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 fiscal year ended June 30, 2001

                        Commission File Number 000-30468
                               -------------------
                               CeleXx Corporation
              (Exact Name of Small Business Issuer in Its Charter)

          Nevada                                         65-0728991
  (State or other jurisdiction of           (I.R.S. Employer Identification No.)
   incorporation or organization)

                             885 Main Street, Unit 4
                         Tewksbury, Massachusetts 01876
                                 (978) 851-5317
        (Address, including zip code, and telephone number, including area code,
         of issuer's executive offices)

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

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

                     Common Stock, par value $.001 per share

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the Exchange  Act 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 No X


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

     Issuer's revenue for its most recent fiscal year:  $20,528,653

     As of October  30,  2001 there were  outstanding  54,287,730  shares of the
issuer's common stock, par value $0.001 per share. As of October 30, 2001, there
were  outstanding 298 shares of the issuer's Series A preferred stock, par value
$0.001  per  share.   The  aggregate  market  value  of  common  stock  held  by
nonaffiliates  of the issuer  (26,560,994  shares) based on the closing price of
the registrant's common stock as reported on the Over the Counter Bulletin Board
operated by the National Association of Securities Dealers, or OTCBB, on October
30,  2001,  was  $424,976.  For  purposes  of this  computation,  all  executive
officers,  directors,  and 10% beneficial owners of the registrant are deemed to
be affiliates.  Such  determination  should not be deemed an admission that such
officers,  directors,  or 10% beneficial owners are, in fact,  affiliates of the
registrant.

                   Documents incorporated by reference: None.

================================================================================

<PAGE>


                               CELEXX CORPORATION
                          ANNUAL REPORT ON FORM 10-KSB
                         FISCAL YEAR ENDED JUNE 30, 2001
                                TABLE OF CONTENTS
                                                                          Page
PART I

     ITEM 1.      DESCRIPTION OF BUSINESS................................      1

     ITEM 2.      DESCRIPTION OF PROPERTY................................     11

     ITEM 3.      LEGAL PROCEEDINGS......................................     11

     ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....    11

PART II

     ITEM 5.      MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS    12

     ITEM 6.      MANAGEMENT'S DISCUSSION AND ANALYSIS....................    12

     ITEM 7.      FINANCIAL STATEMENTS....................................    17

     ITEM 8.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE......................   17

PART III

     ITEM 9.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
                  COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT........   17

     ITEM 10.     EXECUTIVE COMPENSATION...................................   19

     ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                  AND MANAGEMENT...........................................   23

     ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...........   24

     ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K.........................   25

SIGNATURES        .........................................................   27

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................................  F-1

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

                 Statement Regarding Forward-Looking Statements

     The statements  contained in this Report on Form 10-KSB that are not purely
historical are  forward-looking  statements within the meaning of Section 27A of
the  Securities  Act of 1933 and Section 21E of the  Securities  Exchange Act of
1934,  including   statements  regarding  our  "expectations,"   "anticipation,"
"intentions,"  "beliefs," or "strategies"  regarding the future.  Our operations
and our financial  condition are  susceptible to various factors that may affect
future  results such as the  following:  our need for  additional  capital;  our
history of net losses; risks related to our technology becoming obsolete;  risks
related to  acquisitions;  risks  related to the terms of our  preferred  stock;
competitive  market  forces;  volatility of stock price;  and  dependence on key
personnel.  It is  important  to note  that  our  actual  results  could  differ
materially from those in the forward-looking statements.  Among the factors that
could cause actual  results to differ  materially  are the factors  discussed in
Item 1, "Special Considerations."


                                       -i-
<PAGE>



                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS

Overview

         We deliver technology solutions that allow our clients to operate and
grow their businesses more efficiently. The products and services we offer are
designed to

     o    improve  the  performance  of  our  clients'  information   technology
          systems;

     o    improve  profitability  and production at client companies through the
          delivery of services and  solutions  essential to Customer  Relational
          Management (CRM) and Enterprise Resource Planning (ERP); and

     o    deliver other advanced  technologies  designed specifically to improve
          our  clients'   delivery  of  services  to  their  customers,   or  to
          communicate with and manage their employees.

These products and solutions often include improved communications applications
for order tracking, customer management, employee training, inventory control,
customer service, knowledge tools, and a variety of other network-based
solutions that help businesses operate more efficiently.

         We deliver these products and services through technology businesses we
acquire, as well as by pairing the competencies of these businesses to deliver
complete solutions to customers. We reach our customers through

     o    direct corporate sales;

     o    partnering with software developers and hardware suppliers; and

     o    partnering with large  solutions  providers who expand and broaden our
          capabilities and expertise to deliver  essential  products,  services,
          and solutions.

         Our operations are organized into four groups according to function:
Integrated Solutions, Performance Media, Information Engineering, and Special
Applications. Our corporate headquarters, based in Tewksbury, Massachusetts,
provides certain essential services to our operating companies and manage the
synergies between those companies. Our corporate headquarters also provides an
environment that allows our operating companies to flourish by delivering
complete solutions to clients and expanding their own capabilities through
collaboration, referral, and collocation.

         Computer Marketplace, Inc., or CMI, a wholly owned subsidiary of our
company, is the principal business in our Integrated Solutions Group (ISG) and
performs systems engineering, networking, computer telephony integration, and
other large scale network support services. Revenue for the Integrated Solutions
Group increased during fiscal 2001 due in part to expanding contractual services
primarily with Sodexho-Marriott, Investors Bank, Cisco, Hewlett Packard, and
other major clients for whom we are providing custom systems and/or solutions.
In addition, ISG continued to expand its partner outreach by joining with such
companies as Hewlett-Packard, Exodus, Citrix, major OEMs, and other leading
solution providers.

         Pinneast East, Inc., or Pinneast, a wholly owned subsidiary of our
company, is the principal business of our Performance Media Group (PMG) that
develops high-end multimedia applications and delivers e-Learning, Distance
Learning, and other Internet solutions that integrate seamlessly into customer
relations management systems for our clients. This group also increased revenue
during fiscal 2001, due in part to the more universal acceptance of the Internet
as a means of delivering education and training across great distances. The
operations of our Performance Media Group include the development of complex
electronic databases and specialized engineering functions in graphics,
facilities management, hosting, and wireless technologies to provide clients
with customized solutions for handling large-scale data.

         The Information Engineering Group was established to develop and
implement large-scale data base applications, and the Special Applications Group
was established to market and distribute select web-based software products and
services. These two divisions do not have any operations or revenue.


<PAGE>

Industry Overview

         Information technology has grown in tandem with the worldwide
proliferation of computerization over the last two decades, and has expanded its
rate of growth with the commercialization and universal acceptance of the
Internet and corporate Intranets over the last five years. We believe the growth
in online systems in use will fuel demand for additional computer products and
services, as well as create new market opportunities in the CRM and
enterprise-wide sectors over the next few years.

         To capitalize on the growth of e-commerce, businesses are expanding and
upgrading their Internet and networking infrastructures in order to better
manage their customers and employees. This expansion, in turn, gives rise to a
growing market for greater bandwidth, database engineering, archiving and
retrieval, as well as specialized training for employees and contractors. The
industry is highly competitive and is characterized by numerous small companies
implementing and supporting the proprietary products and services of larger
companies. These smaller entrepreneurial companies, generally known as
"developers," create numerous products and add-ons that are widely accepted as
CRM and enterprise-wide solutions. Our "vendor-neutral" approach positions us to
continue to grow in specific market segments by delivering or providing
consulting services for the delivery of the widely accepted solutions of various
developers, as well as the delivery of our proprietary products.

Our Strategy

         Our goal is to be a leading single-source integrator and provider of
specialized CRM and ERP network applications. Key elements of our strategy to
achieve this goal include the following:

     o    acquiring established  complimentary  business that expand our product
          and service offerings;

     o    building our  distribution  channels through customer direct sales and
          additional strategic partnering;

     o    attracting  and retaining  personnel  and  management  experienced  in
          network  and  database   engineering,   custom  development,   systems
          integration, configuration, and information systems sales; and

     o    improving  the  operational  efficiencies  of acquired  businesses  by
          integrating  the "best  practices" of those  businesses as well as the
          finance, accounting, and human resource functions into our business.

Integrated Solutions Group

         Our Integrated Solutions Group is an established network solutions and
hardware/software integrator. ISG commenced operations during April 2000, upon
our acquisition of Computer Marketplace, Inc. ISG delivers products and services
directly to corporate customers and through strategic alliances with other
solutions providers. ISG's customers include America Online, Lucent
Technologies, AT&T, J.C. Penney, Bell Canada, The Prudential Insurance
Companies, the Boston Public Schools, Sprint Corp., IBM Global Services, USA
Group, USA Bank, and Hewlett Packard Co. Through our Integrated Service Group,
we perform a variety of strategic services, including the following:

     o    integration of software and customized  design of networks to run such
          software;

     o    procurement of computer hardware and software solutions for clients;

     o    resale of software to corporate clients; and

     o    engineering  and  integration of legacy and newer systems so that they
          efficiently communicate with each other.

         Key products and services of our Integrated Services Group include the
following:

     o    Improvement of Client Infrastructure. Through ISG, we provide customer
          assessment to increase capacity of our clients' existing networks.  We
          perform  needs  analysis  for  additional   equipment  and  assist  in
          procurement.  We also  re-engineer  and  customize  systems to run new
          applications and expand network  capabilities to include wireless wide
          area and  local  area  networks.  ISG  integrates  new  hardware  with

                                       2
<PAGE>

          existing customer legacy systems to more effectively  deliver products
          and services  while  preserving  our clients'  capital  investments in
          computer systems infrastructure.

     o    Support Services.  ISG provides technical engineering support services
          and 24-hour emergency support services. Onsite and offsite engineering
          support  is   provided  on  a   long-term   contractual   basis  as  a
          cost-effective  outsourcing option.  Additionally,  these services are
          provided to larger  companies on a short-term  basis during periods of
          upgrade,  and to  strategic  partners  during  periods of  large-scale
          rollouts  or  service  upgrades.  The group  also  delivers  help desk
          support  in a variety  of  formats  to  customer  technical  staff and
          end-users, including e-mail, telephone, and call center services.

     o    Integration and configuration. ISG provides hardware configuration and
          software integration to its customers. Integration can be as simple as
          loading  software or as complex as  re-engineering  client networks to
          communicate  effectively with other external  networks.  Configuration
          may occur at  customer  locations  or  before  customers  receive  the
          equipment.   In  these   situations,   customers   take   delivery  of
          pre-configured  equipment that is compatible  with existing  networks,
          thus minimizing the requirement for additional onsite  engineering and
          associated costs.

     o    Telephony.  ISG also performs Computer Telephony Integration (CTI) and
          Internet  Protocol  Telephony (IPT).  Computer  networks and telephone
          systems have long been  converging and what was once  considered  next
          generation  telephony is now rapidly becoming standard for businesses.
          The requirements for storage,  retrieval,  archival,  and transfer are
          often dictated by the customer's need for the  instantaneous  delivery
          of information. CTI is the integration of advanced software for use in
          "call centers" by which sales agents,  help desk personnel,  or others
          can access  and  manipulate  data as  needed.  IPT refers to the newer
          server and  Internet-based  telephonic systems that provide the client
          with customization  features that were traditionally provided by major
          telephone  companies.  Most of these new features  can be  articulated
          directly  from a  desktop  computer  onsite.  Because  customers  have
          several software  developers and hardware  manufacturers from which to
          choose,  we use a  vendor-neutral  approach  with respect to telephony
          solutions for specific customer requirements.  We believe our approach
          provides  our  clients  with a degree  of  systems  customization  not
          otherwise possible.

     o    Value-added  reselling  and  asset  management.  Through  ISG,  we are
          actively engaged in the re-selling and distribution of a wide array of
          branded  computer  hardware  and  peripherals  that we  customize  and
          configure to meet specific  customer  needs. In some cases, we perform
          these  services  onsite to fulfill  our  customers'  requirements  for
          timely and cost effective procurement of goods.

         ISG is currently adding new software categories to its CRM solutions
suite. We believe that Knowledge tools, and specifically Knowledge Database
applications and their integration will yield new partnering opportunities and
further expand our capabilities in the growing field of customer relations
management.

Performance Media Group

         Our Performance Media Group capitalizes on the growing demand for
computer-based alternatives to instructor-led training. Interactive web-based
training is a rapidly growing sector of the e-commerce industry. PMG provides a
set of comprehensive eLearning and data warehousing services including
infrastructure, content development, and repositioning of services. PMG often
teams with leading eLearning Developers and Learning Management Systems
developers to provide learning products with a wide range of capabilities. We
commenced operation of the Performance Media Group upon our acquisition of
Pinneast during 1999. We maintain formal  alliances and partnerships  with
Science  Applications International Corporation, Logicon, Centra, Docent, WBT
Systems, LearnFrame, and other suppliers of learning management systems.

          Key products and services of our Performance Media Group include the
following:

     o    Infrastructure.  Our Performance Media Group provides clients with the
          ability to establish local,  departmental-level,  and  enterprise-wide
          eLearning and data  warehousing  capabilities.  PMG's key products and
          services include  eLearning  consulting,  LMS system design,  software

                                       3
<PAGE>

          sales,  network  and  database  integration,  and web  hosting.  PMG's
          strategic  alliances  enable it to feature  customization  and hosting
          off-the-shelf  eLearning systems for end-users of Centra,  Docent, and
          WBT learning  management  systems,  and assessment and  implementation
          through the consulting process.

     o    Content.   PMG  meets  client   requirements   by  providing   content
          development  services  ranging  from  conversion  or  re-purposing  of
          existing  Instructor-led  courses into web-based and CD-ROM format, to
          complete  instructional  systems  design using  Instructional  Systems
          Design and Systems Approach to Training  processes.  Training products
          include custom web and CD-based  programs  built to Aviation  Industry
          Compliance  Committee and Shareable  Courseware Object Reference Model
          specifications,  client specifications,  and eLearning software system
          standards. These product offerings are generally interactive in nature
          and often include video and audio  components  that may be produced on
          site at PMG's facility.  Other products include  instructional  design
          and support  services for blended media  delivery,  and development of
          curriculum  management  and  student  support  materials.  Examples of
          specific program types are custom content for manufacturing processes,
          custom software application training, performance support systems, and
          productivity  improvement/ TQM programs,  OSHA,  HIPPA, and regulatory
          compliance training with online testing, data storage, and retrieval.

     o    Services.  PMG also  provides  eLearning  training  courses,  Learning
          Management  System  maintenance,   and  24-hour  eLearning  Help  Desk
          support.  Training  program  maintenance  provides updates to existing
          programs in order to maintain currency with industry,  regulatory, and
          company  standards.  LMS  maintenance  provides  software  updates and
          configuration  management for client eLearning systems.  Our eLearning
          Help Desk provides  Tiers I, II, and III customer  support,  including
          the provision of system administration,  custom report generation, and
          courseware support.  This service is specifically  designed to support
          rapid rollout of newly implemented  Learning  Management Systems until
          the  client is  prepared  to support it with  internal  resources  and
          ensure the continued  successful operation of established systems. The
          Group  also  provides  clients  with an  extension  of their  training
          department  with specific  skills in the operation and  maintenance of
          their training and ERP systems.  Additionally,  ISG provides a host of
          consulting   services  for  the  delivery  of  eLearning  systems  and
          management as well as the  development and delivery of our proprietary
          products.

     ISG clients  include a broad base of industrial and  technology  companies,
financial  institutions,   government  agencies  and  educational  institutions.
Prominent  among its  clients are Dow  Chemical,  Lucent  Technologies,  Hewlett
Packard,  Nortel  Networks,   Rational  Software,  Inktomi  Software,   Staples,
Michelin,  Volvo,  Delta  Airlines,  Winn-Dixie,  and the U.S.  Army.  While our
Performance  Media Group has been servicing  companies in certain key industries
such as finance, insurance,  transportation, and manufacturing, the scope of its
services can be readily applied to most businesses and government organizations.
Generally,  however,  customers  within the group  must have a need for  ongoing
training  and  must  maintain   ongoing  training  support  programs  for  their
employees. PMG maintains a customer retention rate in excess of 80%.

     The  Performance  Media Group  markets and  distributes  its  products  and
services through trade sources, customer referrals, and direct marketing.

Employees

     As of October 30, 2001, we had 72 full-time employees. Of our employees, 13
are involved in sales and marketing; 44 in technical services,  professional, or
customer support services;  and 15 in finance and  administration.  No employees
are covered by any collective bargaining agreements with us, and we believe that
the relationship with our employees is good.


                                       4
<PAGE>

Sales and Marketing

     Sales operations are managed and performed by full-time employees. However,
on occasion,  we may deploy  outside  sales  consultants  or  independent  sales
representatives with training in our specialized product and service offerings.

     Our product and service  offerings  require  targeted  marketing.  We use a
variety of different media to market our company,  including trade shows,  trade
journals, cooperative advertising, commercial web site referral, direct mail and
email prospecting,  telemarketing,  and participation  with strategic  partners'
marketing initiatives.  Additionally, certain of our employees serve on industry
councils,   where  `best  of  class'   providers  and  integrators   communicate
requirements and capabilities.

                             SPECIAL CONSIDERATIONS

     An  investment  in our common  stock  involves a high  degree of risk.  You
should consider  carefully the following,  in addition to the other  information
contained in this report, before purchasing any of our common stock.

If we do not find  additional  sources of capital,  we may be required to reduce
the scope of our business activities until we can obtain other financing.

     We believe  that our current  capital will  satisfy our  operating  capital
needs  through  the  third  quarter  of fiscal  2002  based  upon our  currently
anticipated  business  activities.  Our operating companies have been generating
sufficient cash flow to sustain their own operations, however, their growth will
be  severely  constrained  if we do  not  secure  additional  financing.  Unless
additional  capital is  secured  from third  party  financing  or loans from our
officers,  we may need to utilize cash flow from our  operating  companies  that
would result in additional  constraints on current  operations and on the future
growth of our company.

