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

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549



                                 FORM 10-KSB/A-2



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

           For the year ended June 30, 2001
                              -------------

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

           For the transition period from ________________ to ________________

Commission file number:  0-27587
                        --------

                                CDKNET.COM, INC.
                                ----------------
                 (Name of small business issuer in its charter)

             Delaware                                    22-3586087
             --------                                    ----------
  (State or other jurisdiction              (I.R.S. Employer Identification No.)
of incorporation or organization)

   250 West 57th Street, Suite 1101
          New York, New York                                  10019
          ------------------                                  -----
(Address of principal executive offices)                    (Zip Code)

Issuer's telephone number:  (212) 547-6050
                            --------------

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

         Securities registered under Section 12(g) of the Exchange Act:
                         Common Stock, $.0001 par value
                         ------------------------------

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

Issuer's revenues for its most recent fiscal year.  $5,874,000.
                                                    ----------

The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the average high and low price of such
common equity, as of October 5, 2001 is $0.185.

As of October 5, 2001, there were 31,321,075 shares of common stock, $.0001 par
value, outstanding.

Transitional Small Business Disclosure Format (check one):  [ ] Yes    [X] No

                                EXPLANATORY NOTE
                                ----------------

This Amendment No. 2 on Form 10-KSB amends in its entirety the Annual Report on
Form 10-KSB of the Registrant for fiscal year ended June 30, 2001, filed on
October 9, 2001, and amended on October 30, 2001 (File No. 0-27587)
================================================================================
<PAGE>

                                CDKNET.COM, INC.

                          ANNUAL REPORT ON FORM 10-KSB

                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----
Part I
------

Item 1       Description of Business                                          1

Item 2       Description of Property                                         15

Item 3       Legal Proceedings                                               15

Part II
-------

Item 5       Market for Common Equity and Related Stockholder Matters        15

Item 6       Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                       17

Item 7       Financial Statements                                            21

Item 8       Changes in and Disagreements with Accountants on Accounting
             and Financial Disclosure                                        21

Part III
--------

Item 9       Directors, Executive Officers, Promoters and Control Persons;
             Compliance with Section 16(a) of the Exchange Act               21

Item 10      Executive Compensation                                          21

Item 11      Security Ownership of Certain Beneficial Owners and Management  21

Item 12      Certain Relationships and Related Transactions                  21

Item 13      Exhibits and Reports on Form 8-K                                22


<PAGE>
                                     PART I

                           FORWARD-LOOKING INFORMATION

            All statements in this annual report on Form 10-KSB that are not
historical are forward-looking statements within the meaning of Section 21e of
the Securities Exchange Act, including statements regarding our "expectations,"
"beliefs," "hopes," "intentions," "strategies," or the like. Such statements are
based on management's current expectations and are subject to a number of
factors and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. We caution investors
that there can be no assurance that actual results or business conditions will
not differ materially from those projected or suggested in such forward-looking
statements as a result of various factors, including, but not limited to, the
risk factors discussed in this Annual Report on Form 10-KSB. We expressly
disclaim any obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements contained herein to reflect any
change in our expectations with regard thereto or any change in events,
conditions, or circumstances on which any such statements are based.


ITEM 1.  DESCRIPTION OF BUSINESS.

Our Company
-----------

            CDKnet.com, Inc. is a holding company incorporated in the State of
Delaware. Prior to June 2001, our business was conducted through our two
subsidiaries: CDKnet, LLC and ValueFlash.com Incorporated. CDKnet, LLC provides
proprietary convergence technology that links audio, video and the worldwide web
on standard compact discs. ValueFlash provided proprietary, non-intrusive,
highly targeted e-messaging (which we called "Vflash(TM)") that enabled our
clients to communicate directly with their customers on a real-time basis. On
June 13, 2001, we consummated the sale of substantially all of the assets and
business of ValueFlash to Elbit Limited (NASDAQ: ELBT) and its subsidiaries
(collectively, "Elbit") for $3.5 million in cash plus the assumption of
liabilities and forgiveness of indebtedness.

            Since June 2001, we have revised our business plan. We now pursue
two lines of business: (1) custom compact discs through our subsidiary, CDKnet,
LLC, and (2) financial services through the creation of new subsidiaries and
private equity investments. On August 2, 2001, we formed Azure Capital Holdings,
LLC ("Azure"), a fund and money management subsidiary, that will serve as the
initial stage of our financial services line of business.

            Our audited financial statements for the period July 1, 2000 to June
30, 2001, reflect a net loss of $7,372,000 to common stockholders on net
revenues of $5,874,000 compared to a net loss of $7,118,000 on revenues of
$345,000 in the fiscal year ended June 30, 2001. Revenue generated from
ValueFlash in fiscal 2001 and 2000 was $5,419,000 and $153,000, respectively.
Since the sale of our interest in ValueFlash, we expect to have lower production
costs and lower overhead that will provide us with the means to be profitable in
our remaining technology business while developing the new financial services
elements of our business.

            As a result of the sale of ValueFlash, we were left with
approximately $3.5 million in cash and escrow receivables, under $1.4 million in
liabilities and a royalty producing license based on our CDK(TM) technology
platforms.

                                       1
<PAGE>

            Our common stock, $.0001 par value, is quoted on the
Over-the-Counter Bulletin Board. As of October 5, 2001, we had 31,321,075 shares
of common stock issued and outstanding. Of these shares, 2,016,009 shares are
restricted stock owned by our directors and key employees. The remaining
29,305,066 shares are owned by approximately 117 shareholders, 2 of whom we
believe hold more than five percent (5%) ownership of our common stock.

            CDKnet, LLC
            -----------

            Our subsidiary CDKnet, LLC, a New York limited liability
corporation, formed in October 1997, has developed a unique multimedia
technology, CDK(TM), integrating audio, video and Internet connectivity on a
standard compact disc. Our MixFactory(TM) system, an extension of the core
CDK(TM) technology, enables users to create their own personalized multimedia
compact discs from a web site. These custom compact discs include full-screen,
full-motion video, Red Book (digital standard) audio and targeted web links. The
media components are presented through CDKnet, LLC's proprietary media players
that have been developed for ease of use and functionality.

            The CDKnet, LLC business model has been revised and is now based on
two revenue streams. The first revenue stream is from development and use fees
for client-specific CDKs(TM). During most of fiscal year 2001, we leveraged the
marketing opportunity offered by the Vflash(TM) technology by presenting CDK
2.0(TM) client specific compact discs (CDK's) as the logical distribution method
for the Vflash messenger in the form of commercially sold or promotionally
distributed compact discs. On June 13, 2001, however, we sold substantially all
of the business and assets of ValueFlash to Elbit. Pursuant to the sale, we
entered into a Technology and License Agreement with Elbit, whereby we agreed to
provide CDKs(TM) to Elbit in return for royalty fees and per disc production
fees.
                                       2
<PAGE>

            We placed emphasis on research and development throughout fiscal
2001. The new version of our product, CDK 3.0., was launched this year. Since
that time, we have generated revenue through client-specific CDK 3.0 discs for
Maverick Records, WorldWest Communications, and Raval Media, Ford, IBM,
Blockbuster, EMI and NBC. Our second revenue stream is from the sale of custom
compact discs. Custom compact disc sales, which were minimal in fiscal 2000,
increase in fiscal 2001.

            Azure Capital Holdings, LLC
            ---------------------------

            Our subsidiary, Azure Capital Holdings, LLC, was established on
August 2, 2001.  It is in the development stage and has not had significant
operations to date.


            Organization Within Last Five Years
            -----------------------------------

            Our executive offices are located at 250 West 57th Street, Suite
1101, New York, New York 10019. The following is a chronology of our corporate
history:

            On August 20, 1997, Creative Technology, LLC, a limited liability
company organized under the laws of the State of New York, was formed to operate
technology related enterprises for the development and sale of computer
technology and software. Creative Technology began operations on October 1,
1997.

            On or around October 1, 1997, Technology Applications, LLC, a
limited liability company organized under the laws of the State of New York, was
formed to operate technology related enterprises for the development and sale of
computer technology and software.

            In October 1997, Creative Technology contributed capital of
approximately $1,100,000 and subordinated loans of $400,000 in exchange for a
40% interest and voting control in Technology Applications. The operating
agreement for Technology Application provided that Creative Technology would
control the management committee.

            Kelly Music and Entertainment Corp., a Delaware corporation, was
founded in 1995 to operate technology related enterprises for the development
and sale of computer technology and software. In October 1997, Kelly Music
contributed all of its intellectual property (which forms the core of the
majority of our products and fixed assets) to Technology Applications in
exchange for a 40% ownership interest in Technology Applications valued at
$1,500,000. Kelly

                                       3
<PAGE>

Music received its 40% ownership interest directly from Technology Applications
in consideration for Kelly Music's contribution of intellectual property to
Technology Applications.

            In October 1997, Alvin Pock and Robert Kelly, both principals of
Kelly Music, contributed to Technology Applications notes of Kelly Music (some
of which were collateralized). In exchange, Pock and Kelly received ownership
interests in Technology Applications of 12.5% and 7.5% respectively.

            On February 4, 1998, Technology Applications changed its name to
CDKnet, LLC. On May 7, 1998, Technology Horizons Corp. was formed as a Delaware
corporation to operate technology related enterprises for the development and
sale of computer technology and software. On that same day, Technology Horizons
purchased 100% of the ownership interests of Creative Technology in exchange for
6,000,000 shares of Technology Horizons common stock, acquiring Creative
Technology as a wholly owned subsidiary.

            On May 21, 1998, Technology Horizons merged with International Pizza
Group, Inc., a Florida corporation that was inactive but had its common stock
traded on the Over-the-Counter Bulletin Board under the symbol "IPZZ." As a
result of the merger, Technology Horizons acquired the net assets of
International Pizza and began trading on the Over-the-Counter Bulletin Board on
May 21, 1998, under the symbol "THCX."

            On June 2, 1998, Creative Technology, Kelly Music, Pock, Kelly and
CDKnet, LLC agreed to convert $280,766 and $93,750 of debt which CDKnet, LLC
owed to Creative Technology and Pock into additional ownership interests of 8%
and 2.5%, respectively. Accordingly, the ownership interests of Kelly Music and
Kelly were reduced to reflect the increased ownership of Creative Technology and
Pock.

            Following this debt conversion, the ownership of CDKnet, LLC was as
follows: Creative Technology 48%, Pock 15%, Kelly 5.85% and Kelly Music 31.15%.
By agreement dated June 3, 1998 Creative Technology, Kelly Music, Pock, Kelly
and CDKnet, LLC, CDKnet, LLC, agreed that $800,000 in advances from CDKnet, LLC
to Kelly Music were to be used to reduce Kelly Music's membership interest in
CDKnet, LLC by 5%, thereby increasing the combined ownership of Pock, Kelly and
Creative Technology by an aggregate of 5%. Following this transaction, the
ownership of CDKnet, LLC was as follows: Creative Technology 51.5%, Pock 16.1%,
Kelly 6.25% and Kelly Music 26.15%.

            Additionally, by agreements dated June 3, 1998, Technology Horizons
acquired Kelly and Pock's 6.25% and 16.1% interests in CDKnet, LLC issuing in
exchange 363,636 and 936,727 common shares of Technology Horizons, to Kelly and
Pock, respectively. Following these transactions, Technology Horizons held a
22.35% direct ownership interest in CDKnet, LLC bringing its total direct and
indirect ownership to 73.85%.

            On July 8, 1998, Technology Horizons entered into an agreement that
was subsequently amended to purchase Kelly Music's remaining 26.15% ownership
interest in CDKnet, LLC for $5,171,122, payable in a combination of 1,883,635
common shares of Technology Horizons and debt retirement of $600,000 in notes,
and a cash payment of $65,000 raising Technology

                                       4
<PAGE>
Horizons' direct interest in CDKnet, LLC to 48.5%. Creative Technology held the
remaining 51.5%.

            On December 16, 1998, Technology Horizons changed its name to
CDKNET.COM, INC. and, on December 18, 1998, began trading on the
Over-the-Counter Bulletin Board under the symbol of "CDKX".

            On October 7, 1999, we were deleted from the Over-the-Counter
Bulletin Board until our Registration Statement on Form 10-SB, as amended,
completed the U.S. Securities and Exchange Commission's ("Commission") comment
process. We were re-instated on the Bulletin Board in April 2000.

            On January 13, 2000, we created ValueFlash.com Incorporated, a
Delaware corporation. On June 13, 2001, we sold substantially all of the assets
and business of ValueFlash to Elbit Limited (NASDAQ: ELBT), a corporation
organized under the laws of Israel, and its subsidiaries (collectively, "Elbit")
for $3.5 million plus the assumption of liabilities and forgiveness of
indebtedness. Pursuant to the terms of the sale, on July 13, 2001, we changed
the name of ValueFlash.com Incorporated to CDK Financial Corp. We continue to
maintain a business relationship with Elbit (the owner of the VFlash technology)
pursuant to a Technology and License Agreement between Elbit and us that
provides for the distribution by Elbit of CDKnet, LLC's multimedia compact
discs. Currently, our ownership in ValueFlash consists of 8,500,000 shares, or
80.76%, of the outstanding common stock and 2,500,000 options. The remaining
shareholders of CDK Financial Corp. are: Alvin Pock, 75,000 shares; AMRO
International, S.A., 425,000; Austost Anstalt Schaan, 100,000 shares; Balmore
Funds, S.A., 100,000 shares; Mabcrown, Inc., 500,000 shares; Aizik Wolf, 50,000
shares; Incentive Management, Inc., 175,000 shares; ValueFlash Corporation PTE
Ltd., 500,000 shares; David Wolf, 100,000 shares; and Steven A. Horowitz,
800,000 options

            On August 2, 2001, we formed a fund and money management subsidiary,
Azure Capital Holdings, LLC ("Azure"), to perform financial services for other
customers. Azure is a limited liability company organized under the laws of
Delaware. We own 60% of Azure directly and indirectly with the remaining
ownership distributed among fund managers.

            In addition to our interests in CDK Financial Corp. and Azure
Capital Holdings, we currently have two wholly-owned subsidiaries: Creative
Technology and CDKnet, LLC. We directly own 100% of Creative Technology and
48.5% of CDKnet, LLC. Creative Technology owns the remaining 51.5% ownership
interest of CDKnet, LLC, giving us an indirect 100% ownership interest of
CDKnet, LLC. We conduct our business through both CDKnet, LLC and Azure. Our
executive office as well as our manufacturing, research and development are
conducted out of our office located at 250 West 57th Street, Suite 1101, New
York, New York 10019. We can be reached at our principal offices by telephone at
212-547-6050 or through our website at: WWW.CDKNET.COM.

