales office at this time. In September 2001, the
Company executed a new lease agreement to relocate its corporate headquarters
and occupy approximately 4,971 square feet of office space in Plantation,
Florida. The new lease agreement replaces the one entered into in July 1999. The
new lease agreement voids the lease cancellation penalties of the original
lease. The new lease is for a term of five years. Total payments under this
lease will be approximately $702,000 over the term of the lease.

                                       7
<PAGE>

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. 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.

The Company filed an action styled LegalClub.com, Inc. v. Bernstein in August
                                   --------------------------------
1999 in the Broward County Circuit Court. This action involved the Company's
claims to rescind certain stock issuance's to Mr. Howard Bernstein
("Bernstein"), a former officer and employee, and claims for slander and various
filed and threatened counterclaims from Mr. Bernstein for alleged back
compensation and other matters. After preliminary proceedings in the case, the
parties entered into a stipulated settlement in April 2000. The settlement
required payments to Mr. Bernstein of $100,000 in cash, paid in April 2000, and
$80,000 on deferred terms and imposed certain restrictions on the timing of Mr.
Bernstein's sales of Company's stock. A dispute arose regarding one of the
deferred payments, and under the terms of the settlement, Mr. Bernstein received
a default judgment for $400,000 against the Company. The default judgement was
vacated on April 5, 2001. The Settlement Stipulation entered into between the
parties requires the Company to continue to make payments to Bernstein in the
amount of $6,700 per month through December 15, 2001 and to issue 125,000
restricted shares of Company common stock to Bernstein. The parties each had to
bear their own costs and attorney fees 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 Department's 1994 findings that the
predecessor company's 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) our 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, 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. Subsequently, the FDOI rejected both conclusions of the
Administrative Law Judge and ordered the Company to become licensed as a legal
expense insurer anyway. The Company appealed this ruling, and a three-judge
panel in 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. As a result of the
favorable ruling by the FDCA, the Company may seek to recover certain costs and
expenses incurred to defend its position. The FDOI has 15 days from the date of
the FDCA's decision to ask the FDCA to reconsider its decision. The FDOI may
also seek discretionary review of the decision by the Florida Supreme Court.

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.

                                       8
<PAGE>

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, 2001.


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, 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
            Quarter Ended June 30, 2000                 3.50         0.56
            Quarter Ended March 31, 2000                3.50         2.75
            Quarter Ended December 31, 1999             4.25         3.06
            Quarter Ended September 30, 1999            4.19         2.63

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.

As of August 31, 2001, there were 436 holders of record of the Company's common
stock and 20,845,594 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 12,160 shares outstanding of the Company's Series B Preferred
Stock held by 12 holders. Certain shares of common stock are held in "street"
name and may, therefore, be held by several beneficial owners.

Of the 20,845,594 shares of outstanding common stock, 14,089,809 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. These sales of eligible
registered securities had a substantial adverse effect on the market price of
the Company's securities.

                                       9
<PAGE>

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.

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, 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 at $0.25
per share for a value of $19,000 for commissions due on the convertible debt
issuance. In April 2001, as part of a. settlement stipulation entered into
between the Company and Bernstein, the Company issued 125,000 restricted shares
of the Company's common stock. The Company also issued 136,000 restricted 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.

During the year ended June 30, 2000, 250,000 shares of common stock were sold in
a private placement, at $1.00 per share, for an aggregate offering price of
$250,000. During the year ended June 30, 2000, 91,572 shares of common stock
were issued to current and former employees and consultants as compensation for
services performed, for a total consideration of $117,000, or $1.28 per share,
and 56,553 shares of common stock were issued to various private investors to
convert existing long-term debt and related accrued interest, for a total
consideration of $156,000, or $2.76 per share. These securities were sold to
private and institutional investors in reliance on Rule 506 of rules and
regulations promulgated under the Securities Act of 1933, as amended.

During the fiscal year ended June 30, 1999, the Company issued 5,649,689 shares
of its common stock. Of this total issuance, 5,438,149 shares were issued at an
average price per share of $0.39, for an aggregate offering price of $2,124,000,
of which 1,200,542 common shares were issued at an average price per share of
$0.38, with warrants, convertible in less than a year, to acquire 1,050,000
additional common shares. The warrants were valued at $0.05 each and were
comprised of 650,000 warrants to purchase common stock at $0.90 per share and
400,000 to purchase common stock at $2.00 per share. During the fiscal year
ended June 30, 1999, 211,540 shares were used to convert existing long-term debt
and related accrued interest to various private investors for a total
consideration of $634,000 or $3.00 per share. These securities were sold 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. In September 2000, the Company raised $192,000 through a
private placement of Convertible Notes to accredited investors. Upon maturity,
the notes and accrued interest are convertible into common shares at $0.50 per
share. Additionally, 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, or 96,000 warrants, at
an exercise price of $0.25 per share. Brokers authorized by the Company, who
participated in the private placement of Convertible Notes, are 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 addition to a fee of
10% of the proceeds raised. The Company is currently in default of the
convertible debt and has begun discussions to modify the debt arrangement.

Series A Convertible Preferred Stock. In February 1999, the Company issued
27,778 shares of its Series A Convertible Preferred Stock, which are convertible
into 2,777,800 shares of our common stock. The aggregate offering price was
$2,500,000. These securities were sold to accredited private and institutional
investors in reliance on Rule 506. In March 2001, holders of 11,112 shares of
Series A Convertible Preferred Stock (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.

                                       10
<PAGE>

Series B Convertible Preferred Stock. During the year ended June 30, 2000, the
Company issued 12,160 shares of the Series B Convertible Preferred Stock (Series
B stock), at $250 per share, for a total consideration of $3,040,000. Each share
of Series B stock is convertible into 100 shares of our common stock, or $2.50
per share. These securities were sold to accredited private and institutional
investors in reliance on Rule 506. In connection with the Series B stock
offering, the Company issued warrants for the purchase of 390,000 shares of
common stock to institutional investors and 5,600 warrants were issued to
brokers authorized to participate in the offering. Brokers authorized to
participate in the Series B stock offering were entitled to receive warrants to
purchase 10% of the common stock equivalent shares placed by the broker, at a
per share price equal to 125% of the price paid by the investors in the
offering, and a 10% fee.

Warrants. As of June 30, 2001, immediately exercisable warrants to purchase
817,800 of our common stock were outstanding. Some of the terms of the
outstanding warrants granted in the completed fiscal years are as follows:

      Fiscal Year Ended June 30, 2001

During fiscal 2001, the Company issued warrants to purchased 1,117,800 shares of
common stock at an exercise price varying from $0.25 to $3.00 per share 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. The warrants have contractual lives of
two to five years. Since these warrants were issued with exercise prices at or
above fair value, no book value was assigned to them at issuance.

o     200,000  warrants are exercisable for $3,00 per share and expire on
               April 1, 2005

o      50,000  warrants are exercisable for $0.50 per share and expire on
               August 1, 2005

o     172,800  warrants are exercisable for $0.25 per share and expire on
               September 30, 2005

o     200,000  warrants are exercisable for $0.35 per share and expire on
               October 25, 2005

o     245,000  warrants are exercisable for $0.33 per share and expire on
               November 15, 2005

o      50,000  warrants are exercisable for $0.25 per share and expire on
               January 15, 2006

o      50,000  warrants are exercisable for $2.00 per share and expire on
               April 1, 2006

o      25,000  warrants are exercisable for $1.00 per share and expire on
               August 1, 2006

o      25,000  warrants are exercisable for $1.50 per share and expire on
               August 1, 2007

o      33,333  warrants are exercisable for $2.00 per share and expire on
               August 1, 2008

o      33,333  warrants are exercisable for $2.50 per share and expire on
               August 1, 2009

o      33,334  warrants are exercisable for $3.00 per share and expire on
               August 1, 2010

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.

      Fiscal Year Ended June 30, 2000

During fiscal 2000, the Company issued warrants to purchase 545,600 shares of
common stock at an exercise price varying from $2.50 to $10.00 per share to
non-employee investors as part of their investment consideration. The exercise
prices were arrived at through arms-length negotiations with the warrant
holders. The warrants have contractual lives of two to five years. Since these
warrants were issued with exercise prices at or above fair value, no book value
was assigned to them at issuance.

o     100,000  warrants are exercisable for $3.00 per share and expire on
               April 1, 2005

o      50,000  warrants are exercisable for $2.50 per share and expire on
               March 1, 2002

o     130,000  warrants are exercisable for $5.00 per share and expire on
               January 17, 2004

o     130,000  warrants are exercisable for $7.50 per share and expire on
               January 17, 2004

o     130,000  warrants are exercisable for $10.00 per share and expire
               January 17, 2004

o       5,600  warrants are exercisable for $2.75 per share and expire on
               January 17, 2004

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.

                                       11
<PAGE>

The Company has granted the holder of certain warrants to purchase 390,000
shares of common stock, registration rights and conversion rights different than
those described above. The terms of these warrants require the Company to file a
registration statement with respect to the warrant shares, provided that at
least 50% of the warrant holders request the Company to do so. The Company is
not obligated to take any action on such request if the Company certifies that
such a registration statement would be detrimental to the Company. The holder of
these warrants also has "piggyback" registration rights that are the same as
those of the other warrant holders described above. Finally, this warrant is
convertible into shares of common stock at any time at the option of the holder.