     We cannot predict the timing or amount of our capital  requirements at this
time. Our actual funding  requirements may differ materially as a result of many
factors, including the settlement of outstanding claims, our ability to sell our
products and services,  our  acquisition  of other  companies,  and the proposed
growth of our  company.  We may not be able to obtain  additional  financing  in
sufficient  amounts or on acceptable  terms when needed,  which could  adversely
affect our operating results and prospects.

Although our operating companies generate cash from operations, our consolidated
company has a history of net losses.

     We have  incurred net losses of  approximately  $5.7 million  during fiscal
2001 and approximately  $4.4 million during fiscal 2000. As a result, as of June
30, 2001, we had an accumulated a deficit of  approximately  $11.1  million.  We
believe that we will require additional capital for operations and growth within
the next twelve months.

     As a  result,  we  can  be  expected  to  incur  consolidated  losses  from
operations and consolidated  negative cash flows for the foreseeable  future. If
our  revenue  does not  increase  and if our  spending  levels are not  adjusted
accordingly,  we may not sustain or increase  profits on a regular  basis in the
future.

A significant or prolonged economic downturn could have a material adverse
effect on our business.

     Our results of operations are affected by the level of business activity of
our clients,  which in turn is affected by the level of economic activity in the
industries and markets that they serve.  In addition,  our business tends to lag
behind  economic  cycles  in an  industry.  A decline  in the level of  business
activity of our clients could have a material adverse effect on our revenues and
profit margin.  We are now seeing some evidence of an economic  slowdown in some
markets,  including a  reduction  in capital  expenditures  and  technology  and
associated  discretionary  spending by our clients,  particularly  in the United
States.  This has caused clients to cancel or suspend orders and new orders, and
has  created a general  slowdown  in our  business  and the  utilization  of our
personnel.

Our business  will be negatively  affected if we are not able to anticipate  and
keep pace with rapid changes in technology or if growth in the use of technology
in business is not as rapid as in the past.


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<PAGE>

     Our success  depends,  in part,  on our  ability to develop  and  implement
management and technology solutions that anticipate and keep pace with rapid and
continuing changes in technology, industry standards, and client preferences. We
may not be successful in anticipating  or responding to these  developments on a
timely basis, and our ideas may not be successful in the marketplace.  Moreover,
products and  technologies  developed by our competitors may make our service or
product  offerings  uncompetitive  or obsolete.  Any one of these  circumstances
could have a material  adverse effect on our ability to obtain and  successfully
complete important client engagements.

     Our business is also dependent,  in part, upon continued  growth in the use
of  technology  in business by our  clients  and  prospective  clients and their
customers  and  suppliers.  If the  growth  in the use of  technology  does  not
continue,  demand for our  services  may  decrease.  Use of new  technology  for
commerce  generally  requires the  understanding  and acceptance of a new way of
conducting  business and  exchanging  information.  Companies  that have already
invested  substantial  resources in traditional means of conducting commerce and
exchanging  information  may be  particularly  reluctant  or slow to adopt a new
approach  that may make  some of their  existing  personnel  and  infrastructure
obsolete.

We may face damage to our professional reputation or legal liability if our
clients are not satisfied with our services.

     As a  professional  services  firm,  we  depend  to a large  extent  on our
relationships with our clients and our reputation for high-caliber  professional
services and integrity to attract and retain clients.  As a result,  if a client
is  not   satisfied   with  our  services  or  products,   including   those  of
subcontractors  we employ, it may be more damaging in our business than in other
businesses.  Moreover, if we fail to meet our contractual obligations,  we could
be subject to legal  liability or loss of client  relationships.  Our  contracts
typically  include  provisions to limit our exposure to legal claims relating to
our services  and the  applications  we develop,  but these  provisions  may not
protect us or may not be enforceable in all cases.

Our services or products may infringe upon the intellectual property rights of
others.

     We cannot be sure that our services and products, or the products of others
that we offer to our  clients,  do not  infringe  on the  intellectual  property
rights of third parties, and we may have infringement claims asserted against us
or against our clients. These claims may harm our reputation, cost us money, and
prevent us from offering some services or products.  Any claims or litigation in
this area,  whether  we  ultimately  win or lose,  could be  time-consuming  and
costly, injure our reputation,  or require us to enter into royalty or licensing
arrangements.  We may not be able to  enter  into  these  royalty  or  licensing
arrangements  on acceptable  terms.  Depending on the  circumstances,  we may be
required to grant a specific  client  greater  rights in  intellectual  property
developed in connection  with an engagement  than we otherwise do, in which case
we seek to cross license the use of the intellectual property. Any limitation on
our   ability  to  provide  a  service  or  product   could  cause  us  to  lose
revenue-generating  opportunities and require us to incur additional expenses to
develop new or modified solutions for future projects.

Acquisitions  could divert  management's  time and attention,  dilute the voting
power of  existing  stockholders,  and have a  material  adverse  effect  on our
business.

     As part of our growth  strategy,  we may continue to acquire  complementary
businesses and assets.  Acquisitions that we may make in the future could result
in the  diversion of time and  personnel  from our  business.  We also may issue
shares of common stock or other  securities  in  connection  with  acquisitions,
which could result in the dilution of the voting power of existing  stockholders
and could dilute earnings per share.  Any  acquisitions  would be accompanied by
other risks commonly encountered in such transactions, including the following:

     o    difficulties  integrating  the  operations  and  personnel of acquired
          companies;

     o    additional  financial  resources  required to fund the  operations  of
          acquired companies;

     o    potential disruption of our business;

     o    our ability to maximize our financial  and  strategic  position by the
          incorporation  of acquired  technology or businesses  with our product
          and service offerings;

     o    difficulty in maintaining uniform standards, controls, procedures, and
          policies;


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<PAGE>

     o    potential loss of key employees of acquired companies;

     o    impairment  of  employee  and  customer  relationships  as a result of
          changes in management; and

     o    significant expenditures to consummate acquisitions.

         As a part of our acquisition strategy, we may engage in discussions
with various businesses respecting their potential acquisition. In connection
with these discussions, we and each potential acquired business may exchange
confidential operational and financial information, conduct due diligence
inquiries, and consider the structure, terms, and conditions of the potential
acquisition. In certain cases, the prospective acquired business may agree not
to discuss a potential acquisition with any other party for a specific period of
time, may grant us certain rights in the event the acquisition is not completed,
and may agree to take other actions designed to enhance the possibility of the
acquisition. Potential acquisition discussions may take place over a long period
of time, may involve difficult business integration and other issues, and may
require solutions for numerous family relationship, management succession, and
related matters. As a result of these and other factors, potential acquisitions
that from time to time appear likely to occur may not result in binding legal
agreements and may not be consummated. Our acquisition agreements may contain
purchase price adjustments, rights of set-off, and other remedies in the event
that certain unforeseen liabilities or issues arise in connection with an
acquisition. These remedies, however, may not be sufficient to compensate us in
the event that any unforeseen liabilities or other issues arise.

The consulting, information technology, and outsourcing markets are highly
competitive, and we may not be able to compete effectively.

         The consulting, information technology and outsourcing markets in which
we operate include a large number of participants and are highly competitive.
Our primary competitors include:

     o   large accounting, consulting, and other professional service firms;

     o   information technology service providers;

     o   application service providers;

     o   packaged software vendors and resellers; and

     o   service groups of computer equipment companies.

         Our marketplace is experiencing rapid changes in its competitive
landscape. Some of our competitors have sought access to public and private
capital and others have merged or consolidated with better-capitalized partners.
These changes may create larger and better-capitalized competitors with enhanced
abilities to compete for market share generally and our clients specifically, in
some cases, through significant economic incentives to clients to secure
contracts. These competitors may also be better able to compete for skilled
professionals by offering them large compensation incentives. In addition, one
or more of our competitors may develop and implement methodologies that result
in superior productivity and price reductions without adversely affecting the
competitors' profit margins. Any of these circumstances may impose additional
pricing pressure on us, which would have an adverse effect on our revenues and
profit margin.

         In addition, our ability to generate clients will depend to a
significant degree on the quality of our products and services and our
reputation among our clients and the market in general, compared with the
quality of services provided by and the reputations of our competitors. To the
extent we lose clients to our competitors due to of dissatisfaction with our
services, or if our reputation is adversely affected for any other reason, our
business could be materially adversely affected.

         Because we rely on the skill of our personnel and the quality of our
client service, we have no patented technology that would preclude or inhibit
competitors from entering our markets. We are likely to face additional
competition from new entrants into the market in the future. Existing or future
competitors may develop or offer services that provide significant performances,
price, creative, or other advantages over those offered by us, which could have
a material adverse effect on our business, financial condition, results of
operations, and prospects.


                                       7
<PAGE>

If we are unable to attract and retain employees, we will not be able to compete
effectively and will not be able to grow our business.

         Our success and ability to grow are dependent, in part, on our ability
to hire and retain talented people. The inability to attract qualified employees
in sufficient numbers to meet demand or the loss of a significant number of our
employees could have a serious negative effect on us, including our ability to
obtain and successfully complete important client engagements and thus maintain
or increase our revenue.

         We regularly benchmark our employee compensation to the marketplace in
all markets in which we operate. We make annual adjustments to remain
competitive based on the individual markets and the demand for top talent. To
attract and retain the number of employees we need to grow our business, we may
have to increase our compensation levels in the future. This would adversely
affect our operating margins.

The holders of shares of Series A preferred stock have the right to
substantially dilute the holders of shares of common stock.

         The holders of shares of Series A preferred stock have the right, at
the option of the holder, to convert the shares of Series A preferred stock into
common stock at a conversion price per share equal to the lesser of (a) $2.50;
or (b) 80% of the five-day floating average trading price of our common stock.
As a result, the holders of Series A preferred stock have the right to convert
their shares into an indeterminate number of shares of common stock, and that
number increases as the price of our common stock declines. As of October 30,
2001, there were 298 shares of Series A preferred stock outstanding that were
convertible into approximately 373,000,000 shares of common stock at a
conversion price per share of less than $0.01.

         We have agreed to at all times reserve and keep available authorized
and unissued shares of common stock sufficient to cover the conversion of the
Series A preferred stock and payment of dividends on the Series A preferred
stock. This requirement could have the effect of delaying or prohibiting
additional offerings of equity securities if those issuances would cause us to
have insufficient shares of common stock to cover the conversions of the Series
A preferred stock.

Certain terms of our Series A preferred stock could have an adverse effect on
our capital requirements and our ability to raise additional equity capital.

         We granted various rights to the holders of our Series A preferred
stock in connection with the offering of those securities. The rights of the
Series A preferred, if exercised, could have a material adverse effect on our
working capital and our ability to raise additional capital. For so long as the
registration statement covering the resale of the shares of common stock
underlying the Series A preferred stock is not effective, we may not effect
certain transactions without the consent of the holders of Series A preferred
stock, including the following:

     o    issue any  equity  securities,  or debt  securities  convertible  into
          equity securities,  if the registration  statement covering the resale
          of the underlying common stock is not effective; or

     o    register any other securities under the securities laws.

         In addition, the holders of Series A preferred stock have the right to
force us to redeem the Series A preferred stock and any shares of common stock
issued upon conversion of the Series A preferred stock at a redemption price of
125% of the stated value of the Series A preferred and the market value of the
common stock if

     o    such  registration  statement is not  effective for more than a 25-day
          period;

     o    our common stock is no longer eligible for quotation on the OTCBB;

     o    we fail to deliver for a ten-day period  certificates  of common stock
          upon a conversion;

     o    there is a change of  control  of our  company  or a  redemption  of a
          certain amount of common stock;


                                       8
<PAGE>

     o    we breach the registration rights agreement that has not been cured by
          us;

     o    we fail to maintain  sufficient  authorized and  unreserved  shares of
          common  stock to issue to a holder of Series A preferred  stock upon a
          conversion; or

     o    we cause various other breaches under our articles of incorporation or
          the documents governing the issuance of the Series A preferred stock.

In the event of any of conditions above where the Series A holders force a
redemption of their shares, and we were not able to secure additional financing,
we may not have sufficient capital available to redeem the shares. As a result,
we would be in default of the terms of the Series A preferred stock, which is
secured by all of the assets of our company. Any such redemption would have a
material adverse effect on our business and financial condition.

We are required to pay dividends on shares of Series A preferred stock, and we
do not intend to pay dividends on our common stock.

         We are required to accrue a 6% annual dividend on the outstanding
principal balance of our Series A preferred stock. The dividends may be paid in
either common stock or cash, however, under certain conditions we must pay the
dividends in cash. The holders of Series A preferred stock are entitled to
receive payment of dividends prior to our paying any dividends to holders of
common stock. For the foreseeable future, we intend to retain any remaining
future earnings, if any, to finance our operations and do not anticipate paying
any cash dividends with respect to our common stock.

The price of our common stock has been volatile.

         The trading volume of our common stock historically has been limited
and sporadic, and the stock prices have been volatile. For example, during the
last twelve months, our common stock has traded at prices ranging from $0.01 to
$1.19. As a result of the limited and sporadic trading activity, the quoted
price for our common stock is not necessarily a reliable indicator of its fair
market value. The price at which our common stock will trade may be highly
volatile and may fluctuate as a result of a number of factors, including the
following:

     o    quarterly variations in our operating results;

     o    large purchases or sales of our common stock;

     o    actual or anticipated announcements of new products or services by us,
          our business partners, or competitors;

     o    investor  perception  of  our  business  prospects or our  industry in
          general;

     o    general conditions in the markets in which we compete; and

     o    worldwide economic and financial conditions.

Our common stock is a "penny stock," and compliance with requirements for
dealing in penny stocks may make it difficult for holders of our common stock to
resell their shares.

         Our common stock currently is deemed to be "penny stock" as that term
is defined in Rule 3a51-1 under the Exchange Act. Section 15(g) of the Exchange
Act and Rule 15g-2 under the Exchange Act require broker/dealers dealing in
penny stocks to provide potential investors with a document disclosing the risks
of penny stocks and to obtain manually signed and dated written receipt of the
document before affecting a transaction in a penny stock for the investor's
account. Compliance with these requirements may make it more difficult for
holders of our common stock to resell their shares to third parties or
otherwise, which could have a material adverse effect on the liquidity and
market price of our common stock.

         Penny stocks are stocks

     o    with a price of less than $5.00 per share;

     o    that are not traded on a "recognized" national exchange;


                                       9
<PAGE>

     o    whose prices are not quoted on the Nasdaq automated quotation system;
          or

     o    issued by companies  with net  tangible  assets less than $2.0 million
          (if the issuer has been in  continuous  operation  for at least  three
          years) or $5.0 million (if in continuous operation for less than three
          years), or with average revenue of less than $6.0 million for the last
          three years.

Shares of common stock eligible for sale in the public market may adversely
affect the market price of our common stock.

         Sales of substantial amounts of common stock by shareholders in the
public market, or even the potential for such sales, are likely to adversely
affect the market price of the common stock and could impair our ability to
raise capital by selling equity securities. As of October 30, 2001, 33,240,425
of the 54,287,730 shares of common stock currently outstanding were freely
transferable without restriction or further registration under the securities
laws, unless held by "affiliates" of our company, as that term is defined under
the securities laws. In addition, approximately 26.0 million shares of common
stock issuable upon conversion of our Series A Preferred Stock have been
registered for resale. We also have outstanding 21,047,305 shares of restricted
stock, as that term is defined in Rule 144 under the securities laws, that are
eligible for sale in the public market, subject to compliance with the holding
period, volume limitations, and other requirements of Rule 144. Moreover, the
exercise of outstanding options and warrants and the conversion of Series A
preferred stock will result in additional outstanding shares of common stock and
will create additional potential for sales of additional shares of common stock
in the public market.

Rights to acquire shares of common stock will result in dilution to other
holders of common stock.

         Outstanding stock options and warrants could adversely affect the terms
on which we can obtain additional financing, and the holders can be expected to
exercise these securities at a time when, in all likelihood, we would be able to
obtain additional capital by offering shares of common stock on terms more
favorable to us than those provided by the exercise or conversion of these
securities. Holders of these securities will have the opportunity to profit from
an increase in the market price of our common stock, with resulting dilution in
the interests of the holders of common stock. Upon conversion of the Series A
preferred stock, there will be outstanding approximately 432,000,000 shares of
common stock. In addition, as of October 30, 2001, we have outstanding the
following securities:

     o    options held by our  directors,  officers,  and  employees to purchase
          approximately  3.0 million shares of common stock with exercise prices
          ranging from $0.29 to $0.50 per share; and

     o    warrants to purchase  approximately  1,500,000  shares of common stock
          with exercise prices ranging from $1.00 to $3.54 per share.

Investors may not be able to exercise control over our company as a result of
management's and other principal stockholders' ownership.

         Our current executive officers and directors of our company
beneficially own approximately 46% of our outstanding common stock. As a result,
the executive officers and directors of our company can significantly influence
the management and affairs of our company and all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions. This concentration of ownership could have the effect of
delaying or preventing a change in control of our company, even when such change
of control is in the best interests of stockholders. Control by management might
adversely affect the market price of the common stock and the voting and other
rights of our company's other stockholders.

ITEM 2.           DESCRIPTION OF PROPERTY

         We lease our corporate headquarters located in a 1,700 square feet
facility located in Coral Springs, Florida under a short-term lease that expired
during August 2001. Since that time, we have been leasing the space on a monthly
basis. Effective November 1, 2001, we relocated our headquarters to our facility
in Tewksbury, Massachusetts described below.