Our Industry
------------

                 The Custom Compact Disc Market
                 ------------------------------

                 A.   Industry Overview
                      -----------------


                                       5
<PAGE>

            Internet usage has increased dramatically in the last decade. As a
result, many new personal and commercial applications have been developed for
Internet users and, increasingly, consumers are conducting business through
Internet applications. We believe that web-connected multimedia compact discs
will be one of the next significant applications of the Internet. Web-connected,
multimedia compact discs contain audio, video and HTML (or, HyperText Markup
Language, the underlying "code" for web pages) all navigable by a standard web
browser. Our CDK(TM) technology forms the foundation multimedia for CD-ROM
authoring, production, and custom online compilations. Further, our CDK(TM)
technology provides an outstanding platform for the dissemination of Elbit's
Vflash(TM) messenger.

            We believe there is strong market potential for CDK(TM) technology
across various industries. Target industries include:

            o  Entertainment (music, movies, TV)   - Toys/Games

            o  Travel & Tourism                    - Fashion

            o  Professional Sports                 - Food/Cooking

            o  Financial Services                  - Automotive

            o  Education                           - HealthCare

            We believe that the industry will become more competitive. Our
inability to compete in the market could have a material effect on our business
operations.

            B.   Competition
                 -----------

            While other companies have the potential to develop web-based, audio
and video, custom compact discs, we believe that none offer the economic,
development or quality advantages of our CDK(TM) technology. We believe that
there are four main companies currently offering custom audio compact disc
development. These companies are Customdisc.com, Amplified.com, and K-Tel.com.
However, we believe that none of these companies offer custom audio and video
compact disc development. In an effort to further secure a strong position in
the marketplace, CDKnet, LLC has submitted patent requests for certain aspects
of our technology. Finally, we believe that other companies, including
established Internet companies, software companies and companies in the
entertainment business could enter this business and become competitors.


                                       6
<PAGE>

Products and Services
---------------------

            We have developed and are marketing the following products and
services:

                 (1)  CDK(TM) Technology

                 CDK(TM) technology combines the following products and services
through a browser interface:

                        o   compact disc digital audio (i.e., audio tracks that
                            are playable on both home stereo systems and
                            personal computers);

                        o   full-screen video; and

                        o   integrated web links.

            A browser interface is the main interface page that is presented
when the compact disc is placed in a personal computer. Our technology allows
video playback at the full-screen size of the video monitor and at full-motion
which is the industry standard of 30 frames per second. The browser interface
also allows easy linking to other web sites through the CDK(TM) interface page.


            The CDK(TM) HTML authoring system -- the process for creating web
pages -- is used by CDKnet, LLC to produce custom HTML interface pages for
specific clients in about a day. We have proprietary techniques for creating
full-motion, full-screen video playback from using a compact disc. Any user with
a personal computer of at least 166MHZ or Macintosh G3 should be able to play
our custom audio and video compact discs.

            CDK(TM) has been engineered to offer compatibility with the majority
of CD-ROM drives on the market. We believe that we have achieved a high level of
reliability, as evidenced by extensive testing and major CDK(TM) releases, and
we believe this reliability will provide a major competitive advantage over
other multisession (i.e., both audio and video) compact discs in the market.
Additionally, the CDK(TM) system is engineered for mass-production. The
integration of the complete file structure of the CDK(TM) is automated. Audio,
video and HTML assets can be placed in the production templates created by us
for a fast turn-around time for the creation of CDKs.

                                       7
<PAGE>

                 (2)  Financial Services
                      ------------------

            We are actively seeking opportunities to finance companies with well
developed, comprehensive business plans that reflect high growth potential and
low burn rates. We intend to build a portfolio of these types of companies and
help them grow with strategic planning, assistance with the development of
management, and the provisions of additional financing through their network of
strategic financial partners (including investment banking and possible direct
public offerings).


Research & Development
----------------------

            Through the fiscal year ending June 30, 2001, we expended $225,000
on research and development of our products and services. During the fiscal year
ending June 30, 2000, we expended approximately $164,000 on research and
development. We continue development of our newly released CDK(TM) 3.0
technology.

            During the fiscal year ending June 30, 2001, we continued to enhance
the value of our product/service offerings through ongoing research and
development efforts. Specifically, we engaged in the following internal
projects:

                o   Development of our financial services line of business;

                o   Development of CDK(TM) 2.0 version featuring Macintosh
                    compatibility, a reduced installation set as well as
                    improved video performance; and

                o   Development of CDK(TM) 3.0 version featuring video
                    encryption, international language capabilities, and greater
                    flexibility to alter the look, feel and function. We have
                    also developed the "Game Installer" which allows
                    browser-based installation of any software product from a
                    CDK multimedia CD. This version [was released on March 31,
                    2001] [is in its final testing stage].


Sales and Marketing
-------------------

        1.   CDKnet, LLC
             -----------

                                       8
<PAGE>


            The primary marketing objective for CDKnet, LLC is to establish
CDK(TM) technology as the standard for integrating digital audio,
full-screen/full-motion video and Web links on a standard compact disc. CDK(TM)
technology provides clients with the ability to distribute information and
multimedia content to their existing and potential customer base. Additionally,
our client-specific CDKs(TM) are ideally suited to distribute Elbit's Vflash(TM)
messenger.

            CDKnet, LLC will continue to capitalize on the market opportunity
presented by Elbit's VFlash(TM) Messenger by providing Elbit's clients with
Web-connected multimedia compact discs (CDKs) that serve as an efficient
distribution mechanism for the Vflash(TM) application. Additionally, CDKnet, LLC
will continue to provide multimedia compact disc production to clients who are
interested in developing compact disc-based marketing programs but who may not
be candidates for a full-fledged Vflash program.

        2.  Azure Capital Holdings, LLC
            ---------------------------

            Our subsidiary, Azure Capital Holdings, LLC, was established on
August 2, 2001. It is in the development stage and has not had significant
operations to date.


Plan of Operation
-----------------

            Our operational plan for fiscal year 2001 included: (1) moving
custom, multimedia compact disc operations (i.e., MixFactory(TM)) to a higher
volume, lower rent production environment; (2) forming strategic alliances with
a digital video services company to meet increasing demand for these services;
(3) signing up MixFactory(TM) partner sites across various industries; and (4)
developing the Vflash technology and product and begin marketing. We achieved
all of the goals.

            Our operational plan for fiscal 2002 anticipates that Elbit's Vflash
Messenger will continue to be a major factor in our revenue and business growth.
We expect such revenue growth to be generated from the Technology and Licensing
Agreement with Elbit. Also, we will continue to focus on generating revenue from
the sale of client specific compact discs, and development of our financial
services division through our subsidiary, Azure.

            Costs are projected to increase to support the growing operations,
clients, and subscribers and continuing development.

                                        9
<PAGE>

            For more information, see "Management's Discussion and Analysis or
Plan of Operation."

Material Agreements
-------------------

            We consider the following agreements to be material in our ability
to provide our customers with our products and services:

            o    Technology and Licensing Agreement between CDKnet.com, Inc.,
                 Elbit Limited and Elbit VFlash Inc. dated June 13, 2001, under
                 which the parties agreed that for an initial 3-year period, we
                 shall provide CDKs(TM) for Elbit in return for disc mastering
                 fees and per disc production fees. Pursuant to the Agreement,
                 the Licensees are entitled to make such improvements,
                 derivatives and applications from our CDK(TM) technology as
                 they may provided that they are used solely in the developing,
                 marketing and selling of mechanisms for desk-top messaging. The
                 Licensees shall also have the right to protect such
                 improvements to, derivatives from, or applications to, our
                 CDK(TM) technology by registering the same through patent,
                 copyright, trademark applications or the like. Should we decide
                 to sell all or portions of our ownership of the CDK(TM)
                 technology, the Licensees shall have the option, for seven days
                 from receipt of notice of the terms of the sale, to purchase
                 such ownership interest on identical terms and conditions.

                                       10
<PAGE>


            o    Agreement dated November 16, 1999 with Asia Pioneer, Ltd., a
                 Hong Kong-based Internet technology company serving the
                 Chinese-speaking world population. The agreement grants Asia
                 Pioneer the right to our web-connected multimedia compact disc
                 technology as well as MixFactory(TM) technology to offer
                 customized multimedia compact discs through Asia Pioneer's new
                 web site beatasia.com. Beatasia.com is a comprehensive music
                 entertainment web site and is known as "the heartbeat of Asia."
                 Rights extended in the agreement cover the worldwide Chinese
                 speaking community. In exchange for these rights, we received a
                 4.89% ownership interest in Asia Pioneer at the completion of
                 the underlying services. The parties also entered into a
                 Subscription Agreement under which Asia Pioneer purchased
                 500,000 shares of our common stock at $.50 per share in two
                 allotments. In accordance with the terms of the Agreement, Asia
                 Pioneer assigned its rights, duties and obligations under the
                 Agreement to Leadway Technology Limited.

            o    Agreement between ValueFlash, CDKnet, LLC, Track Marketing
                 Partners, Inc., and Arcadia Marketing, Inc. dated May 4, 2000
                 for the marketing of CDKnet technology. Track will have
                 exclusive rights to market and/or sell the products to an
                 established client list. From CDKnet, Track will receive (1) a
                 percentage of the net revenues from the sale to a Track Client,
                 (2) CDKnet.com options based on gross revenues generated by
                 Track Clients, and (3) if Track identifies or introduces
                 investors to CDKnet, then Track will receive 2.5 percent of the
                 investment made by that investor. This agreement is for 24
                 months except as to specific provisions identified as existing
                 longer.

            o    Agreement between ValueFlash, CDKnet, LLC, and Arcadia
                 Marketing, Inc.(AMI) dated May 4, 2000 for the marketing of
                 CDKnet technologies. AMI will receive compensation as follows:


                 >>   From CDKnet.com: (1) options based on gross revenue
                      created by AMI efforts or clients, and (2) 5 percent of
                      the investment if AMI identifies or introduces investors
                      to CDKnet.

                                       11
<PAGE>

                 >>   AMI will also receive compensation in the form of: (1) 20
                      percent of CDKnet net revenue when sales are related to a
                      Track client (2) CDKnet.com options based on revenues
                      generated, (3) CDKnet.com options for every 1,000,000
                      compact disc units produced and (4) 2.5 percent of any
                      investment in CDKnet identified by Track for CDKnet.

                 >>   When JMC clients are involved, AMI will also receive
                      compensation of (1) options to purchase CDKnet.com common
                      stock based on gross revenue from AMI clients, (2) options
                      to purchase CDKnet.com common stock for every 1,000,000
                      compact disc units produced with CDK(TM) technology if AMI
                      clients were cause of production, and (3) 2.5 percent of
                      investments made to CDKnet by an investor identified by
                      JMC.

            o    Agreement between ValueFlash, CDKnet, LLC, JMC Investments,
                 LLC, and Arcadia Marketing, Inc. dated May 4, 2000 for the
                 marketing of CDKnet technology. JMC will have exclusive rights
                 to market and/or sell the products to an established client
                 list. JMC will receive:


                 >>   From CDKnet.com: (1) options to purchase CDKnet.com common
                      stock based on gross revenues generated by JMC clients,
                      (2) options to purchase CDKnet.com common stock for the
                      use of the CDK(TM) technology, and (3) if JMC identifies
                      or introduces investors to CDKnet then JMC will receive
                      2.5 percent of the investment made by that investor.







                                       12
<PAGE>



                      This agreement is for 24 months except as to specific
                      provisions identified as existing longer.







































                                       13
<PAGE>

Intellectual Property Rights
----------------------------

            We rely on copyrights, trademarks, patents, trade secret laws and
contractual restrictions to establish and protect our proprietary rights in our
services and products. We were issued U.S. Patent No. 6,047,292 on April 4,
2000, relating to the basic CDK(TM) technology. The patent is directed to a
multi-session, digitally encoded recording medium navigable by an Internet web
browser. Our intellectual property counsel has filed a continuation application
to separate the previously rejected claims from the issued patent into a new
application, which intellectual property counsel will continue to prosecute in
the U.S. Patent and Trademark Office.

            No assurance can be given that a second patent will issue or that if
a second patent does issue that it will be broad enough to provide significant
protection to us. No assurance can be given that the issued patent is valid and
enforceable or that it provides sufficient coverage to prevent a competitor from
entering our market or adopting a version of our patented technology. Moreover,
one of our competitors may be able to design a system which operates similarly
to ours, but does not infringe the patent. Our management believes that the
steps taken by us to protect its intellectual property are consistent with
industry standards for online, custom compact disc companies today.

            On June 13, 2001, we entered into a 3-year Technology and License
Agreement along with Elbit Limited and Elbit Vflash Inc. Pursuant to the
Agreement, the Licensees are entitled to make such improvements, derivatives and
applications from our CDK(TM) technology as they may provided that they are used
solely in the developing, manufacturing and selling of merchandise for desk-top
messaging. The Licensees shall also have the right to protect such improvements
to, derivatives from, or applications to, our CDK(TM) technology by registering
the same through patent, copyright, trademark applications or the like. Should
we decide to sell all or portions of our ownership of the CDK(TM) technology,
the Licensees shall have the option, for seven days from receipt of notice of
the terms of the sale, to purchase such ownership interest on identical terms
and conditions.

            Additionally, on June 6, 2000, we filed a patent application (No.
09/588,768) for a system and method for disseminating information over a
communication network according to predefined consumer profiles, for our
Vflash(TM) product. On June 13, 2001, we assigned our patent application and
intellectual property rights in VFlash(TM) to Elbit.

            We also rely on third-party software licenses, such as Microsoft
Development Network (MSDN), which provides software development tools. All
employees and contractors are required to and have entered into confidentiality
and invention assignment agreements. Suppliers, distributors and customers are
also required to enter into confidentiality agreements.

            To date, we have received no notification that our services or
products infringe the proprietary rights of third parties. Third parties could
however make claims of infringement in the future. Any future claims that do
occur may have a material adverse effect on our business.

            We have the following issued and pending trademarks:

                                       14
<PAGE>


            o    Issued Trademark Registrations
                 ------------------------------
                 TM: CDK Serial No. 75/426,937 - Filed February 2, 1998 Issued:
                 06-27-00 Reg. No. 2,361,144

            o    Pending:
                 -------
                 TM: MIX FACTORY Serial No. 75/757,751 Filed: 7/22/99


Employees
---------

            As of October 9, 2001, we had the following number of employees: 2
full-time employees of CDKnet, LLC; and 2 full-time employees of Azure. While
sourcing and recruiting appropriate technical personnel is often difficult and
competitive, we expect that our need to recruit additional personnel in the
future will not negatively affect our operations. As we implement our new
business plan and expand our financial services business, we expect may need to
hire additional employees to service our customers. Management believes that our
employee relations are good, and none of our employees are represented by a
collective bargaining unit.

ITEM 2. DESCRIPTION OF PROPERTY.
        -----------------------

            Our executive office as well as our manufacturing, research and
development are located at 250 57th Street, Suite 1101, New York, New York
10019. This office may be reached at (212) 547-6050.

            The office consists of approximately 6,690 square feet, leased under
the terms of one lease. We have a 10-year lease for this office space through
2010.