      Fiscal Year Ended June 30, 1999

During fiscal 1999, the Company issued warrants to purchase 1,050,000 shares of
common stock at an exercise price varying from $0.90 to $2 per share to
non-employee investors as part of their investment consideration. The exercise
prices were arrived at through arms-length negotiations with the warrant
holders. The warrants have contractual lives of four to ten years. Since these
warrants were issued with exercise prices at or above fair value, no book value
was assigned to them at issuance.

o     300,000  warrants are exercisable for $.90 per share and expire on
               December 31, 2003

o      50,000  warrants are exercisable for $.90 per share and expire on
               December 31, 2003

o     300,000  warrants are exercisable for $.90 per share and expire on
               February 12, 2009

o     300,000  warrants are exercisable for $2.00 per share and expire on
               August 1, 2009

o     100,000  warrants are exercisable for $2.00 per share and expire on
               December 31, 2003

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, provided that holders of at least 10,000 shares request such
registration. In addition, the managing underwriter of any offering, if any, has
the right to limit the number of shares proposed to be included in the
registration.


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

Results of Operations

Years Ended June 30, 2001 and 2000

Revenue increased $3,821,000, or 184.5%, to $5,892,000 in fiscal year 2001
compared with $2,071,000 in 2000. This increase was principally the result of
increased revenue generated from sales of LCOA services and sales of personal
computers by ECC. Sales of LCOA services representated 56%, or $3,312,000, of
total revenues and sales of personal computers through ECC representated 44%, or
$2,580,000, of total revenues.

The Company reported a net loss of $2,102,000, or $0.11 per basic and diluted
common share, for the year ended June 30, 2001, compared to a net loss of
$4,519,000, or $0.24 per basic and diluted common share for the comparable
period in 2000. This decrease in net loss for fiscal year 2001 is attributable
to higher revenue levels, as well as reductions in operating expenses, excluding
cost of sales.

Membership revenue from LCOA products was $3,312,000 for the year ended
June 30, 2001, compared with $2,071,000 during the same period in 2000, an
increase of 59.9%. The increase in membership revenue was the result of (1) an
increase in direct marketing sales of $1,344,000, or 195.1%, to $2,033,000,
compared with $689,000 in fiscal year 2000, (2) an increase in worksite sales of
$382,000, or 63.3%, to $985,000, compared with $603,000 in the comparable period
in 2000, and (3) an increase in affinity market sales of $36,000 or 14.0%, to
$294,000 compared with $258,000 in fiscal year 2000. These increases were
partially offset by a $521,000 decline in infomercial sales during this same
period because the Company discontinued this distribution channel in November
1999.

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. 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.

                                       12
<PAGE>

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

Operating expenses, excluding cost of sales, decreased $1,095,000, or 16.6%, to
$5,511,000 in fiscal year 2001 compared with $6,606,000 in the comparable period
in 2000. This decrease was primarily the result of reductions in advertising and
marketing, general and administrative costs, as well as professional fees,
partially offset by increased employee compensation and benefits costs.

Compensation and employee benefits increased $81,000, or 2.9%, to $2,832,000, in
fiscal year 2001, compared with $2,751,000 for the same period in 2000. This
increase related primarily to bonuses, amounting to $595,000, earned and accrued
in 2001. During 2001 the Compensation Committee of the Board of Directors (the
"Board") adopted a bonus plan to incentify management of the Company. The
Committee established 10% of the fiscal year gross revenues as the maximum
amount of bonus that could be earned. The requirements to earn the bonus were as
follows: (1), the Company must increase income (or reduce losses) from
operations by at least 20% for the current fiscal year compared to the prior
fiscal year, and (2), the Company must increase gross revenue for the same
comparative period by 20% to 100%. Once the minimum targets were met for both
requirements, the amount of bonus earned would depend on achieving increasing
revenue targets, that ranged from a 20% to 100% increase for the comparable
annual fiscal periods. The bonus earned by each manager was a Board approved
allocation percentage of the bonus available. The bonus earned by the managers
totaled $595,000 as the Company decreased its losses by 53.5% and increased
gross revenue by more than 100% during the year ended June 30, 2001. Due to the
cash position of the Company, no bonuses have been paid. Excluding accrued
bonus, compensation and employee benefits decreased $514,000, or 18.7%,
reflecting management's continued efforts to reduce the per-employee operational
costs associated with marketing, servicing, and administering customers in
connection with the Company's cost cutting efforts. During the year ended June
30, 2001, the Company closed two of its regional offices. These closures did not
impact the Company's national marketing efforts nor did it diminish the quality
of service provided to customers.

Additionally, in 2001, the Company did not use stock as a form of compensation
payment. Services performed for stock compensation amounted to $117,000 in the
fiscal year 2000. Compensation and employee benefits, including bonus expense
and stock compensation, decreased 1.3%.

Advertising and marketing costs were $196,000 in the current fiscal year
compared with $1,052,000 in fiscal year 2000, a decrease of $856,000, or 81.4%.
This decrease was primarily attributable to costs incurred in 2000, associated
with the discontinued infomercial marketing of LCOA services.

Professional fees were $407,000 in fiscal year 2001, compared with $552,000 in
the prior fiscal year, a decrease of $145,000, or 26.3%, primarily attributable
to lower expenditures for investment banking, and legal services.

General and administrative expenses were $1,480,000 during the year ended June
30, 2001, a decrease of $37,000, or 2.4%, compared with $1,517,000 during the
same period in 2000. This decrease was comprised primarily of decreases in (1)
travel expenses ($194,000), (2) telephone costs ($91,000) and (3) meals and
entertainment ($29,000). These decreases were partially offset by increases in
(1) commissions ($217,000) and (2) provision for doubtful accounts ($135,000).
The reduction in travel expenses and meals and entertainment was due to a
decrease in costs associated with the marketing of products, as these
relationships have matured, the closing of two of its regional offices, as well
as less travel associated with investment banking activities. Telephone costs
decreased due to a reduction in rates negotiated for telephone usage and a
decrease in telecommunications usage associated with the effect of a reduced
workforce, including the closing of two regional offices. The increase in
commissions was directly associated with increased revenues from LCOA products
as well as personal computers sales by ECC. The increase in provision for
doubtful accounts was due to the increase in receivables related to sales from
personal computers.

                                       13
<PAGE>

Occupancy expenses increased $15,000, or 4.5%, to $346,000, during the year
ended June 30, 2001 from $331,000 during the comparable period in 2000 due to
higher office space costs. This is primarily due to the effect of a full year's
rent effect for the Company's headquarters in Sunrise, Florida, which was
partially offset by the effect of closing three regional offices during the
prior fiscal year. In September 2001, the Company signed a new five-year lease
with the same corporate property management company, whereby the Company will
move its corporate office to smaller premises around December 2001, and will
effectively reduce its lease expenses by approximately 50% over the next five
years.

Legal settlement costs decreased $77,000, or 42.8%, to $103,000, during the year
ended June 30, 2001 from $180,000 during the comparable period in 2000. During
2001, the Company incurred costs as part of a settlement stipulation entered
into between the Company and a former officer and employee whereby the Company
issued 125,000 restricted shares of the Company's common stock and is to
continue making payments in the amount of $6,700 per month through December 15,
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.

Depreciation and amortization expenses amounted to $147,000 in fiscal year 2001,
compared with $106,000 for the comparable period in 2000, an increase of
$41,000, or 38.7%. This increase was the result of a full year's depreciation on
purchases made in 2000, as well as additional depreciation due to the
amortization of software development costs incurred to develop an operating
platform for ECC's computer sales.

Interest expense increased $320,000 to $385,000 during the year ended June 30,
2001, from $65,000 during the comparable period in 2000. The primary reason for
this increase were the interest costs associated with ECC's notes payable to
finance computer sales.

As a result of the terrorist attacks on the United States of America on
September 11, 2001, the Company is unable to predict the impact of an economic
downturn, if any, on the Company's financial condition or results of operations.
As of September 27, 2001, there has been no decline in the Company's membership
revenues or client contracts as a result of the terrorist attacks.

Liquidity and Capital Resources

The principal sources of the Company's liquidity have been cash flow from sales
of equity and debt securities, LCOA membership revenues and in 2001, revenues
from personal computer sales.

June 30, 2001

Net cash used in operating activities was $396,000 for the year ended June 30,
2001, compared with $4,125,000 for the comparable period in 2000. The decrease
of $3,729,000 in net cash used in operating activities resulted primarily from a
$2,417,000 decrease in net loss.

Cash flows used for investing activities decreased $125,000 in fiscal year 2001
compared to 2000. This was due to reduced acquisitions of computer equipment and
furniture. Management believes that additional purchases of computer equipment,
software and leasehold improvements over the next twelve months will not be
material.

Cash flows provided by financing activities were $333,000 for the year ended
June 30, 2001, compared with $2,901,000 for the same period in 2000. This
decrease was primarily due to lower proceeds from sales of equity securities
during fiscal year 2001 compared to the prior fiscal year. During fiscal year
2001, the Company raised $192,000 through a private placement of convertible
notes. The notes have a stated coupon rate of 25% per annum and matured in
September 2001. Upon maturity, the notes and accrued interest are convertible
into common shares at $0.50 per share. The Company is currently in default of
the convertible debt and has begun discussions to modify the debt arrangement.
During fiscal year 2001, the Company sold 385,000 shares of common stock for
$193,000, or $0.50 per share, in private placements to accredited investors.
Additionally, $67,000 of restricted cash was released and used for working
capital purposes and $119,000 of long-term debt and capital leases were repaid.
During the comparable period in 2000, 250,000 shares of common stock were sold
for $250,000 and 12,160 shares of Series B convertible preferred stock were sold
for $3,040,000. Additionally, during fiscal year 2000, the Company repaid
$262,000 of long-term debt and placed $177,000 in escrow securing letters of
credit relating to office space lease and equipment leases.