                                       10
<PAGE>

         We lease production and executive office space located in an 8,000
square feet facility located in Tewksbury, Massachusetts under two separate
lease agreements, the latest expiring in July 2003. We leased this facility
through a realty company owned by Mr. Burke, our Chairman of the Board and Chief
Executive Officer.

         We lease additional office space located in a 6,600 square feet
facility located in Colombia, South Carolina under a three-year lease expiring
in November 2004.

         We believe that these facilities will be adequate for our needs for the
foreseeable future.

ITEM 3.           LEGAL PROCEEDINGS

         On March 27, 2001 we executed a Memorandum of Settlement, pursuant to
court ordered arbitration, with a vendor for a final judgement totaling $186,059
payable $10,000 at closing and the balance payable in monthly installments of
$10,000 beginning May 1, 2001. As of June 30, 2001 we have paid $10,000 and no
further collection efforts have proceeded.

         We are involved in various legal proceedings arising out of our
operations in the ordinary course of business. We do not believe that such
proceedings, even if determined adversely, will have a material adverse effect
on our business, financial condition, or results of operations.

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

         Not applicable.


                                     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Since November 1999 our common stock has been quoted on the OTCBB under
the symbol "CLXX," and prior to November 1999 our common stock has been quoted
under the symbol "CBRA." The following table sets forth, for the period since
July 1, 1999, the high and low bid quotations for our common stock for the
periods indicated as reported by the OTCBB. The quotations reflect prices
between dealers and do not include retail mark-up, mark-down, or commissions,
and may not represent actual transactions.

                                                       High                Low
                                                    -----------     ------------

Year ended June 30, 2000:
   First quarter...............................      $  1.15             $ 0.63
   Second quarter..............................         0.83               0.45
   Third quarter...............................         4.13               0.56
   Fourth quarter..............................         2.68               0.81

Year ended June 30, 2001:
   First quarter...............................      $  1.19             $ 0.37
   Second quarter..............................         0.48               0.11
   Third quarter...............................         0.55               0.11
   Fourth quarter..............................         0.24               0.03

Year ended June 30, 2002:
   First quarter................................     $  0.04             $ 0.01
   Second quarter (through October 30, 2001)....        0.01               0.01

         As of October 30, 2001, there were approximately 300 holders of record
of our common stock. On October 30, 2001, the closing sales price of our common
stock as quoted on the OTCBB was $0.01 per share.


                                       11
<PAGE>

Dividend Policy

         We are required to pay a 6% annual cumulative dividend on our Series A
preferred stock, and such dividends are deemed to accrue whether or not earned
or declared and whether or not there are any profits, surplus, or other funds
legally available for the payment of dividends. We have the option to cumulate
the dividends or pay them in cash, however, under certain conditions we must pay
the dividends in cash. So long as any shares of Series A preferred stock remain
outstanding, we may not pay or declare any dividends on our common stock.

         For the foreseeable future, we intend to retain any remaining future
earnings to finance our operations and do not anticipate paying any cash
dividends with respect to our common stock. Subject to the preferences that may
be applicable to any then-outstanding preferred stock, the holders of common
stock will be entitled to receive such dividends, if any, as may be declared by
our board of directors from time to time out of legally available funds.
Payments of any cash dividends in the future will depend on our financial
condition, results of operations, and capital requirements as well as other
factors deemed relevant by our board of directors.

ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS

         You should read the following discussion in conjunction with our
consolidated financial statements and related notes and special considerations
included elsewhere in this report.

         We deliver technology solutions that help companies operate and grow
their businesses. The products and services we offer are designed to

     o    improve the performance of client information technology systems;

     o    improve  client   profitability   and  production   through   Customer
          Relational Management (CRM) solutions or Enterprise Resource  Planning
          (ERP) solutions; and

     o    deliver other new  technology  developed  specifically  to improve our
          clients'  delivery of services to their customers or communicate  with
          and manage their employees.

These solutions may include improved communications applications for order
tracking, customer management, employee training, inventory control, customer
service, knowledge tools, and a variety of other network-based solutions that
help businesses operate.

         We deliver these products and services through our acquisition and
operation of synergistic technology businesses in select markets and our pairing
competencies of these businesses in order to deliver complete solutions to
customers. We reach our customers through

     o    direct corporate sales;

     o    partnering  with  software   developers   providing   specialized  CRM
          solutions; and

     o    partnering with large solutions  whereby our expertise is essential in
          the deliver of their products and services to their customers.

         Our operations are organized into four groups according to function:
Integrated Solutions, Performance Media, Information Engineering, and Special
Applications. Our corporate headquarters, based in Tewksbury, Massachusetts,
provides certain essential services to our operating companies and manage the
synergies between those companies. Our corporate headquarters also provides an
environment for our management team to deliver complete services to clients and
expand each operating company's capabilities through collaboration, referral,
and colocation.

         Our company was incorporated in the State of Nevada during February
1997 under the name Spectrum Ventures, Inc. During February 1999, we merged with
Cobra Technologies International, Inc., a Delaware corporation, with our company
as the surviving entity in the merger. In connection with the merger, we issued
4.5 million shares of our common stock.


                                       12
<PAGE>

     During May 1999,  we merged with  Pinnacle  East,  Inc.,  a South  Carolina
corporation,  pursuant  to an  Agreement  and  Plan  of  Reorganization  whereby
Pinneast  became our wholly owned  subsidiary in connection with our issuance of
500,000 shares of our common stock and a cash payment of $100,000.  During March
2001, pursuant to the merger agreement, we issued 1,043,210 additional shares of
our common stock to the former shareholders of Pinneast.

     Our company changed its name to CobraTec, Inc. during August 1999 and again
to CeleXx Corporation during November 1999.

     During April 2000, we acquired Computer  Marketplace,  Inc., pursuant to an
Agreement  and Plan of  Reorganization  whereby  CMI  became  our  wholly  owned
subsidiary. We completed the merger through consideration consisting of: (a) 1.4
million shares of our common stock; (b) a cash payment of $1.5 million;  and (c)
a promissory  note for $1.0 million at 6%, payable in equal annual  installments
at the first and second anniversaries of the merger.  During June 2001, pursuant
to the merger agreement,  we issued 13,625,000 additional shares of common stock
to the former shareholder of CMI.

     During June 2000, our Board of Directors  approved the change of our fiscal
year-end from December 31 to June 30.  Accordingly,  and to assist  readers with
meaningful  comparisons  of our operating  results,  the discussion of financial
results set forth below  compares  the  twelve-month  period ended June 30, 2001
with unaudited information for the twelve-month period ended June 30, 2000.

Factors Effecting Our Operating Results

     We recognize  information  technology  service  revenue when  personnel are
engaged on client projects. Therefore, the relative utilization of our personnel
directly affects our operating  results.  Variations in utilization of personnel
may materially affect our information  technology services business,  or failure
to obtain additional engagements in our information technology services business
could have a material adverse effect on our business,  financial condition,  and
results of operations.

     Our  acquisitions  have placed,  and are  expected to continue to place,  a
significant strain on our managerial and operational  resources.  To effectively
manage our company,  we must continue to implement and improve our  operational,
management, and financial systems and to train and manage our employees. As part
of our  business  strategy,  we may seek to  acquire  additional  businesses  or
strategic  relationships with other information  technology  businesses.  To the
extent that any of the companies  that we acquire may fail, we would be required
to write-off the amount of the  investment,  and any such write-off could have a
material adverse effect on our financial condition.

     We  have a  short  operating  history,  and  since  our  inception  we have
generated  approximately  $7.5 million of losses from  operations and as of June
30, 2001, we had an  accumulated  deficit of  approximately  $11.1  million.  To
successfully  execute  our  business  plan,  we  believe  that we  will  require
substantial  additional  capital from equity or debt financings in order to meet
our projected working capital and other cash requirements. Moreover, the sale of
additional equity or other securities could result in additional dilution to our
stockholders.  We may  not  be  able  to  secure  any  additional  financing  on
acceptable terms, if at all.

Results of Operations

     The following table sets forth certain  statement of operations data of our
company expressed as a percentage of net revenue for the periods indicated:
                                      13
<PAGE>
<TABLE>
<CAPTION>
                                                       Year Ended June       Six Months Ended       Year Ended June
                                                           30, 2001            June 30, 2000            30, 2000
                                                      -------------------    ------------------    -------------------
<S>                                                        <C>                     <C>                   <C>
Net revenue.......................................         100.0%                  100.0%                100.0%
Cost of revenue...................................          75.5%                   71.1%                 69.5%
                                                          ------                 -------                ------
Gross profit......................................          24.5%                   28.9%                 30.5%
Selling, general and administrative...............          27.1%                   50.4%                 73.1%
Depreciation and Amortization
of goodwill and intangibles.......................          10.6%                   53.4%                 50.1%
Total operating expenses..........................          37.7%                  103.8%                123.2%
                                                          ------                 -------                ------
Operating losses..................................         (13.2)%                 (74.9)%               (92.7)%
                                                          -------                --------               -------
Other expenses....................................         (14.5)%                 (14.8)%               (17.0)%
                                                          -------                --------               -------
Net loss..........................................         (27.7)%                 (89.7)%              (109.7)%
                                                          =======                ========              ========
</TABLE>
Comparison of the fiscal year ended June 30, 2001 with fiscal year ended June
30, 2000

         Our total revenue during fiscal 2001 increased by $16,508,421, or 411%,
from $4,020,232 during fiscal 2000. This increase was due primarily to (a) our
acquisition of CMI during April 2000, and (b) increased service revenue
generated by our Performance Media Group, whose revenue increased 279% over
fiscal 2000.

         Our cost of revenue increased as a percentage of net revenue to 75.5%
during fiscal 2001, compared with 69.5% for the fiscal year ended June 30, 2000.
Correspondingly, gross profit margins decreased from 30.5% of revenue in 2000 to
24.5% for the year ended June 30, 2001. The increase in absolute dollars, and
corresponding decrease in gross profit margins, was due in part to the inclusion
of the results of CMI (acquired in April, 2000) in our consolidated results of
operations. Additionally, CMI's business involves substantial systems design and
installation work where profit margins on hardware components are historically
lower than gross profit margins on the sale of information technology solutions
and services.

         Selling, general and administrative expenses for the year ended June
30, 2001 increased to $5.6 million, up from $2.9 million in 2000, but decreased
as a percentage of revenue to 27.1% from 73.1% when compared with the fiscal
year ended June 30, 2000. The increase in absolute dollars resulted to a great
extent from the inclusion of CMI in the results of operations as well from
increased expenses at the company's headquarters relating to the administration,
operation, acquisition and integration of subsidiaries, and regulatory reporting
requirements. However, as a result of the higher operating incomes achieved
during the year ended June 30, 2001, operating losses decreased as a percentage
of revenues, from 92.7% to 13.2%.

         Included in the results of operations and table above are depreciation
and amortization of goodwill, intangibles and stock compensation of $2.2 million
and $2.0 million for the years ended June 30, 2001 and 2000, respectively. This
depreciation and amortization, amounting to 10.6% and 50.0% of net revenues,
respectively, are non-cash items and reflect primarily write down of the excess
of cost of the acquisition of our subsidiaries, Pinneast and CMI, over the net
tangible book value of the assets in those businesses at time of acquisition.
Total operating expenses for the year ended June 30, 2001, and the period ended
June 30, 2000 amounted to $7.7 million and $4.9 million, respectively, or 37.7%
and 123.2% of net revenue for the periods, and reflects the growth in
consolidated revenue of 510.6% of revenue for the year ended June 30, 2001 over
the corresponding period ended June 30, 2000.

         Other income and expenses, which included interest, miscellaneous
income and expense, and the settlement of litigation, amounted to -$3.0 million
and -$687,000, during the year and period ended June 30, 2001 and June 30, 2000,
respectively. During the second fiscal quarter in 2001, we determined that the
carrying value of our investment in E-Pawn.Com, Inc., received in partial
settlement of a lawsuit by that company, exceeded our net realizable value in
the marketplace. As a result, we wrote off the investment, resulting in a
non-recurring charge of $2.7 million, or approximately 13% of revenues against
earnings for the year.

         Consolidated net loss increased by $1.5 million to $5.7 million for the
year ended June 30, 2001 compared with $4.5 million for the period ended June
30, 2000, reflecting primarily the $2.7 million write-down in the value of
marketable securities.

         The net loss per common share decreased from $0.38 per share for the
fiscal year ended June 30, 2000 to a loss of $0.21 per share for the year ended
June 30, 2001, resulting in an improvement of $0.17 per share, or 45%. The
primary factor affecting the aforementioned changes was the nearly 213% increase
in common stock issued during fiscal 2001, principally on the 14.7 million
contingent shares issued pursuant to the acquisitions of CMI and Pinneast.
                                       14
<PAGE>

         As of June 30, 2001, we had a consolidated federal and state net
operating loss carry forward of approximately $8,455,000, expiring between the
years 2014 and 2021.

Future Assessment of Recoverability and Impairment of Goodwill

     Goodwill  arises  when an acquirer  pays more for a business  than the fair
value of the tangible and  separately  measurable  intangible  net assets of the
business.  For financial reporting  purposes,  goodwill and all other intangible
assets are amortized over the estimated period benefited. In connection with its
various acquisitions,  we recorded goodwill and other intangibles that are being
amortized on a straight-line basis over a period of 7 to 10 years, the estimated
period over which we expect to benefit from such intangible  assets.  As of June
30,  2001 and June 30,  2000 our  unamortized  goodwill  and  other  intangibles
combined were $ 4,009,304 and $3,999,035,  respectively  (which  represented 53%
and 49% of total assets and 117% and 91% of stockholders' equity, respectively).
We have determined the life for amortizing  goodwill based upon several factors,
the most  significant  of which  are the  relative  size,  historical  financial
viability and growth trends of the acquired  companies and the relative  lengths
of time such companies have been in existence.

     We periodically review the carrying value and recoverability of unamortized
goodwill and other intangibles.  If the facts and circumstances suggest that the
goodwill  and other  intangibles  may be impaired,  the  carrying  value of such
assets will be adjusted  accordingly,  and will  result in an  immediate  charge
against  income  during  the period of the  adjustment  and/or the length of the
remaining amortization period may be shortened, which will result in an increase
in the amount of  amortization  during the period of adjustment  and each period
thereafter  until fully amortized.  Once adjusted,  we may be required to adjust
further for  impairment and  recoverability  in future  periods.  Of the various
factors we consider in determining  whether goodwill and other  intangibles have
been impaired, the most significant are (i) losses from operations, (ii) loss of
customers;  and (iii) industry  developments,  including our ability to maintain
market share,  development of competitive products or services and imposition of
additional regulatory requirements.

     During July 2001, the Financial  Accounting Standards Board issued SFAS No.
141,  "Business  Combinations" and SFAS No. 142.  "Goodwill and Other Intangible
Assets".  SFAS No. 142 requires  that the  amortization  of goodwill be replaced
with periodic tests of the  goodwill's  impairment  and that  intangible  assets
other than goodwill be amortized over their useful lives. We will adopt SFAS No.
141 and No. 142 immediately with regard to business combinations initiated after
June 30, 2001.

Other Accounting Pronouncements

     During August 2001, the Financial  Accounting  Standards  Board issued SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets".  SFAS
No. 144 supercedes  SFAS No. 121,  "Accounting  for the Impairment of Long-lived
Assets and Assets to be Disposed of" and the accounting and reporting provisions
of  Accounting  Principles  Board  Opinion  No. 30,  "Reporting  the  Results of
Operations  -Reporting  the Effects of Disposal of a Segment of a Business,  and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS
No. 144 also amends Accounting Research Bulletin No. 51, "Consolidated Financial
Statements,"  to eliminate the exception to  consolidation  for a subsidiary for
which control is likely to be temporary.  The provisions of SFAS No. 144 will be
effective for fiscal years  beginning  after  December 15, 2001. We have not yet
determined  the  effect  SFAS No.  144 will have on our  consolidated  financial
position or results of operations.

Liquidity and Capital Resources

     Historically,  we have  satisfied  our  cash  requirements  primarily  from
private  equity  issuances,  working  capital  lines of  credit,  and loans from
certain officers and stockholders. During fiscal 2001, we secured our additional
working  capital  primarily from loans and sale of restricted  common stock from
our principal stockholders totaling approximately $274,000. As of June 30, 2001,
we had a cash balance of approximately $209,000.

     During fiscal 2001,  net cash used in investing  and  financing  activities
combined of $922,977  exceeded  net cash  provided by  operations  of  $609,786,
resulting  in a decrease of  $313,190  in cash.  During  fiscal  2000,  net cash
provided by investing and financing activities of $759,951 exceeded cash used in
operating activities of $521,056, resulting in a $238,895 increase in cash.


                                       15
<PAGE>

     Pinneast has three credit lines with aggregate availability of $300,000. As
of June 30,  2001,  we have  utilized  approximately  $204,000 on these lines of
credit, which expire on November 10, 2003 and bear interest at 10.50% per annum.
On July 20,  2001,  we modified  and  combined  these three  credit lines into a
single bank note of approximately  $201,000,  payable in 47 monthly installments
of principal and interest of $5,100. The monthly payments commence during August
2001 and continue  through July 2005.  The modified  note bears  interest at the
bank's  prime  rate plus 2% and is secured  by  substantially  all the assets of
Pinneast and a corporate guaranty by our company.

     During August 2001, CMI entered into a two-year  financing  agreement for a
$3.0  million  secured  revolving  credit  line  maturing  in  August  2003 from
Rosenthal &  Rosenthal,  Inc.  Availability  under the credit line is based on a
formula of eligible accounts receivable and inventory and allows for an increase
in the credit  facility to be considered as necessary.  Borrowings bear interest
at a base rate plus 2% per annum and are secured by  essentially  all the assets
of CMI, including accounts receivable, inventory, and general intangibles, and a
corporate  guaranty by our company.  The credit line also requires,  among other
conditions, compliance with certain financial covenants.