            The future minimum lease commitments are as follows:

                        June 30, 2002                       $60,000
                        June 30, 2003                       $62,000
                        June 30, 2004                       $62,000
                        June 30, 2005                       $62,000
                        June 30, 2006                       $63,000

            All property is insured to industry standards.

            In June 2001, we closed our sales office in Los Angeles, California
that previously serviced our ValueFlash customers.

ITEM 3. LEGAL PROCEEDINGS.
        -----------------

         NONE

                                     PART II

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

1.      Market Information
        ------------------

        Our stock is quoted on the Over-the-Counter Bulletin Board. As of
October 5, 2001, we had 31,321,075 shares of common stock outstanding. Of this
amount, 10,574,673 of those shares are nonrestricted and 22,502,219 of those
shares are restricted. As of October 5, 2001, the

                                       15
<PAGE>

number of holders of record of our common stock, $0.0001 par value, was 117. The
following table sets forth the range of high and low sales prices for the stock
for each full quarterly period within the two most recent fiscal years and any
subsequent interim period covered by the financials. The sales represent prices
between dealers, do not include retail markup, mark down or other fees or
commissions, and do not necessarily represent actual transactions.


Calendar Quarter                          Ended Bid Prices
----------------                          ----------------

                                     Low                     High
                                     ---                     ----
FISCAL YEAR 2000
----------------
September 30, 1999                  $.968                   $1.843

December 31, 1999                   $.350                   $1.000

March 31, 2000                      $.375                   $8.200

June 30, 2000                       $1.312                  $5.950

FISCAL YEAR 2001
----------------
September 30, 2000                  $.687                   $3.937

December 31, 2000                   $.145                   $1.000

March 31, 2001                      $.1510                  $.2604

June 30, 2001                       $.086                   $.193


FISCAL YEAR 2002
----------------
September 30, 2001                  $.06                    $.11



2.      Dividend Policy
        ---------------

        To date, we have not paid a cash dividend to our shareholders. We are
also limited in our ability to do so under the terms of our 6% convertible
subordinated debenture due September 1, 2003.

3.      Recent Sales Of Unregistered Securities; Use Of Proceeds From Registered
        ------------------------------------------------------------------------
        Securities
        ----------

        We have filed three registration statements, as amended, with the
Commission registering certain shares of our common stock as follows:


            o    On December 22, 1999, we filed a Registration Statement on Form
                 SB-2 (File No. 333-93277), as amended, which became effective
                 on March 27, 2000. Pursuant to Rule 429 of the Securities Act,
                 we filed a post-effective amendment to this registration
                 statement in our August 1, 2000 registration statement which is
                 not yet effective.

            o    On August 1, 2000, we filed a Registration Statement on Form
                 SB-2 (File No. 333-42696), which also amended our prior SB-2
                 (File No. 333-93277). This registration statement is not yet
                 effective.

            o    On October 11, 2001, we filed a Registration Statement on Form
                 S-8 (File No. 333-71356) to register 500,000 shares of our
                 common stock pursuant to a Consulting Agreement between Mr.
                 Steve Wildstein and us dated September 10, 2001.


                                       16
<PAGE>

            We incorporate by reference from our quarterly report on Form
10-QSB, dated May 21, 2001 (File No. 0-27587), the list of securities that we
have issued or sold during the last three years. The following additional
securities were issued or sold without registering them under the Securities Act
of 1933 in reliance upon the exemptions from registration provided by the
Securities Act as follows:


            o    500,000 shares of our common stock to Steven E. Wilestein for
                 services to be rendered on an on-going basis in connection with
                 a Consulting Agreement between the parties dated September 10,
                 2001. We agreed to issue the shares to Mr. Wildstein in
                 reliance upon the exemption provided by Regulation D and/or
                 Section 4(2) because he is an accredited investor who purchased
                 the stock for investment purposes.

            o    250,000 shares of our common stock to Mike Muzio for services
                 to be rendered on an on-going basis in connection with a
                 Consulting Agreement between the parties dated September 10,
                 2001. We agreed to issue the shares to Mr. Muzio in reliance
                 upon the exemption provided by Regulation D and/or Section 4(2)
                 because he is an accredited investor who purchased the stock
                 for investment purposes.

            o    154,679 shares of our common stock to Casa Di Cara on
                 August 20, 2001 in connection with the conversion of $10,000 of
                 our Preferred Stock Series A. We issued the stock to Casa
                 DiCara in reliance upon the exemption provided by Regulation D
                 and/or Section 4(2) because it is an accredited investor who
                 purchased the stock for investment purposes.

            o    100,000 shares of our common stock to Scott Eliasoph for
                 services to be rendered on an on-going basis in connection with
                 a Consulting Agreement between the parties dated effective the
                 2nd day of May 2001. We agreed to issue the shares to Mr.
                 Eliasoph in reliance upon the exemption provided by Regulation
                 D and/or Section 4(2) because he is an accredited investor who
                 purchased the stock for investment purposes.

            o    250,000 shares of our common stock to Wavecount Advisory
                 Services for services to be rendered on an on-going basis in
                 connection with an Investment Advisory Agreement between the
                 parties dated effective the 2nd day of May 2001. We agreed to
                 issue the shares to Wavecount in reliance upon the exemption
                 provided by Regulation D and/or Section 4(2) because it is an
                 accredited investor who purchased the stock for investment
                 purposes.

            o    Effective May 10, 2001, we agreed with Masaki Hashimoto to
                 rescind his initial purchase of 2,631,579 of our common stock
                 for $500,000, which we issued on January 4, 2001. We had agreed
                 to issue the shares to Mr. Hashimoto in reliance upon the
                 exemption provided by Regulation D and/or Section 4(2) because
                 he was an accredited investor who purchased the stock for
                 investment purposes.




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

        The following contains forward-looking statements based on current
expectations, estimates and projections about our industry, management's
beliefs, and assumptions made by management. All statements, trends, analyses
and other information contained in this report relative to trends in our
financial condition and liquidity, as well as other statements, including, but
not limited to, words such as "anticipate," "believe," "plan," "intend,"
"expect," "predict," and other similar expressions constitute those statements.
These statements are not guarantees of future performance and are subject to
risks and uncertainties that are difficult to predict. Accordingly, actual
results may differ materially from those anticipated or expressed in the
statements. Potential risks and uncertainties include, among others, those set
forth below. Particular attention should be paid to the cautionary statements
involving our limited operating history, the unpredictability of our future
revenues, the unpredictable and evolving nature of our business model, the
competitive multimedia CD and financial services industries and the risks
associated with capacity constraints, systems development, management of growth
and business expansion, as well as other risk factors.

Overview
--------

        We are a holding company incorporated in the State of Delaware. We have
two subsidiaries through which we conduct our business: (1) CDKnet, LLC, a New
York limited liability company, and (2) Azure Capital Holdings, LLC, a Delaware
limited liability company.

        We have developed a multimedia technology, called CDK(TM), which
integrates audio, video and Internet connectivity on a standard compact disc.
Our technology enables users to create their own personalized compact discs
simply by visiting a Website. These custom compact discs play audio and display
videos on a full-screen, using high-quality videos and digital technology. The
custom compact discs also include software applications and targeted Web links.

        The CDK(TM) product is targeted at the following industries: (1)
entertainment (music, movies, and TV); (2) travel and tourism; (3) professional
sports; (4) financial services; (5) education; (6) toys/games; (7) fashion; (8)
food/cooking; (9) automotive; and (10) healthcare. Its primary customers and/or
strategic partners include Central Park Media, CollegeMusic.com, Megaforce
Records, HappyPuppy.com, theglobe.com and SugarBeats.com.



         In June 2001, we sold substantially all of the assets of our
subsidiary, ValueFlash to Elbit Limited for $3.5 million in cash plus the
assumption of liabilities and forgiveness of indebtedness. In connection with
the sale of ValueFlash, we entered into a Technology and License Agreement with
Elbit whereby the parties agreed that for an initial 3-year period, we shall
provide CDKs(TM) for Elbit in return for disc mastering fees and per disc
production fees.



                                       17
<PAGE>


        We have a limited operating history. While historically we have
generated revenues primarily from development and use fees for client specific
compact discs and the sale of custom compact discs, in fiscal 2001, most of our
resources were directed to developing and marketing the VFlash(TM) product
in accordance with our fiscal 2001 operating plan. In light of the sale of
ValueFlash and our new business strategy, we anticipate that our financial
services business will be a major factor in our future revenue and business
growth.  We expect our future growth to be generated from (1) revenues from our
technology and license agreement with Elbit and (2) from our financial services
line of business once it develops.

        In fiscal 2001, significant expenditures were incurred for marketing and
advertising the VFlash(TM) product and to build the infrastructure to support
it. With the sale of ValueFlash, we expect our expenses and overhead to
substantially reduced in fiscal 2002.

        In the near term, we will continue to focus on generating revenue from
the sale of client-specific CDKs and custom compact disc services.


        Our current business development efforts include both full-time
employees as well as outside consultants. Consultants are compensated on a
performance basis.

        We receive funds from product sales and services. To date, we have
focused our funds on the development of CDK(TM) products (including CDK(TM))
1.0, CDK(TM) 2.0, CDK(TM) 3.0, and Gameplayer 2.0.

        Following the sale of ValueFlash, we were left with cash reserves of
approximately $3.5 million in cash and escrow receivables, under $1.4 million in
liabilities and a royalty producing licensing based from our CDK(TM) technology
platforms.

        In fiscal 2001, we successfully raised $1.4 million from private sales
of our common stock. We have not explored financings since June 2001.  However,
if necessary, we will explore various financings including private placements
and debt financings during fiscal 2002.

        As of October 5, 2001, we had 31,321,075 shares of common stock issued
and outstanding. Our stock is traded on the Over-the-Counter Bulletin Board
under the symbol "CDKX."


Stock Dividend
--------------

        We have not issued a dividend to date.


                                       18
<PAGE>
Recent Developments
-------------------

        On August 2, 2001, we formed a new subsidiary, Azure Capital Holdings,
LLC, that will be the initial stage of our business strategy change to the
financial services market. We anticipate that Azure will serve as the
centerpiece of our financial services operations as we move from a technology
company to a financial services company for the small and medium sized corporate
markets.

        On August 14, 2001, we completed our first private equity investment in
Eascent, LLC, a New York limited liability corporation, engaged in the import,
export, and distribution of new products and technologies between the United
States and Eastern and Central Europe. The investment consists of a convertible
bridge financing of $100,000 and provides us with (1) the opportunity to convert
our loan into a 10% equity stake in Eascent and (2) warrants to purchase up to
an additional 5% of the equity of Eascent at current funding value for a period
of two years. Our investment in Eascent was part of the implementation of our
new business strategy. Steven A. Horowitz, our Chairman, Chief Executive
Officer, Chief Financial Officer and Secretary is a principal owner and officer
of Eascent.

         In September 2001, we loaned $500,000 to DBS Industries under a
convertible note receivable. This note bears interest at 6% per annum and is
convertible at the lower of $0.98 (the Fixed Conversion Price) or a variable
conversion price depending upon certain events. However, the conversion price
shall in no event be lower than $0.21 per share (the Minimum Conversion Price).

        On October 4, 2001, we completed our second private equity investment in
Optical Systems, LLC, a New York limited liability corporation, engaged in the
design and development of optoelectronic devices for the marine safety
marketplace. Effective October 19, 2001, Optical Systems LLC merged with Optical
Systems Inc., a Delaware corporation formed for such purpose. The investment
consists of a convertible bridge financing of $100,000 and provides us with (1)
the opportunity to convert our loan into a 10% equity stake in Optical Systems
and (2) warrants to purchase up to an additional 5% of the equity of Optical
Systems at a fifty percent premium to current funding value for a period of two
years. Our investment in Optical Systems was part of our continued
implementation of our new business strategy to develop our financial services
operations. Steven A. Horowitz, our Chairman, Chief Executive Officer, Chief
Financial Officer and Secretary is a principal owner and officer of Optical
Systems, Inc.

Stock Issuance
--------------

        In September 2001, we issued 500,000 shares of our common stock to
Steve Wildstein and 250,000 shares to Mike Muzio pursuant to consulting
contracts with them.

Agreements
----------

        The following are highlights from our significant agreements:

        -- On May 31, 2001, we entered into a 3-year Technology and License
Agreement with Elbit Vflash, Inc., a Delaware Corporation and Elbit Vflash Ltd,
a company registered in the Isle of Man, (collectively the "Licenses") pursuant
to which we granted the Licensees an irrevocable, non-exclusive world-wide
license in our CDK(TM) technology. As consideration for granting the license, we
will receive Mastering Fees, Media player Monthly Hosting Fees, specific fees
for any Mixfactory custom compact discs and fees related to the replication of
CDK(TM) masters prepared for the Licensees. Pursuant to the Agreement, the
Licensees are entitled to make such improvements, derivatives and applications
from our CDK(TM) technology as they many provided that they are used solely in
the developing, manufacturing and selling of merchandise for desk-top messaging.
The Licensees shall also have the right to protect such improvements to,
derivatives from, or applications to, our CDK(TM) technology by registering the
same through patent, copyright, trademark applications or the like. Should we
decide to sell all or portions of our ownership of the CDK(TM) technology, the
Licensees shall have the option, for seven days from receipt of notice of the
terms of the sale, to purchase such ownership interest on identical terms and
conditions.

        --  We entered into a Sales Agency Agreement with the Almont Group of
Alexandria, Virginia, dated effective August 14, 2001, to represent our
convergent multimedia technology, version CDK 3.0. Pursuant to the agreement,
the Almont Group will market our CDK(TM) technology to help broaden our customer
base and bring greater exposure to its unique presentational capabilities.


Results of Operations - Years ended June 30, 2001 and June 30, 2000
-------------------------------------------------------------------

        During the year ended June 30, 2001, we incurred a net loss of
$7.3 million on revenues of $5,874,000 compared to a net loss of $7.1 million on
revenues of $345,000 in the year ended June 30, 2000.

                                       19
<PAGE>

        The cost of revenues for the year ended June 30, 2001 was $2,234,000
compared to $80,000 for the year ended June 30, 2000. The decreasing costs are
directly related to the decrease in revenues noted above.

        For the year ended fiscal 2001, we expensed approximately $225,000 on
research and development compared to $164,000 during fiscal year end 2000. Our
research and development costs were higher during the fiscal 2001 due to
expenditures for the development of VFlash(TM), enhancements to our core
technology and product development.

        For the year ended June 30, 2001, other operating expenses were $10.8
million compared to $6.0 million during the year ended June 30, 2000 as
expenditures related to the marketing, advertising and infrastructure buildup to
support ValueFlash were incurred.

        Interest expense was $129,000 for the fiscal 2001, compared to $84,000
in fiscal 2000.

Liquidity and Capital Resources
-------------------------------

        As of June 30, 2001, we had $750,000 in cash and cash equivalents. Our
principal commitments are $165,000 in Subordinated Convertible Debentures and
$91,000 in long-term debt and operating and capital lease obligations. We have
no material commitments for capital expenditures, nor do we anticipate any. We
do not anticipate that we will experience growth in operating, marketing and
advertising expenses for the foreseeable future or that such expenses will be a
material use of our cash resources.