                                       14
<PAGE>

Due to insufficient cash generated from operations, the Company presently does
not have cash available to timely pay its already incurred accounts payable and
other liabilities. 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 current and future obligations. The
Company, has incurred losses since its inception, and continues to require
additional capital to fund operations and development. As such, the Company's
independent auditors have raised substantial doubt about the Company's ability
to continue as a going concern. During the year ended June 30, 2001 compared to
the same period in 2000, the Company reduced its losses and successfully grew
its LCOA membership revenue sources from direct marketing and worksite sales and
through sales of personal computers by ECC.

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 methodology. The program was developed
to take advantage of the Company's distribution channels, including its network
of independent agents. The Company began delivering computers to employees
utilizing this methodology in October 2000 in accordance with an agreement with
Gateway. In February 2001, Gateway ended its relationship with the Company. 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 ECC. See Part I, Item 3, Legal
Proceedings

The Company is committed to seek opportunities to continue expanding its
marketing initiatives to generate working capital through sales of its Legal
Club products and Einstein personal computers. In September 2001, ECC entered
into a another agreement with a brand name computer manufacturer, Micron PC, to
sell their computers as an authorized agent. ECC will sell 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, as opposed to ECC's prior payroll deduction program. ECC anticipates
that it will begin marketing and selling personal computers under this program
in October 2001. There can be no assurance that this new arrangement will be
successful.

In addition to its expansion of marketing and sales initiatives mentioned
previously, the Company will continue its cost savings initiatives in fiscal
year 2002. Failure to expand marketing and sales initiatives and to achieve
timely reduction in expenses 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. There can be no assurance that the Company will be
able to obtain such equity financing 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.

On October 27, 1999, the Company obtained a $50,000 six-month term loan at a 7%
annual interest rate from Jason Krouse, the Company's Executive Vice President
of Sales. The loan and interest were due and payable in April 2000. At June 30,
2001, the amount outstanding on this loan was $37,000. Although the Company has
received from time to time related party loans in the past, there is no
assurance that affiliated parties would be willing to make such loans in the
future.

Brett Merl, the Company's Chairman of the Board and Chief Executive Officer and
Jason Krouse, the Company's Executive Vice President of Sales, have
subscriptions for a total of 396,000 shares of common stock. The Company has
recorded the receivable and related accrued interest, at 6% per year, in equity.
The Company does not expect the subscriptions receivable to be paid in the near
future, although Mr. Merl and Mr. Krouse have indicated the notes will be
satisfied. Accrued interest on these notes is expected to be satisfied when the
notes are satisfied.

                                       15
<PAGE>

The Company is in default of certain of its debt agreements. The amount of debt
in default totaled $204,000 at June 30, 2001. These debt agreements have various
original maturities from 1998 through September 2001. Principal and accrued
interest, at annual rates ranging from 7% to 25%, and on term loans, an
additional interest payment equal to 20% of the principal amount, are currently
in default. Management will continue its attempt to convert the remaining
$127,000 principal amount of term loans to common 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. The Company
is also currently in default of the convertible debt and has begun discussions
to modify the debt arrangement. Should debt holders be able to accelerate
repayment of amounts in default, there is no assurance that the Company could
pay such amounts without adversely impacting operations. 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.- Also see Note 1 to the Consolidated Financial Statements, "Going Concern
Considerations".

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,
and the resolution of the proceedings in courts regarding insurance regulations
of the State of Florida; (b) the effectiveness of the Company's
marketing strategies to significantly grow membership and its personal computer
business; (c) the ability to 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 consequences attributable
to the events that took place in New York City and Washington D.C. on September
11, 2001. Therefore, forward-looking statements should not be relied upon as a
prediction of actual future results.

                                       16
<PAGE>

Item 7.     Financial Statements

The following consolidated financial statements are included in Item 7.

                                                                        Page
                                                                        ----

INDEPENDENT AUDITORS' REPORT                                             18

CONSOLIDATED FINANCIAL STATEMENTS

      Consolidated Balance Sheet as of June 30, 2001                     19

      Consolidated Statements of Operations for the Years                20
      Ended June 30, 2001 and 2000

      Consolidated Statements of Cash Flows for the Years                21
      Ended June 30, 2001 and 2000

      Consolidated Statements of Stockholders' Equity                    22
      (Deficit) for the Years Ended June 30, 2001 and 2000

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                             23 - 36


                                       17
<PAGE>

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


To the Board of Directors
Legal Club of America Corporation

We have audited the accompanying consolidated balance sheet of Legal Club of
America Corporation and its subsidiaries (collectively, the "Company") as of
June 30, 2001, and the related consolidated statements of operations,
stockholders' deficit, and cash flows for each of 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. 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, 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.

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 19, 2001, except for Note 12(c),
for which the date is September 28, 2001

                                       18
<PAGE>

<TABLE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 2001


<CAPTION>
                                     ASSETS
                                     ------
<S>                                                                                  <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                          $     39,000
  Restricted cash                                                                         110,000
  Accounts receivable, net of allowance for doubtful accounts of $83,000 at
        June 30, 2001                                                                   1,005,000
  Inventory                                                                                54,000
  Prepaid expenses                                                                          2,000
  Advances and other assets                                                               198,000
                                                                                     ------------

         TOTAL CURRENT ASSETS                                                           1,408,000

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

         TOTAL                                                                       $  3,387,000
                                                                                     ============

<CAPTION>
                      LIABILITIES AND STOCKHOLDERS' DEFICIT
                      -------------------------------------
<S>                                                                                  <C>
CURRENT LIABILITIES:
  Accounts payable                                                                   $    824,000
  Accrued compensation and related expenses                                               245,000
  Accrued bonus                                                                           595,000
  Current portion of long-term debt and capital leases                                  1,352,000
  Interest payable                                                                        415,000
  Accrued commissions on Series B preferred stock                                         194,000
  Accrued legal settlement                                                                 40,000
  Other accrued expenses and liabilities                                                  307,000
                                                                                     ------------

         TOTAL CURRENT LIABILITIES                                                      3,972,000
                                                                                     ------------

LONG-TERM DEBT AND CAPITAL LEASES, less current portion                                 1,754,000
                                                                                     ------------

TOTAL LIABILITIES                                                                       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, 2001
    26,000 shares designated Series B;  12,160 issued and outstanding                         -
  Common stock, $0.0001 par value; 50,000,000 shares authorized;
    20,845,594 shares issued and outstanding at June 30, 2001                               2,000
  Additional paid-in capital                                                           11,994,000
  Deficit                                                                             (13,855,000)
  Stock subscriptions, including interest receivable                                     (480,000)
                                                                                     ------------

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

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

See notes to the consolidated financial statements.

                                       19
<PAGE>

<TABLE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000


<CAPTION>
                                                          2001                   2000
                                                      ------------           ------------
<S>                                                   <C>                    <C>
REVENUES:
   Membership fee income
        Worksites and consumers                       $    985,000           $    603,000
        Direct marketing                                 2,033,000                689,000
        Affinity                                           294,000                258,000
        Infomercials                                           -                  521,000
                                                      ------------           ------------
   Total membership fee income                           3,312,000              2,071,000
   Sales                                                 2,580,000                    -
                                                      ------------           ------------

        TOTAL REVENUES                                   5,892,000              2,071,000
                                                      ------------           ------------

COSTS AND OPERATING EXPENSES:
   Cost of sales                                         2,330,000                    -
   Services performed for common stock                         -                  117,000
   Compensation and employee benefits                    2,832,000              2,751,000
   Advertising and Marketing                               196,000              1,052,000
   Professional fees                                       407,000                552,000
   Office, administrative, and general                   1,480,000              1,517,000
   Legal Settlement                                        103,000                180,000
   Occupancy                                               346,000                331,000
   Depreciation and amortization                           147,000                106,000
                                                      ------------           ------------

          TOTAL COSTS AND OPERATING EXPENSES             7,841,000              6,606,000
                                                      ------------           ------------

         LOSS FROM OPERATIONS                           (1,949,000)            (4,535,000)
                                                      ------------           ------------

OTHER INCOME (EXPENSE):
   Other income                                            232,000                 81,000
   Interest expense                                       (385,000)               (65,000)
                                                      ------------           ------------

          OTHER, NET                                      (153,000)                16,000
                                                      ------------           ------------

LOSS BEFORE INCOME TAX BENEFIT                          (2,102,000)            (4,519,000)
INCOME TAX BENEFIT                                             -                      -
                                                      ------------           ------------

          NET LOSS                                    $ (2,102,000)          $ (4,519,000)
                                                      ============           ============


LOSS PER COMMON SHARE:
   Basic and Diluted                                  $      (0.11)          $      (0.24)
                                                      ============           ============

AVERAGE NUMBER OF COMMON  SHARES OUTSTANDING
   Basic and Diluted                                    19,684,694             18,717,802
                                                      ============           ============
</TABLE>

See notes to the consolidated financial statements.