     On April 7, 2000, we completed an equity financing with Birch Circle LLC, a
Connecticut-based private investment banking firm, that generated $3,500,000 for
our  company  through  the  sale of  shares  of our  Series A  preferred  stock.
Approximately  $1.9  million  of  the  net  proceeds   (including   commissions,
accounting,  and  attorneys'  fees) were  utilized for our  acquisition  of CMI.
Shares of Series A preferred stock accrue dividends at the rate of 6% per annum,
and we may  decide  whether  to  cumulate  the  dividends  or pay  them in cash.
However, under certain conditions we must pay the dividends in cash. Pursuant to
the terms of the  financing,  we filed a  registration  statement  covering  the
resale of shares  of common  stock  issuable  upon  conversion  of the  Series A
preferred  stock,  which  became  effective  during  June  2001.  On the date of
effectiveness,  based on a  conversion  price of $0.043,  the Series A preferred
stockholder  was  entitled to convert its shares into  approximately  71,000,000
shares.  From July 2001 to October 2001, the Series A preferred  stockholder has
converted 52 shares of Series A preferred  into  8,404,268  shares of our common
stock.

     The accompanying 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 report of our  independent
public accountants on our financial  statements for the year ended June 30, 2001
states that our recurring operating losses,  reduced working capital,  and other
factors  raise  substantial  doubt  about our  ability  to  continue  as a going
concern. We believe that our working capital, together with any cash provided by
operations,  will be  adequate  to meet our cash  requirements  working  capital
through the third quarter of fiscal 2002. Substantial additional capital will be
needed in order to fund operations beyond that time.

     Our working  capital  requirements  for future  periods  depend on numerous
factors, including the timing of expenditures related to product development and
marketing,  the rate at which we  expand  our  staff,  and our  ability  to meet
revenue  projections,  among other items.  While we cannot predict the timing or
amount of our future expenditures,  we believe that we will have sufficient cash
on hand to fund our current operations through the third quarter of fiscal 2002,
provided we meet our expected revenue  targets.  Beyond the third fiscal quarter
of fiscal 2002, we may require additional financings, which may come from future
equity  or  debt  offerings  that  could  result  in  further  dilution  to  our
stockholders.  We are currently in the process of attempting to raise additional
capital in the next three to six months that will be used to acquire  additional
companies,  build our management  team, and provide  working  capital.  Adequate
capital may not be available and the lack of such capital could adversely affect
our business.  In the event our ability to obtain future capital looks doubtful,
we will exercise prudent business practices and curtail spending to maximize our
remaining resources.

ITEM 7.  FINANCIAL STATEMENTS

         Reference is made to the consolidated financial statements, the notes
thereto, and report of independent public accountants thereon commencing at page
F-1 of this report, which consolidated financial statements, notes, and report
are incorporated herein by reference.

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

                  Not applicable.
                                       16
<PAGE>

                                    PART III

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

Executive Officers and Directors

                  The following table sets forth certain information regarding
our executive officers and directors.

Name                    Age    Position

David R. Burke, Sr..... 58     Chairman of the Board and Chief Executive Officer
Vincent Caminiti....... 49     President and Chief Operating Officer
David C. Langle........ 51     Vice President Finance
Douglas H. Forde....... 59     Director
Lionel Forde........... 57     Director
William Lerner......... 65     Director
John Straatsma......... 47     Assistant Secretary


     David R. Burke,  Sr. has served as our  Chairman of the Board of  Directors
since August 2000 and as our Chief  Executive  Officer since  October 2001.  Mr.
Burke served as the Chief  Executive  Officer of Computer  Marketplace,  Inc., a
company he founded in 1983 that was  acquired by our company  during April 2000.
Prior to that time,  Mr.  Burke  spent 15 years  serving  in several  management
positions including technical  supervisor,  manufacturing  engineering  manager,
production  manager,  and  international  sales  manager with the  Metrigraphics
Division of Dynamics  Research  Corporation,  a multinational  manufacturer  and
distributor of  electro-optical  products.  Mr. Burke received his technical and
business education at Worchester Polytechnic, Lowell Technological Institute and
Boston University.  Mr. Burke also received  specialized training in information
systems from Novell,  Microsoft,  IBM, Hewlett  Packard,  Compaq and other "tier
one" microcomputer and software producers. Mr. Burke is a member of the American
Production & Inventory  Control Society and co-authored  Metriform  Fabrication,
Electronic   Packaging   and   Production,   May   1981,   Cahners   Publishing.


     Vincent  A.  Caminiti  has served as the  President  of our  company  since
October 2001 and as a member of our Board of Directors  since January 1999.  Mr.
Caminiti served as our Vice President, Chief Operating Officer from January 1999
until October 2001 and has served in various other  capacities  with our company
since June 1998.  From April 1994 until June 1998,  Mr.  Caminiti  served as the
Managing  Director of Rendon  International,  Ltd., a business  consulting  firm
active in the  telecommunications  and  information  technology  industries with
offices in Denver, Los Angeles, Hong Kong, Moscow, and London. In that capacity,
Mr. Caminiti assisted businesses with constructing strategic business alliances,
identifying acquisition candidates, and developing new market strategies through
consulting agreements,  including CBS Television's program distribution strategy
to Asian markets.

     David C. Langle has served as our Vice  President  Finance since  September
2000, and served as our Chief Financial  Officer from March 2000 until September
2000.  Mr.  Langle  served as a director  of our  company  from March 2000 until
September  2000.  Prior to joining our company,  Mr.  Langle  served as the Vice
President and Chief  Financial  Officer of Terra  Telecommunications  Corp. from
September  1997 until March 2000.  Mr. Langle has also served in various  senior
management  capacities as Vice President,  Chief Financial Officer, and director
for three  Florida-based  NASDAQ  and OTCBB  companies.  From 1982 to 1991,  Mr.
Langle served in various capacities with the Miami office of Spicer & Oppenheim,
CPAs, an international accounting and consulting firm, most recently as an audit
partner.  Mr.  Langle is a  certified  public  accountant  and has a bachelor of
science degree from the University of Illinois in Chicago.

     Douglas H. Forde has served as a director  of our  company  since  February
1999.  Mr.  Forde  founded our company in 1997 and served as our Chairman of the
Board of  Directors,  President,  and Chief  Executive  Officer from August 1999
until  September  2001.  Mr.  Forde  served  as  the  Director  of  Mergers  and
Acquisitions  for our company from June 1998 until  August  1999.  Prior to that
time, Mr. Forde served as Vice President, Strategic Planning for Computer Access
International,  Inc. from November 1996 until June 1998. Prior to November 1996,
Mr. Forde served as a business  consultant to numerous  companies,  ranging from
the Fortune 500 to smaller entrepreneurial  businesses.  Mr. Forde is a graduate
of the University of the Virgin  Islands,  the  University of Illinois,  and the

                                       17
<PAGE>

Bernard M. Baruch  College of the City  University of New York and holds degrees
in accounting,  finance,  and taxation.  Mr. Douglas Forde is the brother of Mr.
Lionel Forde.

     Lionel  Forde  has  served  as a member  of our  Board of  Directors  since
February  1999,  and as our Vice  President and Treasurer  from our inception in
March 1998 until  September  2001.  From November 1997 until  February 1999, Mr.
Forde served as the  President  of the  international  group at Computer  Access
International,  Inc.,  where he was  responsible  for developing  markets in the
Caribbean  and in Latin  America.  Prior to that,  Mr.  Forde served as a senior
manager in the Color Paper Products Division at Eastman Kodak Company. Mr. Forde
holds a masters in business administration degree (with honors) from Long Island
University  and a bachelor  of science  degree in business  administration  from
Eastern  Illinois  University.  Mr.  Lionel Forde is the brother of Mr.  Douglas
Forde.

     William  Lerner  has  served as a member of our  Board of  Directors  since
February 1999. Since 1994, Mr. Lerner has practiced corporate and securities law
with offices in Pennsylvania and Florida.  Mr. Lerner is also counsel to the law
firms of Sweeney &  Associates  (Pittsburgh)  and Snow  Becker  Krauss,  PC (New
York).  Mr. Lerner serves as a director of Seitel,  Inc. (a NYSE-listed  oil and
gas  producing  company),  Helm  Resources,  Inc. (an  AMEX-listed  company that
provides    mezzanine    financing   to   middle    market    companies),    and
Micros-to-Mainframes,  Inc.  (a  NASDAQ-listed  company  and  producer  of high-
technology  communications and computer services to Fortune 500 companies).  Mr.
Lerner is a graduate of Cornell University (1955) and of the New York University
School of Law (1960).  Mr.  Lerner is a member of the state bars of New York and
Pennsylvania,  and has served with the Securities and Exchange  Commission,  the
American Stock Exchange, and as general counsel to Hornblower, Weeks, Hemphill &
Noyes, a New York Stock Exchange brokerage/investment firm.

     John  Straatsma  served as our corporate  secretary from October 1999 until
September  2001, and as our assistant  secretary  since  September  2001.  Since
August 1998, Mr. Straatsma has acted as a consultant to our company for business
development and operations.  In September 1995, Mr. Straatsma founded, and since
has acted as president of Consultants  Ltd., a consulting  company for companies
active in the information  technology  industry.  From January 1983 until August
1995, Mr. Straatsma served as president of Trinidad Computers Ltd., a company he
founded.  Mr.  Straatsma holds a bachelor of commerce degree from the University
of  Guelph,  in  Guelph,  Ontario,  Canada,  and a master of  science  degree in
management from Florida International University, Miami, Florida.

ITEM 10.          EXECUTIVE COMPENSATION

         The following table sets forth the total compensation received for
services rendered in all capacities to our company for the fiscal years ended
June 30, 2001 and June 30, 2000 by our Chief Executive Officer and our three
other most highly compensated executive officers.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>


                                                                                        Long Term
                                                                                       Compensation
                                                                           -------------------------------------
                                                                                         Awards
                                                           Annual          -------------------------------------
                                                        Compensation         Restricted           Securities            All Other
                                                      -----------------        Stock              Underlying          Compensation
Name and Principal Position(1)             Year          Salary (2)          Awards ($)        Options (#) (3)           ($) (4)
--------------------------------------    --------    -----------------    ---------------     -----------------     ---------------
<S>             <C>                        <C>            <C>              <C>                     <C>                 <C>
David R. Burke, Sr. (5)..........          2001           $150,000                  --                  --                 --
   Chief Executive Officer                 2000            106,250(5)               --                  --                 --
   and President

Doug H. Forde (6)................          2001           $146,667         $ 2,618,000(6)               --                 --
   Former Chief Executive Officer          2000            109,900                  --                  --                 --


David C. Langle (7)..............          2001           $125,000         $   243,100(7)          150,000             $6,000
   Vice President - Finance                2000             27,250                  --                  --              1,500


                                       18
<PAGE>

Lionel Forde (8).................          2001           $100,483                  --             425,000                 --
   Vice President, Assistant               2000             60,000                  --                  --                 --
   Treasurer
-------------------------
</TABLE>

(1)  We  consider  Messrs.  Burke,  Caminiti,  and  Langle  to be our  executive
     officers.
(2)  Messrs.  Burke,  D.  Forde,  Langle,  and L.  Forde also  received  certain
     perquisites,  the value of which did not exceed 10% of their salary  during
     fiscal 2001.
(3)  The  exercise  price of all  stock  options  granted  was equal to the fair
     market value of our common stock on the date of grant.
(4)  Amounts shown represent automobile allowances for Mr. Langle.
(5)  Mr. Burke became our Chief Executive  Officer during October 2001.  Amounts
     listed for fiscal 2000 do not include  compensation paid to Mr. Burke prior
     to CMI's acquisition by our company during April 2000.
(6)  Mr. D. Forde resigned as our Chief Executive Officer during September 2001.
     During  September 2000, we issued to Mr. D. Forde  7,000,000  shares of our
     common  stock at a price of $0.37  per  share  as  compensation  under  his
     employment agreement.  As of June 30, 2001, Mr. D. Forde owned 5,200,000 of
     these restricted shares, which had a value of $156,000 at that time.
(7)  Mr. Langle joined our company during March 2000.  During September 2000, we
     issued to Mr. Langle 650,000 shares of our common stock at a price of $0.37
     per share as compensation  under his employment  agreement.  As of June 30,
     2001, Mr. Langle owned all of these restricted shares, which had a value of
     $19,500 at that time.
(8)  Mr. L. Forde resigned as our Vice  President,  Assistant  Treasurer  during
     September 2001.

Options Grants

         The following table represents certain information related to the
options granted to the officers listed during the last fiscal year.

                        OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
                                                                       Individual Grants
                                          -----------------------------------------------------------------------------
                                             Number of
                                             Securities            % of Total
                                         Underlying Options        Granted
                                              Options          to Employees in        Exercise Price        Expiration
Name                                       Granted(#)(1)         Fiscal Year          Per Share (2)           Date
--------------------------------------    -----------------    -----------------    ------------------    -------------
<S>                                            <C>                    <C>                 <C>                  <C>  <C>
David R. Burke, Sr...................               --                 --                 --                    --
Douglas H. Forde.....................               --                 --                 --                    --
David C. Langle......................          150,000                4.9%                $0.50                9/05/03
Lionel Forde.........................          425,000               13.8%                $0.50                9/05/03
---------------
</TABLE>

(1)  One-third of the options vest and become  exercisable on each of the first,
     second, and third anniversaries of the date of grant.

(2)  The  exercise  price of all  options  granted  was equal to the fair market
     value of our common stock on the date of grant.

Option Holdings

         The following table sets forth information with respect to the
unexercised options held as of June 30, 2001 by each of the officers listed.
None of the officers listed exercised options during fiscal 2001.


                                       19
<PAGE>

                        OPTIONS HELD AS OF JUNE 30, 2001

                                                  Number of Securities
                                                 Underlying Unexercised
                                                         Options
                                                    at Fiscal Year-end (1)
                                             -----------------------------------
                                                Exercisable       Unexercisable
                                             ----------------  -----------------
           David R. Burke, Sr..............          -                       -
           Douglas H. Forde................          -                       -
           David C. Langle.................          -                 150,000
           Lionel Forde....................          -                 425,000
----------------
(1)      None of the unexercised options listed had any value at fiscal
         year-end, because the exercise price of all of the options held by the
         listed officers was greater than $0.03, which was the closing sales
         price of our common stock as quoted on the OTCBB on June 29, 2001.

Employment Agreements

     We have an  employment  agreement  with Mr. Burke that  provides for him to
serve as our Chief Executive Officer through April 2003. The agreement  provides
for Mr.  Burke to receive (a) an annual base  salary of $150,000  during  fiscal
2001,  subject  to  increase  or  decrease  by our Board of  Directors;  and (b)
reimbursement of all business  expenses  incurred on behalf of our company.  The
agreement  also  provides  for Mr.  Burke to  participate  in all of our benefit
plans.

     Mr.  Burke's  employment  agreement  provides  for him to receive his fixed
compensation  through the date of  termination  of his  employment  by reason of
disability  or if we  terminate  the  agreement  "for  cause,"  as  defined  the
agreement.  In the event that we decide  terminate the agreement  other than for
cause,  or in the event of termination of the agreement by reason of Mr. Burke's
resignation,  Mr.  Burke will be  entitled  to  receive  his salary for one year
following the date of  termination.  Mr. Burke has agreed to not compete with us
within a specified  territory  for two years  following the  termination  of his
employment  for cause or due to his  resignation.  The  agreement  also contains
typical provisions related to non-disclosure of confidential information.

     We have an employment  agreement  with Mr.  Douglas Forde that provides for
him to serve as our Chairman of the Board of Directors, Chief Executive Officer,
and President of our company through May 2005.  During September 2001, Mr. Forde
resigned as our Chairman and Chief Executive Officer, but continues to serve our
company in various capacities  including  assisting with mergers,  acquisitions,
and business development. The agreement provides for Mr. Forde to receive (a) an
annual  base  salary of  $175,000  during  fiscal  2001,  subject to increase or
decrease by our Board of Directors;  (b) an  automobile  allowance of $1,000 per
month; and (c)  reimbursement of all business expenses incurred on behalf of our
company.  The agreement also provides for Mr. Forde to participate in all of our
benefit  plans  and to  participate  in $10  million  of keyman  life  insurance
coverage of which our company is the  beneficiary.  We did not pay Mr. Forde his
automobile  allowance during fiscal 2000 or 2001, and have not yet purchased the
keyman life insurance policy.

     We have an employment agreement with Mr. Lionel Forde that provides for him
to serve as our Treasurer  through February 2002. Mr. L. Forde resigned from our
company  during  September  2001.  The  agreement  provided  for Mr. L. Forde to
receive (a) an annual base salary of $120,000  during  fiscal  2001,  subject to
increase or decrease by our Board of Directors;  (b) an automobile  allowance of
$700 per month;  and (c)  reimbursement  of all  business  expenses  incurred on
behalf  of our  company.  The  agreement  also  provided  for Mr.  L.  Forde  to
participate in all of our benefit plans. We did not pay Mr. Forde his automobile
allowance during fiscal 2000 or 2001.

     We have an  employment  agreement  with Mr. Langle that provides for him to
serve as the Vice  President  of Finance of our company  through  May 2005.  The
agreement  provides  for Mr.  Langle to  receive  (a) an annual  base  salary of
$125,000 per annum,  subject to increase or decrease by our Board of  Directors;
(b) an  automobile  allowance of $600 per month;  and (c)  reimbursement  of all
business expenses incurred on behalf of our company. The agreement also provides

                                       20
<PAGE>

for Mr. Langle to  participate in all of our benefit plans and to participate in
keyman life insurance coverage of which our company is the beneficiary.  We have
not yet purchased this policy.

