<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MAY 31, 2001

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

           FOR THE TRANSITION PERIOD FROM _________ TO ______________

                        COMMISSION FILE NUMBER 001-15591

                            PREMIER CLASSIC ART INC.
                ------------------------------------------------
             (Exact name of registrant as specified in its charter)

         DELAWARE                                              22-3680581
----------------------------                              ----------------------
(State or Other Jurisdiction                                 (I.R.S.Employer
      Incorporation                                       or Identification No.)
    of Organization)

                1158 STAFFLER ROAD, BRIDGEWATER, NEW JERSEY 08807
                                 (908) 526-7388
             ------------------------------------------------------
             (Address and telephone number, including area code, of
                    registrant's principal executive office)

         Securities registered pursuant to Section 12(b) of the Act: NONE

         Securities registered pursuant to Section 12(g) of the Act: COMMON
         STOCK, $.001 PAR VALUE

         Indicate by check mark whether the Registrant(1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

         Aggregate market value of voting stock held by non-affiliates as of
August 21, 2001 was approximately $3,200,110 (based upon the closing sales price
of those shares reported on the National Association of Securities Dealers
Bulletin Board for that day).

         Number of shares of Common Stock outstanding as of August 30, 2001:
8,648,946.

         DOCUMENTS INCORPORATED BY REFERENCE: NONE


<PAGE>


                            PREMIER CLASSIC ART INC.

                                      INDEX

Part I
                                                                            Page
                                                                            ----
         Item 1.  Business                                                     1

         Item 2.  Properties                                                   4

         Item 3.  Legal Proceedings                                            4

         Item 4.  Submission of Matters to Vote of
                  Security Holders                                             5

Part II

         Item 5.  Market for Registrant's Common Equity
                  and Related Stockholders Matters                             5

         Item 6.  Management's Discussion and Analysis
                  of Financial Condition and Results
                  of Operations                                                7

         Item 7.  Financial Statements                                         8

         Item 8.  Changes in and Disagreements with
                  Accountants on Accounting and
                  Financial Disclosure                                         9


Part III

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

         Item 10. Executive Compensation                                      10

         Item 11. Security Ownership of Certain Beneficial
                  Owners and Management                                       10

         Item 12. Certain Relationships and
                  Related Transactions                                        11
 Part IV

         Item 13. Exhibits and Reports on Form 8-K                            11

         Signatures                                                           13


         * Page F-1 follows page 8.

<PAGE>

PART I

         All statements contained herein that are not historical facts,
including, but not limited to, statements regarding anticipated growth,
revenues, gross margins and earnings, statements regarding the Company's current
business strategy, the Company's projected sources and uses of cash, and the
Company's expectations, are forward-looking statements in nature and involve a
number of risks and uncertainties. Actual results may differ materially. Among
the factors that could cause results to differ materially are the following: the
availability of sufficient capital to finance the Company's business plans on
terms satisfactory to the Company; changes in marketing distribution, and
capital costs; future acquisitions or strategic partnerships; general business
and economic conditions; and other factors described from time to time in the
Company's reports filed with the Securities and Exchange Commission. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements. These statements are made pursuant to the Private
Securities Litigation Reform Act of 1995 and, as such, speak only as of the date
made.


ITEM 1.  BUSINESS

General Development of Business

         Premier Classic Art, Inc. (the "Company") was incorporated as Pet-Con
Industries, Inc. in the State of Delaware on June 14, 1991. The Company
previously manufactured recyclable containers and bottles for sale to private
grocery product manufacturers and food packers. The Company discontinued these
operations in June 1995 and had no operating activities from then until
September 1999.

         On September 2, 1999, the Company hired Charles Trapp as its President
and a director and issued 1,158,845 shares of its common stock. At the same
time, Louis A. Pistilli joined the Company as a director and the Company's
former president resigned. Mr. Pistilli was issued 75,000 shares of the
Company's common stock.

         On September 2, 1999, the Company purchased all of the outstanding
shares of stock of Cool Classic Incorporated, a Nevada corporation, in exchange
for 3,069,788 shares of the Company's common stock. Cool Classic Incorporated is
the owner of approximately 400,000 original, hand-painted animation production
cels, which the Company is attempting to market.


                                        1

<PAGE>

Description of Business

         The Company acquired all of the outstanding stock of Cool Classic
Incorporated with its collection of 400,000 animation production cels. The
Company intends to market these cels to the public through its website as well
as through art galleries, department type stores, other retail outlets and
catalogues.

         Pursuant to a Sub-Lease and Assembly Agreement, dated as of September
1999, by and between the Company and Royal Animated Art, Inc., a California
corporation ("Royal"), the Company stores its collection of cels in a warehouse
leased by Royal from a third party. In addition, Royal has agreed to provide
services such as cleaning, sorting, cataloguing, matching with backgrounds,
matting and framing (as requested by the Company) as well as generally preparing
the cels for market. The Company is to pay Royal $1,000 per month for the
warehouse space as well as out of pocket costs for labor and materials plus 15%
of such costs of an estimate of Royal's overhead allocable to the Company's
products for the services rendered to the Company.

         In addition to the marketing and sale of its own collection of cels,
the Company has entered into a Distribution Agreement, dated September 2, 1999,
with Royal. The agreement is for a three year term, subject to renewal. As part
of the agreement, Royal has granted to the Company the non-exclusive right to
purchase and market reproductions of certain animation and comic strip images
and characters, including animation art and comic strip lithographs, which Royal
has or acquires reproduction rights. These rights are subject to any
restrictions or limitations contained in agreements pursuant to which Royal
acquired its rights and to the approval of how many reproductions of each
particular piece of artwork should be sold to the Company. The Company is
required to pay Royal a percentage of Royal's suggested retail price, depending
on whether the Company sells directly to the ultimate consumer (50%) or to
wholesalers, distributors, retailers and/or other middlemen (25%).

         On March 8, 2001, the Company signed an agreement for sale of 80,000
pieces of cel art for 40,000 shares of the buyers Series B Convertible Preferred
Stock, $100 par value. The preferred stock has an 8% cumulative dividend payable
quarterly in cash or in kind at option of the Company and during the first two
years after closing, the stock shall convert into common stock at a 20% discount
and after two year convertible into common stock at 80% of average closing
price. It will cost the Company approximately $250,000 to prepare the cels for
sale. The Company retained a Certified Financial Analyst to render an opinion on
the value of its ownership of 40,000 shares of the buyers Series B Convertible
Preferred Stock. Based on the financial analyst findings, the Company valued the
investment at approximately $750,000. As of May 31, 2001, the Company shipped
10,550 (13%) of the 80,000 cels and recorded the investment of $98,906 (13% of
$750,000), which is included in other assets on the Company's balance sheet.

         The Company is currently seeking an acquisition or merger with an
operating company.


                                       2
<PAGE>

Animation Cels

         The term "cel" is used to describe the basic component of most types of
animation art. In its strictest sense, a cel is a plastic sheet, either
cellulose nitrate or cellulose acetate, on which animated characters are
painted. In practice, the term cel has come to mean that plastic sheet in
combination with the outline and coloring of a character, object or special
effect. Outlines can be either hand-inked or Xerographically transferred to the
sheet of plastic. Those outlines are then filled with color, either by
hand-painting or a serigraphic process, to complete the cel.

         The Company's cel collection includes a combination of 12 field cels
(approximately 12" x 10" in size) and pan cels (approximately 36" x 10" in
size). The cels are selected from and were used in the production of Real
Ghostbusters/Slimer, Ewoks (Star Wars), He-Man, Masters of the Universe, She-Ra
Princess of Power, Bravestar, Flash Gordon, Shelly Duvall's Bedtime Stories,
Beethoven, Back to the Future and others.