                                       20
<PAGE>

<TABLE>
LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000

<CAPTION>
                                                                                                          2001             2000
                                                                                                      -----------      -----------
<S>                                                                                                   <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                                           $(2,102,000)     $(4,519,000)
   Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation and amortization                                                                       147,000          106,000
      Provision for doubtful accounts                                                                     135,000          (51,000)
      Amortization of debt discount                                                                         8,000              -
      Services performed for common stock                                                                     -            117,000
      Common stock for services performed with convertible debt issuance                                   19,000              -
      Legal settlements                                                                                   103,000          180,000
      Interest due from shareholders                                                                      (24,000)         (24,000)
      Changes in certain assets and liabilities:
        Accounts receivable                                                                               235,000         (244,000)
        Inventory                                                                                         (54,000)
        Prepaid expenses                                                                                   25,000           59,000
        Advances and other assets                                                                        (125,000)         (41,000)
        Accounts payable                                                                                  155,000          317,000
        Accrued compensation and related expenses                                                          88,000          157,000
        Accrual bonus                                                                                     595,000              -
        Interest payable                                                                                  292,000           26,000
        Accrued commissions on Series B preferred stock                                                       -            194,000
        Other accrued expenses and liabilities                                                            107,000         (402,000)
                                                                                                      -----------      -----------

         NET CASH USED IN OPERATING ACTIVITIES                                                           (396,000)      (4,125,000)
                                                                                                      -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITY:
         Purchase of property and equipment                                                              (175,000)        (300,000)
                                                                                                      -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Restricted cash                                                                                         67,000         (177,000)
   Proceeds from long-term debt                                                                           192,000           50,000
   Repayments of long-term debt and capital leases                                                       (119,000)        (262,000)
   Issuances of Series B preferred stock                                                                      -          3,040,000
   Issuances of common stock                                                                              193,000          250,000
                                                                                                      -----------      -----------

         NET CASH PROVIDED BY FINANCING ACTIVITIES                                                        333,000        2,901,000
                                                                                                      -----------      -----------

         NET DECREASE IN CASH AND CASH EQUIVALENTS                                                       (238,000)      (1,524,000)

CASH AND CASH EQUIVALENTS, beginning of year                                                              277,000        1,801,000
                                                                                                      -----------      -----------

CASH AND CASH EQUIVALENTS, end of year                                                                $    39,000      $   277,000
                                                                                                      ===========      ===========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the period for:
      Interest                                                                                        $    19,000      $    38,000
                                                                                                      ===========      ===========
      Income taxes                                                                                    $       -        $       -
                                                                                                      ===========      ===========


SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

    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
    Capital leases entered into to acquire computer equipment                                                 -            182,000
    Conversion of debt to common stock
              Long-term debt                                                                                  -             89,000
              Accrued interest payable                                                                        -             67,000
   Common stock issued as compensation to  employees and consultants
              91,572 shares of common stock                                                                   -            117,000
</TABLE>

See notes to the consolidated financial statements.

                                       21
<PAGE>

<TABLE>
               LEGAL CLUB OF AMERICA CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                   FOR THE YEARS ENDED JUNE 30, 2001 AND 2000

<CAPTION>
                                                                                                      Series A
                                                                            Common       Series A     Preferred       Series B
                                                              Common       Stock, at     Preferred    Stock, at      Preferred
                                                              Shares       par value      Shares      par value        Shares
                                                           -------------   ----------   -----------   ----------   -------------
<S>                                                        <C>             <C>          <C>           <C>          <C>
STOCKHOLDERS' EQUITY, July 1, 1999                           18,539,726    $   2,000        27,778    $       -                -

Common stock issued for the conversion
    of debt and accrued interest                                 56,553
Issuance of common stock for cash                               250,000
Issuance of common stock for services performed                  91,572
Cancellation of previously issued common stock                  (89,920)
Issuance of common stock to complete prior year debt
    conversion                                                  163,663
Accrued interest on subscription agreements
Issuance of Series B preferred stock for cash, net of
    expenses                                                                                                              12,160
Net loss
                                                           -------------   ----------   -----------   ----------   -------------

STOCKHOLDERS' DEFICIT,  June 30, 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 to Common 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
                                                           =============   ==========   ===========   ==========   =============


<CAPTION>
                                                           Series B
                                                          Preferred     Additional                        Stock          Total
                                                          Stock, at       Paid-in                      Subscriptions  Stockholders'
                                                          par value       Capital         Deficit       Receivable       Deficit
                                                         ------------   ------------   -------------   ------------   -------------
<S>                                                      <C>            <C>            <C>             <C>            <C>
STOCKHOLDERS' EQUITY, July 1, 1999                        $        -    $ 8,374,000    $ (7,234,000)    $ (433,000)   $    709,000

Common stock issued for the conversion
    of debt and accrued interest                                            156,000                                        156,000
Issuance of common stock for cash                                           250,000                                        250,000
Issuance of common stock for services performed                             117,000                                        117,000
Cancellation of previously issued common stock
Issuance of common stock to complete prior year debt
    conversion
Accrued interest on subscription agreements                                                                (23,000)        (23,000)
Issuance of Series B preferred stock for cash, net of
    expenses                                                              2,815,000                                      2,815,000
Net loss                                                                                 (4,519,000)                    (4,519,000)
                                                         ------------   ------------   -------------   ------------   -------------

STOCKHOLDERS' DEFICIT,  June 30, 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 to Common 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)
                                                         ============   ============   =============   ============   =============
</TABLE>

See notes to the consolidated financial statements.

                                       22
<PAGE>

                     LEGAL CLUB OF AMERICA AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2001 AND 2000


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 13,000 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.

During the quarter ended June 30, 2000, the Company launched Einstein Computer
Corp. ("ECC" or "Einstein"), a wholly owned subsidiary of the Company, that 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. 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.

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 generate additional resources and attain profitable operations to
enable it to continue in business. Management plans to continue obtaining
additional capital through the issuance of common stock, preferred stock and
debt pursuant to placements, and to obtain operating capital through revenue
growth. See Note 13 for activities occurring subsequent to June 30, 2001. 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. Should any of these
events not occur, the accompanying financial statement will be materially
affected.

                                       23
<PAGE>

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. The Company has escrow deposits of $110,000 as collateral on
outstanding letters of credit, which are renewed annually, relating to the
Company's office space lease and equipment leases. The escrow deposits have been
classified on the balance sheet as restricted cash.

Accounts Receivable. Accounts receivable at June 30, 2001, were comprised of
$270,000 relating to LCOA memberships and $2,284,000 relating to the sales of
personal computers, of which $1,466,000 is due after June 30, 2002. The personal
computer sales' accounts receivable are collected from employees at worksites in
monthly installments over a period of thirty-six months. The Company maintains
an allowance for doubtful accounts based on management's estimate of
uncollectible receivables.

Inventory. Carrying amounts of merchandise and materials inventories are
generally determined on a specific identification method and are carried at the
lower of cost or market

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.

Revenue Recognition and Credit Risks. Membership revenue from services provided
to employees at work-sites 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. The Company
reserves for uncollected membership fees and for certain collected membership
fees, subject to refund policy. Provision for losses are provided in the
financial statements and consistently have been within management's
expectations.

Sales revenue from computer systems is recorded upon shipment of the product to
the customer. Cost of sales is recognized based on the number of units shipped
during the period. The Company has reserved estimated losses on sales shipped
during the year ended June 30, 2001, based on management's current best
estimate. Management continues to analyze and will adjust its allowance for
doubtful accounts based on future accounts receivable collections.

Advertising and Marketing. The costs of advertising, promotion, and marketing
programs are charged to operations in the year incurred. Expenses for these
programs totaled $196,000 and $1,052,000 for the years ended June 30, 2001 and
2000, 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

                                       24
<PAGE>

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. SFAS No. 128, "Earnings Per Share" 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 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.

Stock Based Compensation. The Company has implemented SFAS No. 123, "Accounting
for Stock-Based Compensation". SFAS No. 123 encourages, but does not require,
companies to record compensation plans at fair value. The Company has chosen, in
accordance with the provision of SFAS No. 123, to account for stock based
compensation under the provisions of the Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued Employees" and to disclose the general and
pro-forma financial information required by SFAS No. 123. For transactions with
other than employees, in which services were performed in exchange for stock,
the transactions were recorded on the basis of the fair value of the services
received or the fair value of the equity instrument issued, whichever was more
readily measurable.

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

Accounting for Derivative Instruments and Hedging Activities. During fiscal year
2001, the Company adopted SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities-Deferral of FASB Statement No. 133". SFAS No. 137
deferred for one year the effective date of SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended requires that the
Company 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. As of June 30, 2001, the Company has not
entered into hedging activities nor invested in derivative securities.

Segment Reporting. The Company first implemented SFAS No. 131,"Disclosure about
Segments of an Enterprise and Related Information," during fiscal year 2001.
SFAS No. 131 establishes annual and interim reporting standards for an
enterprise's operating segments and related disclosures about its products,
services, geographic areas and major customers. Under SFAS No. 131, the
Company's operations are defined as consisting of two operating segments.

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

Recent Significant Accounting Pronouncements. In July 2001, SFAS No. 141,
"Business Combinations", SFAS No. 142, "Goodwill and Other Intangible Assets"
and SFAS No. 143, "Accounting for Asset Retirement Obligations" were issued.
SFAS No. 141 changes certain accounting methods used for business combinations.
Specifically, it requires use of the purchase method of accounting for all
business combinations initiated after June 30, 2001, thereby eliminating use of
the pooling-of-interests method. SFAS No. 142 establishes new guidance on how to
account for goodwill and intangible assets after a business combination is

                                       25
<PAGE>

completed. Among other things, it requires that goodwill and certain other
intangible assets no longer be amortized, but will now be tested for impairment
at least annually, and expensed only when impaired. This statement will apply to
existing goodwill and intangible assets, beginning with fiscal years starting
after December 15, 2001. Early adoption of the statement is permitted for
certain companies with a fiscal year beginning after March 15, 2001. 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.