        Through fiscal 2001, our cash requirements have historically been
financed primarily through the sale of debentures and common stock. In the year
ended June 2001, $1.4 million has been raised from the sale of our common stock
and $491,000 from the sale of ValueFlash assets. We do not maintain credit
facilities with any financial institutions.

        Net cash used by operating activities equaled $2.4 million for the year
ended June 30, 2001, compared to net cash used in operating activities of $4.2
million for the year ended June 30, 2000. Cash used by operations resulted from
net losses partly offset by non-cash depreciation and amortization charges,
compensation charges related to stock options and services paid in common stock
and warrants.

        Net cash used in investing activities was $1.3 million for the year
ended June 30, 2001, compared to $627,000 in the prior year period. Net cash
used in investing activities in fiscal 2000 was primarily due to the purchases
of furniture and equipment. Additionally, in fiscal year ended June 30, 2001, we
spent $156,000 on software development, mostly on the VFlash(TM) product. We
spent $470,000 in investments in joint ventures in fiscal year 2001.


                                       20
<PAGE>


        Net cash from financing activities was $4.9 million for the year ended
June 30, 2001, compared to $5.6 million for the year ended June 30, 2000. Cash
provided by financing activities resulted in proceeds of $1.4 million from the
sale of our common stock, $606,000 in proceeds from the sale of ValueFlash
assets and minority interest sale.

        The proceeds from these financing activities were used in fiscal
2001 to (i) continue our ongoing operations, (ii) to further develop our
CDK(TM), VFlash(TM), Gameplayer, and MixFactory.com(TM) product lines, and (iii)
repay our debt. With the exception of development of VFlash(TM), we anticipate
to use our funds in the same manner in fiscal year 2002.

Factors Affecting Future Results
--------------------------------

        We do not provide forward-looking financial information. However, from
time to time statements are made by employees that may contain forward looking
information that involve risks and uncertainties. In particular, statements
contained in this annual report that do not historically contain predictions are
made under the Safe Harbor Corporate Private Sector Litigation Reform Act of
1995. Our actual result of operations and financial condition have varied and
may in the future vary significantly from those stated in any predictions.
Factors that may cause these differences include without limitation the risk,
uncertainties and other information discussed within this registration
statement, as well as the accuracy of our internal estimate of revenue and
operating expense levels. We face a number of risk factors which may create
circumstances beyond the control of management and adversely impact the ability
to achieve our business plan.

ITEM 7. FINANCIAL STATEMENTS.
        --------------------
        Our financial statements are filed under this Item 7, beginning on page
F-1 of this report.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        ---------------------------------------------------------------
        FINANCIAL DISCLOSURE.
        --------------------
        NONE.

                                    PART III
                                    --------

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

        The following sets forth our directors and executive officers and key
employees as of October 30, 2001, their respective ages, the year in which each
was first elected or appointed a director, and any other office held by each
director:

                                       21
<PAGE>

CDKnet.com, Inc.
----------------

NAME OF DIRECTOR/       AGE         POSITION HELD               DATE ELECTED
OFFICER                                                         OR APPOINTED
--------------------------------------------------------------------------------
Steven A. Horowitz      42          Chairman, Chief Executive   May 1998
                                    Officer, Chief Financial
                                    Officer and Secretary

Andrew J. Schenker      41          Director                    May 1998
Anthony J. Bonomo       42          Director                    May 1998


CDKnet, LLC
-----------------

NAME OF DIRECTOR/       AGE         POSITION HELD               DATE ELECTED
OFFICER                                                         OR APPOINTED
--------------------------------------------------------------------------------
Steven A. Horowitz      42          Chairman, Chief Financial   May 1998
                                    Officer, and Secretary

Don Hegarty             32          Chief Technical Officer     July 2000

FAMILY RELATIONSHIPS
--------------------

No family relationship exists between or among any of our directors, executive
officers, and significant employees, as defined below, or any person
contemplated to become such.

BUSINESS EXPERIENCE
-------------------

STEVEN A. HOROWITZ - Chairman, Chief Executive Officer, Chief Financial Officer
and Secretary, CDKnet.com, Inc.; and Chairman, Chief Financial Officer and
Secretary of CDKnet, LLC.

Mr. Horowitz has served as Chairman of the Board of Directors and Secretary of
CDKnet.com since May 1998, has served as Chief Financial Officer since October
1999, and has served as the managing member of Creative Technology and CDKnet,
LLC since October, 1998 and November, 1998, respectively. Since April 1, 2000,
he has served as a partner in Moritt, Hock, Hamroff & Horowitz, LLP, a Garden
City, New York-based law firm. From October 1, 1991 to March 2000, he was the
founding principal of Horowitz, Mencher, Klosowski, & Nestler, P.C., a Garden
City, New York-based law firm. Mr. Horowitz holds a degree from Hofstra
University School of Law and a Master of Business Administration degree in
Accounting from Hofstra University School of Business. Mr. Horowitz is an
Adjunct Professor of Law at Hofstra University School of Law. In 1986 and 1987,
Mr. Horowitz was Director of Taxes for Symbol Technologies, Inc., a New York
Stock Exchange corporation. Mr. Horowitz is a member of the American Bar
Association and the New York State Bar Association.

ANTHONY J. BONOMO - Director, CDKnet.com, Inc.

Mr. Bonomo has served as a director of CDKnet.com since June, 1998. He has,
since 1986, served in various executive capacities at Administrators for the
Professions, Inc., the Physicians' Reciprocal Insurers, one of the largest
medical malpractice carriers in New York State, including Executive Vice
President and Chief Operating Officer from 1993 to 1995 and President from 1995
to the present. Mr. Bonomo is a member of the New York State Bar and serves as a
board member of several charitable associations and foundations.

                                       22
<PAGE>

ANDREW J. SCHENKER - Director, CDKnet.com, Inc.

Mr. Schenker became a director of CDKnet.com in May, 1998. He recently stepped
down from his position as the Director of Finance for North America Sales and
Services Division at Symbol Technologies, Inc. a manufacturer and world leader
in bar-code based data transaction systems based in Holbrook, New York to
concentrate on entreprenuerial opportunities. Since November 1986, he has held
several financial management positions at Symbol Technologies, Inc., most
recently at the position described above. He is also the trustee for several
trusts and a public foundation, as well as an executive committee member of the
Smithtown School District Industry Advisory Board.

DON HEGARTY - Chief Technical Officer, CDKnet, LLC

Don Hegarty joined CDKnet in 1999. He is responsible for CDK software
development, overall website management, and the automated robotic processes
behind the Mixfactory.com websites. His duties also include maintaining the
order fulfillment system, programming new automation, and managing the customer
support staff. Prior to joining CDKnet he was Director of CD production at
MY-CD.com, a Bandai company. There he worked on creating one of the first
customized CD sites on the Internet. Prior to that, he lead programming for
Market Growth Resources, A True North Company, on many projects including
Tropicana, Duracell, and Mastercard. Mr. Hegarty has also worked for the Library
of Congress in creating a database system to track both Braille books and books
on tape for thousands of users across the United States. Mr. Hegarty has a B.S.
in Computer Science from Manhattan College.

            SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
            -------------------------------------------------------

            Under Section 16(a) of the Securities Exchange Act of 1934, as
amended, our directors, executive officers, and any persons holding more than
ten percent of our common stock are required to report to the SEC their initial
ownership of our stock and any subsequent changes in that ownership. Based on a
review of Forms 3, 4 and 5 under the Exchange Act furnished to us, we believe
that during the fiscal year ended June 30, 2000, our officers, directors and
holders of more than 10 percent of our common stock filed all Section 16(a)
reports on a timely basis.

ITEM 10.    EXECUTIVE COMPENSATION
            ----------------------

The following sets forth all compensation paid by us of fiscal year ended June
30, 2001, to all of the executive officers of our subsidiaries, CDKnet, LLC and
Valueflash.com Incorporated.

1. EXECUTIVE OFFICER COMPENSATION

CDKnet, LLC
----------------

The following table sets forth all compensation paid by us as of fiscal year
ended June 30, 2000, to all of our executive officers:








                           SUMMARY COMPENSATION TABLE
<TABLE><CAPTION>
--------------------------- --------- ----------------------------------- ------------------------------------------------
                                           Annual Compensation(1)(2)                      Long-Term Compensation
                                      ----------------------------------- ------------------------------------------------
                                                                                    Awards                 Payouts
                                                                          ------------------------- ----------------------
                                                                Other                  Securities              All Other
                                                               Annual     Restricted   Underlying               Compen-
         Name And                                             Compen-        Stock      Options/      LTIP      sation
     Principal Position     Year         Salary     Bonus       sation    Award(s)        SARs      Payouts        ($)
                                            ($)        ($)         ($)         ($)          (#)         ($)        (i)
                (a)            (b)          (c)        (d)         (e)         (f)          (g)         (h)
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
<S>                         <C>       <C>           <C>       <C>         <C>          <C>          <C>        <C>
Steven A. Horowitz(3)       FY00               0       --        78,000         --          28,571       --          --
                            FY01               0       --             0         --       1,550,000       --          --
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
Shai Bar-Lavi(4)            FY00          75,000       --        29,000         --       1,500,000       --          --
                            FY01               0       --       100,000         --         500,000       --          --
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
Israel Hersh(5)             FY00          45,000       --         2,100         --         100,000       --          --
                            FY01          60,000       --         2,000         --               0       --          --
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
Shlomo Shur(6)              FY00               0       --        23,000         --         500,000       --          --
                            FY01               0       --             0         --         500,000       --          --
</TABLE>

                                       23
<PAGE>
<TABLE><CAPTION>
<S>                         <C>       <C>           <C>       <C>         <C>          <C>          <C>        <C>
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
Michael W. Jolly            FY00          50,673       --            --         --         280,000       --          --
                            FY01               0       --            --         --         100,000       --          --
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
Russell A. Kern             FY00          47,692       --            --         --         280,000       --          --
                            FY01               0       --            --         --         100,000       --          --
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
Keith A. Fredericks         FY00          63,766       --            --         --              --       --          --
                            FY01               0       --            --         --               0       --          --
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
Tom Ross                    FY00          50,000       --            --         --       1,000,000       --          --
                            FY01               0       --            --         --         200,000       --          --
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
Don Hegarty                 FY00          69,160       --            --         --          50,000       --          --
                            FY01               0       --            --         --               0       --          --
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
</TABLE>

1  We discontinued compensation to Messrs. Bar-Lavi, Shur, Jolly, Kern and Ross
   in February 2000 upon their transition to consultants for CDKnet, LLC and to
   officers of ValueFlash.com.
2  In fiscal 2001, each of the named officers are to receive salary compensation
   as follows:

         Steven A. Horowitz              $ 0
         Donald Hegarty                  $ 90,000

3  Mr. Horowitz is our Chairman, Chief Executive Officer, Chief Financial
   Officer, and Secretary. In fiscal 2000, Mr. Horowitz was considered a
   consultant because he did not keep regular hours, decided his own schedule
   and otherwise fit the characteristics of a consultant as promulgated under
   the relevant sections of the Internal Revenue Code and Regulations and case
   law. During fiscal 2000, we accrued $78,000 for such consulting services for
   Mr. Horowitz, none of which has been paid.  Commencing July 1, 2000, Mr.
   Horowitz became an employee of CDKnet.com, Inc.
4  Mr. Bar-Lavi received $25,000 in consulting fees from CDKnet, LLC in fiscal
   2000 prior to becoming an employee. Additionally, Mr. Bar-Lavi received
   $4,000 in local transportation allowance reimbursements as an employee.
   Effective June 13, 2001, Mr. Bar-Lavi resigned his position with CDK, LLC as
   a result of the sale of substantially all of the assets and business of
   ValueFlash. The table reflects a payment of $100,000 which was paid to Damiga
   Corp., a Delaware corporation, that is controlled by Mr. Bar-Lavi.
5  Mr. Hersh received $2,000 in local transportation allowance reimbursements.
   Mr. Hersh resigned his position on January 1, 2001.

                                       24
<PAGE>

6  Mr. Shur was a consultant to CDKnet, LLC prior to becoming an employee. His
   firm received $23,000 in consulting fees and expense reimbursements in fiscal
   2000. Effective June 13, 2001, Mr. Shur resigned his position with CDK, LLC
   as a result of the sale of substantially all of the assets and business of
   ValueFlash.

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR
                               (INDIVIDUAL GRANTS)
                               -------------------

<TABLE><CAPTION>
-------------------------- ------------------ --------------------- -------------------- -------------------
                                                     Percent Of
                               Number Of          Total Options/
                                Securities        SARs Granted
                               Underlying         To Employees            Exercise Or
                             Options/SARs           In Fiscal            Base Price
       Name                   Granted (#)              Year                 ($/Sh)         Expiration Date
       (a)                        (b)                  (c)                   (d)                   (e)
-------------------------- ------------------ --------------------- -------------------- -------------------
-------------------------- ------------------ --------------------- -------------------- -------------------
<S>                        <C>                <C>                   <C>                  <C>
Steven A. Horowitz         FY01   750,000             15.79%                 $.20                1/9/01
                                  800,000             16.84%                 $.50               1/31/03
                           ------------------ --------------------- -------------------- -------------------
                           ------------------ --------------------- -------------------- -------------------
Shai Bar-Lavi              FY01   500,000             10.53%                 $.16                2/8/03
                           ------------------ --------------------- -------------------- -------------------
                           ------------------ --------------------- -------------------- -------------------
Shlomo Shur                FY01   500,000             10.53%                 $.16                2/8/03
                           ------------------ --------------------- -------------------- -------------------
                           ------------------ --------------------- -------------------- -------------------
Michael W. Jolly           FY01   100,000              2.11%                 $.16                2/8/03
                           ------------------ --------------------- -------------------- -------------------
                           ------------------ --------------------- -------------------- -------------------
Russell A. Kern            FY01   100,000              2.11%                 $.16                2/8/03
                           ------------------ --------------------- -------------------- -------------------
                           ------------------ --------------------- -------------------- -------------------
Tom Ross                   FY01   200,000              4.22%                 $.16                2/8/03
                           ------------------ --------------------- -------------------- -------------------
                           ------------------ --------------------- -------------------- -------------------
Robert Reeves              FY01   500,000             10.53%                 $.16                2/8/03
                           ------------------ --------------------- -------------------- -------------------
                           ------------------ --------------------- -------------------- -------------------
Israel Hersh (1)           FY01         0                 0                     0                   --
                           ------------------ --------------------- -------------------- -------------------
                           ------------------ --------------------- -------------------- -------------------
Dan Hagerty                FY01         0                 0                     0                   --
-------------------------- ------------------ --------------------- -------------------- -------------------
</TABLE>
-------------------
(1) Mr. Hersh resigned as President of CDKNET, LLC effective January 1, 2001. At
the time of his resignation, he had 100,000 options which had been granted in
fiscal 2000 on February 1, 2000, which options were cancelled upon his
resignation.