Original Production Cels

         These cels are hand-painted and have actually been used in the making
of animated films, They can have either Xerographed or hand-inked outlines and
are hand-painted at the studio. Each animation film is made of thousands of
individual hand-painted cels. They are filmed in sequence to create the illusion
of motion. Many original production cels have been either lost or destroyed
through the years, which enhances their value as collectible art. In addition
each cel is a one-of-a-kind piece of art, and this rarity also enhances its
value. Because they were created to make an actual cartoon, each cel is a
component part of a larger movement. Different cels from the same scene may be
more or less desirable depending on a variety of factors such as size, profile,
and expression of the character, any damage to inking or paint and overall
visual appearance.

The Making of Cels

         The Company does not produce its own cels. However, an understanding of
the production process is helpful toward an understanding of the nature of the
cels and their collectibility.

         For production cels, the process begins when a storyboard is created by
a talented animator, who, with the film director, determines the extent of the
background to be shown, the size of the characters and props to be used in each
scene. The animator makes a sketch from what will become each of approximately
16 frames per foot of film. Next, an outlined ink drawing is made of each of the
sketches. This outline is on a sheet of clear celluloid acetate. Each and every
inked outline is turned over to a painter and, by hand, the brilliant colors
applied with special paints. Once each cel is hand painted and the foregrounds
and backgrounds are complete, the artwork is ready for photography. Using a
multiplane camera, the foreground, animation plane and the background are
meticulously arranged and photographed.


                                       3
<PAGE>


Industry and Competition

         The Company believes that collecting of animation production cels is a
rapidly expanding pastime with more and more people every day discovering the
enjoyment and appreciating the hand-craftsmanship of these timeless works of
art. The Company is aware of two major distributors of animation cels, The Walt
Disney Co. (through its Walt Disney Art Classics division) and Time Warner, Inc.
(through its Warner Bros. division) in addition to several distributors of
lesser stature. These distributors have significantly greater resources than the
Company. In addition, many collectors and distributors of cels have established
a presence on the Internet.

Sales and Marketing

         Commencing January 11, 2000, the Company opened a website at
www.premierclassicart.com through which it offers for sale a selection of its
animated cels. The Company receives orders from its website, all of which are
paid by credit card. Each order is filled by am employee of the Company and
shipped by regular mail or overnight courier. The Company has chosen IMC On-line
as its internet service provider. It subscribes to this service on a quarterly
basis at a rate of $315 per quarter. The Company is also attempting to market
its cels through art galleries, department stores, other retail outlets and
catalogues. The Company has no existing agreement with any such gallery or
store.

Seasonality

         The Company's management believes that the demand for animation cels is
not subject to seasonal fluctuations.

Employees

         The Company currently employs one executive and, if its revenue
increases, expects that it will require one to three additional employees.


ITEM 2.  PROPERTIES

         On September 1, 1999, the Company entered into a Sublease and Assembly
Agreement with Royal Animated Art, Inc. of California. The agreement provides
for the Company to pay Royal Animated Art, Inc. $1,000 per month for the use of
space in a warehouse facility in order to store the Company's collection of
cels. The agreement also provides for services to be performed by Royal in
connection with the cels and payment by the Company of Royal's costs in
connection with such services plus 15% of its overhead costs.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is not party to any material pending legal proceedings.


                                       4
<PAGE>

         However, the Company is currently in default on a note for $375,000 due
September 3, 2001 and is in arrears four months interest totaling approximately
$13,000. The note is collateralized by 200,000 pieces of the Company's cel art
inventory. The note holder is a director of the Company and the Company has on
going negotiations to extend the due date and resolve the past due interest.
There is no assurance that the Company will be able to secure an extension and
cure the default. It is possible that the lender will foreclose on its
collateral and bring an action on the note.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of the Company's shareholders
during the forth quarter of the year ending May 31, 2001.

PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)      Market Information

         The Company's securities trade are traded in the over-the-counter
market "pink sheets". The Company's trading symbol is "PMCL". Over-the-counter
market quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commissions and may not represent actual transactions. The following sets
forth the range of high and low bid information for the quarterly periods as
reported on America Online:

                                                High           Low
               Year Ended May 31, 2000
                           1st Quarter              0              0
                           2nd Quarter              0              0
                           3rd Quarter              6 1/2          0
                           4th Quarter              5            0.5

               Year Ended May 31, 2001
                           1st Quarter           2.00           0.45
                           2nd Quarter         0.3125          0.125
                           3rd Quarter           1.22         0.1875
                           4th Quarter           0.25         0.0625


                                       5
<PAGE>

         The Company has 8,648,946 shares of common stock outstanding, but, of
these shares, only 2,369,514 shares are freely tradable. All of the remaining
shares of common stock are considered "restricted securities" and in the future,
may be sold only in compliance with Rule 144 or in an exempt transaction under
the Securities Act of 1933 (the "Act") unless registered under the Act.

Recent Sales of Unregistered Securities

         The following paragraphs set forth certain information with respect to
all securities sold by the Company within the past year without registration
under the Securities Act of 1933, as amended (the "Securities Act"). The
information includes the names of the purchasers, the date of issuance, the
title and number of securities sold and the consideration received by the
Company for the issuance of these shares.

         In September 1999, the Company issued to Charles F. Trapp 1,158,845
shares of common stock at $.001 per share in exchange for services rendered.

         In September 1999, the Company issued to Mr. Louis Pistilli 125,000
shares in the aggregate (75,000 at $.001 per share for services rendered and
50,000 at $.10 per share pursuant to a 504 offering.

         In September 1999, the Company issued 3,069,788 shares of common stock
to Joe Cool Collectibles, Inc. in exchange for all the outstanding stock of Cool
Classics, Inc.

         In September 1999, the Company sold 2,250,000 shares of common stock at
$0.10 per share in connection with the Company's 504 financing.

         In March 2001, the Company issued 1,000,000 shares of common stock at
$0.20 per share in exchange for consulting services rendered.

(b)      Holders

         As of August 30, 2001, the number of holders of record of common stock,
excluding the number of beneficial owners whose securities are held in street
name was approximately 368.

(c)      Dividend Policy

         The Company is prohibited from paying cash dividends on the common
stock until the preferred stock is converted into common stock or all preferred
dividends in arrears are brought current.

         However, even assuming its obligation on its preferred stock are
satisfied, the Company does not anticipate paying any cash dividends on its
common stock in the foreseeable future and it intends to retain its earnings to
finance the expansion of its business. Thereafter, the declaration of dividends
will be determined by the Board of Directors in light of conditions then
existing, including, without limitation, the Company's financial condition,
capital requirements and business condition.


                                       6
<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

Liquidity and Capital Resources

         The Company does not have adequate cash reserves to meet its future
cash requirements. The Company is seeking to raise additional working capital
through debt or equity financing. The Company's ability to continue as a going
concern will depend upon successful completion of such financing and on its
ability to market its inventory. The Company does not expect to have to purchase
any property or equipment over the next year that cannot be financed in the
ordinary course of business.

         On September 3, 1999, the Company issued a $775,000 principle 10 1/2%
convertible note due September 3, 2000 (the "Note"). Interest is payable monthly
in arrears from September 1999, commencing in December 1999. The Note is
convertible into 250,000 shares of the Company's common stock, at $3.10 per
share. The Note automatically converts if the closing bid of the common stock is
greater than or equal to $5.50 per share for twenty consecutive trading days. In
connection with the execution of this Note, the Company sold the holder 100,000
shares of the Company's common stock for $.001 per share (which was below fair
market value) and issued him a warrant to purchase 400,000 shares of the
Company's common stock at $1.00 per share. The Note is collateralized with
200,000 of the Company's cels. On August 18, 2000, the Company signed an
extension agreement to extend the due date until September 3, 2001 (the
"Extension Agreement"). Under this agreement, the Company was required to pay a
reduction in principal of the Note by $300,000 on or before September 3, 2000
and $100,000 on or before October 3, 2000. The Company made the $400,000 of
principal payments.