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, 2001:


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

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

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 Einstein.

In September 2000, Einstein entered into agreements with Gateway to distribute
and finance computer systems manufactured by Gateway, through Einstein's
distribution channels, providing additional benefits to employees at the
worksite. Participating worksite employees pay for the computer systems through
automatic payroll deduction, over a specified period of time. Einstein's
receivables collateralize borrowings under a Note and Security agreement with
Gateway. See Note 4.


NOTE 3 - PROPERTY AND EQUIPMENT, NET

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


    Office equipment                               $195,000
    Computer equipment
                                                    193,000
    Computer software                               473,000
    Leasehold improvements                           22,000
                                                   --------
              Total cost                            883,000
    Less: Accumulated depreciation                  287,000
                                                   --------

              Property and equipment, net          $596,000
                                                   ========

                                       26
<PAGE>

Depreciation and amortization expense, which includes capital lease
amortization, totaled $146,000 and $106,000 for the years ended June 30, 2001
and 2000, respectively.

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, 2001 are included above as follows:

    Office Equipment             $ 109,000
    Computer Equipment              73,000
                                 ---------
                                   182,000
    Accumulated                     63,000
    amortization
                                 ---------
                                 $ 119,000
                                 =========


NOTE 4 - LONG-TERM OBLIGATIONS

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

   Term loans with various maturity dates through                    $127,000
   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

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

   Capital leases with terms from three to
   five years, with imputed interest rates ranging                    108,000
   from 9% to 22%

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

   Convertible notes at a stated interest
   coupon rate of 25%, due September 2001. These                      190,000
   notes are in default as of September 2001. See
   below.

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

   Term loans refinanced during 2001:
                                                                       59,000
      Payable in monthly installments of $13,561,
      including interest at a rate of 15%, through
      December 2001
                                                                 ------------
         Total long-term obligations                                3,106,000
         Less:  Current portion                                     1,352,000
                                                                 ------------

         Long-term obligations due 2003                            $1,754,000
                                                                 ============

On September 25, 2000, the Company entered into a Note and Security agreement
with Gateway to finance the purchase of computer systems by its Einstein
subsidiary. This Note matures on September 24, 2003 and bears interest at a rate
of 15.5% per annum. Payments under this Note are to be made to Gateway from the
monthly installment payments collected on Einstein'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 and has not been making these payments. Outstanding borrowings under
this agreement are collateralized by Einstein's accounts receivable and
inventory.

                                       27
<PAGE>

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 have a stated coupon rate of 25% and mature in one year, with interest due
at maturity. At maturity, the holder will have the option to convert the
outstanding balance of the principal and interest, into shares of the Company's
common stock at $0.50 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. 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 as a reduction of the Convertible Notes, with the
$10,000 being accreted to interest expense over the term of the notes. As of
September 2001, the Convertible Notes are currently in default as to principal
and interest. The Company has begun discussions to modify the debt arrangement.

The total principal amount of Term Loans 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 were refinanced during the year
ended June 30, 2001 and are presented separately under refinanced loans.

Interest expense for the years ended June 30, 2001 and 2000 totaled $385,000 and
$65,000, respectively.

Maturities of capital lease obligations subsequent to June 30, 2001 are as
follows:

             Years Ending June 30,
    ---------------------------------------
                     2002                            $ 61,000
                     2003                              46,000
                     2004                              17,000
                                                     --------
    Total minimum lease payments                      124,000
    Less amounts representing interest                 16,000
                                                     --------
    Present value of minimum lease payments          $108,000
                                                     ========


NOTE 5 - INCOME TAXES

Asummary of the provision for income taxes for the years ended June 30, 2001 and
2000 is as follows:

                                                   2001               2000
                                               -----------        -----------

    Currently payable                           $      -          $       -
    Deferred tax benefit                          (736,000)        (1,582,000)
    Less: Valuation allowance                      736,000          1,582,000

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

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

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

    Deferred tax asset:
    Available federal and state net operating loss carryover       $ 4,182,000
         Less:  Valuation allowance                                 (4,182,000)
                                                                   -----------

                                                                   $      -
                                                                   ===========

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,

                                       28
<PAGE>

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, 2001, the Company has tax net operating losses carryforwards (NOLs)
of approximately $12,166,000 expiring beginning 2011 and accordingly no income
tax provision (benefit) is recognized on the financial statements. 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, 2001 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.

During 1999, the Company amended its articles of incorporation to authorize the
1,000,000 preferred shares, and designated 40,000 of these preferred shares as
"Series A Convertible Preferred Stock" (Series A stock). During 2000, the
Company amended its articles of incorporation to designate 26,000 shares as
"Series B Convertible Preferred Stock" (Series B stock).

Common Stock

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.

During the year ended June 30, 2000, the Company issued 250,000 shares of common
stock for $250,000 cash pursuant to a Reg. D private placement offering, and
91,572 shares valued at $117,000 were issued as compensation to current and
former employees and consultants. Terms notes totaling $89,000 and accrued
interest payable on such notes of $67,000 were converted to 56,553 shares of the
Company's common stock during the year.

Conversion of Series A Convertible Preferred Stock

In March 2001, holders of 11,112 shares of Series A Convertible Preferred Stock
(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.

Convertible Debt

In September 2000, the Company raised $192,000 through a private placement of
Convertible Notes to accredited investors (see Note 4). Upon maturity, the notes
and accrued interest are convertible into common shares at $0.50 per share.
Additionally, 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

                                       29
<PAGE>

each $2.00 invested in the Convertible Notes, or 96,000 warrants, at an exercise
price of $0.25 per share. Brokers authorized by the Company, who participated in
the private placement of Convertible Notes, 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 addition to a fee of 10% of the proceeds
raised.

Series A Convertible Preferred Stock

During the year ended June 30, 1999, the Company issued a total of 27,778 shares
of its Series A stock for a cash payment of $2,500,000. In March 2001, 11,112
Series A shares were converted to common stock.

Holders of the Series A stock have the following rights and preferences and are
subject to the following terms: (1) Right to convert each share of their Series
A stock, at any time, into one hundred shares of common stock, subject to
certain adjustments; (2) are entitled to receive dividends as and if declared by
the board of directors on the common stock, and in such amount that such holders
would have received had they converted their Series A stock to common stock on
the record date; (3) have priority over the holders of the common stock in the
event of a liquidation, dissolution or winding up; and (4) The holders are
entitled to vote, as a class with the holders of the common stock, such number
of votes as they would have been entitled to had they converted their Series A
stock to common stock on the record date.

The Company has the right to redeem some or all of the Series A stock at any
time after January 31, 2002 at a price of $90 per share, plus all accrued
dividends, if any.

Series B Convertible Preferred Stock

During the year ended June 30, 2000, the Company sold 12,160 shares of the
Series B stock through a private placement offering memorandum for gross
proceeds of $3,040,000. There was approximately $225,000 of expenses and
commissions associated with the issuance.

Holders of the Series B stock have the following rights and preferences and are
subject to the following terms: (1) Right to convert each share of Series B
stock into one hundred shares of common stock; (2) to receive dividends, if
declared by the Company's Board of Directors on the common stock, (3) to vote,
in each case as if the Series B stock had been converted to common stock on the
record date, and (4) have a liquidation preference of $250 per share over the
holders of common stock, but this preference is junior to the preference of the
Company's Series A stock. All Series B stock converts to common stock in 2002,
if not previously converted by the holders.

In connection with the Series B stock offering, the Company issued warrants for
the purchase of 390,000 shares of common stock to institutional investors and
5,600 warrants were issued to brokers authorized to participate in the offering.
Brokers authorized to participate in the Series B stock offering were entitled
to receive warrants to purchase 10% of the common stock equivalent shares placed
by the broker, at a per share price equal to 125% of the price paid by the
investors in the offering, and a 10% fee. At June 30, 2001, there was $194,000
of broker fees to be paid.


NOTE 7 - STOCK OPTION PLAN AND WARRANTS

In 1997, the Company established a stock option plan (the "Plan") to issue more
qualified stock options and incentive stock options to key employees and
directors. The 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 Plan, to increase to 4,000,000, from 2,000,000, the number of authorized and
reserved shares of the Company's common stock. 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.

As required by SFAS No. 123 pro forma disclosures of 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

                                       30
<PAGE>

for these options was estimated at the date of grant using a Black-Scholes
options pricing model with the following weighted-average assumptions for 2001
and 2000: risk-free interest rate of 6% and no dividend yield for the two years;
volatility factors of the expected market price of the Company's common stock of
83% and 85%, respectively; and a weighted-average expected life of the option of
7.7 and 8.9 years, respectively. The weighted average fair values of the stock
options were $0.19 at June 30, 2001 and $0.90 at June 30, 2000.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
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, 2001 and 2000, as follows:


                                                 2001                2000
                                             ------------        ------------
    Net loss:
    As reported                              $(2,102,000)        $(4,519,000)
    Pro forma                                 (2,165,000)         (4,890,000)
    Net loss per share (basic and diluted)
    As reported                              $     (0.11)        $     (0.24)
    Pro forma                                      (0.12)              (0.26)

The pro forma amounts may not be representative of the effect on future reported
net income and earnings per share that will result from 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.

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

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

    Outstanding at June 30, 1999          577,523        $1.54
                                       ----------

          Granted                       1,353,663         1.14
          Cancelled / forfeited          (518,663)        0.56

    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
                                       ==========        =====
    Exercisable at June 30, 2001          654,189        $1.83
                                       ==========        =====

Warrants

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. The warrants have contractual lives of one to six years and the
exercise of the warrants is contingent on sales targets. These warrants were
issued with exercise prices above the fair value of the Company's common stock.