                                       25
<PAGE>

         AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
                                OPTION/SAR VALUES
                                -----------------
<TABLE><CAPTION>
-------------------------- -------------- -------------- ------------------- -------------------
                                                              Number Of
                                                             Securities           Value Of
                                                             Underlying          Unexercised
                              Shares                         Unexercised        In-The-Money
                            Acquired                        Options/SARs        Options/SARs
                                 On            Value        At FY-End (#)       At FY-End ($)
                             Exercise        Realized       Exercisable/        Exercisable/
    Name                         (#)             ($)        Unexercisable       Unexercisable
      (a)                        (b)             (c)             (d)                 (e)
-------------------------- -------------- -------------- ------------------- -------------------
-------------------------- -------------- -------------- ------------------- -------------------
<S>                        <C>            <C>            <C>                 <C>


Steven A. Horowitz         FY01         0              0         1,578,571/0                  $0
                           -------------- -------------- ------------------- -------------------

Shai Bar-Lavi(1)           FY01         0              0         1,250,000/0                  $0
                           -------------- -------------- ------------------- -------------------

Israel Hersh(1)            FY01         0              0                   0                  $0
                           -------------- -------------- ------------------- -------------------

Shlomo Shur(1)             FY01         0              0           500,000/0                  $0
                           -------------- -------------- ------------------- -------------------

Michael W. Jolly(1)        FY01         0              0           100,000/0                  $0
                           -------------- -------------- ------------------- -------------------

Russell A. Kern(1)         FY01         0              0           100,000/0                  $0
                           -------------- -------------- ------------------- -------------------

Bob Reeves(1)              FY01         0              0           500,000/0                  $0
                           -------------- -------------- ------------------- -------------------

Tom Ross(1)                FY01         0              0           200,000/0                  $0
                           -------------- -------------- ------------------- -------------------

Don Hegarty                FY01         0              0            50,000/0                  $0
-------------------------- -------------- -------------- ------------------- -------------------
</TABLE>

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

                                       26
<PAGE>

(1)  Messrs. Bar Lavi, Shur, Reeves, Ross, Kern and Jolly resigned their
     respective positions effective June 13, 2001. Each of their Plan options
     were automatically canceled upon the termination of their employment. Mr.
     Hersh resigned his position effective January 1, 2001.  His options were
     automatically canceled upon termination of his employment.

2.   COMPENSATION OF DIRECTORS

Effective January 9, 2001, our directors agreed to be compensated for their
services at the rate of $2,000 per year, retroactive to their respective dates
of engagement.

3.   EMPLOYMENT AGREEMENTS

In August 1999, we entered into an employment agreement with Shai Bar Lavi to
serve as President of CDKnet, LLC. The agreement provides that Mr. Lavi shall
receive: (A) an annual salary of $150,000, (B) an annual bonus determined by the
Management Committee's sole discretion, provided that Mr. Lavi's combined salary
and bonus is not exceeded by that of any of our full time employees (to a
maximum of $500,000 combined salary and bonus) and (C) a stock option to
purchase 750,000 shares of our common stock, with an exercise price of $1.00 per
share. The options will vest 25% every six months from the Commencement Date and
may be exercised in multiples of five thousand shares. Mr. Lavi may exercise up
to 50% of the options outstanding (up to an aggregate of 375,000) at any time by
converting such options into common stock. The agreement provides for a two year
term and may be terminated upon notice with or without "cause" (as defined). If
terminated without cause, Mr. Bar-Lavi is entitled to six months salary as
severance. If he resigns or is terminated for cause, our obligations under the
contract will cease (options terminate 90 days from such resignation or
termination).  The Agreement terminated upon his resignation on June 13, 2001.

In June 1999, we entered into a finders agreement with Shai Bar Lavi and
Frederick E. Smithline (together referred to as "Finders"). In return for the
Finders' efforts to introduce to us one or more parties who may be interested in
(a) the potential financing of CDKnet.com, (b) the purchase or merger with us or
(c) establishment of a joint venture with us (collectively referred to as a
"Transaction"). Under the Agreement, Mr. Smithline shall receive a five year
warrant to acquire 100,000 shares of our common stock at an exercise price of
$1.00 per share. Additionally, we will pay Finders' Success Fees (50% to Shai
Bar Lavi and 50% to Frederick E. Smithline) as follows: (i) upon completion of a
financing transaction ((a) above) arising out of finder's introduction that
results in at least $2 million, we will issue to finder five year warrants to
purchase the greater of 500,000 shares of our common stock at $1.00 per share,
or 2.5% of our common stock outstanding at an exercise price of $1.00 per share.
If the financing is less than $2 million, the fee shall be reduced
proportionately; (ii) upon completion of a purchase or merger ((b) above), we
shall pay finder 5% of the total consideration paid to us or 5% of the total
consideration paid by us to a third party; or (iii) upon the completion of a
joint venture ((c) above), we shall pay finder an amount equal to 5% of that
portion of the venture contributed by the party. Under the agreement, we agree
to reimburse finder for reasonable out of pocket expenses incurred during its
activities effectuating this agreement. We have the right, without any liability
to the finder, to terminate discussions for the financing, purchasing or venture
involving us for any reason. The agreement has a term of twelve months, subject
to early termination by us (providing there is thirty days notice). The
Agreement terminated upon his resignation on June 13, 2001.

In August 1999, we entered into an employment agreement with Tom Ross, Executive
Vice President and Entertainment Division Chief CDKnet, LLC. The agreement
provides that Mr. Ross shall receive: (A) an annual salary of $100,000, (B) a
right to a bonus determined annually by the Management Committee, in its sole
discretion and (C) a stock option to purchase up to 1,000,000 shares of common
stock in CDKnet.com with an exercise price per share of $1.00. The options may
be exercised in multiples of five thousand shares and will vest as follows:
150,000 upon execution of the agreement, and 150,000 shares every six months
from the Commencement Date of the agreement; and 62,500 shares during the term
when our revenues reach $5 million, $10 million, $20 million and $30 million.
All of the options will vest immediately if: (1) this agreement is terminated
without cause; (2) upon the sale of all or substantially all of the assets of
the Company or 50% or more of the equity interests in us; or (3) if any third
party obtains the right to control our Management Committee. Mr. Ross may
exercise up to 50% of the options outstanding (up to an aggregate of 500,000) at
any time by converting such options into common stock.

                                       27
<PAGE>


The agreement provides for a two year term and may be terminated upon notice by
us, with or without "cause."  Mr. Ross is given the right to terminate the
agreement for "good reason."  If the agreement is terminated by us without cause
or by Mr. Ross for good cause, we must pay Mr. Ross his monthly salary
multiplied by the number of months remaining until the end of the agreement's
two year term, plus all of the outstanding but not vested options shall vest. If
he resigns or is terminated for cause, our obligations under the contract will
cease (options terminate 90 days from such resignation or termination). The
Agreement terminated upon his resignation on June 13, 2001.


ValueFlash.com Incorporated
---------------------------

The following table sets forth all compensation paid by us as of fiscal year
ended June 30, 2001, to the executive officers of our subsidiary, CDK Financial
Corp. (F/K/A ValueFlash.com). On June 13, 2001, we completed the sale of
substantially all of the assets and business of ValueFlash to Elbit Limited and
Messrs. Bar-Lavi, Shur, Reeves, Jolly, Ross and Kern each resigned their
positions effective on that date.


                           SUMMARY COMPENSATION TABLE
<TABLE><CAPTION>
--------------------------- --------- ----------------------------------- ------------------------------------------------

                                           Annual Compensation(1)                         Long-Term Compensation
                                      ----------------------------------- ------------------------------------------------
                                                                                    Awards                 Payouts
                                                                          ------------------------- ----------------------
                                                                                       Securities
                                                                Other                    Under-                All Other
                                                               Annual     Restricted     lying                 Compen-
         Name And                                              Compen-       Stock      Options/      LTIP      sation
     Principal Position     Year         Salary     Bonus      sation     Award(s)        SARs      Payouts        ($)
                                            ($)        ($)         ($)         ($)          (#)         ($)        (i)
                (a)            (b)          (c)        (d)         (e)         (f)          (g)         (h)
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
<S>                         <C>       <C>           <C>       <C>         <C>          <C>          <C>        <C>
Shai Bar-Lavi(2)            FY00             75,000         0       8,400            0    1,500,000          0           0
                            FY01            172,500   100,000     100,000            0            0          0           0
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
Shlomo Shur(2)              FY00             50,000         0       9,100            0    1,000,000          0           0
                            FY01            115,000   100,000           0            0            0          0           0
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
Robert Reeves(2)            FY00             36,474         0       1,500            0      250,000          0           0
                            FY01            153,333    55,000           0            0            0          0           0
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
Michael W. Jolly(2)(3)      FY00             41,667         0      33,950            0      300,000          0           0
                            FY01            101,746         0           0            0            0          0           0
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
Tom Ross                    FY00             62,500         0           0            0    1,000,000          0           0
                            FY01             50,000         0           0            0            0          0           0
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
Steven A. Horowitz          FY00                  0         0           0            0      750,000          0           0
                            FY01                  0         0           0            0            0          0           0
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
Russell A. Kern(3)          FY00             41,667         0      10,000            0      300,000          0           0
                            FY01            125,686         0           0            0            0          0           0
--------------------------- --------- ------------- --------- ----------- ------------ ------------ ---------- -----------
</TABLE>
---------------
1  In fiscal 2002, no salary compensation is due to any former ValueFlash
   officer.
2  Messrs. Bar-Lavi, Shur, Reeves and Jolly received local transportation
   allowance and reimbursements of $8,400, $9,100, $1,500 and $1,950,
   respectively. Messrs. Bar-Lavi, Shur and Reeves received bonuses of $100,000,
   $100,000 and $ 55,000, respectively. Additionally, $100,000 was paid to
   Damiga Corp., a Delaware corporation, that is controlled by Mr. Bar-Lavi.
3  Messrs. Jolly and Kern received sales commissions of $32,000 and $10,000,
   respectively.

                                       28
<PAGE>

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR
                               (INDIVIDUAL GRANTS)
<TABLE><CAPTION>
-------------------------- ------------------ --------------------- -------------------- -------------------
                                                     Percent Of
                               Number Of          Total Options/
                                Securities        SARs Granted
                               Underlying         To Employees            Exercise Or
                            Options/SARs             In Fiscal            Base Price
       Name                   Granted (#)              Year                 ($/Sh)         Expiration Date
       (a)                        (b)                  (c)                   (d)                   (e)
-------------------------- ------------------ --------------------- -------------------- -------------------
-------------------------- ------------------ --------------------- -------------------- -------------------
<S>                        <C>                <C>                   <C>                  <C>

Shai Bar-Lavi(1)           FY01    250,000(3)           3.66%               $1.50              12/31/04
                           ------------------ --------------------- -------------------- -------------------
                           ------------------ --------------------- -------------------- -------------------
Shlomo Shur(1)             FY01    250,000(3)           3.66%               $1.50              12/31/04
                           ------------------ --------------------- -------------------- -------------------
                           ------------------ --------------------- -------------------- -------------------
Robert Reeves(1)           FY01     0                   0                    0                    0
                           ------------------ --------------------- -------------------- -------------------
                           ------------------ --------------------- -------------------- -------------------
Steven A. Horowitz         FY01     0                   0                    0                    0
                           ------------------ --------------------- -------------------- -------------------
                           ------------------ --------------------- -------------------- -------------------
Michael W. Jolly(1)        FY01     0                   0                    0                    0
                           ------------------ --------------------- -------------------- -------------------
                           ------------------ --------------------- -------------------- -------------------
Tom Ross(1)                FY01     0                   0                    0                    0
                           ------------------ --------------------- -------------------- -------------------
                           ------------------ --------------------- -------------------- -------------------
Russell A. Kern(1)         FY01     0                   0                    0                    0
                           ------------------ --------------------- -------------------- -------------------
                           ------------------ --------------------- -------------------- -------------------
Michael Vasinkevich(2)     FY01     0                   0                    0                    0
-------------------------- ------------------ --------------------- -------------------- -------------------

</TABLE>
--------------------------
(1)   Effective June 13, 2001, Messrs. Bar-Lavi, Shur, Reeves, Jolly, Ross and
      Kern each resigned their positions with ValueFlash.com Incorporated.
(2)   Effective October 16, 2000, Mr. Vasinkevich resigned as a director of
      ValueFlash.
(3)   The options indicated were cancelled as of their owner's respective
      resignations from ValueFlash.com Incorporated.








         AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
                                OPTION/SAR VALUES
<TABLE><CAPTION>
-------------------------- -------------- -------------- ------------------- -------------------
                                                             Number Of
                                                              Securities           Value Of
                                                             Underlying          Unexercised
                              Shares                        Unexercised        In-The-Money
                             Acquired                      Options/SARs         Options/SARs
                                 On            Value      At FY-End (#)       At FY-End ($)
                             Exercise        Realized       Exercisable/        Exercisable/
    Name                         (#)             ($)      Unexercisable        Unexercisable
      (a)                        (b)             (c)               (d)              (e)
-------------------------- -------------- -------------- ------------------- -------------------
-------------------------- -------------- -------------- ------------------- -------------------
<S>                        <C>            <C>            <C>                 <C>

Shai Bar-Lavi (1)          FY01   0              0               250,000/0                0/0
                           -------------- -------------- ------------------- -------------------
                           -------------- -------------- ------------------- -------------------
Shlomo Shur (1)            FY01   0              0               250,000/0                0/0
                           -------------- -------------- ------------------- -------------------
                           -------------- -------------- ------------------- -------------------
Robert Reeves (1)          FY01   0              0                     0/0                0/0
                           -------------- -------------- ------------------- -------------------
                           -------------- -------------- ------------------- -------------------
Steven A. Horowitz         FY01   0              0             1,550,000/0                0/0
                           -------------- -------------- ------------------- -------------------
                           -------------- -------------- ------------------- -------------------
Michael W. Jolly (1)       FY01   0              0                     0/0                0/0
                           -------------- -------------- ------------------- -------------------
                           -------------- -------------- ------------------- -------------------
Russell A. Kern (1)        FY01   0              0                     0/0                0/0
                           -------------- -------------- ------------------- -------------------
                           -------------- -------------- ------------------- -------------------
Tom Ross (2)               FY01   0              0             1,000,000/0                0/0
-------------------------- -------------- -------------- ------------------- -------------------

</TABLE>
-------------------
(1) Options previously held by Messrs. Bar-Lavi, Shur, Reeves Jolly and Kern
    terminated upon their resignations, effective June 13, 2001.
(2) The table includes 1,000,000 options that expired by the terms of the option
    agreement on August 12, 2001, 60 days after the termination of Mr. Ross's
    employment, effective June 13, 2001.


                                       29
<PAGE>

2.    COMPENSATION OF DIRECTORS

None of our directors were compensated in fiscal year 2000 for their services.