     The  employment  agreements  for  Messrs.  D. Forde,  L. Forde,  and Langle
provide for each executive to receive his fixed compensation through the date of
termination of his employment by reason of disability, death, resignation, or as
a result of termination of employment "for cause," as defined in the agreements.

         During July 2000, our Board of Directors granted to Messrs. D. Forde
and Langle 7.0 million and 650,000 shares of our common stock, respectively,
subject to each executive's agreement not to resell the shares for a five-year
period. We have also granted to these executives certain "piggyback"
registration rights with respect to the shares granted pursuant to the
employment agreements.

1999 Stock Option Plan

         During March 1999, our board of directors adopted our 1999 Stock Option
Plan. The plan is intended to attract, retain, and motivate directors,
employees, and independent contractors who provide valuable services to our
company by providing them with the opportunity to acquire a proprietary interest
in our company and to link their interests and efforts to the long-term
interests of our stockholders.

         The plan authorizes the issuance of 4,500,000 shares of common stock.
As of November 1, 2001, we had granted options to purchase 3,076,825 shares of
common stock under the plan, and no shares have been issued upon exercise of
those options. As of November 1, 2001, there were 1,423,175 shares available for
grant under the plan.

         The plan is administered by our Board of Directors or our compensation
committee. Options granted under the plan may be either incentive stock options,
as defined under the Internal Revenue Code, or nonqualified options. The
expiration date, maximum number of shares purchasable, vesting provisions, and
any other provisions of options granted under the plan will be established at
the time of grant. The plan administrator will set the term of each option, so
long as those determinations are consistent with the intent of the plan. Options
will vest and become exercisable in whole or in one or more installments at such
time as may be determined by the plan administrator.

         The plan administrator has the authority to include provisions in any
grant of options that contain a "reload" feature. The "reload" feature provides
that in the event the holder of an option exercises the option with shares of
common stock by delivering to us shares of common stock already owned by the
holder of the option, the holder will receive a new option to purchase shares of
our common stock equal in number to the tendered shares.

         Our Board of Directors may declare that each option granted under the
plan will terminate as of a fixed date in the event of the following:

     o    a proposed dissolution, liquidation of our company;

     o    a  proposed  sale of all or  substantially  all of the  assets  of our
          company; or

     o    a proposed merger or tender offer of our company.

In the event of such a declaration, each optionholder will have the right,
during the 30-day period preceding such an event, to exercise any portion or all
of the holder's options, including shares of stock as to which the option would
not otherwise be exercisable. However, in no such event will the term of the
original option be extended.

         In the event of an optionholder's death or disability, the option
holder (or any applicable executor or administrator) may exercise any options
held at any time prior to the earlier of (a) the expiration date of the option;
or (b) the one year anniversary of the optionholder's termination of employment
by reason of death or disability. In the event of an optionholder's termination
of employment for any reason other than for "cause" (as defined in the plan),
the optionholder will have 30 days following such termination of employment to
exercise any options held, but in no event later than the option expiration
date. In the event the optionholder's employment terminates for "cause," any
options held on the date of termination will expire.


                                       21
<PAGE>

         The Board of Directors may amend, suspend, or discontinue the plan at
any time, as long as any such action does not prejudice the right of any option
holder under the plan. In addition, without obtaining approval of our
stockholders, no such amendment may have the effect of (a) increasing the number
of shares of stock reserved for issuance under the plan, or (b) changing the
definition of persons eligible to receive options under the plan. The plan is
intended to comply with Section 16 of the Exchange Act and, with respect to
incentive stock options, Section 422 of the Internal Revenue Code.

Section 16(a) Beneficial Ownership Compliance

         Section 16(a) of the Exchange Act requires our directors, officers, and
persons who own more than 10% of a registered class of our equity securities to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission. SEC regulations require directors, officers, and greater
than 10% stockholders to furnish our company with copies of all Section 16(a)
forms that they file. Based solely on our discussions with these persons, as of
June 30, 2001, we do not believe that any of our executive officers, directors,
or beneficial owners of 10% or more of our common stock were current with these
filing requirements.

ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information regarding the shares
of our common stock beneficially owned as of October 12, 2001 by each of our
directors and executive officers, all of our directors and executive officers as
a group, and each person known by us to be the beneficial owner of more than 5%
of our common stock.
<TABLE>
<CAPTION>
                                                                Shares
                                                          Beneficially Owned
Name of Beneficial Owner (1)                                      (1)                Percent (2)
------------------------------------------------------    --------------------     -----------------
Directors and Executive Officers:
<S>                                                          <C>                       <C>
David R. Burke, Sr...............................            16,040,460(3)             29.6%
Vincent Caminiti.................................               849,900(4)              1.6
Douglas H. Forde.................................             6,314,375                11.6
Lionel Forde.....................................               916,525(5)              1.9
David C. Langle..................................               699,950(6)              1.3
William Lerner...................................               250,000                 *
John W. Straatsma................................               416,500(7)              *

All executive officers and directors as a group
   (seven persons)...............................            25,487,710                46.1%

5% Stockholders:
Birch Circle, LLC................................             8,404,268(8)             15.5%
E-Pawn.com, Inc..................................             2,712,361(9)              5.0%
</TABLE>


-------------------
*  Less than 1% of the outstanding shares of common stock.

(1)      Each person named in the table has sole voting and investment
         power with respect to all common stock beneficially owned by him or
         her, subject to applicable community property law, except as otherwise
         indicated. Except as otherwise indicated, each person may be reached at
         10100 West Sample Road, Suite 401, Coral Springs, Florida 33065.
(2)      The percentages shown are calculated based upon 54,287,730
         shares of our common stock outstanding on October 30, 2001, which does
         not include 372,777,875 shares of common stock issuable upon conversion
         of the Series A preferred stock. The numbers and percentages shown
         include the shares of common stock that each named stockholder has the
         right to acquire within 60 days of October 30, 2001. In calculating
         percentage of ownership, all shares of common stock that the named
         stockholder has the right to acquire upon exercise of options or
         warrants within 60 days of October 30, 2001 are deemed to be
         outstanding for the purpose of computing the percentage of common stock
         owned by such stockholder, but are not deemed to be outstanding for the
         purpose of computing the ownership percentage of any other stockholder.


                                       22
<PAGE>

         Includes, when applicable, shares owned of record by such person's
         minor children and spouse and by other related individuals and entities
         over whose shares of common stock such person has sole or shared voting
         control or power of disposition.
(3)      Amounts  do not  include  additional shares of common stock that may be
         issued to Mr.  Burke during April 2002 pursuant to our merger agreement
         with CMI.See Item 12, "Certain Relationships and Related Transactions."
(4)      Includes 599,900 shares issuable upon exercise of options.
(5)      Includes 141,525 shares issuable upon exercise of options.
(6)      Includes 49,950 shares issuable upon exercise of options.
(7)      Includes 166,500 shares issuable upon exercise of options.
(8)      Represents 8,404,268 shares of common stock. Amounts do not
         include 372,777,875 shares of common stock issuable to Birch Circle
         upon conversion of 298 shares of Series A preferred stock. Birch Circle
         has sole voting and dispositive power with respect to the shares of
         common stock and Series A preferred stock. The address of Birch Circle
         is c/o Citco Trustees (Cayman) Limited, Commercial Centre, P.O. Box
         31106 SMB, Grand Cayman, Cayman Islands, British West Indies.
(9)      E-Pawn.com,  Inc. has sole voting and  dispositive  power with respect
         to the shares of common  stock.The address for E-Pawn.com, Inc. is 2855
         University Drive, Suite 200, Coral Springs, Florida 33065.

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         During November 1998, we entered into an agreement with Girmon
Investment Co., Limited, a company that is 33% owned by Moty Hermon, a former
member of our board of directors. Pursuant to the agreement, Girmon performed
corporate finance advisory services for our company through October 2001. As
consideration for services performed on our behalf, we issued to Girmon 500,000
shares of our common stock at $0.25 per share.

         Mr. Burke was the former chief executive officer and principal owner of
Computer Marketplace, Inc. During April 2000, we acquired Computer Marketplace,
Inc., pursuant to an Agreement and Plan of Reorganization whereby CMI became our
wholly owned subsidiary. We completed the merger through consideration
consisting of: (a) 1.4 million shares of our common stock; (b) a cash payment of
$1.5 million; and (c) a promissory note for $1.0 million at 6%, payable in equal
annual installments at the first and second anniversaries of the merger.
Pursuant to the merger, we agreed to issue additional shares of our common stock
to the former shareholders of CMI, including Mr. Burke, in the event the price
of our common stock, as quoted on the OTCBB, fell below $2.50 on the first two
anniversaries of the closing of the merger. As a result, during June 2001, we
issued 13,625,000 additional shares of common stock to Mr. Burke. We will be
required to issue to Mr. Burke additional shares of our common stock during
April 2002 if the price of our common stock does not increase above $0.27 per
share.

     During  fiscal  2000,  Mr. D. Forde  provided us with  related  party notes
payable  of  approximately   $101,000.   The  notes  are  non-interest  bearing,
unsecured, and have no specified date for repayment. During fiscal 2001, we made
principal  payments  of  approximately  $112,400  to Mr.  Forde,  and Mr.  Forde
advanced additional  principal to us of approximately  $134,500.  As of June 30,
2001, we owed Mr. Forde approximately $123,100 on these notes.

     During fiscal 2000, Messrs. D. Forde, L. Forde,  Caminiti,  Straatsma,  and
Ms. Michelle Michalow,  a former shareholder of Pinneast,  guaranteed up to $1.0
million of  operating  capital  on an  as-needed  basis to assure the  continued
growth and success of our company.  The letter agreement  expired during October
2001.

         During November 2000, we sold 1,170,000 shares of our common stock to
Mr. Burke at $0.20 per share, generating total cash proceeds of $234,000.

         We believe that all of the related party transactions listed above were
provided on terms no less favorable to us than could have been obtained from
unrelated firms or third parties. All future transactions between us and our
officers, directors, and principal stockholders are expected to be on terms no
less favorable to us than could be obtained from unaffiliated persons.


                                       23
<PAGE>



ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

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

    2.1        Plan of Reorganization  and Agreement of Merger,  dated April 14,
               2000, by and between Computer Marketplace,  Inc., David R. Burke,
               Sr.,  Betty  Des  Meules,  Cobra  Technologies,   Inc.,  and  CMI
               Acquisition Corp. (1)
    3.1        Articles of Incorporation, including all amendments
    3.2        Bylaws (2)
    4.1        Specimen of common stock certificate
    4.2        Terms of Series A Convertible Preferred Stock (3)
    4.3        Warrant Certificate issued to Wellington Capital Corporation (4)
   10.1        Lease  Agreement  dated May 11,  1999,  between  Sawgrass  Realty
               Holdings, Inc. and the Registrant (5)
   10.2        1999 Stock option Plan (6)
   10.3        Employment Agreement dated March 1, 1999 and amended as of August
               24, 1999 by and between the Registrant and Lionel Forde (7)
   10.4        Employment Agreement dated March 1, 1999 and amended as of August
               24,  1999  and  further  on  June  1,  2000  by and  between  the
               Registrant and Douglas H. Forde (8)
   10.5        Merger Agreement dated May 25, 1999 by and between Pinnacle East,
               Inc., Mitchell D. Smith, Steven R. Lounsberry, and the Registrant
               (9)
   10.6        Employment  Agreement  dated  June  1,  2000 by and  between  the
               Registrant and David C. Langle (10)
   10.7        Series A Convertible  Stock Purchase  Agreement dated as of April
               7, 2000 among the Registrant and Birch Circle LLC (11)
   10.8        Registration  Rights  Agreement dated as of April 7, 2000 between
               the Registrant and Birch Circle LLC
   10.9        Security Agreement (12)
   10.10       Intellectual Property Security Agreement (13)
   10.11       Stock Pledge Agreement (14)
   10.12       Employment  Agreement  dated  April 10,  2000 by and  between the
               Registrant and David R. Burke, Sr.
   10.13       Financing   Agreement  dated  August  7,  2001  between  Computer
               Marketplace, Inc. and Rosenthal & Rosenthal, Inc.
   21          Subsidiaries of the Registrant

--------------------
(1)            Incorporated by reference to Exhibit 2 of the  Registrant's  Form
               10-SB filed with the Commission on December 29, 1999.
(2)            Incorporated by reference to Exhibit 3.1 of the Registrant's Form
               10-SB filed with the Commission on December 29, 1999.
(3)            Incorporated by reference to Exhibit 10.8(a) of the  Registrant's
               Annual  Report on Form  10-KSB for the fiscal year ended June 30,
               2000 filed with the Commission on October 18, 2000.
(4)            Incorporated by reference to Exhibit 10.8(f) of the  Registrant's
               Annual  Report on Form  10-KSB for the fiscal year ended June 30,
               2000 filed with the Commission on October 18, 2000.
(5)            Incorporated  by reference  to Exhibit  10.1 of the  Registrant's
               Form 10-SB filed with the Commission on December 29, 1999.
(6)            Incorporated by reference to Exhibit 4 of the  Registrant's  Form
               10-SB filed with the Commission on December 29, 1999.
(7)            Incorporated by reference to Exhibit 10.2 of the Registrant's
               Form 10-SB filed with the Commission on December 29, 1999.
(8)            Incorporated  by reference  to Exhibit  10.6 of the  Registrant's
               Annual  Report on Form  10-KSB for the fiscal year ended June 30,
               2000 filed with the Commission on October 18, 2000.
(9)            Incorporated  by reference  to Exhibit  10.4 of the  Registrant's
               Form 10-SB filed with the Commission on December 29, 1999.

                                       24
<PAGE>

(10)          Incorporated  by reference  to Exhibit  10.7 of the  Registrant's
               Annual  Report on Form  10-KSB for the fiscal year ended June 30,
               2000 filed with the Commission on October 18, 2000.
(11)           Incorporated by reference to Exhibit 10.8(b) of the  Registrant's
               Annual  Report on Form  10-KSB for the fiscal year ended June 30,
               2000 filed with the Commission on October 18, 2000.
(12)           Incorporated by reference to Exhibit 10.8(c) of the  Registrant's
               Annual  Report on Form  10-KSB for the fiscal year ended June 30,
               2000 filed with the Commission on October 18, 2000.
(13)           Incorporated by reference to Exhibit 10.8(d) of the  Registrant's
               Annual  Report on Form  10-KSB for the fiscal year ended June 30,
               2000 filed with the Commission on October 18, 2000.
(14)           Incorporated by reference to Exhibit 10.8(e) of the  Registrant's
               Annual  Report on Form  10-KSB for the fiscal year ended June 30,
               2000 filed with the Commission on October 18, 2000.

(b)      Reports on Form 8-K

         None.










                                       25
<PAGE>



                                   SIGNATURES

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

                               CELEXX CORPORATION



                               By:  /s/ David R. Burke, Sr.
                               -------------------------------------------------
                               David R. Burke, Sr.
                               Chairman of the Board and Chief Executive Officer


Date:  October 31, 2001

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

Signature                   Capacity                             Date

/s/ David R. Burke, Sr.     Chairman of the Board and Chief    October 31, 2001
--------------------------- Executive Officer (Principal
David R. Burke, Sr.         Executive Officer)


/s/ David C. Langle         Vice President Finance (Principal  October 31, 2001
--------------------------- Accounting and Financial Officer)
David C. Langle

/s/ Vincent Caminiti        President, Chief Operating         October 31, 2001
--------------------------- Officer, and Director
Vincent Caminiti

/s/ Lionel Forde            Director                           October 31, 2001
----------------------------
Lionel Forde

/s/ Douglas H. Forde        Director                           October 31, 2001
---------------------------
Douglas H. Forde

/s/ William Lerner          Director                           October 31, 2001
---------------------------
William Lerner




                                       26

<PAGE>




                          INDEX TO FINANCIAL STATEMENTS

                       CELEXX CORPORATION AND SUBSIDIARIES



Independent Auditors' Report.................................................F-2

Consolidated Balance Sheets..................................................F-3

Consolidated Statements of Operations and Comprehensive Loss.................F-4

Consolidated Statements of Stockholders' Equity..............................F-5

Consolidated Statements of Cash Flows........................................F-7

Notes to Consolidated Financial Statements...................................F-9








                                       F-1
<PAGE>

                           INDEPENDENT AUDITORS' REPORT



To the Board of Directors of
CeleXx Corporation
Coral Springs, Florida

We have audited the accompanying consolidated balance sheets of CeleXx
Corporation and Subsidiaries, as of June 30, 2001 and 2000, and the related
consolidated statements of operations and comprehensive loss, stockholders'
equity and cash flows for the year ended June 30, 2001, the six months ended
June 30, 2000 and the year ended December 31, 1999. 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 audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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 provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of CeleXx
Corporation and Subsidiaries, as of June 30, 2001 and 2000, and the consolidated
results of their operations and their cash flows for the year ended June 30,
2001, the six months ended June 30, 2000 and the year ended December 31, 1999,
in conformity with auditing principles generally accepted in the United States
of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2(A) to
the consolidated financial statements, the Company incurred losses of
approximately $5,712,000 and $3,195,000 for the year ended June 30, 2001 and for
the six months ended June 30, 2000, respectively. Additionally, the Company had
a working capital deficiency of approximately $1,125,000 at June 30, 2001. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern without the raising of additional  debt and/or equity
financing to fund  operations. Management's plans with respect to these
matters are described in Note 2(A). The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.