         During the year ended May 31, 2001, the Company issued $658,700 of 12%
convertible notes. The note is convertible into common stock at $0.125 per
share. Interest on the note was paid with additional notes. Proceeds from this
financing was used to reduce the $775,000 note due September 3, 2000 by $400,000
and the balance for accounts payable and operating expenses. The Company is
currently in default on the balance of the note of $375,000 which matured
September 3, 2001.

Plan of Operation

         The Company plans to continue marketing and selling its collection of
cels over the internet and through art galleries department stores, other retail
outlets and catalogues. The Company currently has no agreement with any such
entity. The Company anticipates that it will take more than five years for it to
liquidate the collection so as to maximize its value and to take advantage of
opportunities to sell pieces when possible. The Company has received only
limited revenues from sales of its cels to date. Royal, in accordance with its
agreement with the Company provides the necessary artistic staff to process and
prepare its cels for presentation to the public. The Company has 2,000 cels
ready for presentation and distribution.


                                       7
<PAGE>


Year Ended May 31, 2001 compared to May 31, 2000

Sales

Sales decreased from $135,200 for the year ended May 31, 2000 to $100,598 for
the year ended May 31, 2001. The Company attributes the decrease to the
Company's inability to market its inventory to the general public.

Cost of Sales

Cost of sales increased from $20,259 for the year ended May 31, 2000 to $57,887
for the year ended May 31, 2001. The Company attributes the increase to the
reasons described above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased from $1,079,854 for the
year ended May 31, 2000 to $699,128 for the year ended May 31, 2001. The Company
attributes the decrease primarily to acquisition fees, legal and accounting fees
in connection with the filings by the Company with the Securities and Exchange
Commission in 2000.

Interest Expense

Interest expense increased from $272,798 for the year ended May 31, 2000 to
$536,278 for the year ended May 31, 2001. The increase is primarily attributed
to non-cash interest in connection with the issuance of warrants relating to the
convertible notes.

Loss on Sale of Marketable Securities

Loss on sale of marketable securities increased from $-0- for the year ended May
31, 2000 to $44,619 for the year ended May 31, 2001. The Company attributes the
increase to the exchange of its shares of marketable securities for shares of
another marketable security owned by a shareholder.


ITEM 7.  FINANCIAL STATEMENTS


                                       8
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
Premier Classic Art, Inc.


We have audited the accompanying consolidated balance sheets of Premier Classic
Art, Inc.(the "Company") as of May 31, 2001, and 2000, and the related
consolidated statements of operations, stockholders' deficiency, and cash flows
for each of the three years in the period ended May 31, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, such financial statements referred to above present fairly, in
all material respects, the financial position of Premier Classic Art, Inc. and
its subsidiary at May 31, 2001 and 2000 and the results of their operations and
their cash flows for each of the years in the period ended May 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.



                                      F-1
<PAGE>



The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As more fully explained in Note 1 of Notes to
consolidated Financial Statements, the Company needs to obtain additional
financing and sell its inventory to liquidate its debts and support the
Company's overhead. The Company is currently in default of the $375,000 note
payable which was due September 3, 2001. These uncertainties raise substantial
doubt about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.



WIENER, GOODMAN & COMPANY, P.C.
Certified Public Accountants
Eatontown, New Jersey


September 7, 2001



                                      F-2

<PAGE>

                     PREMIER CLASSIC ART, INC. & SUBSIDIARY
                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>

                                    ASSETS
                                                                     May 31, 2001                   May 31, 2000
                                                                    -------------                   ------------
<S>                                                                  <C>                            <C>
Current Assets:

     Cash                                                            $     7,150                    $    28,408
     Marketable securities                                                    --                          2,188
     Inventories                                                         258,865                        295,297
     Prepaid expenses - current                                          166,667                        166,666
                                                                     -----------                    -----------
         Total Current Assets                                            432,682                        492,559

Marketable securities                                                     98,906                             --
Other assets                                                              41,666                        208,334
                                                                     -----------                    -----------
         TOTAL ASSETS                                                $   573,254                    $   700,893
                                                                     ===========                    ===========

               LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:

     Short-term debt                                                 $   375,000                    $   775,000
     Convertible notes payable                                           658,700                             --
     Accrued expenses                                                    306,307                        189,001
                                                                     -----------                    -----------
         Total Current Liabilities                                     1,340,007                        964,001
                                                                     -----------                    -----------

Commitments and Contingencies

Stockholders' Deficiency:
     Series A cumulative convertible
         preferred stock - 8% cumulative,
         par value $.002 per share, authorized
         10,000,000 shares; outstanding
         136,000 and 136,000 shares                                          272                            272
     Common stock - par value $.001 per share,
         authorized 50,000,000 shares; outstanding
         8,648,946 and 7,648,946 shares                                    8,649                          7,649
     Additional paid-in capital                                        2,658,373                      1,970,323
     Deficit                                                          (3,434,047)                    (2,196,733)
     Cumulative other comprehensive(loss)                                     --                        (44,619)
                                                                     -----------                    -----------
         Total Stockholders' Deficiency                                 (766,753)                      (263,108)
                                                                     -----------                    -----------

         TOTAL LIABILITIES AND
            STOCKHOLDERS' DEFICIENCY                                 $   573,254                    $   700,893
                                                                     ===========                    ===========


</TABLE>

                       See notes to financial statements

                                      F-3

<PAGE>

                     PREMIER CLASSIC ART, INC. & SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                           Year Ended
                                                            May 31,
                                          ---------------------------------------------
                                              2001             2000             1999
                                          -----------      -----------      -----------
<S>                                       <C>              <C>              <C>
Sales                                     $   100,598      $   135,200      $        --
                                          -----------      -----------      -----------

Cost and Expenses:
      Cost of sales                            57,887           20,259               --
      Selling, general
       and administrative                     699,128        1,079,854               --
                                          -----------      -----------      -----------
                                              757,015        1,100,113               --
                                          -----------      -----------      -----------

Loss from operations                         (656,417)        (964,913)              --

Interest expense - net                        536,278          272,798           23,400
Loss on sale of marketable securities          44,619
                                          -----------      -----------      -----------
      Total other expenses                    580,897          272,798           23,400
                                          -----------      -----------      -----------

Loss before income tax provision
       and extraordinary gain              (1,237,314)      (1,237,711)         (23,400)

Income tax benefit                                 --         (127,000)              --
                                          -----------      -----------      -----------

Loss before extraordinary gain             (1,237,314)      (1,110,711)         (23,400)

Extraordinary gain on
      extinguishment of debt (net
      of income tax of $127,000)                   --          246,974               --
                                          -----------      -----------      -----------

Net (loss)                                $(1,237,314)     $  (863,737)     $   (23,400)
                                          ===========      ===========      ===========

Net (loss) per common
      share-basic and diluted             $     (0.16)     $     (0.20)     $     (0.31)

Extraordinary gain on
      extinguishment of debt                       --             0.04               --
                                          -----------      -----------      -----------

Net (loss) per common
      share-basic and diluted             $     (0.16)     $     (0.16)     $     (0.31)
                                          ===========      ===========      ===========

Weighted average of common
      shares outstanding - basic
      and diluted                           7,816,069        5,549,875           75,410
                                          ===========      ===========      ===========

</TABLE>

                       See notes to financial statements

                                      F-4

<PAGE>

                     PREMIER CLASSIC ART, INC. & SUBSIDIARY
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

<TABLE>
<CAPTION>

                                                                                                                 Series A
                                                                                            Net unrealized   Preferred Stock
                                                                                              (loss) on     ------------------
                                                              Comprehensive                   marketable       Shares        Par
                                                    Total         (loss)        Deficit       Securities    Outstanding     Value
                                                 -----------   -------------   ---------    --------------  -----------     ------
<S>                                              <C>           <C>              <C>         <C>            <C>           <C>
Balance June 1, 1997                             $ (456,871)                  $ (1,286,196)     $     --       256,800      $  514
     Retroactive effect of 1-for-50
      reverse stock split effective
      September 1, 1999
     Net (loss)                                     (23,400)                       (23,400)