                                       31
<PAGE>

In September 2000, the Company raised capital through a private placement of
Convertible Notes to accredited investors (see 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. 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 October 2000, the Company issued a former officer and employee warrants to
purchase 200,000 shares of common stock at $0.35 per share. 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 Company also issued to investment
advisors, warrants to purchase 200,000 shares of common stock at $3.00 per
share. The warrants have a contractual live of five years and the exercise of
the warrants is contingent on sales targets. These warrants were issued with an
exercise price above the fair value of the Company's common stock.

In November 2000, the Company, issued to business partners, warrants to purchase
245,000 shares of common stock at $0.33 per share and warrants to purchase
50,000 shares of common stock at $0.25. The warrants have contractual lives of
five years and were issued with exercise prices above the fair value of the
Company's common stock.

The Company also issued warrants to purchase 50,000 shares of common stock at
$2.00 per share, during the year ended June 30, 2001, 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.

During the year ended June 30, 2000, the Company issued warrants to purchase
150,000 shares of common stock at prices varying from $2.50 to $3.00 per share,
to investment advisors. The warrants have contractual lives of two to five
years. These warrants were issued with exercise prices at or above fair value
and accordingly, no book value was assigned to them at issuance.

During the year ended June 30, 2000, the Company issued warrants to
institutional investors, and to brokers authorized to participate in the Series
B stock offering. The institutional investors were issued warrants for the
purchase of 390,000 shares of common stock at prices varying from $5.00 to
$10.00 per share. The brokers were entitled to receive 5,600 warrants to
purchase 10% of the common stock equivalent shares placed by the broker, at a
per share price equal to 125% of the price paid by the investors in the Series B
stock offering. Since these warrants were issued at exercise prices above the
price paid by investors in the Series B stock offering, no book value was
assigned to them at issuance. These warrants will expire four years from
issuance.


NOTE 8- 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, 2001 and 2000 were
$8,000 and $11,000, respectively.


NOTE 9 - NET LOSS PER COMMON SHARE

For the years ended June 30, 2001 and 2000, 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.

                                       32
<PAGE>

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:


                                        2001               2000
                                    -----------        -----------

    Common shares outstanding        20,845,594         19,011,594
    Effect of weighting              (1,160,900)          (293,792)
                                    -----------        -----------
    Weighted average common
    shares outstanding               19,684,694         18,717,802
                                    ===========        ===========

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 on net losses incurred during the years
ended June 30, 2001 and 2000, include the following:


                                                  2001            2000
                                               ----------      ----------
    Common stock options                        2,270,023       1,412,523
    Series A convertible preferred stock        1,666,600       2,777,800
    Series B convertible preferred stock        1,216,000       1,216,000
    Convertible debt                              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               -
         Other                                  1,095,000         150,000


NOTE 10 - 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
$84,000 and $60,000, respectively, at June 30, 2001 and 2000, with the balance
due from shareholders for the subscription obligation, including accrued
interest receivable, totaling $480,000 at June 30, 2001.

See Note 4 for description of term loans due shareholders. Interest expense on
the term loans was $7,000 and $10,000 for the years ended June 30, 2001 and
2000, respectively

In December 2000, the Compensation Committee 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 increases under the 2000 and 2001 employment agreements were
accrued during the period of service and are being deferred on the balance
sheet. At June 30, 2001, accrued compensation relating to the Chief Executive
Officer amounted to approximately $108,000.

In December 2000, the Compensation Committee approved, effective January 1,
2001, a new employment agreement for the Chief Financial Officer of the Company.
This new Employment Agreement has a term of three years. The increase in
compensation under the employment agreement was accrued during the period of
service and is being deferred on the balance sheet. At June 30, 2001, accrued
compensation relating to this agreement amounted to $20,000.

In December 2000, the Compensation Committee approved, effective January 1,
2001, a new employment agreement, for the Executive Vice President - Marketing
and Sales. This new Employment Agreement has a term of three years. The increase

                                       33
<PAGE>

in compensation under the employment agreement is being accrued during the
period of service and is being deferred on the balance sheet. At June 30, 2001,
accrued compensation relating to this agreement amounted to approximately
$30,000.


NOTE 11 - SEGMENT INFORMATION

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", established standards of reporting information about operating
segments in the Company's financial statements. It also established standards
for related disclosures about products and services, and geographic areas.
Operating segments are defined as components of an enterprise about which
separate financial information is available and is evaluated regularly by the
chief operating decision maker, in deciding how to allocate resources and in
assessing performance. The chief operating decision maker is the Chief Executive
Officer of the Company.

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. In the June 2000 quarter, the Company began marketing computer systems
through Einstein and sales began in fiscal year 2001. See Note 1, Organization.


                                                        Consolidated
                                 LCOA          ECC         Total
                              ------------ -------------------------
Revenues
  2001                         $3,312,000   $2,580,000   $5,892,000
  2000                          2,071,000                 2,071,000

Operating Loss
  2001                         (1,810,000)    (139,000)  (1,949,000)
  2000                         (4,517,000)     (18,000)  (4,535,000)

Segment Assets
  2001                            903,000    2,484,000    3,387,000
  2000                          1,313,000       63,000    1,376,000

Depreciation and Amortization
  2001                            119,000       28,000      147,000
  2000                            106,000                   106,000


NOTE 12 - COMMITMENTS AND CONTINGENCIES

(a) Operating Lease Commitments

At June 30, 2001, the Company had operating lease commitments of approximately
$1,490,000, including leased space for its corporate office, which lease expires
June 2006. In September 2001, the Company executed a new lease agreement
replacing the agreement in effect at June 30, 2001. The new lease agreement is
for a term of five years, with total payments under this lease of approximately
$702,000 over the term of the lease.

                                       34
<PAGE>

Future annual lease payments for non-cancelable operating leases are as follows:

     Twelve Months
    Ending June 30,
    ---------------
         2002                        $ 137,000
         2003                          135,000
         2004                          140,000
         2005                          146,000
         2006                          152,000
                                     ---------

                                     $ 710,000
                                     =========

Payments under operating lease contracts were approximately $311,000 and
$321,000 for the years ended June 30, 2001 and 2000, respectively.

(b) Letters of Credit

At June 30, 2001, the Company had letters of credit totaling $110,000, relating
to the Company's office space lease and equipment leases. The letters of credit
are collateralized by deposits held in escrow at a financial institution, and
have one-year renewable terms. Management does not expect that any claims will
be made against these financial instruments and therefore expects no material
losses to result from these off-balance-sheet instruments.

(c) Legal Proceedings

The Company filed an action styled LegalClub.com, Inc. v. Bernstein in August
                                   --------------------------------
1999 in the Broward County Circuit Court. This action involved the Company's
claims to rescind certain stock issuance's to Mr. Howard Bernstein
("Bernstein"), a former officer and employee, and claims for slander and various
filed and threatened counterclaims from Mr. Bernstein for alleged back
compensation and other matters. After preliminary proceedings in the case, the
parties entered into a stipulated settlement in April 2000. The settlement
requires payments to Mr. Bernstein of $100,000 in cash, paid in April 2000, and
$80,000 on deferred terms and imposed certain restrictions on the timing of Mr.
Bernstein's sales of Company's stock. Recently, a dispute arose regarding one of
the deferred payments, and under the terms of the settlement, Mr. Bernstein
received a default judgment for $400,000 against the Company. The default
judgement was vacated on April 5, 2001. The Settlement Stipulation entered into
between the parties requires the Company to continue to make payments to Mr.
Bernstein in the amount of $6,700 per month through December 15, 2001 and to
issue 125,000 restricted shares of Company common stock to Bernstein. The
parties each had to bear their own costs and attorney fees 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. Subsequently, the FDOI rejected both
conclusions of the Administrative Law Judge and ordered the Company to become
licensed as a legal expense insurer anyway. The Company appealed this ruling,
and a three-judge panel in 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. As a
result of the favorable ruling by the FDCA, the Company may seek to recover
certain costs and expenses incurred to defend its position. The FDOI has 15 days
from the date of the FDCA's decision to ask the FDCA to reconsider its decision,
and the FDOI may also seek discretionary review of the decision by the Florida
Supreme Court.

                                       35
<PAGE>

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 13 - SUBSEQUENT EVENTS

In September 2001, ECC entered into a new agreement with a brand name computer
manufacturer to sell their computers as an authorized agent. Under this
agreement, the finance company contracted by the computer manufacturer will
finance the employee's computer purchase by extending consumer credit directly
to the employee, as opposed to ECC's prior payroll deduction program. ECC will
sell a brand name computer manufacturer personal computers as a voluntary
benefit to employees at the worksite. Under this arrangement, the finance
company contracted by a brand name computer manufacturer will finance the
employee's computer purchase by extending consumer credit directly to the
employee, not by payroll deduction. There can be no assurance that the Company's
arrangement with the brand name computer manufacturer will achieve the market
penetration, sales volume and success that the Gateway payroll deduction plan
could have achieved.

The new agreement with a brand name computer manufacturer will change the manner
in which the Company recognizes revenues from computer sales. Presently, the
Company reflects the full purchase price of computers as revenues, and reduces
that revenue by its cost of good sold to present its gross profits. Under the
changed basis of presentation, the Company will reflect only its gross profits
(commissions) as revenues, and will not record or recognize a cost of goods
sold. Such changed method of revenue recognition, will substantially reduce the
revenues that the Company reflects from computer sales. This presentation change
will have no impact on net income recognition.