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

         SECURITY OWNERSHIP OF CERTAIN NON-MANAGEMENT BENEFICIAL OWNERS

The following are our non-management, beneficial owners of more than 5 percent
of the outstanding shares amount of our common stock, $.001 par value, as of
October 5, 2001:

Name and Address of                 Amount and Nature               Percent of
Beneficial Stockholder              of Beneficial Ownership         Class (1)(2)
----------------------              -----------------------         ------------
Masaki Hashimoto                           7,368,421                    23.53%
2-3-35 Nighizaka Tsushima
Okayama City, Okayama Japan

Erno and Rachel Bodek                      3,000,000                    9.58%
c/o Victoria Sales Corporation
541 West 21st Street
New York, New York 10011

Beneficial Owners as a group (3)
--------------------------------------
Notes to table of non-management beneficial shareholders

(1) There were 31,321,075 shares of common stock outstanding as of October 5,
2001.

                                       30
<PAGE>


(2) Except as described in footnote (3) below, the persons named in the table
have sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them, subject to the information contained in
this table and these notes.

(3) As set forth in this table, there are 2 individuals or entities who are not
members of our management each of whom individually owns 5% or more of our
common stock. In addition to these individuals, there is a large group of
individuals who may constitute beneficial owners of our common stock pursuant to
the terms of a Stockholders Agreement dated May 7, 1998. Under the Stockholder's
Agreement, its 35 signatories are required to vote their respective shares of
stock identified in the Agreement as a class under certain circumstances. The
names of the 35 signatories and their respective ownership interests are
incorporated by reference in Exhibit 99.1 of this document. As a result, the
signatories as a group may constitute beneficial owners of our common stock
although only a few individually owns more than 5% of our common stock. The
voting and certain other provisions of the Stockholders Agreement have been
rescinded by 16 of the signatories to the Shareholders Agreement. We believe it
is the position of the signatories to the Stockholders Agreement that they do
not constitute a "group" as such term is defined under Rule 13(d)(3) promulgated
under the Securities Exchange Act of 1934, as amended. The rescindment will not
become effective until all 35 shareholders execute the Stockholders' Agreement.
Further, under the terms of the Agreement, it will terminate upon our filing an
effective initial public offering with the Commission. We consider our Form
10-SB, as amended, filed on October 7, 1999 (File No. 0-27587) which became
effective on December 7, 1999, to be an initial public offering. Therefore, we
believe that the Agreement terminated on its own terms on December 7, 1999.

                        SECURITY OWNERSHIP OF MANAGEMENT
                        --------------------------------

The following table sets forth information with respect to the share ownership
of our common stock, $.001 par value, by our officers and directors, both
individually and as a group, and by the record and/or beneficial owners of more
than 5 percent of the outstanding amount of such stock as of October 30, 2001:

                                       31
<PAGE>

                SHARES OF COMMON STOCK OWNED BENEFICIALLY AND OF
                              RECORD BY MANAGEMENT

Name and Address                    Amount and Nature               Percent of
of Beneficial Owner                 of Beneficial Ownership         Class(1)(2)
------------------                  -----------------------         -----------
Steven A. Horowitz                         3,332,496(3)                9.55%
c/o 250 West 57th Street
Suite 1101
New York, NY 10019

Andrew J. Schenker                           313,306(4)                 *
c/o 250 West 57th Street
Suite 1101
New York, NY 10019

Anthony J. Bonomo                            250,000(5)                 *
c/o 250 West 57th Street
Suite 1101
New York, NY 10019

Shai Bar-Lavi                              1,500,000(6)                4.57%
c/o 250 West 57th Street
Suite 1101
New York, NY 10019

Shlomo Shur                                  500,000(7)                1.57%
c/o 250 West 57th Street
Suite 1101
New York, NY 10019

Don Hegarty                                   50,000(8)                 *
c/o 250 West 57th Street
Suite 1101
New York, NY 10019

All officers and directors                 5,945,802(9)               16.87%
as a group (10 persons)
---------------------------------------
Notes to table of beneficial shareholders
*Denotes less than 1%

(1)  There were 31,321,075 shares of common stock outstanding as of October 5,
2001.
                                       32
<PAGE>

This table does not include options to purchase shares of our common stock under
the Plan held by Mr. Israel Hersh, the former President of CDKnet, LLC. Mr.
Hersh resigned effective January 1, 2001. This table also does not include
options of Messrs Bar-Lavi and Shur who resigned effective June 13, 2001. All of
the plan options held by Messrs. Hersh, Bar-Lavi and Shur expired upon their
resignation.

(2) Except for the limitations set forth in the Stockholders Agreement dated May
7, 1998, the persons named in the table have sole voting and investment power
with respect to all shares of common stock shown as beneficially owned by them,
subject to the information contained in this table and these notes. See Exhibit
4.2.

(3) This table includes 28,571 two-year Warrants to purchase common stock. Mr.
Horowitz is our Chairman of the Board of Directors, Chief Executive Officer,
Chief Financial Officer and Secretary. This figure does not include 150,000
warrants issued to Horowitz, Mencher, Klosowski & Nestler P.C., a law firm
formerly controlled by Mr. Horowitz, in connection with a loan and loan
extension. Of the 3,332,496 shares attributed to Mr. Horowitz in the table,
30,000 shares are owned by his wife, Katherine Horowitz, 10,000 are held by Mr.
Horowitz c/f Daniel Horowitz UGMA NY and 10,000 are held by Mr. Horowitz c/f
Joshua D. Horowitz UGMA NY. This table also includes 750,000 two-year warrants
to purchase common stock at the exercise price of $0.20 per share and 800,000
two-year options to purchase common stock at the exercise price of $0.50 per
share.

(4) This table includes options to purchase 50,000 shares of our common stock
under the Plan and options to purchase 100,000 shares of common at $0.20 per
share outside of the plan. Mr. Schenker is one of our directors.

(5) This table includes options to purchase 50,000 shares of our common stock
under the Plan and options to purchase 100,000 shares of common at $0.20 per
share outside of the plan. Mr. Bonomo is one of our directors.

(6) This table includes 750,000 warrants to purchase common stock at $1.000 per
share, 250,000 options to purchase common stock at $1.00 outside of the Plan and
500,000 options to purchase common stock outside of the Plan at $.16 per share.

(7) This table includes 500,000 options to purchase common stock at $.16 per
share outside of the Plan.

(8) This table includes 50,000 options to purchase common stock at $1.00 per
share under the Plan.

(9) Includes all stock options to purchase shares of common stock and Warrants
owned by officers and directors.

2. INDEBTEDNESS OF MANAGEMENT

No member of our management is or has been indebted to us. No director or
executive officer is personally liable for repayment of amounts advanced any
financing received by us.

                                       33
<PAGE>

3. PROMOTERS

   None.

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

1. TRANSACTIONS WITH MANAGEMENT AND OTHERS; CERTAIN BUSINESS RELATIONSHIPS;
PROMOTERS

We have incorporated by reference the list of our transactions with management
and others from our:

     o   annual report on Form 10-KSB (File No. 27587), dated October 14, 2000,
         as amended;

     o   quaterly reports on our Form 10-QSB dated November 14, 2000 (File No.
         0-27587) and dated February 14, 2001 (File No. 0-27587)

     o   Form 8-K (File No. 0-27587) dated July 5, 2001

In addition to these transactions, the following transactions have been with our
management:

On August 14, 2001, we completed our first private equity investment in Eascent,
LLC, a New York limited liability corporation, engaged in the import, export,
and distribution of new products and technologies between the United States and
Eastern and Central Europe. The investment consists of a convertible bridge
financing of $100,000 and provides us with (1) the opportunity to convert our
loan into a 10% equity stake in Eascent and (2) warrants to purchase up to an
additional 5% of the equity of Eascent at current funding value for a period of
two years. Our investment in Eascent was part of the implementation of our new
business strategy. Steven A. Horowitz, our Chairman, Chief Executive Officer,
Chief Financial Officer and Secretary is a principal owner and officer of
Eascent.

In June 2001, we entered into a consulting agreement with Damiga Corp., a
Delaware corporation that is controlled by Shai Bar-Lavi, the former Chairman
and CEO of ValueFlash.com, Inc., which called for an initial distribution of
$100,000 and $10,000 per month for 10 months. Additionally, we distributed
another $100,000 to Damiga Corp.

On October 4, 2001, we completed our second private equity investment in Optical
Systems, LLC, a New York limited liability corporation, engaged in the design
and development of optoelectronic devices for the marine safety marketplace.
Effective October 19, 2001, Optical Systems LLC merged with Optical Systems
Inc., a Delaware corporation formed for such purpose. The investment consists of
a convertible bridge financing of $100,000 and provides us with (1) the
opportunity to convert our loan into a 10% equity stake in Optical Systems and
(2) warrants to purchase up to an additional 5% of the equity of Optical Systems
at a fifty percent premium to current funding value for a period of two years.
Our investment in Optical Systems was part of our continued implementation of
our new business strategy to develop our financial services operations. Steven
A. Horowitz, our Chairman, Chief Executive Officer, Chief Financial Officer and
Secretary is a principal owner and officer of Optical Systems, Inc.

2. INDEBTEDNESS OF MANAGEMENT

No member of our management is or has been indebted to us. No director or
executive officer is personally liable for repayment of amounts advanced from
any financing received by us.

                                       34
<PAGE>

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

          (a)  The exhibits to this Form 10-KSB are listed in subsection (d) of
               this Item 13.

          (b)  We filed two reports on Form 8-K during fiscal year 2000 as
               follows:

               1.   On July 5, 2001, we filed a report on Form 8-K (File No.
                    0-27587) announcing the sale of substantially all of the
                    business and assets of our subsidiary, ValueFlash, to Elbit.

               2.   On January 17, 2001, we filed a report on Form 8-K (File
                    No. 0-27587) announcing the completion of a financing
                    transaction with Mr. Masaki Hashimoto for investment in
                    ValueFlash of up to $2.8 million for subscription shares of
                    ValueFlash common stock.

          (c)  Our financial statements are set forth beginning on page F-1 of
               this report.

          (d)  Exhibits.






                                       35
<PAGE>
                                  EXHIBIT INDEX
                                  -------------

     3.1       Articles of Incorporation of the Registrant. (Incorporated by
               reference from our Registration Statement filed on Form 10-SB on
               October 7, 1999 (File No. 0-27587).)

     3.2       Amendment to the Articles of Incorporation. (Incorporated by
               reference from our Registration Statement filed on Form 10-SB on
               October 7, 1999 (File No. 0-27587).)

     3.3       By-Laws of the Registrant. (Incorporated by reference from our
               Registration Statement filed on Form 10-SB on October 7, 1999
               (File No. 0-27587).)

     3.4       Certificate of Merger of the Registrant. (Incorporated by
               reference from our Registration Statement filed on Form 10-SB on
               October 7, 1999 (File No. 0-27587).)

     3.5       Amendment to the Articles of Incorporation. (Incorporated by
               reference from our Registration Statement filed on Form 10-SB on
               October 7, 1999 (File No. 0-27587).)

     3.6       Designation of Series A Preferred Stock. (Incorporated by
               reference from our Registration Statement filed on Form 10-SB on
               October 7, 1999 (File No. 0-27587).)

     4.1       Specimen of Common Stock Certificate. (Incorporated by reference
               from our Registration Statement filed on Form 10-SB on October 7,
               1999 (File No. 0-27587).)

     4.2       Technology Horizons Corp. Stockholders Agreement dated May 7,
               1998. (Incorporated by reference from our Registration Statement
               filed on Form 10-SB on October 7, 1999 (File No. 0-27587).)

     4.3       Subscription Agreement, between CDKnet.com, Inc. and Mr. Masaki
               Hashimoto dated December 15, 2000. (Incorporated by reference
               from our Report on Form 8-K filed on January 17, 2001 (File No.
               0-27587)).

     10.1      Technology Horizons Corp. 1998 Equity Incentive Plan.
               (Incorporated by reference from our Registration Statement filed
               on Form 10-SB on October 7, 1999 (File No. 0-27587).)

     10.2      Convertible Subordinated Debenture Due February 1, 2009.
               (Incorporated by reference from our Registration Statement filed
               on Form 10-SB Amendment No. 2 on November 26, 1999 (File No.
               0-27587).)

     10.2.1    Amendment No. 1 to Convertible Subordinated Debenture due
               February 1, 2009. (Incorporated by reference from our
               Registration Statement filed on Form 10-SB Amendment No. 2 on
               November 26, 1999 (File No. 0-27587).)

     10.3      Registration Rights Agreement between Technology Horizons Corp.
               and Kelly Music & Entertainment Corp. dated September 4, 1998.
               (Incorporated by reference from our Registration Statement filed
               on Form 10-SB on October 7, 1999 (File No. 0-27587).)

     10.4      Assignment Agreement between Kelly Music & Entertainment Corp.
               and Technology Horizons Corp. dated September 4, 1998.
               (Incorporated by reference from our Registration Statement filed
               on Form 10-SB on October 7, 1999 (File No. 0-27587).)

                                       36
<PAGE>

     10.5      Amendment to Registration Rights Agreement between Technology
               Horizons Corp. and Alvin Pock dated October 15, 1998.
               (Incorporated by reference from our Registration Statement filed
               on Form 10-SB on October 7, 1999 (File No. 0-27587).)

     10.6      Amendment to Registration Rights Agreement between Technology
               Horizons Corp. and Robert L. Kelly dated October 15, 1998.
               (Incorporated by reference from our Registration Statement filed
               on Form 10-SB on October 7, 1999 (File No. 0-27587).)

     10.7      Registration Rights Agreement between Technology Horizons Corp.
               and Robert L. Kelly dated June 3, 1998. (Incorporated by
               reference from our Registration Statement filed on Form 10-SB on
               October 7, 1999 (File No. 0-27587).)

     10.8      Registration Rights Agreement between Technology Horizons Corp.
               and Alvin Pock dated June 3, 1998. (Incorporated by reference
               from our Registration Statement filed on Form 10-SB on October 7,
               1999 (File No. 0-27587).)

     10.9      Assignment Agreement between Robert L. Kelly and Technology
               Horizons Corp. dated June 3, 1998. (Incorporated by reference
               from our Registration Statement filed on Form 10-SB on October 7,
               1999 (File No. 0-27587).)

     10.10     Assignment Agreement between Alvin Pock and Technology Horizons
               Corp. dated June 3, 1998. (Incorporated by reference from our
               Registration Statement filed on Form 10-SB on October 7, 1999
               (File No. 0-27587).)

     10.11     Assignment Agreement between Kelly Music & Entertainment Corp.
               and CDKnet, LLC, dated June 3, 1998. (Incorporated by reference
               from our Registration Statement filed on Form 10-SB on October 7,
               1999 (File No. 0-27587).)

     10.12     Employment Agreement, dated August 1, 1999, by and between
               CDKNET.COM, INC. and Shai Bar-Lavi. (Incorporated by reference
               from our Registration Statement filed on Form 10-SB on October 7,
               1999 (File No. 0-27587).)