                                                 -----------   -------------  -------------     --------       -------      ------
Balance, May 31, 1998                              (480,271)                    (1,309,596)                    256,800         514
     Capitalized debt                                88,630                             --                          --
     Net (loss)                                     (23,400)                       (23,400)                         --

                                                 -----------   -------------  -------------     --------      --------      ------
Balance, May 31, 1999                              (415,041)                    (1,332,996)                    256,800         514
     Sale of common stock (at $.12
      per share)                                     15,000
     Issuance of stock to repay
      accounts payable (valued at
      $.10  per share)                                   93
     Issuance of stock to repay debt
      and accrued interest (valued at
      $.10 per share)                                   236
     Conversion of preferred stock
      to common stock                                    --                                                    (40,000)        (80)
     Capitalized debt                                38,319
     Issuance of common stock for
      services (valued at $.10 per share)           209,362
     Issuance of common stock in
      connection with acquisition
      (valued at $.10 per share)                    306,879
     Issuance of stock warrants for
      services and in connection with
      financing                                     260,000
     Issuance of common stock for
      services (valued at $.10 per share)             1,400
     Sale of common stock (at $.10 per
      share)                                        223,600
     Conversion of preferred stock
      to common stock                                                                                          (64,000)       (128)
     Issuance of common stock to repay
      debt and accrued interest (valued
      at $.10 per share)                                400
     Conversion of preferred stock to
      common stock                                        -                                                    (16,800)        (34)
     Issuance of common stock for
      services (valued at $5.00 per share)            5,000
     Net unrealized loss on marketable
      securities                                    (44,619)   $    (44,619)                     (44,619)
     Net (loss)                                    (863,737)       (863,737)      (863,737)
                                                               -------------
     Comprehensive loss                                        $   (908,356)
                                                 -----------   =============  -------------     --------      --------      ------
Balance, May 31, 2000                              (263,108)                    (2,196,733)      (44,619)      136,000         272
     Contribution of capital                         28,750
     Issuance of common stock for services
       (valued at $.20 per share)                   200,000
     Issuance of stock warrants in
         connection with convertible notes          326,300
     Issuance of stock warrants for
         services in connection with financing      134,000
     Realized loss                                   44,619    $     44,619                       44,619
     Net (loss)                                  (1,237,314)     (1,237,314)    (1,237,314)            -             -           -
                                                               -------------
     Comprehensive loss                                        $ (1,192,695)
                                                 -----------   =============  -------------     --------      --------      ------
Balance, May 31, 2001                            $ (766,753)                  $ (3,434,047)     $     --       136,000      $  272
                                                 ===========                  =============     ========      ========      ======
</TABLE>



<TABLE>
<CAPTION>

                                                             Common Stock
                                                        ------------------------
                                                                                    Additional
                                                           Shares         Par         Paid-In
                                                        Outstanding      Value         Capital
                                                       -------------   ----------   -------------
<S>                                                    <C>             <C>          <C>
Balance June 1, 1997                                      3,770,521    $   3,770    $    825,041
     Retroactive effect of 1-for-50
      reverse stock split effective
      September 1, 1999                                  (3,695,111)      (3,695)          3,695
     Net (loss)

                                                       -------------   ----------   -------------
Balance, May 31, 1998                                        75,410           75         828,736
     Capitalized debt                                            --                       88,630
     Net (loss)                                                  --                           --

                                                       -------------   ----------   -------------
Balance, May 31, 1999                                        75,410           75         917,366
     Sale of common stock (at $.12
      per share)                                            124,590          125          14,875
     Issuance of stock to repay
      accounts payable (valued at
      $.10  per share)                                          925            1              92
     Issuance of stock to repay debt
      and accrued interest (valued at
      $.10 per share)                                         2,360            2             234
     Conversion of preferred stock
      to common stock                                         9,000            9              71
     Capitalized debt                                                                     38,319
     Issuance of common stock for
      services (valued at $.10 per share)                 2,093,618        2,094         207,268
     Issuance of common stock in
      connection with acquisition
      (valued at $.10 per share)                          3,069,788        3,070         303,809
     Issuance of stock warrants for
      services and in connection with
      financing                                                                          260,000
     Issuance of common stock for
      services (valued at $.10 per share)                    14,000           14           1,386
     Sale of common stock (at $.10 per
      share)                                              2,236,000        2,236         221,364
     Conversion of preferred stock
      to common stock                                        14,475           14             114
     Issuance of common stock to repay
      debt and accrued interest (valued
      at $.10 per share)                                      4,000            4             396
     Conversion of preferred stock to
      common stock                                            3,780            4              30
     Issuance of common stock for
      services (valued at $5.00 per share)                    1,000            1           4,999
     Net unrealized loss on marketable
      securities
     Net (loss)

     Comprehensive loss

                                                       -------------   ----------   -------------
Balance, May 31, 2000                                     7,648,946        7,649       1,970,323
     Contribution of capital                                                              28,750
     Issuance of common stock for services
       (valued at $.20 per share)                         1,000,000        1,000         199,000
     Issuance of stock warrants in
         connection with convertible notes                                               326,300
     Issuance of stock warrants for
         services in connection with financing                                           134,000
     Realized loss
     Net (loss)                                                  --           --              --

     Comprehensive loss

                                                       -------------   ----------   -------------
Balance, May 31, 2001                                     8,648,946    $    8,649   $   2,658,373
                                                       =============   ==========   =============
</TABLE>

                       See notes to financial statements.


                                      F-5
<PAGE>

                   PREMIER CLASSIC ART, INC. & SUBSIDIARY
                    CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                                Year Ended
                                                                                                 May 31,
                                                                              ---------------------------------------------
                                                                                  2001             2000             1999
                                                                              -----------      -----------      -----------
<S>                                                                           <C>              <C>              <C>
Cash flows from operating activities:
     Net (loss)                                                               $(1,237,314)     $  (863,737)     $   (23,400)

        Adjustments to reconcile net (loss) to cash provided by operating
         activities:
           Depreciation and amortization                                              --             3,387
           Extraordinary gain on extinguishment of debt                               --          (373,974)
           Non-cash interest expense                                              326,300               --               --
           Non-cash compensation expense                                          200,000          215,762
           Other non-cash items                                                   134,000          260,000
           Loss on sale of marketable securities                                   44,619
           Non-cash sales                                                         (98,906)              --               --
        Changes in operating assets and liabilities:
           Decrease (increase) in prepaid expenses and other assets               166,667         (375,000)
           Decrease in inventories                                                 36,432           11,682               --
           Increase in accrued expenses                                           119,494          187,995           23,400
                                                                              -----------      -----------      -----------

           Net Cash Used in Operating Activities                                 (308,708)        (933,885)              --
                                                                              -----------      -----------      -----------

Cash flows from investing activities:
     Purchase of marketable securities                                                 --          (46,807)              --
     Sale of marketable securities                                                 28,750               --               --
                                                                              -----------      -----------      -----------

           Net Cash Provided by (Used in) Investing Activities                     28,750          (46,807)              --
                                                                              -----------      -----------      -----------

Cash flows from financing activities:
     Proceeds from sale of common stock                                                --          238,600               --
     Proceeds from short term borrowings                                          658,700          775,000               --
     Payments of short term borrowings                                           (400,000)          (4,500)              --
                                                                              -----------      -----------      -----------

           Net Cash Provided by Financing
            Activities                                                            258,700        1,009,100               --
                                                                              -----------      -----------      -----------

Net (decrease) increase in cash                                                   (21,258)          28,408               --

Cash - beginning of year                                                           28,408               --               --
                                                                              -----------      -----------      -----------

Cash - end of year                                                            $     7,150      $    28,408      $        --
                                                                              ===========      ===========      ===========

Supplemental disclosure of non-cash financing activities:
     Capital contribution to forgive debt                                     $        --      $    38,319      $    88,630
                                                                              ===========      ===========      ===========

Non-cash investing activities:
     Unrealized loss on marketable
      securities                                                              $   (44,649)     $    44,619
                                                                              ===========      ===========

     Common stock issued for inventory                                        $        --      $   306,979
                                                                              ===========      ===========
     Common stock issued for debt                                             $   200,000      $       729
                                                                              ===========      ===========
</TABLE>


                       See notes to financial statements.