The Company' convertible debt is currently in default as to principal and
interest. The Company has begun discussions to modify the debt arrangement.

                                       36
<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, ages and positions held with respect
to each Director and Executive Officer:

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

Brett Merl...............    39       Chief Executive Officer and Chairman of
                                      the Board

Michael Samach...........    47       Chief Financial Officer

Jason Krouse.............    33       Executive Vice President of Sales and
                                      Director

Matt Cohen...............    43       Director

Richard Campanaro (1)....    59       President and Chief Operating Officer

Ronald G. Agypt (2)......    45       Director

A. Clinton Allen (3).....    58       Director


Brett Merl has served as our Chief Executive Officer and Chairman of the Board
since October 1999. From January 1999 to October 1999, he served as our
President, Chief Executive Officer and Director. From January 1997 to January
1999, he served as our 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.
("BZFI"), an insurance agency specializing in group benefits and pension
planning. BZFI is also a benefits coordinator for three South Florida credit
unions, offering financial services to credit union members and the member
corporations. Mr. Merl received a B.S. degree in Marketing from Long Island
University in 1993.

Michael Samach began serving as our Chief Financial Officer in September 1999.
From February 1999 to September 1999, he acted as an independent financial
consultant. From September 1998 to February 1999, Mr. Samach served as the Chief
Financial Officer of Equipnet, Inc., a medical network management company. From
January 1998 to August 1998, he served as the Chief Financial Officer of CHCS,
Inc., also a medical network management company. From January 1996 to November
1997, he served as the Chief Financial Officer and the Chief Operating Officer
of American Medical Healthcare, Inc., a start-up HMO. From May 1993 to January
1996, Mr. Samach served as the Finance Director of the Florida Region for
Foundation Health of Florida. Mr. Samach is a Certified Public Accountant and
holds an M.B.A. and an M.S. degree from the University of Miami. He also holds a
B.S. degree from Florida State University.

Jason Krouse has served as our Executive Vice President of Sales, since August
1998 and as a Director since December 1998. In 1997, Mr. Krouse was employed by
the law firm of Kahl and Associates and in 1996 was associated with the law firm
of Bob, Spier, Ciotelli. Mr. Krouse received a J.D. degree from Nova Southern
Shepard Broad Law Center in 1997 and received his B.S. degree in marketing from
Florida Atlantic University in 1990. Mr. Krouse sits on the board of directors
of the Mass Marketing Insurance Institute and the National Association of
Voluntary Enrollment Specialists.

                                       37
<PAGE>

Matt Cohen has served as a Director since September 1999. From July 1997 to
August 1999, Mr. Cohen served as our 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

Richard Campanaro (1) served as President and Chief Operating Officer from
October 1999 to September 2000. On September 15, 2000, Mr. Campanaro resigned
his positions as President and Chief Operating Officer.

Ronald G. Agypt (2) served as a Director and the Chairman of the Compensation
Committee since March 1999 and Chairman of the Audit Committee since November
2000. On August 8, 2001, Mr. Agypt resigned his positions as Director and
Chairman of the Compensations and Audit Committees.

A. Clinton Allen (3) served as a Director from 1998 until his resignation in
November 2000.

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 2000.


      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. Based on its review of these copies and written representations
provided by such persons to the Company, the following executive officers and
director filed late reports. Brett Merl, Chief Executive Officer filed late with
respect to the Initial Statement of Beneficial Ownership and filed late with
respect to one transaction during the year ended June 30, 2000 and three
transactions in fiscal 2001; Michael Samach, Chief Financial Officer, filed late
with respect to the Initial Statement of Beneficial Ownership and filed late
with respect to one transaction in fiscal 2001; Jason Krouse, Executive Vice
President, Sales, filed late with respect to the Initial Statement of Beneficial
Ownership and filed late with respect to one transaction in fiscal 2001 and
Matthew Cohen, Director, filed late with respect to the Initial Statement of
Beneficial Ownership and filed late with respect to one transaction in fiscal
2001 The Company has not been furnished reports by other persons who were
directors or executive officers during the year ended June 30, 2001, and
therefore it is not aware that the required reports have been filed with the SEC
in compliance with Section 16(a)


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, 2001, and Executive
Officers who received compensation of at least $100,000 during fiscal years
2001, 2000 and 1999.

See following page.

                                       38
<PAGE>

Summary Compensation Table

<TABLE>
<CAPTION>
-------------------------- ------- -------------------------------------------- ------------------------------------- -------------
                                               Annual Compensation                      Long-term Compensation
                                   -------------------------------------------- -------------------------------------
                                                                                          Awards            Payouts
                                                                                -------------------------- ----------
                                                                                Restricted     Securities
                                                                 Other Annual      Stock       Underlying    LTIP      All Other
       Name and                        Salary         Bonus      Compensation    Award(s)     Options/SARs  Payouts   Compensation
  Principal Position        Year        ($)            ($)            ($)           ($)           (#)         ($)         ($)
          (a)                (b)        (c)            (d)            (e)           (f)           (g)       (h) (1)     (i) (8)
-------------------------- ------- -------------- -------------- -------------- ------------ ------------- ---------- -------------
<S>                        <C>     <C>            <C>            <C>            <C>          <C>           <C>        <C>
Brett Merl,                2001    $ 237,500 (2)  $  245,490 (3)      $9,000          $--           --            --        $1,662
Chairman of the Board
and Chief Executive
Officer
-------------------------- ------- -------------- -------------- -------------- ------------ ------------- ---------- -------------
                           2000      186,346 (4)         --            8,942           --             --          --         2,296
-------------------------- ------- -------------- -------------- -------------- ------------ ------------- ---------- -------------
                           1999      159,038         50,000 (5)        3,000           --         82,090          --           163
-------------------------- ------- -------------- -------------- -------------- ------------ ------------- ---------- -------------
Richard Campanaro,         2001       50,539             --               --           --             --          --            --
President and Chief
Operating Officer (6)
-------------------------- ------- -------------- -------------- -------------- ------------ ------------- ---------- -------------
                           2000      123,231             --               --           --        500,000          --            --
-------------------------- ------- -------------- -------------- -------------- ------------ ------------- ---------- -------------
Michael Samach, Chief      2001      155,000 (2)    184,117 (3)        9,000           --        350,000          --            --
Financial Officer
-------------------------- ------- -------------- -------------- -------------- ------------ ------------- ---------- -------------
                           2000      100,212             --            6,346           --        300,000          --            --
-------------------------- ------- -------------- -------------- -------------- ------------ ------------- ---------- -------------
Jason Krouse, Executive    2001      148,574 (2)    128,882 (3)        7,200           --             --          --         1,494
Vice President, Sales
-------------------------- ------- -------------- -------------- -------------- ------------ ------------- ---------- -------------
                           2000       95,536          1,500            7,154           --             --          --           659
-------------------------- ------- -------------- -------------- -------------- ------------ ------------- ---------- -------------
                           1999       58,467             --            1,800           --         18,269          --            --
-------------------------- ------- -------------- -------------- -------------- ------------ ------------- ---------- -------------
Matt Cohen (7)             2001           --             --               --           --           --            --            --
-------------------------- ------- -------------- -------------- -------------- ------------ ------------- ---------- -------------
                           2000       25,385             --            2,250           --             --          --            --
-------------------------- ------- -------------- -------------- -------------- ------------ ------------- ---------- -------------
                           1999      128,077         50,000 (5)        3,000           --         67,164          --            --
-------------------------- ------- -------------- -------------- -------------- ------------ ------------- ---------- -------------

------------------
<FN>
(1)  The Company does not have a Long-term Incentive Plan.

(2)  Includes compensation for Brett Merl, Michael Samach and Jason Krouse of
     $87,500, $20,000 and $30,000, respectively due under employment agreements
     that was deferred due to insufficient working capital

(3)  Bonuses deferred due to insufficient working capital by the named
     executives in fiscal year 2001.

(4)  Includes $37,500 of compensation voluntarily deferred by the employee.

(5)  Bonuses voluntarily deferred in fiscal year 1999. Paid in fiscal year 2000.

(6)  Richard Campanaro became President and Chief Operating Officer of the
     Company in October 1999 and resigned from these positions on September 15,
     2000. None of Mr. Campanaro's options were exercised and all of them were
     cancelled upon termination. In connection with his severance arrangements,
     however, Mr. Campanaro received warrants to purchase 200,000 shares of
     common stock exercisable at any time within five years from the date of
     grant at an exercise price of $0.35 a share.

(7)  Matt Cohen was the Company's Chief Financial Officer until September 1999.
     He has been on the Board of Directors since 1997 and began serving as a
     member of the Audit and Compensation Committees in November 2000.

(8)  Amounts contributed to the account of the named executive under the
     Company's 401(k) Plan.
</FN>
</TABLE>

                                       39
<PAGE>

Option Grants in Last Fiscal Year

<TABLE>
<CAPTION>
--------------------------------- ---------------------------------------------------------------------
                                                           Individual Grants
                                  ---------------------------------------------------------------------
                                    Number of      % of Total
                                    Securities      Options
              Name                  Underlying     Granted to
                                     Options       Employees          Exercise of
                                     Granted       in Fiscal           Base Price     Expiration Date
                                  --------------    Year (1)            ($/Sh.)             (2)
                                    # (1) (3)
--------------------------------- --------------- ------------- --- ----------------- -----------------
<S>                               <C>             <C>               <C>               <C>
Brett Merl                           350,000             23.5             $ 0.31               10/31/10
--------------------------------- --------------- ------------- --- ----------------- -----------------

Michael Samach                       350,000             23.5               0.31               10/31/10
--------------------------------- --------------- ------------- --- ----------------- -----------------

Jason Krouse                         350,000             23.5               0.31               10/31/10
--------------------------------- --------------- ------------- --- ----------------- -----------------

------------------
<FN>
(1)  Percentages are based upon the total number of options of the Company's
     common stock granted during the fiscal year ended June 30, 2001.