     10.13     Finder's Agreement between the Registrant and Shai Bar-Lavi and
               Frederick Smithline dated June 1, 1999. (Incorporated by
               reference from our Registration Statement filed on Form 10-SB
               Amendment No. 2 on November 26, 1999 (File No. 0-27587).)

     10.14     Employment Agreement dated August 1, 1999, by and between CDK,
               LLC and Tom Ross. (Incorporated by reference from our
               Registration Statement filed on Form 10-SB Amendment No. 2 on
               November 26, 1999 (File No. 0-27587).)

     10.15     Stock Purchase Agreement between CDKnet.com, Inc. and the Gross
               Foundation, Inc., Steven A. Horowitz, Shai Bar-Lavi, and Michael
               Sonnenberg dated November 2, 1999. (Incorporated by reference
               from our Registration Statement filed on Form 10-SB Amendment No.
               2 on November 26, 1999 (File No. 0-27587).)

                                       37
<PAGE>
     10.16     Subscription Agreement between CDK and Asia Pioneer Limited dated
               November 16, 1999. (Incorporated by reference from our
               Registration Statement filed on Form 10-SB Amendment No. 4 on
               March 6, 2000 (File No. 0-27587).)

     10.17     Technology and License Agreement CDK and Asia Pioneer Limited
               dated November 16, 1999. (Incorporated by reference from our
               Registration Statement filed on Form 10-SB Amendment No. 4 on
               March 6, 2000 (File No. 0-27587).)

     10.18     Agreement dated March 19, 1999 between Peterson's and CDKnet,
               LLC. (Incorporated by reference from our Registration Statement
               filed on Form 10-SB Amendment No. 2 on November 26, 1999 (File
               No. 0-27587).)

     10.19     Undated Registration Rights Agreement between Spiga Limited and
               CDK INC. (Incorporated by reference from our Registration
               Statement filed on Form 10-SB Amendment No. 2 on November 26,
               1999 (File No. 0-27587).)

     10.20     Agreement dated October 25, 1999, between CDKnet, LLC and Atomic
               Pop, LLC. (Incorporated by reference from our Registration
               Statement filed on Form 10-SB Amendment No. 4 on March 6, 2000
               (File No. 0-27587).)

     10.21     Agreement dated March 29, 1999, between Central Park Media Corp.
               and CDKnet, LLC. (Incorporated by reference from our Registration
               Statement filed on Form 10-SB Amendment No. 2 on November 26,
               1999 (File No. 0-27587).)

     10.22     Purchase Agreement dated August 9, 1999 between CDK and Y2G.
               (Incorporated by reference from our Registration Statement filed
               on Form 10-SB Amendment No. 2 on November 26, 1999 (File No.
               0-27587).)

     10.23     Convertible Subordinated Debenture Due September 1, 2003.
               (Incorporated by reference from our Registration Statement filed
               on Form 10-SB Amendment No. 2 on November 26, 1999 (File No.
               0-27587).)

     10.24     Letter Agreement dated May 4, 1998, between Megaforce
               Entertainment and CDKnet, LLC regarding the use of CDK
               technology. (Incorporated by reference from our Registration
               Statement filed on Form 10-SB Amendment No. 2 on November 26,
               1999 (File No. 0-27587).)

     10.25     Agreement dated August 5, 1999 between the Company and DreamWorks
               Records. (Incorporated by reference from our Registration
               Statement filed on Form 10-SB Amendment No. 4 on March 6, 2000
               (File No. 0-27587).)

     10.26     Agreement dated September 16, 1999 between the Company and
               CollegeMusic, Inc. (Incorporated by reference from our
               Registration Statement filed on Form 10-SB Amendment No. 4 on
               March 6, 2000 (File No. 0-27587).)

     10.27     Agreement between CDKnet, Inc. and Young & Rubicam dated February
               3, 2000. (Incorporated by reference from our Registration
               Statement on Form SB-2 dated August 1, 2000 (File No.
               333-42696).)
                                       38
<PAGE>

     10.28     Agreement between ValueFlash.com Incorporated and Richard A.
               Eisner and Company dated April 15, 2000. (Incorporated by
               reference from our Registration Statement on Form SB-2 dated
               August 1, 2000 (File No. 333-42696).)

     10.29     Agreement between ValueFlash.com Incorporated, CDKnet, LLC, Track
               Marketing and Arcadia Marketing, Inc. dated May 4, 2000.
               (Incorporated by reference from our Registration Statement on
               Form SB-2 dated August 1, 2000 (File No. 333-42696).)

     10.30     Agreement between ValueFlash.com Incorporated, CDKnet, LLC, and
               Arcadia Marketing, Inc. dated May 4, 2000. (Incorporated by
               reference from our Registration Statement on Form SB-2 dated
               August 1, 2000 (File No. 333-42696).)

     10.31     Agreement between ValueFlash.com Incorporated, CDKnet, LLC, JMC
               Investments, LLC and Arcadia Marketing, Inc. dated May 4, 2000.
               (Incorporated by reference from our Registration Statement on
               Form SB-2 dated August 1, 2000 (File No. 333-42696).)

     10.32     Development Proposal between ValueFlash.com Incorporated, CDKnet,
               LLC and House of Blues dated May 12, 2000. (The Registrant has
               requested confidential treatment of certain portions of this
               exhibit and has omitted such portions. A complete copy has been
               filed separately with the Commission.)

     10.33     Agreement between ValueFlash.com Incorporated and ValueFlash
               Japan Inc. dated May 25, 2000. (Incorporated by reference from
               our Registration Statement on Form SB-2 dated August 1, 2000
               (File No. 333-42696).)

     10.34     Agreement between ValueFlash.com Incorporated and Naviant
               Marketing Solutions, Inc. dated June 12, 2000. (Incorporated by
               reference from our Registration Statement on Form SB-2 dated
               August 1, 2000 (File No. 333-42696).)

     10.35     Agreement between ValueFlash.com Incorporated and theglobe.com,
               Inc. dated June 26, 2000. (Incorporated by reference from our
               Registration Statement on Form SB-2 dated August 1, 2000 (File
               No. 333-42696).)

     10.36     Agreement between CDKnet, LLC and the globe.com, Inc. dated June
               26, 2000. (Incorporated by reference from our Registration
               Statement on Form SB-2 dated August 1, 2000 (File No.
               333-42696).)

     10.37     Agreement between ValueFlash.com Incorporated and J. Walter
               Thompson U.S.A., Inc. dated June 29, 2000. (Incorporated by
               reference from our Registration Statement on Form SB-2 dated
               August 1, 2000 (File No. 333-42696).)

     10.38     Warrant to Purchase Stock between ValueFlash.com Incorporated and
               WPP Dotcom Holdings (Twelve) LLC dated June 29, 2000, for 5%
               interest in ValueFlash.com. (Incorporated by reference from our
               Registration Statement on Form SB-2 dated August 1, 2000 (File
               No. 333-42696).)

                                       39
<PAGE>

     10.39     Warrant to Purchase Stock between ValueFlash.com Incorporated and
               WPP Dotcom Holdings (Twelve) LLC dated June 29, 2000, for 5%
               interest in ValueFlash.com. (Incorporated by reference from our
               Registration Statement on Form SB-2 dated August 1, 2000 (File
               No. 333-42696).)

     10.40     Agreement between ValueFlash.com Incorporated and WPP Dotcom
               Holdings (Twelve) LLC dated June 29, 2000. (Incorporated by
               reference from our Registration Statement on Form SB-2 dated
               August 1, 2000 (File No. 333-42696).)

     10.41     Agreement between ValueFlash.com Incorporated and ACUSA.com dated
               June 1, 2000 for services to the House of Blues. (Incorporated by
               reference from our Registration Statement on Form SB-2 dated
               August 1, 2000 (File No. 333-42696).)

     10.42     Agreement between ValueFlash (Asia) Limited, Sprouts Online Pte
               Ltd. and Prodigy Alliances Pte Ltd. dated September 15, 2000.

     10.43     Collateral Assignment of Patents and Trademarks and Security
               Agreement between CDKnet.com, Inc., CDKnet, LLC and Steven A.
               Horowitz dated November 14, 2000. (Incorporated by reference from
               our Report on Form 8-K on January 17, 2001 (File No. 0-27587)).

     10.44     Collateral Assignment of Patents and Trademarks and Security
               Agreement between ValueFlash.com, Incorporated, CDKnet.com, Inc.,
               Steven A. Horowitz and Dan Roc Limited Partnership dated November
               14, 2000. (Incorporated by reference from our Report on Form 8-K
               on January 17, 2001 (File No. 0-27587)).

     10.45     10% - $100,000 Secured Promissory Note between CDKnet.com, Inc.
               and Steven A. Horowitz October 31, 2000. (Incorporated by
               reference from our Report on Form 8-K on January 17, 2001 (File
               No. 0-27587)).

     10.46     10% - $100,000 Secured Promissory Note between ValueFlash.com,
               Incorporated and CDKnet.com, Inc. dated October 31, 2000.
               (Incorporated by reference from our Report on Form 8-K on January
               17, 2001 (File No. 0-27587)).

     10.47     10% - $250,000 Secured Promissory Note between ValueFlash.com,
               Incorporated and Dan Roc Limited Partnership dated October 10,
               2000. (Incorporated by reference from our Report on Form 8-K on
               January 17, 2001 (File No. 0-27587)).

     10.48     10% - $100,000 Secured Promissory Note between ValueFlash.com,
               Incorporated and Steven A. Horowitz dated November 14, 2000.
               (Incorporated by reference from our Report on Form 8-K on January
               17, 2001 (File No. 0-27587)).

     10.49     10% - $250,000 Secured Promissory Note between ValueFlash.com,
               Incorporated and Steven A. Horowitz dated December 14, 2000.
               (Incorporated by reference from our Report on Form 8-K on January
               17, 2001 (File No. 0-27587)).

     10.50     Security Agreement between CDKnet.com, Inc. and Steven A.
               Horowitz dated November 14, 2000. (Incorporated by reference from
               our Report on Form 8-K on January 17, 2001 (File No. 0-27587)).

     10.51     Security Agreement between CDKnet.com, Inc., Steven A. Horowitz
               and Dan Roc Limited Partnership dated November 14, 2000.
               (Incorporated by reference from our Report on Form 8-K on January
               17, 2001 (File No. 0-27587)).

     10.52     Assignment of ValueFlash.com, Incorporated options by CDKnet.com,
               Inc. to Steven A. Horowitz and Dan Roc Limited Partnership dated
               November 14, 2000. (Incorporated by reference from our Report on
               Form 8-K on January 17, 2001 (File No. 0-27587)).

     10.53     Asset Purchase Agreement between CDKnet.com, Inc., ValueFlash.com
               Incorporated, and Elbit Limited dated June 13, 2001.

     10.54     Technology License Agreement between CDKnet.com, Inc.,
               ValueFlash.com Incorporated, and Elbit Limited dated June 13,
               2001.

     16        Letter from former accountant Grant Thornton LLP. (Incorporated
               by reference from our report on Form 10-QSB Amendment No. 1,
               filed on February 25, 2000.)

     16.1      Letter from former Accountant, Wagner, Zwerman & Steinberg LLP.
               (Incorporated by reference from our Registration Statement on
               Form 10-SB Amendment No. 3 filed on December 28, 1999 (File No.
               000-27587).)

     21        Subsidiaries of the Registrant.

     99.1      Chart of the signatories to the Company's Stockholder's Agreement
               (and their interest in the Company). (Incorporated by reference
               from our Registration Statement filed on Form SB-2 on December
               22, 1999, as amended (File No. 333-93277).)

                                       40
<PAGE>

                                   SIGNATURES

            In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this amended report on form 10-KSB to be signed on its behalf
by the undersigned, thereunto duly authorized.


                                           CDKnet.com, Inc. (Registrant)

                                           By: /s/ Steven A. Horowitz
                                               ---------------------------------
                                           Chairman, Chief Executive Officer,
                                           Chief Financial Officer and Secretary

                                           Date: December 7, 2001

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

                            Chairman, Chief Executive
                            Officer, Chief Financial
/s/ Steven A. Horowitz        Officer and Secretary            December 7, 2001
----------------------        ---------------------            ----------------
Steven A. Horowitz                  Title                            Date


/s/ Andrew J. Schenker              Director                   December 7, 2001
----------------------              --------                   ----------------
Andrew J. Schenker                  Title                            Date



/s/ Anthony J. Bonomo               Director                   December 7, 2001
---------------------               ---------                  ----------------
Anthony J. Bonomo                   Title                            Date

















                                       41
<PAGE>

                              FINANCIAL STATEMENTS

                                TABLE OF CONTENTS



Page

Reports of Independent Certified Public Accountant                   F-1

Financial Statements

Consolidated Balance Sheet at June 30, 2001                          F-2

Consolidated Statements of Operations for the years ended
June 30, 2001 and June 30, 2000                                      F-3

Consolidated Statement of Stockholders' Equity for the years ended
June 30, 2001 and June 30, 2000                                      F-4 - F-5

Consolidated Statements of Cash Flows for the years ended
June 30, 2001 and June 30, 2000                                      F-6 - F-7

Notes to Consolidated Financial Statements                           F-8 - F-24

























                                       42
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT



Board of Directors and Stockholders
CDKNET.COM, Inc. and Subsidiaries

            We have audited the accompanying consolidated balance sheet of
CDKNET.COM, Inc. as of June 30, 2001, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years ended June 30,
2001 and 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

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


                                                  /s/ RADIN, GLASS & CO, LLP


                                                  Certified Public Accountants

New York, New York
October 5, 2001



                                       F-1
<PAGE>
                        CDKNET.COM, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
<TABLE><CAPTION>
                                                                                      June 30,
                                                                                       2001
                                                                                    ------------
<S>                                                                                 <C>
                                     ASSETS
CURRENT ASSETS
  Cash & cash equivalents                                                           $  2,257,000
  Cash escrow                                                                            750,000
  Prepaid expenses and other current assets                                               48,000

          Total current assets                                                         3,055,000

CASH ESCROW                                                                              500,000

FURNITURE AND EQUIPMENT - at cost, less accumulated
    depreciation and amortization of $373,000                                            224,000

OTHER ASSETS                                                                              21,000
                                                                                    ------------
                                                                                    $  3,800,000
                                                                                    ============
                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable and accrued expense                                              $    815,000
  Due to related party                                                                    38,000
  Current portion of long-term debt                                                       22,000
                                                                                    ------------
          Total current liabilities                                                      875,000

LONG-TERM DEBT, net of current portion                                                    91,000

SUBORDINATED CONVERTIBLE DEBENTURES                                                      165,000

OTHER LIABILITIES                                                                         27,000

MINORITY INTEREST                                                                        179,000

COMMITMENTS and CONTINGENCIES                                                               --

STOCKHOLDERS' EQUITY
  Convertible Preferred stock - par value $.0001 per share; authorized
    5,000,000 shares; 1,450,000 shares outstanding (stated value $1,450,000)           1,249,000
  Common stock - par value $.0001, per share; authorized,
    40,000,000 shares; 30,316,396; shares issued and outstanding                           3,000
  Additional paid in capital                                                          23,092,000
  Accumulated deficit                                                                (21,755,000)
  Unearned compensation expense                                                         (126,000)
                                                                                    ------------
                                                                                       2,463,000
                                                                                    ------------
                                                                                    $  3,800,000
                                                                                    ============
</TABLE>
         The accompanying notes are an integral part of this statement.