                                      F-6
<PAGE>

                     PREMIER CLASSIC ART, INC. & SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Organization

         Premier Classic Art, Inc. and it's subsidiary (the "Company") formerly
         Pet-Con Industries, Inc. discontinued operations in June 1995. On
         September 1, 1999 the Company changed its name and is currently engaged
         in the marketing of original, hand-painted production animation cels
         through a variety of outlets throughout the United States.

         Basis of Presentation

         The accompanying consolidated financial statements have been prepared
         on a going concern basis, which contemplates the realization of assets
         and the satisfaction of liabilities in the normal course of business.

         The Company's operating activities have commenced under new management.

         The Company's ability to continue as a going concern is dependant upon
         its ability to obtain needed working capital through additional equity
         and/or debt financing and its ability to market its inventory.
         Management is actively seeking additional capital to liquidate its
         current obligations. There is no assurance that additional capital will
         be obtained or the Company will be able to sell its current inventory.
         The Company's $375,000 note payable which was due on September 3, 2001
         is currently in default. The Company does not have adequate cash
         reserves to fulfill this obligation and there is no assurance that the
         terms of a new agreement can be met. These uncertainties raise
         substantial doubt about the ability of the Company to continue as a
         going concern.

         During the year ended May 31, 2001, the Company issued $658,700 of 12%
         convertible promissory notes which are due the earlier of 180 days from
         the date of the note or upon completion of an equity financing. The
         Company is currently paying a 3% penalty per month for each note which
         is over 180 days old. As of May 31, 2001, $575,000 of the convertible
         notes were assessed the 3% per month penalty in the amount of $43,100
         which is included in interest expense.

         On March 8, 2001, the Company signed an agreement for the sale of
         80,000 pieces of cel art for 40,000 shares of the buyer's Series B
         Convertible Preferred Stock, $100 par value. The preferred stock has an
         8% cumulative dividend payable quarterly in cash or in kind at the
         option of the Company and during the first two years after closing, the
         preferred stock shall convert into common stock at a 20% discount and
         after two years convertible into common stock at 80% of average
         closing price. It will cost the Company approximately $250,000 to
         prepare the cels for sale.

         The Company retained a certified financial analyst to render an opinion
         on the value of its ownership of the 40,000 shares of the buyers Series
         B Convertible Preferred Stock. Based on the financial analyst findings,
         the Company valued the investment at approximately $750,000. As of May
         31, 2001, the Company shipped 10,550 (13%) of the 80,000 cels and
         recorded the investment of $98,906 (13% of $750,000)


                                       F-7

<PAGE>


         The financial statements do not include any adjustments relative to the
         recoverability and classification of recorded asset amounts and
         classification of liabilities that might be necessary should the
         Company be unable to continue as a going concern.

         Principles of Consolidation

         The consolidated financial statements include the accounts of the
         Company and its wholly-owned subsidiary. All intercompany transactions
         and balances have been eliminated.

         Use of Estimates

         The preparation of the financial statements in conformity with
         generally accepted accounting principles requires management to make
         estimates and assumptions that affect the reported amounts of assets
         and liabilities and 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.

         Marketable Securities

         The Company classifies its investment in equity securities as
         "available for sale", and accordingly, reflects unrealized losses, net
         of deferred taxes, as a separate component of stockholders'
         (deficiency).

         The fair values of marketable securities are estimated based on quoted
         market prices. Realized gains or losses from the sales of marketable
         securities are based on the specific identification method.

         The fair value of the preferred stock owned by the Company has been
         determined by a certified financial analyst. The preferred stock is
         included as a non-current asset on the Company's balance sheet.

         Concentration of Credit Risk

         Sales to one major customer accounted for approximately 98% of the net
         sales for the year ended May 31, 2001.

         Reverse Stock Split

         Effective September 1, 1999 the Board of Directors approved a
         one-for-fifty reverse stock split of its common stock. All references
         in the accompanying financial statements to the number of shares and
         per share amounts have been retroactively restated to reflect this
         transaction.

         Prepaid Expenses

         Prepaid expenses consist primarily of a three year consulting agreement
         expiring September 2, 2002 in the amount of $500,000 which was paid in
         cash by the Company in September 1999. Consulting expense charged to
         operations for the years ended May 31, 2001, 2000 and 1999 were
         $166,666, $125,000 and $-0-, respectively.

                                       F-8

<PAGE>

         Evaluation of Long-lived Assets

         Long-lived assets are assessed for recoverability on an ongoing basis.
         In evaluating the fair value and future benefits of long-lived assets
         their carrying value would be reduced by the excess, if any, of the
         long-lived asset over management's estimate of the anticipated
         discounted future net cash flows of the related long-lived asset. As of
         May 31, 2001, management concluded that no impairment exists.

         Inventories

         Inventories, consisting of animated cels are stated at the lower of
         cost (first-in, first-out) or market.

         Revenue Recognition

         Revenue is recognized upon shipment of merchandise after the price to
         the buyer is fixed and determinable and title passes to customers and
         collectibility of the sales price is reasonably assured. The Company
         sold inventory for stock and valued the revenue on a pro-rata basis
         based on the value of the stock received as determined by a Certified
         Financial Analyst hired by the Company.

         Stock-Based Compensation

         The Company has adopted the disclosure-only provisions of Statement of
         Financial Accounting Standards No. 123, "Accounting for Stock-Based
         Compensation". The standard encourages, but does not require, companies
         to recognize compensation expense for grants of stock, stock options
         and other equity instruments to employees based on fair value.

         Earnings Per Common Share

         In February 1997, the Financial Accounting Standards Board issued
         Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
         per Share", which requires companies to present basic earnings per
         share ("EPS") and diluted earnings per share instead of the primary and
         fully diluted EPS that was required. The new standard requires
         additional information disclosures and also makes certain modifications
         to the currently applicable EPS calculations defined in Accounting
         Principles Board No. 15.

         Basic and diluted loss per common share is computed by dividing net
         loss by the weighted average number of common shares outstanding during
         the year. Diluted earnings per common share are computed by dividing
         net earnings by the weighted average number of common and potential
         common shares during the year. Potential common shares are excluded
         from the loss per share calculation, because the effect would be
         antidilutive. Potential common shares relate to the preferred stock
         that is convertible into common stock, convertible debt and outstanding
         warrants. The number of potential common shares outstanding were
         24,992,010, 947,946, and 59,064 as of May 31, 2001, 2000, and 1999
         respectively.


                                       F-9

<PAGE>

         Fair Value of Financial Instruments

         At May 31, 2001, the fair values of cash, other current assets,
         accounts payable, short-term debt, accrued interest and other accrued
         liabilities approximated their carrying values because of the
         short-term nature of these instruments.

         New Financial Standards

         Statement of Financial Accounting Standards ("SFAS") No. 133,
         Accounting for Derivative Instruments and Hedging Activities, is
         effective for all fiscal years beginning after June 15, 2000. SFAS 133,
         as amended, establishes accounting and reporting standards for
         derivative instruments, including certain derivative instruments
         embedded in other contracts, and for hedging activities. Under SFAS
         133, certain contracts that were no formerly considered derivatives may
         now meet the definition of a derivative. The Company adopted SFAS 133
         effective January 1, 2001. Management has concluded that the adoption
         of SFAS 133 will not have a significant impact on the financial
         position, results of operations, or cash flows of the Company.