(2)  The options have a ten-year vesting term and vest cumulatively over three
     years at the rate of 33.3%, 66.6% and 100%, beginning 10/1/01.
</FN>
</TABLE>

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

<TABLE>
<CAPTION>
--------------------------- -------------------- -------------- ---------- ------------------------ -------------------------
                                                                            Number of Securities      Value of Unexperied
                                                                           Underlying Unexercised   In-the-Money Options at
                                                                           Options at Year-End (#)      Year-End ($) (1)
--------------------------- -------------------- -------------- ---------- ------------------------ -------------------------
           Name               Shares Acquired        Value                      Exercisable/              Exercisable/
                                    on             Realized                     Unexercisable            Unexercisable
                                 Exercise             ($)
                                    (#)
--------------------------- -------------------- -------------- ---------- ------------------------ -------------------------
<S>                         <C>                  <C>                       <C>                      <C>
Brett Merl                         --                   --                    82,090 / 350,000             $0 / $0
--------------------------- -------------------- -------------- ---------- ------------------------ -------------------------

Richard Campanaro (2)              --                   --                           --                    $0 / $0
--------------------------- -------------------- -------------- ---------- ------------------------ -------------------------

Michael Samach                     --                   --                    200,000 / 450,000            $0 / $0
--------------------------- -------------------- -------------- ---------- ------------------------ -------------------------

Jason Krouse                       --                   --                    18,269 / 350,000             $0 / $0
--------------------------- -------------------- -------------- ---------- ------------------------ -------------------------

Matt Cohen                         --                   --                       67,164 / 0                $0 / $0
--------------------------- -------------------- -------------- ---------- ------------------------ -------------------------

------------------
<FN>

At June 30. 2001, none of the above options were in the money

(1)  These year-end values represent the difference between (a) the fair market
     value of the Company's common stock underlying the options at June 30, 2001
     (bid price of $0.13) 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,
     2001.

(2)  Mr. Campanaro resigned as President and Chief Operating Officer of the
     Company on September 15, 2000. None of Mr. Campanaro's options were
     exercised and all of them were cancelled upon termination. In connection
     with his severance arrangements, however, Mr. Campanaro received warrants
     to purchase 200,000 shares of common stock exercisable at any time within
     five years from the date of grant at an exercise price of $0.35 a share.
</FN>
</TABLE>


Item 11.    Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of August 31, 2001, 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.

                                       40
<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>
Brett Merl, Chairman, Chief Executive Officer and      2,043,555 shares common stock                         7.5%
Director

Michael Samach, Chief Financial Officer                200,000 shares of common stock                        0.7%

Jason Krouse, Executive Vice President, Sales          600,519 shares common stock                           2.2%

Matt Cohen, Director                                   92,164 shares common stock                            0.3%

All  Executive  Officers and Directors as a group 4    2,936,238 shares common stock                        10.8%
persons)

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

Storie Partners L.P.                                   16,667 shares of Series A Convertible                 6.5%
c/o Howard, Rice, Newmerovski, Canady, Falk &          Preferred Stock (3)
Rabkin
Three Embarcadero, 7th Floor,                          1,000 shares of Series B Convertible
San Francisco, CA  94111-4065                          Preferred Stock (3)
Bulldog  Capital Management                            10,000 shares of Series B Convertible                 5.1%
33 N. Garden Ave., Suite 750                           Preferred Stock (4)
Clearwater, FL  33755
                                                       390,000 warrants to purchase Common
                                                       Stock (4)

--------------------------------------------------------------------------------
<FN>
(1)     Includes the amount of shares 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)     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 10.6% of the fully diluted common stock.

(4)     Holding consists of 10,000 shares of Series B Convertible Preferred
        Stock, which are convertible into 1,000,000 shares of common stock; and
        390,000 warrants to purchase Common Stock. If the Series B preferred
        stock is converted and the warrants are exercised, these shares would
        represent 5.9% of the fully diluted common stock.
</FN>
</TABLE>

Executive Employment Agreements

The Company entered into an Employment Agreement with Brett Merl, effective as
of July 1, 1997, engaging him to serve as our Chief Executive Officer. The
Employment Agreement had a term of three years, with an initial annual base
salary of $125,000. In December 2000, an amendment to the employment agreement
was approved by the Compensation Committee, effective January 1, 2001, to
reflect Mr. Merl's greater responsibilities given the Company's expanded
business activities. This new Employment Agreement Amendment has a term of three
years, with an initial annual base salary of $250,000.

The Company entered into an Employment Agreement with Richard Campanaro,
effective as of October 18, 1999, engaging him to serve as our President and
Chief Operating Officer. The Employment Agreement had a term of one year, with
an initial annual base salary of $180,000. On September 15, 2000, Mr. Campanaro

                                       41
<PAGE>

resigned his position as President and Chief Operating Officer of the Company.
In connection with his severance from the Company, Mr. Campanaro received
warrants to purchase 200,000 shares of common stock exercisable for 5 years from
the date of grant at $.35 a share.

The Company entered into an Employment Agreement with Michael Samach, effective
as of September 17, 1999, engaging him to serve as our Chief Financial Officer.
This Employment Agreement had a term of three years, with an initial annual base
salary of $135,000. In December 2000, the Compensation Committee approved,
effective January 1, 2001, a new employment agreement for Mr. Samach. This new
Employment Agreement has a term of three years, with an initial base salary of
$175,000.

The Company entered into an Employment Agreement with Jason Krouse dated
December 12, 1997, engaging him to serve as our Vice President of Sales. This
Employment Agreement had a term of five years, with an initial annual base
salary of $55,000 per year. In December 2000, the Compensation Committee
approved, effective January 1, 2001, a new employment agreement for Mr. Krouse.
This new Employment Agreement has a term of three years, with an initial base
salary of $150,000.


Item 12.    Certain Relationships and Related Transactions

Brett Merl and Jason Krouse subscribed for and were issued our Common Stock in
exchange for promissory notes with an annual interest rate of 6%. Mr. Merl's
promisory note is for $264,000 and Mr. Krouse's is for $132,000. The notes,
together with the interest accrued thereon, are due December 26, 2003.

Jason 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, 2001, $37,000 was outstanding on the loan.

The Company entered into a Consulting Agreement effective February 16, 1999 with
A.C. Allen & Company, an affiliate of A. Clinton Allen, one of our directors.
Pursuant to this Consulting Agreement, A.C. Allen & Company received
compensation in the amount of $4,000 per month in exchange for providing
business-consulting services. During the year ended June 30, 2000, the Company
accrued consulting fees totaling $20,000 payable to A.C. Allen & Company. This
contract was cancelled upon Mr. Allen's resignation on November 20, 2001.

                                       42
<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)    Marketing Agreement - MicronPC

10(b)    Amendment to Employment Agreement for Brett Merl, dated as of December
         2000, is filed herein.

10(c)    Employment Agreement for Michael Samach, Effective as of January 1,
         2001, is filed herein.

10(d)    Employment Agreement for Jason Krouse, effective as of January 1, 2001,
         is filed herein.

10(e)    Agreement with Forum Marketing, incorporated by reference to the
         Company's Form 10-KSB for the year ended June 30, 2000, September 28,
         2000.

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

10(g)    Lease Agreement, September 2001 with ACP Office I LLC, is included
         herein

10(h)    Lease dated June 8, 1999 with ACP Office I LLC, incorporated by
         reference to the Company's Form 10-SB filed November 18, 1999.

11      Statement re Computation of Per Share Earnings is incorporated by
        reference to Part I., Item 7. Financial Statements, Note 9, Net Loss per
        Share.

21       Subsidiaries of the Registrant is filed herein.

(b) Reports on Form 8-K

There were no reports on Form 8-K filed during the quarter ended June 30, 2001.
On July 19, 2001, the Company filed Form 8-K to report that on July 13, 2001,
Einstein Computer Corp. filed suit against Gateway, Inc., in California Federal
Court claiming damages in excess of $200 million.

                                       43
<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:  October 5, 2001                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:  October 5, 2001                By: /s/ Brett Merl
                                           ------------------------------------
                                           Brett Merl
                                           Chairman and Chief Executive Officer


Dated:  October 5, 2001                By: /s/ Michael Samach
                                           ------------------------------------
                                           Michael Samach, Chief Financial
                                           Officer


Dated:  October 5, 2001                By: /s/ Elvie Lamar Weber
                                           ------------------------------------
                                           Elvie Lamar Weber, Controller
                                           (Chief Accounting Officer)


Dated:  October 5, 2001                By: /s/ Jason Krouse
                                           ------------------------------------
                                           Jason Krouse
                                           Executive Vice President and Director


Dated:  October 5, 2001                By: /s/ Matt Cohen
                                           ------------------------------------
                                           Matt Cohen, Director

                                       44
<PAGE>

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

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

    10(a)     Marketing Agreement MicronPC

    10(b)     Amendment to Employment Agreement for Brett Merl dated December
              2000

    10(c)     Employment Agreement for Michael Samach effective as of January 1,
              2001

    10(d)     Employment Agreement for Jason Krouse effective as of January 1,
              2001

    10(g)     Lease Agreement September 2001

    21        Subsidiaries of Registrant


                                       45