                                             /s/   Feldman Sherb & Co., P.C.
                                                   ----------------------------
                                                   Feldman Sherb & Co., P.C.
                                                   Certified Public  Accountants


New York, New York
October 31, 2001


                                      F-2




<PAGE>

                       CELEXX CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                               ASSETS                 June 30,          June 30,
                                                       2001               2000
                                                    -----------      -----------
CURRENT ASSETS:
    Cash                                            $   209,281     $   522,471
    Accounts receivable, net of allowance for
         doubtful accounts of $72,000 and $30,000     2,588,495       2,212,298
    Inventory                                           213,353         422,744
    Prepaid taxes                                             -         207,082
    Other current assets                                 15,537          26,745
                                                    -----------      -----------
TOTAL CURRENT ASSETS                                  3,026,666       3,391,340

PROPERTY AND EQUIPMENT, NET                             503,005         291,780

MARKETABLE SECURITIES                                         -         437,000

GOODWILL AND OTHER
INTANGIBLE ASSETS, NET                                4,009,304       3,999,251

OTHER ASSETS                                             31,712          53,008
                                                    -----------      -----------
                                                   $  7,570,687     $ 8,172,379
                                                    ===========      ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable and accrued expenses          $  2,620,273     $ 1,301,472
    Note payable and advances - related parties         945,066       1,041,500
    Line of credit - short term portion                 202,666       1,093,811
    Advances from stockholder                           127,704         100,886
    Other liability                                     256,027          46,027
    Deferred revenue                                          -         112,596
                                                   ------------      -----------
    TOTAL CURRENT LIABILITIES                         4,151,736       3,696,292
                                                   ------------      -----------
LINE OF CREDIT - long term portion                            -          71,631
                                                   ------------      -----------
COMMITMENTS AND CONTINGENCIES                                 -               -

STOCKHOLDERS' EQUITY:
    Preferred stock,$.001 par value,20,000,000 shares
      authorized; 305 and 350 shares issued
      and outstanding, respectively                           -               -
    Common stock, $.001 par value, 100,000,000 shares
      authorized; 48,859,480 and 15,619,696 shares
         issued and outstanding, respectively            48,859          15,620
    Additional paid-in capital                       17,825,283      12,501,778
    Unamortized stock compensation                   (3,325,636)     (1,132,083)
    Other comprehensive loss- unrealized loss on
         marketable securities                                -      (1,563,000)
    Accumulated deficit                             (11,129,555)     (5,417,859)
                                                  --------------    ------------
    TOTAL STOCKHOLDERS' EQUITY                        3,418,951       4,404,456
                                                  --------------    ------------
                                                 $    7,570,687     $ 8,172,379
                                                  ==============    ============

                See notes to consolidated financial statements.

                                      F-3

<PAGE>


                       CELEXX CORPORATION AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS


<TABLE>
<CAPTION>


                                                      Six Months
                                      Year Ended         Ended       Year Ended         Year Ended
                                      June 30,2001    June 30,2000  December 31,1999   June 30,2000
                                      -------------   -------------  ---------------    ------------
                                                                                       - unaudited -

<S>                                  <C>             <C>             <C>               <C>
REVENUE                              $ 20,528,653    $ 3,565,274     $    680,989      $ 4,020,232
COST OF REVENUE                        15,502,903      2,533,929          353,140        2,792,873
                                     -------------    ------------   --------------    ------------
GROSS PROFIT                            5,025,750      1,031,345          327,849        1,227,359

OPERATING EXPENSES
  Selling, general and
     administrative expenses            5,569,134      1,797,824        1,390,872        2,939,187
  Depreciation and amortization
     of goodwill, intangibles and
     stock compensation                 2,179,140      1,901,815          683,420        2,012,211
                                     --------------  -----------     --------------    ------------
                                        7,748,274      3,699,639        2,074,292        4,951,398

LOSS FROM OPERATIONS                   (2,722,524)    (2,668,294)      (1,746,443)      (3,724,039)

OTHER INCOME (EXPENSES):
    Interest expense                     (215,845)       (27,047)         (67,754)         (95,801)
    Other expense                         ( 98,327)            -                -                -
    Provision for uncollectible loan
       receivable                                -      (500,000)               -         (500,000)
    Settlement of litigation                     -             -          (91,200)         (91,200)
    Write-down on marketable securities (2,675,000)            -                -                -
                                     --------------  -------------   --------------    ------------
TOTAL OTHER EXPENSES                    (2,989,172)      (527,047)       (159,954)        (687,001)
                                     --------------  -------------   --------------    ------------
NET LOSS                                (5,711,696)    (3,195,341)     (1,906,397)      (4,411,040)

    Dividends on preferred stock           210,000         46,027                           46,027
                                     --------------  -------------   --------------    ------------
NET LOSS APPLICABLE TO COMMON
   STOCKHOLDERS                      $  (5,921,696)   $(3,241,368)   $ (1,906,397)     $(4,457,067)
                                     ==============  =============   ==============    ============

NET LOSS                             $  (5,711,696)   $(3,195,341)   $ (1,906,397)     $(4,411,040)

OTHER COMPREHENSIVE LOSS:
    Unrealized holding loss on
      Marketable securities                      -     (1,563,000)              -       (1,563,000)
                                     --------------  -------------   --------------    ------------
COMPREHENSIVE LOSS                     $(5,711,696)   $(4,758,341)   $ (1,906,397)     $(5,974,040)
                                     ==============  ==============  ==============    ============
NET LOSS PER COMMON SHARE
   - basic                             $     (0.21)   $     (0.24)   $      (0.23)     $     (0.38)
                                     ==============  ==============  ==============    ============
WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING - basic                   27,958,272     13,725,970       8,357,005       11,741,514
                                     ==============  ==============  ==============    =============

</TABLE>

                 See notes to consolidated financial statements.

                                        F-4
<PAGE>

                       CELEXX CORPORATION AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>


                           Convertible
                        Preferred Stock       Common Stock
                        -----------------  ----------------- Additional        Unamortized  Other                     Total
                        Number of          Number of          Paid-in  Deferred  Stock    Comprehensive Accumulated  Stockholders'
                        Shares    Amount   Shares     Amount  Capital  Financing Compensation Loss        Deficit       Equity
                        ---------  ------  ---------  ------- ---------  ------- ----------- ----------  ----------  ----------


<S>              <C>              <C>      <C>       <C>     <C>        <C>      <C>      <C>           <C>         <C>
Balance, January 1, 1999       -  $  -     4,500,000 $4,500  $ 211,621  $     -  $     -  $          -  $ (316,121) $ (100,000)

Shares issued in
 conjunction with merger       -     -       200,000    200       (200)       -        -             -           -           -

Issuance of common stock
 for exchange                  -     -       713,475    713   (160,342)       -        -             -           -    (159,629)

Acquisition of subsidiary      -     -       500,000    500    749,250        -        -             -           -     749,750

Retirement of related
 party debt                    -     -     1,733,333  1,734    446,907        -        -             -           -     448,641

Shares issued for
 consulting services           -     -       500,000    500    124,500        -        -             -           -     125,000

Sale of common stock           -     -       860,250    860    859,390        -        -             -           -     860,250

Issuance of stock for cash
  and services                 -     -       300,000    300    299,700        -        -             -           -     300,000

Shares issued for
 deferred financing services   -     -       400,000    400    249,600 (250,000)       -             -           -           -

Shares issued to
 retire debt                   -     -       400,000    400    183,600        -        -             -           -     184,000

Shares issued in legal
 settlement                    -     -       150,000    150     91,050        -        -             -           -      91,200

Shares issued for services     -     -       650,000    650    161,850        -        -             -           -     162,500

Net loss                       -     -             -      -          -        -        -             -   (1,906,397)(1,906,397)
                        ---------  ------  ---------  ------   --------  -------  -------  ------------  ----------  ----------

Balance, December 31, 1999     -     -    10,907,058 10,907  3,216,926 (250,000)       -             -   (2,222,518)   755,315
</TABLE>

                See notes to consolidated financial statements.

                                        F-5

<PAGE>
                       CELEXX CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                       Convertible Preferred
                             Stock            Common Stock                                      Other                     Total
                         -----------------  ----------------- Additional           Unamortized  Compre-                Stockholders'
                         Number of          Number of          Paid-in   Deferred    Stock      hensive   Accumulated     Equity
                         Shares    Amount   Shares     Amount  Capital   Financing Compensation  Loss       Deficit
                        ---------  ------   --------  ------- ---------  --------- ------------  -------  -----------  ----------
<S>                        <C>    <C>  <C>         <C>     <C>       <C>      <C>                <C>          <C>       <C>
Issuance of Common Stock
 for services                  -   -    2,290,555   $2,291 $3,148,974$(260,400)  $(1,132,083)          -            -   $1,758,782

Sale of
 preferred stock             350   -           -        -   2,634,327  510,400             -           -            -    3,144,727

Exchange of stock for
 marketable securities         -   -    1,000,000   1,000   1,999,000        -             -           -            -    2,000,000

Sale of common stock           -   -       22,083      22       9,978        -             -           -            -       10,000

Acquisition of subsidiary      -   -    1,400,000   1,400   1,538,600        -             -           -            -    1,540,000

Accrual of preferred stock
 dividend payable              -   -            -       -     (46,027)       -             -           -            -      (46,027)

Unrealized loss on marketable
 securities                                     -       -           -        -             -  (1,563,000)           -   (1,563,000)

Net loss                       -   -            -       -           -        -             -           -   (3,195,341)  (3,195,341)
                          ------ ----- ----------- ------- -----------  ------- ------------- ----------  -----------  ----------
Balance, June 30, 2000       350   -    15,619,696  15,620  12,501,778       -    (1,132,083) (1,563,000)  (5,417,859)   4,404,456

Issuance of common stock
 to senior executives
  for services                 -   -     7,700,000   7,700   2,887,700       -    (2,895,400)          -            -            -

Sale of common stock           -   -     1,170,000   1,170     232,830       -             -           -            -      234,000

Sale of common stock
 pursuant to Employee
  Stock Purchase Plan          -   -        14,163      14       2,238       -             -           -            -        2,252

Shares issued in settlement
 of lawsuits                   -   -     2,443,684   2,444     621,515       -             -           -            -      623,959

Write-down on marketable
 securities                    -   -           -       -             -       -              -  1,563,000            -    1,563,000

Contingent shares issued
 pursuant to acquisitions      -   -    14,668,210  14,668     732,500       -             -           -            -      747,168

Shares issued to retire
 related party debt            -   -     1,600,000   1,600      84,800       -             -           -            -       86,400

Shares awarded to employees    -   -           300       -          75       -             -           -            -           75

Shares issued to settle
 accounts payable              -   -        72,500      73      17,072       -             -           -            -       17,145

Issuance of common stock
 for services                 -   -      3,641,445   3,641     943,204       -      (838,799)          -            -      108,046

Issuance of common stock for
transaction breakup            -   -       250,000     250      13,250       -             -           -            -       13,500

Conversion of preferred stock
to common Stock              (45)  -     1,679,482   1,679      (1,679)      -             -           -            -            -

Accrual of preferred stock
 dividend payable             -    -           -         -    (210,000)      -             -           -            -     (210,000)

Amortization of stock
compensation                 -     -           -         -           -       -     1,540,646           -            -    1,540,646

Net loss                     -     -           -         -           -       -             -           -   (5,711,696)  (5,711,696)
                       ---------  ----- ---------  -------  ----------  -------  -----------    --------- ------------  -----------

Balance, June 30, 2001     305 $   -    48,859,480 $48,859 $17,825,283    $  -   $(3,325,636)          - $(11,129,555  $ 3,418,951
                       =========  ===== =========  =======  ==========  =======  ===========    ========= ============  ===========

</TABLE>

                 See notes to consolidated financial statements.

                                       F-6

<PAGE>




                      CELEXX CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                  Six Months
                                                    Year Ended      Ended       Year Ended       Year Ended
                                                    June 30,2001 June 30,2000 December 31,1999   June 30,2000
                                                   ------------  ------------ ----------------   -----------
                                                                                                 - unaudited -
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                <C>            <C>             <C>             <C>
  Net loss                                         $ (5,711,696)  $ (3,195,341)   $ (1,906,397)   $(4,411,040)
                                                   -------------  -------------- ---------------- ------------
  Adjustments to reconcile net loss to net cash
     used in operations:
        Provision for doubtful accounts receivable       42,000              -               -              -
        Depreciation and amortization                 1,109,528        156,708         125,920        267,104
        Write-down on impairment of asset                24,915              -               -              -
        Common stock issued for transaction break-up     13,500              -               -              -
        Common stock issued for interest                      -              -          49,000         49,000
        Common stock issued in legal settlement               -              -          91,200         91,200
        Common stock issued for services              1,069,612      1,758,782         557,500      2,116,282
        Provision for uncollectible loan receivable           -        500,000               -        500,000
        Write-down on marketable securities            2,675,000            -                -              -

  Changes in assets and liabilities net of effects
   from acquisition:
     Accounts receivable                               (418,197)       116,951         118,531        157,502
     Inventory                                           99,409        187,951               -        187,951
     Other current assets                               218,290         (8,500)              -         86,622
     Other assets                                        21,296              -         (42,850)        53,150
     Accounts payable and accrued expenses            1,578,725        409,946        (133,716)       287,707
     Deferred revenue                                  (112,596)        12,082          87,384         93,466
                                                  --------------  --------------  ---------------  ------------
                                                      6,321,482      3,133,920         852,969      3,889,984
                                                  --------------   -------------  ---------------  ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES     609,786        (61,421)     (1,053,428)      (521,056)
                                                  --------------   -------------  ---------------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Cash acquired in acquisition                              -        533,159           8,251        533,159
    Cash utilized in acquisition                              -     (1,650,450)              -     (1,650,450)
    Loan receivable to third party                            -       (500,000)              -       (500,000)
    Marketable securities                                     -              -               -         51,000
    Acquisition of software marketing rights                  -              -        (112,554)      (112,554)
    Deferred acquisition costs                                -              -         (50,000)       (50,000)
    Capital expenditures                              (138,241)       (221,947)        (34,148)      (215,109)
                                                  --------------   -------------   --------------  ------------
NET CASH USED IN INVESTING ACTIVIES                   (138,241)     (1,839,238)       (188,451)    (1,943,954)
                                                  --------------   -------------   --------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Sale of common stock                               236,257          10,000         890,250         10,000
    Net proceeds from sale of convertible
preferred stock                                              -       3,144,727               -      3,144,727
    Capital contributions                                    -               -               -       (197,365)
    Line of credit, net                               (962,776)       (848,570)         14,902       (763,382)
    Net (payments)/borrowings from related parties     (96,434)        (58,500)        492,654        472,134
    Increase in due to related parties                  38,218          37,791         (18,245)        37,791
                                                  --------------   -------------   --------------  ------------
NET CASH (USED IN)PROVIDED BY FINANCING ACTIVITIES    (784,735)      2,285,448       1,379,561      2,703,905
                                                  --------------   -------------   --------------  ------------
NET INCREASE (DECREASE) IN CASH                       (313,190)        384,789         137,682        238,895

CASH - beginning of period                             522,471         137,682               -        283,576
                                                  --------------   -------------   --------------  ------------
CASH - end of period                              $    209,281     $   522,471     $   137,682      $ 522,471
                                                  ==============   =============   ==============  ============
</TABLE>

                 See notes to consolidated financial statements.


                                       F-7




<PAGE>



                       CELEXX CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                  Six Months
                                                    Year Ended      Ended       Year Ended       Year Ended
                                                    June 30,2001 June 30,2000 December 31,1999   June 30,2000
                                                   ------------  ------------ ----------------   -----------
                                                                                                 - unaudited -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<S>                                                 <C>           <C>                <C>          <C>
    Cash paid during the period for interest        $    185,901  $    12,579        $    19,754  $    32,333
                                                   =============  =============  ===============  ============
Non-cash investing and financing activities:


    Note payable issued in acquisition              $        -     $ 1,000,000       $   100,000  $ 1,000,000
                                                    =============  =============   ============== ============

    Common stock issued for acquisitions            $    747,168   $ 1,540,000       $   500,000  $ 1,540,000
                                                    =============  =============   ============== ============

    Conversion of debt to common stock              $       -      $     -           $   583,640  $      -
                                                    =============  =============   ============== ============

    Fair value of assets acquired                   $       -      $  3,450,360      $   248,381  $ 3,450,360
                                                    =============  =============   ============== ============

    Liabilities assumed in acquisition              $       -      $  2,011,124      $   487,727  $ 2,011,124
                                                    =============  =============   ============== ============
    Common stock issued to pay related party
         advances and miscellaneous accounts
         payable                                    $    104,125   $       -         $     -      $     -
                                                    =============  =============   ============== ============
    Common stock issued for compensation
         and services                               $  3,842,245   $       -         $     -      $     -
                                                   =============  =============   ==============  ============

   Common stock issued in settlement of lawsuit     $    623,959   $       -         $     -      $     -
                                                    =============  =============   ============== ============

    Accrued dividends payable on preferred stock    $    210,000   $     46,027      $     -      $   46,027
                                                    =============  =============   ============== ============

   Common stock issued on conversion of
        preferred stock                             $      1,679   $      -          $     -      $     -
                                                    =============  =============   ============== ============


</TABLE>

                 See notes to consolidated financial statements.

                                       F-8

<PAGE>

                       CELEXX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED JUNE 30, 2001, SIX
                        MONTHS ENDED JUNE 30, 2000, YEAR
                         ENDED DECEMBER 31, 1999 AND THE
                            YEAR ENDED JUNE 30, 2000
                                   (UNAUDITED)




1. ORGANIZATION

CeleXx Corporation ("CeleXx" or the "Company") is the successor entity formed by
the acquisition of Cobra Technologies  International,  Inc. ("International") by
Spectrum  Ventures,  Inc.  ("Spectrum").  International  was incorporated in the
State of Delaware on July 10, 1998.

On February 18, 1999, for accounting purposes,  the acquisition has been treated
as a reverse  acquisition,  with International as the accounting  acquirer.  The
historical  financial  statements  included  herein are those of  International.
Subsequent  to  the  acquisition,  Spectrum,  a  publicly  held  "shell"  Nevada
Corporation and the legally  surviving  parent company,  ultimately  changed its
name to CeleXx Corporation.