         In December 1999, the Securities and Exchange Commission ("SEC") issued
         Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in
         Financial Statements. SAB 101 summarizes certain of the SEC's views in
         applying generally accepted accounting principles to revenue
         recognition in financial statements. The Company adopted the provisions
         of SAB 101 during the fourth quarter ended December 31, 2000. Such
         adoption has not resulted in a material impact on the Company's
         consolidated results of operations, financial position or cash flows.

         In March 2000, the Financial Accounting Standards Board ("FASB") issued
         Interpretation No. 44 (FIN No. 44), Accounting for Certain Transactions
         Involving Stock Compensation, an interpretation of APB25. Fin No. 44
         clarifies (i) the definition of employees for purposes of applying APB
         Opinion No. 25, (ii) the criteria for determine whether a plan
         qualifies as a noncompensatory plan, (iii) the accounting consequences
         of various modifications to the terms of a previously fixed stock
         option or \award, and (iv) the accounting for an exchange of stock
         compensation awards in a business combination. FIN No. 44 was effective
         July 1, 2000. This standard has not had a significant impact on the
         Company's consolidated results of operations, financial position or
         cash flow.

2.       ACQUISITION

         On September 3, 1999, the Company acquired Cool Classic, Inc., a
         subsidiary of Joe Cool Collectibles, Inc. for 3,069,788 shares of the
         Company's common stock. Cool Classic, Inc. owned inventory of original,
         hand-painted production animation cels.

         The acquired inventory was accounted for as a non-monetary transaction
         in accordance with Accounting Principles Board Opinion No. 29,
         "Accounting for Non-Monetary Transactions" (APB No. 29). The Company
         recorded the inventory valued at $306,979, which represents the fair
         value ($.10 per share) of the stock issued to acquire Cool Classic,
         Inc. Pursuant to the agreement the acquired inventory will consist of
         400,000 original, hand-painted production animation cels. Cool Classic,
         Inc. had no operating results but was a collector of animated art cels
         and, accordingly, the Company has not included any proforma unaudited
         results of operations.

                                      F-10

<PAGE>

3.       MARKETABLE SECURITIES

<TABLE>
<CAPTION>
                                                                    Gross            Gross
                                                 Estimated        Unrealized       Unrealized
                                   Cost          Fair Value        Gains            Losses
                                ---------       ------------    -------------   ---------------
<S>                             <C>             <C>             <C>             <C>
May 31, 2000:
  Marketable securities-
   current:
   Common stock                   46,807           2,188                --          44,619
                                  ======          ======          ========          ======

May 31, 2001:
  Marketable securities-
   non-current:
   Preferred Stock                98,906          98,906                --              --
                                  ======          ======          ========          ======

</TABLE>

         There were no realized gains or losses for the years ended May 31,
         2000.

         On June 13, 2000 the Company exchanged 17,500 shares of marketable
         securities owned by the Company for 5,000 shares of other marketable
         securities owned by a shareholder. The Company recorded a realized loss
         of $-0- and $44,619 for the year ended May 31, 2000 and May 31, 2001,
         respectively, in connection with the exchange. The Company sold the
         5,000 shares received from the shareholder on the exchange date and
         recorded a contribution of capital by the shareholder in the amount of
         $28,750.

         On March 8, 2001 the Company signed an agreement for sale of 80,000
         pieces of cel art for 40,000 shares of the buyers Series B Convertible
         Preferred Stock, $100 par value. The preferred stock has an 8%
         cumulative dividend payable quarterly in cash or in kind at option of
         the Company and during the first two years after closing, the stock
         shall convert into common stock at a 20% discount and after two year
         convertible into common stock at 80% of average closing price. It will
         cost the Company approximately $250,000 to prepare the cels for sale.

         The Company retained a financial analyst to render an opinion on the
         value of its ownership of the 40,000 shares of the buyers Series B
         Convertible Preferred Stock. Based on the financial analyst findings,
         the Company valued the investment at approximately $750,000. As of May
         31, 2001, the Company shipped 10,550 (13%) of the 80,000 cels and
         recorded the investment of $98,906 (13% of $750,000).

4.       INVENTORY

         The Company's inventory consists of approximately 380,000 original,
         hand-painted production animation cels of which 200,000 cels are
         secured as collateral for the Company's short term debt (see note 6)
         and the balance are secured as collateral for the Company's convertible
         debt.


                                      F-11

<PAGE>

5.       DEBT

         Short-term debt consists of the following:

(a)      On September 3, 1999, the Company issued a $775,000, 10 1/2 %
         convertible note to a related party (a Director of the Company) due
         September 3, 2000. Interest is payable monthly, commencing December
         1999 and payable in arrears from September 1999. The Company is in
         arrears four months on the payment of interest totaling approximately
         $13,000.

         On August 18, 2000, the Company signed an agreement to extend the due
         date until September 3, 2001. Under this agreement, the Company paid
         the required principal amount of $300,000 on September 3, 2000 and paid
         an additional $100,000 on November 3, 2000. The Company is currently in
         default on the balance of the note of, $375,000 which was due on
         September 3, 2001.

         The note is convertible into 250,000 shares of the Company's common
         stock, at the option of the holder, at a conversion price of $3.10 per
         share. The automatic conversion provision has been terminated. The
         Company paid $48,148 and $56,460 in interest on this note for the year
         ended May 31, 2000 and 2001, respectively. In connection with the
         execution of this note, the Company sold the holder 100,000 shares of
         the Company's restricted common stock for $.001 per share (which was
         below fair market value) and a warrant to purchase 400,000 shares of
         the Company's common stock at an exercise price of $1.00 per share
         (which was above fair market value). The Company recorded additional
         consulting expense of $284,000 which will be amortized over the one
         year term of the agreement and an additional $189,333 interest expense
         which will be amortized over the three year term of the note as a
         result of this transaction. The Company is currently four months
         delinquent in interest payments and is in default of this note. The
         Company is in negotiations for an extension on this note.

         The holder of this note received a first priority security in the
         Company's inventory and an insurance policy in the amount of $1.5
         million, naming the holder as an additional insurer.

(b)      During the year ended May 31, 2001 the Company issued $658,700 of 12%
         convertible promissory notes which are due the earlier of 180 days from
         the date of the note or upon completion of an equity financing. In
         connection with the notes, the Company issued 6,011,016 A and
         12,022,033 B warrants to purchase the Company's common stock at $.125
         per share exercisable immediately expiring in September 2002. The Notes
         are secured by the assets of the Company and are subordinated to the
         $375,000 note. In connection with the notes, a registration rights
         agreement was signed which includes a mandatory registration clause
         whereas if the Company does not file a registration agreement with the
         SEC within 180 days from the date of the note, on the first day
         thereafter and each 30 day period thereafter the Company will pay a
         monthly penalty of 3% of the outstanding units. The penalty is payable
         in additional units until such a time as the shares underlying the note
         and warrants are eligible to be sold. The Company accrued $92,677 of
         interest expense for the year ended May 31, 2001. The notes and
         warrants are convertible into 24,044,066 shares of common stock at
         $.125 per share. The fair market value of the stock was not readily
         determinable at the time of issuance. Interest is payable monthly in
         arrears which the Company has the option to pay in cash or in
         additional units of the Company's common stock. This resulted in an
         additional $1,337,800 interest expense which will be amortized over the
         term of the agreement.