The Company acquires, develops, integrates and manages select private businesses
that produce, service, maintain or support the information technology industry.


On  May  25,  1999  CeleXx  acquired   through  its  wholly  owned   subsidiary,
Pinneast.com,  Inc.  ("Pinneast"),  all the outstanding shares of Pinnacle East,
Inc. ("Pinnacle"),  a South Carolina Corporation,  engaged in the development of
multimedia educational and programs for industry and government.


On April 14,  2000,  CeleXx  acquired  Computer  Marketplace,  Inc.  ("CMI"),  a
Massachusetts company engaged in systems engineering,  design and maintenance of
computer network systems.


The  acquisitions  of Pinneast  and CMI were  accounted  for using the  purchase
method of business combinations.


On June 9, 2000, the Board of Directors  elected to change the Company's  fiscal
year end from a year ending  December 31 to a year ending June 30. The  decision
was made to conform to industry group standards and for administrative purposes.





2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


A. Basis of Presentation - The accompanying  consolidated  financial  statements
have been prepared  assuming that the Company will continue as a going  concern.
The Company incurred losses of  approximately  $5,712,000 and $3,195,000 for the
year  ended  June  30,  2001  and  for the  six  months  ended  June  30,  2000,
respectively.  Additionally,  the Company had a working  capital  deficiency  of
approximately  $1,125,000 at June 30, 2001. These  conditions raise  substantial
doubt about the  Company's  ability to continue as a going  concern  without the
raising  of  additional  debt  and/or  equity   financing  to  fund  operations.
Management is actively  pursuing debt and/or equity financing and is continually
evaluating  the Company's  operations,  however,  any results of their plans and
actions cannot be assured. The consolidated  financial statements do not include
any adjustments that might result from the outcome of this uncertainty.


                                      F-9
<PAGE>

B. Principles of consolidation - The consolidated  financial  statements include
the accounts of the Company and its  subsidiaries.  The accounts of Pinneast and
CMI have been  included  from their  dates of  acquisitions  of May 25, 1999 and
April 14, 2000, respectively.  All material intercompany  transactions have been
eliminated.


C.  Estimates - The  preparation  of financial  statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements and the stated  amounts of revenue and expenses  during the reporting
period. Actual results could differ from those estimates.


D. Cash and cash equivalents - The Company considers all highly liquid temporary
cash  investments  with an  original  maturity  of  three  months  or less  when
purchased, to be cash equivalents.


E. Fair value of financial  instruments - The carrying  amounts  reported in the
balance  sheet for cash,  receivables,  accounts  payable and  accrued  expenses
approximate fair value based on the short-term maturity of these instruments.


F. Marketable  securities - Investments in marketable  securities are classified
as available-for-sale and are recorded at fair value with any unrealized holding
gains or losses included in other  accumulated  comprehensive  loss,  which is a
component of stockholders' equity.


G.  Property and  equipment - Property and  equipment are stated at cost and are
depreciated over their estimated useful lives which, for automobiles,  furniture
and fixtures, equipment and computer hardware, range principally from 3 years to
7 years on the straight-line  basis.  Software acquired prior to commencement of
its complete  installation  is  capitalized  and will be amortized over one year
when placed in service. Leasehold improvements are written-off on an accelerated
basis over the term of the lease.


H. Intangible  assets - Intangible  assets represent  goodwill,  customer lists,
trademarks  and trade names from  acquisitions.  These assets are amortized on a
straight-line basis over 7 to 10 years.  Additionally,  the Company recorded the
costs incurred in acquiring the marketing rights to certain  software  products.
This license is being amortized over 3 years.


I. Impairment of long-lived  assets - The Company reviews  long-lived assets for
impairment  whenever  circumstances  and situations change such that there is an
indication that the carrying amounts may not be recovered. At June 30, 2001, the
Company believes that there has been no impairment of its long-lived assets.

J. Unamortized stock  compensation  costs - Unamortized stock compensation costs
are recorded in  connection  with common stock issued to employees  and advisors
for future services and is amortized over the period of agreements, ranging from
2 to 5 years.

K.  Revenue  recognition  - Revenue is  recognized  as  services  are  provided.
Deferred  revenue  arises from the  pro-ration  of the  revenue  provided by the
services of the Company's  Pinneast and CMI  subsidiaries.  These  contracts are
generally completed in one year or less.

                                      F-10
<PAGE>


L. Stock based  compensation - The Company  accounts for stock  transactions  in
accordance  with APB Opinion No. 25 "Accounting  for Stock Issued to Employees."
Additionally,  the Company has adopted the pro forma disclosure  requirements of
Statement of Financial  Accounting Standards No. 123 "Accounting for Stock Based
Compensation".

M. Income taxes - Income taxes are  accounted  for under  Statement of Financial
Accounting  Standards No. 109,  "Accounting for Income Taxes," which is an asset
and liability  approach that requires the recognition of deferred tax assets and
liabilities  for the expected  future tax  consequences of events that have been
recognized in the  Company's  financial  statements or tax returns.  A valuation
allowance  related to deferred tax assets is also  recorded  when it is probable
that some or all of the deferred tax assets will not be realized.

N. Net loss per share - Basic earnings per share have been calculated based upon
the weighted  average  number of common  shares  outstanding.  Stock options and
convertible  preferred  stock have been excluded as common stock  equivalents in
the diluted earnings per share because they are either  anti-dilutive,  or their
effect is not material.

O. Segment  disclosure - The Company uses the  "management  approach"  model for
segment  reporting  which is based on the way a company's  management  organizes
segments  within  the  company  for making  operating  decisions  and  assessing
performance.

P. Comprehensive loss - Comprehensive income (loss) is comprised of net loss and
all changes to the  statements  of  stockholders'  equity,  except  those due to
investments by stockholders, changes in paid-in capital and distributions.

Q. New  accounting  pronouncements  - In July  2001,  the  Financial  Accounting
Standards Board ("FASB") issued SFAS No. 141,  "Business  Combinations" and SFAS
No. 142, "Goodwill and Other Intangible Assets".  SFAS No. 141 requires that all
business  combinations  initiated  after June 30,2001 be accounted for under the
purchase method only and that certain acquired  intangible  assets in a business
combination be recognized as assets apart from  goodwill.  SFAS No. 142 requires
that the  amortization  of  goodwill  be  replaced  with  periodic  tests of the
goodwill's  impairment  and  that  intangible  assets  other  than  goodwill  be
amortized  over their  useful  lives.  The  provisions  of SFAS  No.142  will be
effective for fiscal years  beginning  after December 15, 2001. The Company will
adopt SFAS No. 141 and No. 142 immediately with regard to business  combinations
initiated after June 30, 2001.

In August 2001, the FASB issued Statement of Financial  Accounting Standards No.
144 ("SFAS  144"),  "Accounting  for the  Impairment  or Disposal of  Long-lived
Assets".  SFAS 144 supercedes  Statement of Financial  Accounting  Standards No.
121,  "Accounting  for the  Impairment  of  Long-lived  Assets  and Assets to be
Disposed  of"  and  the  accounting  and  reporting   provisions  of  Accounting
Principles Board Opinion No. 30, "Reporting the Results of Operations -Reporting
the Effects of Disposal of a Segment of a Business,  and Extraordinary,  Unusual
and  Infrequently  Occurring  Events  and  Transactions."  SFAS 144 also  amends
Accounting  Research Bulletin No. 51,  "Consolidated  Financial  Statements," to
eliminate the exception to  consolidation  for a subsidiary for which control is
likely to be  temporary.  The provision of SFAS 144 will be effective for fiscal
years  beginning after December 15, 2001. The most  significant  changes made by
SFAS 144 are: (1) removes goodwill from its scope and, therefore, eliminates the

                                      F-11
<PAGE>

requirements of SFAS 121 to allocate  goodwill to long-lived assets to be tested
for impairment,  and (2) describes a  probability-weighted  cash flow estimation
approach  to deal  with  situations  in which  alternative  course  of action to
recover the carrying amount of a long-lived assets are under  consideration or a
range is estimated for the amount of possible future cash flows. The Company has
not yet determined the effect SFAS 144 will have on its  consolidated  financial
position or results of operations.

R.  Reclassification - Certain  reclassifications  have been made in prior years
financial statements to conform to classifications used in the current years.

S. Unaudited  financial  statements - The  accompanying  unaudited  consolidated
financial  statement  of  operations  and cash flows for the year ended June 30,
2000,  have been  prepared in  accordance  with  generally  accepted  accounting
principles for interim financial information and, in the opinion of the Company,
include all adjustments,  consisting of normal recurring adjustments,  necessary
for a fair  presentation  thereof.  These  statements  and related  notes to the
financials are provided for comparative  purposes with the historical  financial
statements and notes thereto.


3. MARKETABLE SECURITIES

At December  31, 2000,  the Company  determined  that the carrying  value of its
investment  in  E-Pawn.Com,  Inc.  (see  Notes  10 and  14),  exceeded  its  net
realizable value in the marketplace, and that the decline in value was judged to
be other than temporary. As a result, the Company wrote off the remainder of the
investment,  resulting in a non-recurring  charge of $2,675,000 against earnings
for the year.


4. PROPERTY AND EQUIPMENT, NET
                                                                    Six Months
                                                   Year Ended          Ended
                                                  June 30, 2001    June 30, 2000
                                                  ------------     -------------
   Automobiles                                    $   41,458         $   35,659
   Furniture and Fixtures                             47,778             40,767
   Equipment                                         310,429            272,564
   Leasehold Improvements                             36,694             36,694
   Software                                          270,606            183,040
   Computer equipment,
      available for resale                           109,982                  -
                                                  ------------      ------------
                                                  $  816,947         $  568,724
   Less: Accumulated depreciation
            and amortization                       ( 313,942)        (  276,944)
                                                  -----------       ------------
                                                  $  503,005         $  291,780
                                                  ===========       ============

Depreciation expense for the year ended June 30, 2001, the six months ended June
30, 2000 and year ended December 31, 1999 was $36,998, $13,675 and $6,231,
respectively.

                                      F-12
<PAGE>

5. ACQUISITIONS


The following table summarizes the acquisitions of Pinneast and CMI:


 Purchase Price                              Pinneast          CMI
 --------------                              --------      ----------

 Cash                                      $     -         $1,500,000

 Common stock, 500,000 and 1,400,000
 Shares issued, respectively                  750,000       1,540,000

 Note Payable                                 100,000       1,000,000

 Brokerage and legal costs                       -            200,940

 Additional issuance of common stock,
 1,043,210 and 13,625,000 shares,
 respectively (see Note 10)                   158,568         588,560
                                            ----------      ---------
Total Purchase Price                        1,008,568       4,829,500



Less: Fair Market value of
Assets acquired                              (248,381)     (3,450,360)
Liabilities assumed                           487,727       2,011,124
                                          ------------      ---------

Cost in excess of net book value
of assets acquired (principally goodwill)  $1,247,914     $ 3,390,264
                                           ==========     ===========

Amortization  expense on goodwill and other  intangibles for the year ended June
30,  2001,  the six months  ended June 30, 2000 and the year ended  December 31,
1999 was $493,450, $143,033 and $119,689, respectively.




The following unaudited pro-forma information reflects the results of operations
of the Company as though the acquisitions had been consummated as of January 1,
1999.


                                     Six Months
                       Year Ended      Ended       Year Ended        Year Ended
                      June 30,2001  June 30,2000  December 31,1999  June 30,2000
                       -----------  -----------   ----------------  ------------


Revenue               $20,528,653   $7,586,276    $ 16,980,192      $18,527,872
                       ==========   ===========   =============      ===========

Net loss              $(5,711,696)  $(3,177,469)  $ (1,832,431)     $(4,508,822)
                       ==========   ===========   =============      ===========

Net loss per share    $    (0.21)   $   (0.21)    $     (0.19)      $     (0.32)
                       ==========   ===========   =============      ===========

                                      F-13
<PAGE>


6. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS




a. Cash - The  Company  maintains  cash  balances at several  commercial  banks.
Accounts at these  financial  institutions  are  insured by the Federal  Deposit
Insurance Corporation up to $100,000.


b.  Accounts  receivable  - The  concentration  of credit risk in the  Company's
accounts  receivable is mitigated by the Company's  credit  evaluation  process,
credit limits,  monitoring  procedures and  reasonably  short term  collections.
Credit losses have been within  management's  expectations  and the Company does
not require collateral to support the accounts receivable. During the year ended
June 30, 2001,  the six months  ended June 30, 2000 and the year ended  December
31, 1999,  seven  customers,  two customers and three  customers,  respectively,
accounted for  approximately  57%, 27% and 42%,  respectively,  of the Company's
revenues.  These  customers  accounted  for  approximately  64%  and  22% of the
Company's   outstanding   accounts   receivable  at  June  30,  2001  and  2000,
respectively.



7. SEGMENT INFORMATION


The  Company,  through its two  subsidiaries  has two  principal  segments,  the
development  of  multimedia  educational  training  programs  for  industry  and
government  through  Pinneast,  and  network  systems and  telephony  consulting
through CMI.


Segment  information  for the year ended June 30, 2001 and the six months  ended
June 30, 2000 are as follows:




                          Multimedia     Network
                          Education      Systems     Corporate(1)       Total
                         ------------  ------------  ----------     ------------
2001:

Revenue                $  2,307,693    $ 18,220,960  $     -        $20,528,653
                         ============  ============  ===========    ============
Segment (Loss) Profit  $    578,120    $    618,034  $(6,907,850)   $(5,711,696)
                         ============  ============  ===========    ============
Depreciation and
   Amortization        $     16,704    $     7,629  $ 1,085,195     $ 1,109,528
                         ============  ============  ===========    ============

Total Assets           $  1,477,576    $  3,278,512  $ 2,814,599    $ 7,570,687
                         ============  ============  ===========    ============


2000:

Revenue                $    826,996    $  2,738,278  $     -        $ 3,565,274
                         ============  ============  ===========    ============
Segment (Loss) Profit  $    (71,447)   $     21,126  $(3,145,020)   $(3,195,341)
                         ============  ============  ===========    ============
Depreciation and
   Amortization        $      8,245    $      3,750  $   144,713    $   156,708
                         ============  ============  ===========    ============
Total Assets           $  1,096,341    $  2,973,501  $ 4,102,537    $ 8,172,379
                         ============  ============  ===========    ============


(1)  Corporate  includes  corporate  general and  administrative  expenses,  net
interest expense, and other non-operating income and expense.


                                      F-14
<PAGE>

8. RELATED PARTY TRANSACTIONS

As of June 30, 2001 and 2000 CeleXx owes $127,704 and $100,886, respectively, to
stockholders of the Company.  The advances are non-interest  bearing,  unsecured
and have no specified date for repayment.


At June 30,  2001 and 2000,  the Company has a short term note due to the former
stockholders of Pinnacle East, Inc. for $31,500 and $41,500, respectively.


At June 30, 2001 and 2000, the Company has a note due to the former  stockholder
of CMI for $913,566 and $1,000,000,  respectively. The note is due in two annual
payments  on the  first  two  anniversary  dates  of  the  closing  of  the  CMI
acquisition  and bears  interest  at 6% per annum.  The  Company  has secured an
extension  of payment from the note holder on the April 2001  installment  until
January 1, 2002.

9. LINES OF CREDIT

As of June 30, 2001,the Company's Pinneast subsidiary had three credit lines
with aggregate availability of $300,000. As of June 30, 2001 and 2000 Pinneast
has utilized $202,666 and $292,756, respectively, on such lines of credit which
expire on November 10, 2003 and bear interest at 10.50% per annum. On July 20,
2001, these three credit lines were modified and combined into a single bank
note of $200,972, payable in 47 monthly installments of principal and interest
of $5,100, commencing August 20, 2001 to July 20, 2005. The modified note bears
interest at the bank's prime rate plus 1.5%, and is secured by substantially all
the assets of Pinneast and a corporate guaranty by the Parent.

The Company's CMI subsidiary had a line of credit with Finova Capital
Corporation ("Finova") that terminated on February 9, 2001. The outstanding
balance owed to Finova as of June 30, 2001 and 2000 was $0 and $944,317,
respectively.

In August 2001, as a replacement for the line of credit with Finova, CMI entered
into a two-year financing agreement for a $3 million secured Revolving Credit
Line ("Credit Line") maturing in August 2003 from Rosenthal & Rosenthal, Inc.
Availability under the Credit Line is based on a formula of eligible accounts
receivable and inventory and allows for an increase in the credit facility to be
considered. Borrowings bear interest at the prime rate plus 2% per annum and are
secured by essentially all the assets of CMI, including accounts receivable,
inventory, and general intangibles, and a corporate guaranty by the Company. The
Credit Line also requires, among other conditions, compliance with certain
covenants.

On October 16, 2000, the Company's former Chairman and principal stockholder
along with four other officers and/or shareholders provided the Company with a
letter of guaranty to jointly consent to lend the Company up to $1,000,000 on an
as needed basis for a one-year period that expired in October 2001.

                                      F-15
<PAGE>


10. STOCKHOLDERS' EQUITY


Common Stock Issuances:


During the period January 1, 2000 to June 30, 2000 the Company issued  2,180,555
shares of its  restricted  common stock to various  consultants  for  contracted
services.   The  Company  recorded   $1,446,866  in  compensation   expense  and
unamortized stock compensation of $1,132,083 on certain  consultants  covered by
three-year  agreements  to reflect  these  issuances.  From such shares  issued,
420,000  shares related to the preferred  stock  offering as further  discussed.
Additionally,  the Company  issued  110,000 shares of its common stock to settle
outstanding  claims resulting in the Company recording  $209,000 of compensation
expense to reflect such issuance.