                                      F-12

<PAGE>

6.    STOCK OPTIONS AND WARRANTS

      The Company has adopted the disclosure only provisions of Statement of
      Financial Accounting Standards No. 123 "Accounting for Stock-Based
      Compensation". In September 1999, the Company issued three-year warrants,
      which expire September 2002, to purchase 666,666 shares of Common Stock at
      an exercise price of $1.00 per share (which was above fair market value)
      in connection with the execution of a consulting agreement and convertible
      note. This resulted in an additional $284,000 consulting expense which
      will be amortized over the one year term of the agreement, and an
      additional $189,333 interest expense which will be amortized over the
      three year term of the convertible note. In August 2000, the Company
      issued warrants to purchase 18,033,049 shares of Common Stock at an
      exercise price of $0.125 per share in connection with the execution of
      convertible promissory notes. The fair market value of the Company's stock
      was not readily determinable at the time of issuance. The warrants expire
      in September 2002. This resulted in an additional $1,337,800 interest
      expense which will be amortized over the term of the agreement.

      The fair value of warrants are estimated on the date of grant using the
      Black-Scholes option pricing method with the following weighted average
      assumptions issued for grants in the year ending May 31, 2001 and 2000,
      respectively: dividend yield of -0-% and -0-%, expected volatility of 1%
      and 1%, risk free interest rate of 7% and 7% and expected lives of
      forty-one months and one to three years.

      Information regarding the Company's warrants for the years ended May
      31, 2000 and 2001 is as follows:

<TABLE>
<CAPTION>
                                              May 31, 2001                        May 31, 2000
                                  -----------------------------------   --------------------------------
                                                     Weighted Average                  Weighted Average
                                       Shares         Exercise Price      Shares        Exercise Price
                                  ---------------   -----------------   ----------     -----------------
<S>                               <C>               <C>                 <C>            <C>
Warrants outstanding
 beginning of period                    666,666          $  1.00              --          $    --
Warrants exercised                           --          $    --              --          $    --
Warrants granted                     18,033,049          $ 0.125         666,666          $  1.00
Warrants cancelled                           --          $    --              --          $    --
                                     ----------          -------         -------          -------
Warrants outstanding,
 end of period                       18,699,715          $  0.28         666,666          $  1.00
                                     ==========          =======         =======          =======

Warrants price range
 end of period                                      $0.125-$1.00                         $  1.00

Weighted-average fair value
 of warrants granted during
 the year                                                $  0.07                         $  0.71

</TABLE>


                                      F-13

<PAGE>

         The following table summarizes information about fixed-price stock
         options outstanding at May 31, 2001:

<TABLE>
<CAPTION>

                                           Weighted Average         Weighted          Number         Weighted
   Range of        Number Outstanding    Remaining Contractual   Average Exercise  Exercisable at     Average
Exercise Prices      at May 31, 2001          Life                   Price          May 31, 2001   Exercise Price
------------------------------------------------------------------------------------------------------------------
<S>                <C>                   <C>                     <C>              <C>              <C>
 $0.125 - $1.00       18,699,715             3 years                $ 0.28          18,699,715       $.0.28

</TABLE>

7.       STOCK BASED COMPENSATION

         On September 1, 1999, the Company issued 2,093,618 shares of common
         stock for consulting services rendered. The Company valued these shares
         at fair market value and recorded additional compensation expense of
         $213,653 which is included in selling general and administrative costs
         in the Statement of Operations for the year ended May 31, 2000.

         In May 2001, the Company issued 1,000,000 shares of common stock for
         consulting services rendered. The Company valued these shares at $.20
         per share and recorded consulting expense of $200,000 which is included
         in SG&A in the Statement of Operations for the year ended May 31, 2001.
         The fair market value of the Company's stock was not readily
         determinable at the time of issuance.

8.       INCOME TAXES

         The Company has a net operating loss ("NOL") carryforward of
         approximately $3,434,000 expiring in various years through 2014. The
         Company has not reflected any benefit of such NOL carryforward in the
         accompanying financial statements in accordance with Financial
         Accounting Standards Board Statement No. 109 "Accounting for Income
         Taxes" (SFAS 109) as the realization of this deferred tax benefit is
         not more than likely.

         The Tax Reform Act of 1986 provided for a limitation on the life of NOL
         carryforwards, following certain ownership changes. As a result of
         transactions in the Company's common stock during the year ended May
         31, 2000, a change in ownership of greater than 50%, as defined, has
         occurred. Under such circumstances, the potential benefits from
         utilization of tax carryforwards may be substantially limited or
         reduced on an annual basis.

         There is no provision for income taxes for the years ended May 31, 2001
         and 2000, as the Company had net losses.


                                      F-14

<PAGE>

         The tax effect of the net operating loss carryforward on deferred
         income taxes at May 31, 2001 and 2000 was as follows:

<TABLE>
<CAPTION>
                                      May 31,                          May 31,
                                      2001                              2000
                           ----------------------------      ----------------------------
                            Temporary                                          Temporary
                           Difference        Tax Effect       Difference      Tax Effect
                           -----------      -----------      -----------      -----------
<S>                        <C>              <C>              <C>              <C>
Net operating loss         $ 3,434,000      $ 1,374,000      $ 2,197,000      $   879,000
Unrealized loss on
 marketable securities              --               --           45,000           18,000
Valuation allowance         (3,434,000)      (1,374,000)      (2,242,000)        (897,000)
                           -----------      -----------      -----------      -----------
                           $        --      $        --      $        --      $        --
                           -----------      -----------      -----------      -----------

</TABLE>


9.       EXTRAORDINARY GAINS

         During August 1999, the Company issued 2,108,618 common shares to
         extinguish various long-term debt and accrued interest. In connection
         with these transactions the Company recorded an extraordinary gain of
         approximately $246,974, net of tax $127,000 for the year ended May 31,
         2000.


10.      RELATED PARTY TRANSACTIONS

         (a)      In September 1999, the Company issued to the secretary and
                  director of the Company 75,000 shares for services rendered
                  valued at $7,500 and 50,000 shares purchased for $5,000
                  pursuant to a 504 offering.

         (b)      In September 1999, the Company issued 1,158,845 shares of
                  common stock to a consultant of the Company who subsequently
                  become CEO/President of the Company for services rendered
                  valued at $115,885.

         (c)      A related party purchased 1,000 cels at $30 per cel for the
                  year ended May 31, 2001.

         (d)      During the year ended May 31, 2001, a related party was sold
                  for $600,000 12% convertible promissory notes as described in
                  Note 5.

11.      PENSION PLAN

         The Company has a 401-k Retirement Plan that matches employee
         contributions up to 7% of payroll. The Company contributed $1,347,
         $3,150 and $-0- to the 401-k plan for the years ended May 31, 2001,
         2000 and 1999, respectively.

12.      SHAREHOLDERS' EQUITY

         Preferred Stock

         The Company has 136,000 shares of 8% cumulative convertible preferred
         stock (the Preferred Shares) outstanding. Holders of the Preferred
         Shares are entitled to receive cumulative cash dividends at the annual
         rate of $0.20 per share payable quarterly when and if declared by the
         Board of Directors. The Company has not declared a dividend since
         issuance.


                                      F-15

<PAGE>

         The Preferred Shares are convertible, in whole or in part, at the
         option of the holders thereof, into .2222 shares of common stock.

         The Preferred Shares rank senior to the common stock. The Preferred
         Shares have a liquidation preference of $2.50 per share plus all
         declared and undeclared dividends which total $204,365 at May 31, 2001.

         In August 1999, the shareholders approved a 1 for 50 reverse stock
         split of this common stock which had the effect of reducing the
         conversion feature of the Preferred Stock from 11.25 shares of common
         to .2222 shares of common stock.

13.      COMMITMENTS AND CONTINGENCIES

         Leases

         On September 3, 1999, the Company signed a sublease and assembly
         agreement with a warehouse facility. The sublease requires the Company
         to pay certain utility and related charges.

         Rent expense for the years ended May 31, 2001, 2000 and 1999 was
         $12,000, $8,000 and $-0-, respectively.