On April 11,  2000 the  Company  issued  22,083  shares of its  common  stock to
employees of its Pinneast subsidiary for proceeds of $10,000.


On  April  13,  2000  the  Company  issued   1,000,000   shares  to  E-Pawn.com,
Inc.("E-Pawn").  The Company received 1,000,000 shares of E-Pawn common stock in
consideration for these shares.  The investment was valued at $2.00 per share of
the Company's  common stock or  $2,000,000.Additionally,  on November 1, 2000,in
connection  with the  settlement  of a lawsuit  between  CeleXx and E-Pawn,  the
Company issued 2,250,000 shares of CeleXx restricted common stock to E-Pawn (see
Note 14).  Of this  issuance,  250,000  common  shares  were  purchased  from an
executive  into  treasury  under the cost  method and  simultaneously  issued to
E-Pawn.


On April 14, 2000 the Company  issued  1,400,000  shares of its common stock for
the acquisition of CMI (see Note 5).

In July 2000, the stockholders of the Company approved an increase in the number
of common shares authorized from 20,000,000 shares to 100,000,000 shares.

On September  1, 2000,  the Company  issued  7,650,000  shares of the  Company's
common  stock  to two  executives.  Such  shares  were  issued  pursuant  to the
executives' employment agreements and are restricted from resale during the term
of these agreements,  which is five years. In addition,  50,000 shares of common
stock were issued to an individual for services  rendered.  The Company recorded
an increase to unamortized stock compensation of $2,895,400.

During the year ended June 30,  2001,  the Company  issued  3,641,445  shares of
common stock to various consultants and an advertising/public  relations company
for financial,  advertising and advisory services  rendered.  The aforementioned
share issuances  resulted in a charge to earnings of $108,046 and an increase in
unamortized  stock  compensation  of $838,799.  The  attorney for the  financial
consultants  was  issued  50,000  shares  under the same  arrangement  for legal
services provided.

On November 17, 2000 the Company sold 1,170,000 shares of restricted stock to an
officer and director of the Company for total cash proceeds of $234,000.


                                      F-16
<PAGE>



The stock  purchase  agreements  that the Company  entered  into with the former
stockholders  of  Pinnacle  and CMI,  in its  acquisition  of  these  companies,
provided for contingent  consideration of additional  shares to be issued if the
Company's average stock price would be less than $2.00 and $2.50,  respectively,
at certain  anniversary dates of the closing of the  acquisitions.  On March 20,
2001 and June 7, 2001,the  Company  settled on the  issuances of the  contingent
shares to the  former  stockholders  of  Pinneast  and CMI by issuing a total of
1,043,210 and 13,625,000  shares of restricted stock,  respectively.  The former
stockholder  of  CMI  is  potentially  due  additional   shares  on  the  second
anniversary  date (April 14,  2002)  based on the  foregoing  contingency  price
provisions.

On June 7, 2001 the Company issued 1,600,000  shares of restricted  common stock
to a related party in order to satisfy $86,400 of debt obligation.

Preferred Stock Issuance:

On April 7, 2000,  the  Company  issued  350  shares of 6% Series A  convertible
preferred  stock at $10,000 per share plus common  stock  purchase  warrants and
received  net  proceeds  of  $3,144,727.   Each  share  of  preferred  stock  is
convertible into common stock at the lower of (a)$2.50, the closing bid price on
the day preceding the original date of issuance of the preferred  stock,  or (b)
80% of the  average  closing  bid  price of the  common  stock for the five days
preceding the date of conversion.  The shares are convertible  immediately  upon
the  effectiveness  of a  registration  statement  covering  the  resale  of the
underlying shares of common stock. The Company may redeem in cash all or part of
the shares of preferred  stock at the redemption  price of 125% of the principal
amount of the shares to be redeemed  plus all accrued and unpaid  dividends,  so
long as the Company  provides the holder of the preferred  stock a 30-day period
to convert its preferred stock to common stock. Under certain circumstances, the
holder  of  preferred  stock  may  require  the  Company  to  redeem in cash the
preferred stock as well as any underlying common stock issued upon conversion of
the preferred stock at 125% of the stated value(for the preferred stock) and the
market value (for the common stock).


Dividends  accrue  daily at the rate of 6% per  annum,  whether or not earned or
declared  and  whether or not there are  profits or other  funds of the  Company
legally  available for the payment of dividends.  Included in other  liabilities
are  $256,027  and $46,027 of accrued  dividends  payable as of June 30,2001 and
June 30,2000,respectively.


The Company filed a Registration  Statement on Form SB-2 covering  resale of the
common stock underlying the convertible preferred stock that became effective on
June 21, 2001.  On the date of  effectiveness,  based on a  conversion  price of
$0.043,  the  preferred  stock holder would be entitled to convert its shares of
preferred stock into a total of approximately 71,000,000 shares of common stock.
As of June 30,  2001,the  preferred  stock  holder  has  converted  45 shares of
preferred  stock plus accrued  dividends into  approximately  2.5 million common
shares, of which  approximately  825,000 shares were contributed from executives
and other stockholders into treasury under the cost method and, 1.7 million were
delivered in July 2001. Subsequent to June 30, 2000, 7 shares of preferred stock
plus accrued  dividends were converted into  approximately 5.9 million shares of
common stock.




                                  F-17
<PAGE>
In July 2000 the  stockholders of the Company approved an increase in the number
of preferred  shares issuable from 1,000,000  shares to 20,000,000  shares,  par
value $.001, the terms of which may be determined at the time of issuance by the
Board of Directors without further action by the stockholders.


Employee Stock Purchase Plan:

In January  2001,  the Company  implemented  the 2001  Employee  Stock  Purchase
Plan("ESPP"),  subject to final approval by the  stockholders at the next annual
meeting of stockholders.  The terms of the ESPP allow for qualified participants
(as defined) to  participate  in the  purchase of up to 3,000,000  shares of the
Company's  common  stock at a price equal to 85% of the fair market value of the
Company's  common  stock.  During the period  ended June 30,  2001,  the Company
issued 14,163  shares  pursuant to the ESPP at an average price per common share
of approximately $0.16.

Warrants:

As of June 30,  2001  and  2000,  there  were  1,466,667  and  466,667  warrants
outstanding, respectively. Each non-transferable warrant is exercisable into one
share of the Company's  common stock at prices  ranging from $1.00 to $3.54 over
periods ranging from 3 to 5 years.

For the year  ended June 30,  2001 the  estimated  fair  value of the  1,000,000
warrants issued was $110,000 based upon the Black-Scholes valuation. At June 30,
2001, the weighted average exercise price and the average remaining  contractual
life of the outstanding warrants is $2.32 and 2.2 years , respectively.

11. EMPLOYMENT AGREEMENTS

The Company has an employment  agreement with one of its officers,  formerly its
Chief Executive Officer, for a term of five years commencing June 1, 2000 with a
base salary of $175,000 per annum. Additionally, the executive shall be entitled
to grants of the Company's common stock as determined by the Board of Directors.


On June 1, 2000 the Company entered into a five-year employment agreement with
its Chief Financial Officer. The agreement stipulates a base salary of $125,000
per annum. Additionally, the executive shall be entitled to grants of the
Company's common stock as determined by the Board of Directors.


In connection with the CMI acquisition on April 11, 2000 the Company entered
into a three-year employment agreement with the former major shareholder, as the
Chief Executive Officer for CMI. The agreement stipulates a base salary of
$150,000 per annum plus participation in Company benefits.


CMI and Pinneast have also extended employment agreements to various key
management personnel of CMI and Pinneast with terms of three (3) years,
aggregating $555,000 in annual base salary, renewable annually thereafter.

12. STOCK OPTION PLAN

On March 1, 1999 the Board of Directors (the "Board") adopted the CeleXx
Corporation 1999 Stock Option Plan. As of June 30, 2001 the Board or CeleXx's
compensation committee is authorized to issue to eligible persons as defined a
maximum amount of 4,500,000 options under such plan.


                                      F-18

<PAGE>

Stock options  granted and  outstanding  pursuant to the Stock Option Plan as of
June 30, 2001 is as follows:


                                                         Weighted
                                        Exercise price   Average
                            Options     per share        Exercise Price
                            ---------  --------------   -------------
BALANCE AT JUNE 30, 2000        -             -            -

   Granted                  3,076,825  $0.285 - $0.50    $0.48

   Exercised                    -             -            -
                            ---------  --------------    -------------
BALANCE AT JUNE 30, 2001    3,076,825  $0.285 - $0.50    $0.48
                            =========  ==============    =============


The following table summarizes information about stock options outstanding at
June 30, 2001:

---------------Outstanding-------------------  --- Options Exercisable-


Range of       Number        Average       Average   Number       Weighted
exercise       outstanding   remaining     exercise  exercisable  average
price                        contractual   price                  exercise
                             life (Yrs)                           price
----------      ---------   ----------    --------   -----------  ---------
$0.285-$0.50    3,076,825      1.8         $0.49     500,000      $0.50



The following  information reflects the Company's pro forma loss information for
the year ended June 30, 2001 as if the compensation  expense associated with our
stock  plan had been  recorded  under  the  provisions  of SFAS  123.  Pro forma
compensation  expense has been  determined  based upon the estimated fair market
value of the options at the date of grant.  There were no options  granted prior
to the year ended June 30, 2001.


                  Net loss                  $6,029,950
                                            -----------
                  Basic and diluted
                     loss per share         $0.22
                                            -------------


The  estimated  fair  value  of  each  option  grant  is  determined  using  the
Black-Scholes  option-pricing  model with the following  ranges of  assumptions:
expected term of 3 years;  expected  volatility of 200%; and expected  risk-free
interest  rates of 6%.  The  weighted  average  estimated  fair value of options
granted during the year ended June 30, 2001 was $0.11.


                                      F-19
<PAGE>

13. INCOME TAXES

At June 30, 2001 the  Company  has a net  operating  loss  carryforward  for tax
purposes totaling  approximately  $8,455,000  expiring in the years 2014 through
2021.  The  realization  of future tax benefits  from these net  operating  loss
carryforwards may be subject to limitations on their utilization.

The components of net deferred tax asset are as follows:



                             June 30,      June 30,
                               2001          2000
                            -----------  ------------

Net operating loss
   carryforward             $3,382,000   $2,167,000
Write-down on marketable
   securities                1,070,000         -
Valuation Allowance         (4,452,000)  (2,167,000)
                            -----------  -----------

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


The  deferred  tax  assets  have  been  fully  offset by a  valuation  allowance
resulting from uncertainty surrounding their future realization.


The provision  (benefit)  for income taxes differs from the amounts  computed by
applying the statutory federal income tax rate to income (loss) before provision
for income taxes are as follows:



                                           Six Months
                              Year Ended      Ended      Year Ended
                               June 30,      June 30,    December 31,
                                 2001          2000          1999
                              -----------  ------------  ------------

Income tax benefit computed
   at statutory rate          $2,284,000    $1,280,000    $  763,000
Losses for which income tax
     benefit not utilized     (2,284,000)   (1,280,000)    ( 763,000)
                              -----------   ----------    ------------

Net income tax (benefit)      $     -       $    -        $
                              ===========   ==========    ============


14. COMMITMENTS AND CONTINGENCIES

Commitments:

Operating Leases:

CeleXx entered into a five-year lease for office space scheduled to commence May
2002 at a monthly base rental of $10,931.  However, in October 2001, the Company
announced its intention to consolidate and relocate its  headquarters to the CMI
subsidiary  facilities  and  accordingly,   has  advised  the  landlord  of  its
relocation and  cancellation of the lease.  The Company does not believe that it

                                      F-20
<PAGE>

will incur any significant charge resulting from such cancellation, however, the
Company's  minimum future lease  commitments  has included the contracted  lease
amounts.   The  Company  is  currently   leasing   temporary   office  space  at
approximately $600 per month. Rent expense for the year ended June 30, 2001, the
six months ended June 30, 2000 and the year ended December 31, 1999 was $64,773,
$33,505 and $42,400, respectively.

The Company  through its CMI  subsidiary  leases  building  space in  Tewksbury,
Massachusetts  from a related party,  under two separate lease  agreements,  the
latest expiring in July 2003.The  leases require total minimum monthly  payments
of $6,000 plus maintenance and operating costs.  Total rent expenses  (including
common  area  maintenance)  for the year ended June 30,  2001 and the six months
ended June 30, 2000 was $90,673 and $20,489, respectively.

The Company through its Pinneast  subsidiary  leases building space in Columbia,
South  Carolina  under a three-year  lease.  The lease  requires  minimum annual
payments of $48,000 and expires in May 2004.  Total rent  expenses  for the year
ended June 30,  2001 and the six  months  ended June 30,  2000 was  $37,547  and
$12,706, respectively.

The Company has various leases for office furniture and equipment,  which expire
through April 2004.


Approximate minimum future lease commitments are as follows:


                              Years ending June 30,


                                      2002            $ 117,000
                                      2003              218,000
                                      2004              196,000
                                      2005              142,000
                                      2006              123,000
                                                       ----------
                                                      $ 796,000
                                                       ==========
Contingencies:

Settlements of Litigation:

On October 24, 2000, Celexx and E-Pawn.com, Inc. ("E-Pawn") entered into a
Settlement and Release Agreement ("settlement") to settle the lawsuit that
E-Pawn filed against Celexx and any claims that the companies may have had with
respect to each other. The settlement provided for, among other things, the
issuance of an additional 2,250,000 shares of the Company's restricted common
stock to E-Pawn (E-Pawn already had been issued 1,000,000 shares). The Company
was also required to cancel the $500,000 that was due from E-Pawn and return
1,000,000 shares of E-Pawn that it held and, issue to a shareholder of E-Pawn a
warrant to purchase 250,000 shares of the Company's common stock at an exercise
price of $2.50 per share; exercisable until October 20, 2003. The Company, in
return, received 5,250,000 restricted shares of common stock of E-Pawn. The
closing for the above described settlement and exchange of documents and shares
occurred on November 22, 2000.

                                      F-21
<PAGE>


On March 27, 2001 the Company  executed a Memorandum of Settlement with a vendor
for a final  judgement  totaling  $186,059  payable  $10,000 at closing  and the
balance payable in monthly  installments of $10,000 beginning May 1, 2001. As of
June 30, 2001,  the Company has paid $10,000 and no further  collection  efforts
have proceeded.

The Company is also party to other  matters of  litigation  and claims which the
Company  believes are normal in the course of its operations.  While the results
of such  litigation and claims cannot be predicted with  certainty,  The Company
believes  the final  outcome of such  matters  will not have a material  adverse
effect on its results of operations or financial position.


15. SUBSEQUENT EVENTS


On August 15, 2001 the Company and Fifth Street Capital Corporation, Wall Street
Capital  Communications  Group,  Inc. ("Wall Street") and certain  principals of
these  companies,  entered into a Settlement  and Release  Agreement to settle a
notice of  complaint  against  the Company  for  violation  of federal and state
securities laws, breach of consulting agreements with Wall Street and any claims
that the  companies  and certain  principals  may have had with  respect to each
other.  The  settlement  included  unconditional  releases  and was  subject  to
documentation and delivery of all  considerations.  The settlement provided for,
among other things, the issuance of 2,000,000 shares of the Company's restricted
common stock to Wall Street and $50,000 in cash,  payable in two installments of
$15,000  and  $35,000  on or before  August  23,  2001 and  November  15,  2001,
respectively.  The Company was also required to provide  piggyback  registration
rights on the settlement shares. To secure performance of the obligations of the
Company pursuant to the settlement agreement, a company officer and director was
required to grant to Wall  Street a security  interest  in  2,000,000  shares of
common stock of the Company held by such individual.











                                      F-22
<PAGE>

                                 Exhibit Index


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

    2.1        Plan of Reorganization  and Agreement of Merger,  dated April 14,
               2000, by and between Computer Marketplace,  Inc., David R. Burke,
               Sr.,  Betty  Des  Meules,  Cobra  Technologies,   Inc.,  and  CMI
               Acquisition Corp. (1)
    3.1        Articles of Incorporation, including all amendments
    3.2        Bylaws (2)
    4.1        Specimen of common stock certificate
    4.2        Terms of Series A Convertible Preferred Stock (3)
    4.3        Warrant Certificate issued to Wellington Capital Corporation (4)
   10.1        Lease  Agreement  dated May 11,  1999,  between  Sawgrass  Realty
               Holdings, Inc. and the Registrant (5)
   10.2        1999 Stock option Plan (6)
   10.3        Employment Agreement dated March 1, 1999 and amended as of August
               24, 1999 by and between the Registrant and Lionel Forde (7)
   10.4        Employment Agreement dated March 1, 1999 and amended as of August
               24,  1999  and  further  on  June  1,  2000  by and  between  the
               Registrant and Douglas H. Forde (8)
   10.5        Merger Agreement dated May 25, 1999 by and between Pinnacle East,
               Inc., Mitchell D. Smith, Steven R. Lounsberry, and the Registrant
               (9)
   10.6        Employment  Agreement  dated  June  1,  2000 by and  between  the
               Registrant and David C. Langle (10)
   10.7        Series A Convertible  Stock Purchase  Agreement dated as of April
               7, 2000 among the Registrant and Birch Circle LLC (11)
   10.8        Registration  Rights  Agreement dated as of April 7, 2000 between
               the Registrant and Birch Circle LLC
   10.9        Security Agreement (12)
   10.10       Intellectual Property Security Agreement (13)
   10.11       Stock Pledge Agreement (14)
   10.12       Employment  Agreement  dated  April 10,  2000 by and  between the
               Registrant and David R. Burke, Sr.
   10.13       Financing   Agreement  dated  August  7,  2001  between  Computer
               Marketplace, Inc. and Rosenthal & Rosenthal, Inc.
   21          Subsidiaries of the Registrant