         The assembly agreement requires the Company to pay actual labor and
         material costs plus 15% of those costs to assemble the cels. The
         agreement also requires the Company to pay actual labor, material and
         shipping costs plus 15% of those costs to ship the cels. All costs are
         expensed as incurred.

         Distribution Agreement

         On September 3, 1999, the Company signed a three-year distribution
         agreement with an option to extend it for an additional two years. The
         distribution agreement requires the Company to pay a fee of 50% of the
         distributors retail price when the distributor sells directly to the
         ultimate consumer and 25% when sold to wholesalers. No sales have been
         made under this Agreement.



                                      F-16

<PAGE>


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURES

         Not applicable.

PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS; PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         The following table and biographical outlines set forth the directors,
positions and officers within the Company privately held by each executive
officer of the Company and a brief account of the business experience of each
such director and officer for the past five years.


    Name                        Age             Company Position
-------------------------    ------------    --------------------------
Charles F. Trapp                 52          Chairman, Chief Executive
                                               Officer and President
Louis A. Pistilli                46          Director
Giltner Stevens                  54          Director


         Charles F. Trapp is a Certified Public Accountant and has served as the
Company's Chairman, Chief Executive Officer and President since September 1999.
Prior to that time, he was President of Somerset Kensington Capital Co. Inc., a
Company involved in financial restructuring and turnaround management. Mr. Trapp
was Vice President of Finance for A.W. Computer Systems, Inc. from September
1996 to February 1999. A.W. filed Chapter 11 in May 1998 and converted to
Chapter 7 in February 1999.

         Louis A. Pistilli is a Certified Public Accountant and has been the
Secretary and a director of the Company since September 1999. He has been the
managing partner of the accounting firm of Pistilli & Company LLC since January
1999. From January 1990 to December 1998, Mr. Pistilli served as managing
partner of the accounting firm of Pistilli & Company.

         Giltner Stevens has been a director of the Company since July, 2000. He
now serves as a corporate director for several companies and is a Director of
Arvest Bank of Joplin, Missouri. Since 1977, he served as the President and
Chief Executive Officer of the Brady Stevens Company, which specialized in
residential re-sales, as well as commercial, industrial real estate and property
management. He received a B.S. in business administration from the University of
Missouri. He has served as the Chairman of the Joplin Chamber of Commerce and as
President of the Joplin Business Industrial Development Authority.



                                        9


<PAGE>

ITEM 10.          EXECUTIVE COMPENSATION

         The following sets forth, for the fiscal years ended May 31, 2001, 2000
and 1999, the annual and long-term compensation paid or accrued of the Company's
named officers.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                                Long-Term
                                                                                           Compensation Awards
                                                                                               Securities
      Name and                                                        Annual Compensation      Underlying
 Principal Position       Year         Salary       Bonus     Other     Options/SARS (#)      Compensation
---------------------  ----------  ------------- ---------- --------- -------------------- -------------------
<S>                    <C>         <C>           <C>        <C>       <C>                  <C>
Charles Trapp             2001*        $ 60,000        $ -       $ -
President, Chairman       2000         $ 45,000
of the Board, Chief       1999
Executive Officer
</TABLE>

* Does not include $1,347 in 2001 and $3,150 in 2000 contributed by the Company
  to the 401(k) plan for Charles Trapp. Salary of $55,000 is accrued as of May
  31, 2001.



ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth the name and address of each officer and
director of the Company and each person who owns beneficially more than five
percent of the Common Stock of the Company, and the number of shares owned by
each such person and by all officers and directors as a group.

<TABLE>
<CAPTION>

          Name and Address of                     Amount and Nature
           Beneficial Owner                          of Ownership             Approximate % of Class
----------------------------------------     ----------------------------     ----------------------
<S>                                          <C>                               <C>
Charles Trapp, Chairman,
  Chief Executive Officer
  and President                                       1,158,845                      13.40%
Louis Pistilli, Secretary
  and Director                                          125,000                        1.4
Joe Cool Collectables, Inc.                           3,069,788                       35.5
Giltner Stephens (1)                                    833,268                        9.6
Herman Rush (2)                                         266,667                        3.1
Directors and Officers as
 a Group                                              2,283,845                       26.4
</TABLE>

(1)  Includes 120,968 shares underlying a convertible note, 312,300 shares of
     common stock and warrants to purchase 400,000 shares of common stock at
     $1.00 per share which expire in September 2002.
(2)  Includes an option to purchase 266,667 shares at $1.00 per share which
     expires in September 2002.


                                       10

<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Mr. Herman Rush, who owns an option to purchase 266,667 shares of the
Company's issued and outstanding common stock at $1.00 per share which expires
September 2002, is the President of Royal Animated Art, Inc. The Company has
entered into a Sub-Lease and Assembly Agreement, as well as a Distribution
Agreement, with Royal Animated Art, Inc.

         On September 2, 1999, the Company acquired the assets, consisting of
inventory or original, hand-painted production animation cels, of Cool Classic,
Inc., a subsidiary of Joe Cool Collectibles, Inc. for 3,069,788 shares of the
Company's common stock.

         Mr. Giltner Stephens owns 350,000 shares of the Company's common stock,
a warrant to purchase 400,000 shares at $1.00 per share which expires in
September 2002 and a one year $775,000 convertible note due September 2, 2002
convertible into 250,000 shares at $3.10 per share.

         In September 1999, the Company issued to Mr. Louis Pistilli 125,000
shares (75,000 at $.001 per share for services rendered and 50,000 at $.10 per
share).

         In September 1999, the Company issued to Charles F. Trapp 1,158,845
shares of common stock at $.001 per share in exchange for services rendered.

         Charles F. Trapp has purchased 1,000 cels from the Company at a price
of $30 per cel.

         During the year ended May 31, 2001, the Company issued Charles F. Trapp
$600,000 of 12% convertible promissory notes.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         (a) The following financial statements and supplementary financial
information are filed as part of this Annual Report on Form 10-KSB:


                                                                      Page
                                                                      ----
         1. Financial Documents:

         Independent Auditors' Report                               F-1 - F-2

         Balance Sheets, May 31, 2001
          and 2000                                                     F-3

         Statements of Operations,
          Years Ended May 31, 2001,
          2000 and 1999                                                F-4

         Statements of  Stockholders'
          Equity, Years Ended May 31,
          2001, 2000 and 1999                                          F-5

         Statements of Cash Flows,
          Years Ended May 31, 2001,
          2000 and 1999                                                F-6

         Notes to  Financial Statements                             F-7 - F-16

                                       11
<PAGE>

         2.       Financial Statement Schedules:

         All schedules are omitted because they are inapplicable, not required
or the information is included in the financial statements or notes thereto.

         (b)      Reports on Form 8-K:

         The Company did not file any Reports on Form 8-K during the forth
quarter of the year ending May 31, 2001.

         (c) The following Exhibit Index sets forth the applicable exhibits
(numbered in accordance with Item 601 of Regulation S-B) which are required to
be filed with this Annual Report on Form 10-KSB.

Exhibit
  No.     Description
-------   -----------
10.7      Agreement for sale of assets, dated March 8, 2001 by and between the
          Company and 1 Bid America, Inc. incorporated by reference.

10.8      12% Convertible Promissory Note.

11        A statement regarding the computation of earnings per share is omitted
          because such computation can be clearly determined from the material
          contained in this Annual Report on Form 10-KSB.






                                       12

<PAGE>

                                   SIGNATURE



         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.



                                      PREMIER CLASSIC ART, INC.






Date: September 12, 2001              By: /s/Charles F. Trapp
     -------------------                  ----------------------
                                          Charles F. Trapp, President
                                          (Principal Financial and
                                           Accounting Officer)



/s/ Charles F. Trapp
----------------------------------
Charles F. Trapp, President
 and Director


/s/ Louis A. Pistilli
---------------------------------------
Louis A. Pistilli, Director


/s/ Giltner Stevens
---------------------------------------
Giltner Stevens, Director




                                       13