                                      F-2
<PAGE>
                        CDKNET.COM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE><CAPTION>
                                                           Year ended           Year ended
                                                            June 30,             June 30,
                                                              2001                 2000
                                                          ------------         ------------
<S>                                                       <C>                  <C>
Net revenues                                              $  5,874,000         $    345,000
Cost of revenues                                             2,234,000               80,000
                                                          ------------         ------------

          Gross profit                                       3,640,000              265,000

Selling, general and administrative expenses                 8,436,000            5,088,000
Equity based compensation                                    2,418,000              870,000
Depreciation and amortization                                1,748,000            1,868,000
                                                          ------------         ------------

          Loss from operations                              (8,962,000)          (7,561,000)

Other income (expense)
    Interest income                                             10,000               31,000
    Interest expense                                          (129,000)             (84,000)
    Impairment of long lived assets                         (3,610,000)                --
    Gain on  sale of Vflash assets                           5,411,000               80,000
    Minority interest in (gain) loss of subsidiary              (7,000)             479,000
                                                          ------------         ------------

          NET LOSS                                        ($ 7,287,000)        ($ 7,055,000)
                                                          ============         ============

Preferred dividend                                              85,000               63,000
                                                          ------------         ------------

Net Loss to Common Stockholders                           ($ 7,372,000)        ($ 7,118,000)
                                                          ============         ============

Basic and diluted (loss) per share                        ($      0.33)        ($      0.40)
                                                          ============         ============

Weighted-average shares outstanding-
    basic and diluted                                       22,255,847           17,704,924
                                                          ============         ============
</TABLE>
         The accompanying notes are an integral part of this statement.

                                      F-3
<PAGE>
                        CDKNET.COM, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                   For the years ended June 30, 2001 and 2000


<TABLE><CAPTION>
                                                         Preferred                             Common
                                                           Shares            Amount            Shares            Amount
                                                        ------------      ------------      ------------      ------------
<S>                                                     <C>               <C>               <C>               <C>
Balance, June 30, 1999                                          --        $       --          14,046,906      $      1,000
                                                        ------------      ------------      ------------      ------------

Common stock and common stock warrants
     sold for cash, net of expenses                             --                --           5,585,333             1,000
Conversion of 5.75% subordinated debentures to
    preferred shares, net                                  1,500,000         1,265,000              --                --
Conversion of 6% subordinated debentures to
    common shares, net                                          --                --              29,459              --
Exercise of stock options                                       --                --           1,254,623              --
Common shares issued for late registration penalty              --                --               5,665              --
Common stock and common stock warrants issued for
     services                                                   --                --             315,000              --
Equity in issuance of subsidiary stock - Valueflash        2,977,000              --            (715,000)        2,262,000
Preferred stock dividends paid                                  --                --                --                --
Net loss                                                        --                --                --                --

                                                        ------------      ------------      ------------      ------------
Balance, June 30, 2000                                     1,500,000         1,265,000        21,236,986             2,000
                                                        ------------      ------------      ------------      ------------

Common stock and common stock warrants
     sold for cash, net of expenses                             --                --           7,368,421             1,000
Conversion of preferred shares to
    common shares, net                                       (50,000)          (50,000)           79,605              --
Conversion of 6% subordinated debentures to
    common shares, net                                          --                --             681,384              --
Common stock and options issued for services                    --                --             950,000              --
Amortization of unearned compensation                           --                --                --                --
Equity in issuance of subsidiary stock - Valueflash             --                --                --                --
Preferred stock accretion                                       --              34,000              --                --
Net loss                                                        --                --                --                --

                                                        ------------      ------------      ------------      ------------
Balance, June 30, 2001                                     1,450,000      $  1,249,000        30,316,396      $      3,000
                                                        ============      ============      ============      ============
</TABLE>
         The accompanying notes are an integral part of this statement.

                                      F-4
<PAGE>

                        CDKNET.COM, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (continued)

                   For the years ended June 30, 2001 and 2000
<TABLE><CAPTION>

                                                          Additional                           Unearned           Total
                                                           paid-in        Accumulated       Compensation     Stockholders'
                                                           capital           Deficit           Expense           Equity
                                                        ------------      ------------      ------------      ------------
<S>                                                     <C>               <C>               <C>               <C>
Balance, June 30, 1999                                  $ 12,232,000      $ (7,379,000)     $       --        $  4,854,000
                                                        ------------      ------------      ------------      ------------

Common stock and common stock warrants
     sold for cash, net of expenses                        2,448,000              --                --           2,449,000
Conversion of 5.75% subordinated debentures to
    preferred shares, net                                       --                --           1,265,000
Conversion of 6% subordinated debentures to
    common shares, net                                        20,000              --                --              20,000
Exercise of stock options                                    575,000              --                --             575,000
Common shares issued for late registration penalty              --                --                --                --
Common stock and common stock warrants issued for
     services                                              1,014,000              --             (35,000)          979,000
Equity in issuance of subsidiary stock - Valueflash
Preferred stock dividends paid                                (8,000)             --                --              (8,000)
Net loss                                                        --          (7,055,000)             --          (7,055,000)

                                                        ------------      ------------      ------------      ------------
Balance, June 30, 2000                                    19,258,000       (14,434,000)         (750,000)        5,341,000
                                                        ------------      ------------      ------------      ------------

Common stock and common stock warrants
     sold for cash, net of expenses                        1,399,000              --                --           1,400,000
Conversion of preferred shares to
    common shares, net                                        50,000              --                --                   0
Conversion of 6% subordinated debentures to
    common shares, net                                       100,000              --                --             100,000
Common stock and options issued for services               1,794,000              --          (1,437,000)          357,000
Amortization of unearned compensation                           --                --           2,061,000         2,061,000
Equity in issuance of subsidiary stock - Valueflash          491,000              --                --             491,000
Preferred stock accretion                                       --             (34,000)             --                   0
Net loss                                                        --          (7,287,000)             --          (7,287,000)

                                                        ------------      ------------      ------------      ------------
Balance, June 30, 2001                                  $ 23,092,000      $(21,755,000)     $   (126,000)     $  2,463,000
                                                        ============      ============      ============      ============

</TABLE>
         The accompanying notes are an integral part of this statement.

                                       F-5
<PAGE>
                        CDKNET.COM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE><CAPTION>
                                                                Year ended          Year ended
                                                                  June 30,            June 30,
                                                                    2001                2000
                                                                -----------         -----------
<S>                                                             <C>                 <C>
Cash flows from operating activities
  Net loss                                                      ($7,287,000)        ($7,055,000)
  Adjustments to reconcile net loss to net
  cash used in operating activities
    Depreciation and amortization                                 1,748,000           1,868,000
    Bad debt expense                                                255,000                --
    Gain on net sale of ValueFlash assets and liabilities        (2,511,000)               --
    Amortization of debt discount                                     6,000              49,000
    Write off of goodwill and patent                              3,610,000                --
    Compensation related to stock option plan                          --               145,000
    Common stock and stock warrants issued for services           2,418,000             807,000
   Equity share of affiliate loss                                   400,000                --
    Minority interest in loss of consolidated subsidiary              7,000            (479,000)
    Changes in assets and liabilities
      Accounts receivable                                          (645,000)           (387,000)
      Inventory                                                     330,000            (330,000)
     Cash escrow - ValueFlash                                      (750,000)               --
      Due to / from related party                                    32,000              12,000
      Prepaid expenses and other current assets                      (4,000)            (61,000)
      Notes receivable                                                 --              (255,000)
      Accounts payable and accrued expense                          745,000             632,000
      Deferred Revenue                                             (747,000)            887,000
                                                                -----------         -----------
          Net cash used in operating activities                  (2,393,000)         (4,167,000)
                                                                -----------         -----------

Cash flows from investing activities
    Purchase of furniture and equipment                            (180,000)           (426,000)
    Proceeds from sale of equipment                                    --               154,000
    Software development                                           (156,000)           (323,000)
    Cash escrow - ValueFlash                                       (500,000)               --
    Security deposits                                                  --               (72,000)
    Other liabilities & assets                                      (23,000)             40,000
    Investment in joint ventures                                   (470,000)               --
                                                                -----------         -----------
          Net cash used in investing activities                  (1,329,000)           (627,000)
                                                                -----------         -----------

Cash flows from financing activities
    Proceeds from notes payable                                   3,834,000                --
    Repayment of notes payable                                     (860,000)               --
    Principal payments on capitalized lease obligations             (36,000)           (169,000)
    Proceeds from issuance of common stock                        1,400,000           3,024,000
    Minority interest                                               115,000             550,000
    Equity in ValueFlash                                            491,000           2,201,000
    Preferred Dividends Paid                                           --                (8,000)
                                                                -----------         -----------
          Net cash provided by financing activities               4,944,000           5,598,000
                                                                -----------         -----------

          NET INCREASE (DECREASE) IN CASH                         1,222,000             804,000
                                                                -----------         -----------

Cash at beginning of period                                       1,035,000             231,000
                                                                -----------         -----------

Cash at end of period                                           $ 2,257,000         $ 1,035,000
                                                                ===========         ===========
</TABLE>
         The accompanying notes are an integral part of this statement.

                                      F-6
<PAGE>

                        CDKNET.COM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE><CAPTION>
                                                                Year ended          Year ended
                                                                  June 30,            June 30,
                                                                    2001                2000
                                                                -----------         -----------
<S>                                                                 <C>             <C>
Supplemental disclosures of cash flow information:
    Cash paid during the period for
        Interest                                                $    28,000         $    78,000
        Income taxes                                                   --

Noncash investing and financing transactions:
    Conversion of preferred stock to common stock                    50,000
    Common stock and stock warrants issued for purchase
        of fixed assets                                                --               110,000
    Common stock issued for purchase of investment                  125,000
    Stock issued upon conversion of subordinated debentures         100,000           1,285,000
    Stock and stock warrants issued for financing costs              47,000             250,000
</TABLE>






















         The accompanying notes are an integral part of this statement.

                                      F-7
<PAGE>
                        CDKNET.COM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   For the years ended June 30, 2001 and 2000

NOTE 1 - NATURE OF OPERATIONS

CDKNET.COM, INC. and Subsidiaries, (collectively the "Company"), is a New
York-based company that provides products worldwide to customers utilizing
internally developed technology. The Company has developed a multimedia
technology, CDK(TM), and a software based communication module, VFlash(TM). The
CDK(TM) technology integrates audio, video and Internet connectivity on a
standard compact disc ("CDs"), enabling users to create personalized CDs simply
by visiting a Website. The VFlash(TM) technology provides a real-time, direct
communication vehicle for marketers to reach their customers using a personal
computer desktop application. In June 2001, the Company sold its assets and
certain liabilities related to the ValueFlash.com subsidiary and licensed its
technology for resale purposes to the purchaser of the ValueFlash.com assets.
The Company continues to promote audio and video technology via CD's through a
subsidiary and with the purchaser of the ValueFlash.com assets.

The Company has operated limited revenues from development and use fees for
client specific CDs, the sale of custom CDs and Vflash(TM) international
licensing fees. Most resources had been directed to developing and marketing the
Vflash(TM) product during fiscal 2000 and 2001.

The Company expects to utilize the funds received from the sale of
ValueFlash.com assets to be a business development enterprise.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of CDKNET.COM, INC.
(the "Parent"), its wholly owned subsidiaries, Creative Technology, LLC
("Creative") and CDKnet,LLC ("CDK LLC"), both limited liability companies, and
its majority owned subsidiary ValueFlash.com, Inc. ("ValueFlash"), up to June
13, 2001, after elimination of intercompany accounts and transactions. Certain
amounts for prior years have been reclassified to conform to the current
presentation.

USE OF ESTIMATES

The Company uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. These estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosures of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from the estimates that the Company uses.

                                      F-8
<PAGE>

REVENUE RECOGNITION AND DEFERRED REVENUE

The Company recognizes revenue for development and use fees for client-specific
CD's and custom CD's on the date the product is shipped to the customer.
Revenues from licensing and agency fees have been recognized ratably over the
term of such agreements. Barter transactions will be recorded at the fair market
value of the goods or services provided or received, whichever is more readily
determinable.

ACCOUNTING FOR LONG-LIVED ASSETS

The Company reviews long-lived assets, certain identifiable assets and any
goodwill related to those assets for impairment whenever circumstances and
situations change such that there is an indication that the carrying amounts may
not be recoverable. For the year ended June 30, 2001, the Company recorded a
write down of goodwill of $ 3,169,000 and a write down of capitalized patent
costs of $ 441,000 in the fourth quarter. These write downs are a result of the
sale of ValueFlash assets, which was the leading ability of the Company to
develop meaningful cash flows to support such long lived assets.

CASH AND CASH EQUIVALENTS

All liquid investments having an original maturity not exceeding three months
are treated as cash equivalents. Included in cash and cash equivalents is
$80,000 of restricted cash as collateral for a term loan. See Note 6.

FURNITURE AND EQUIPMENT

Furniture and equipment are recorded at cost. Maintenance and repairs are
charged to expenses as incurred; major renewals and betterments are capitalized.
Furniture and equipment are depreciated using the straight-line method over
their estimated useful lives, which range from three to seven years. Leasehold
improvements are amortized over the term of the related lease or the useful life
of the improvements, whichever is shorter.

COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED

Cost in excess of fair value of net assets acquired ("goodwill") is being
amortized on a straight-line basis over five years. The remaining goodwill was
written down in the fourth quarter of fiscal 2001.

                                      F-9
<PAGE>

INTANGIBLE ASSETS

Intangible assets, principally acquired intellectual property related to the
acquisition, are being amortized over the estimated useful life of five years.
On an ongoing basis, management reviews the valuation and amortization of
goodwill and intangible assets to determine the possible impairment by
considering current operating results and comparing the carrying value to the
anticipated undiscounted cash flows of the related assets. The remaining patent
costs capitalized were written down in the fourth quarter of fiscal 2001.

DEFERRED FINANCING COSTS

The costs associated with completed financings are being amortized ratably over
the term of the financing.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs include expenses incurred by the Company to
develop new products and enhance the Company's existing products. Research and
development costs are expensed as incurred. During the years ended June 30,
2001, and 2000 such costs aggregated $ 225,000 and $164,000, respectively.

SOFTWARE DEVELOPMENT COST

The Company capitalized software development costs in accordance with SFAS No.
86 and SOP 98-1. The Company had capitalized $343,000 of such software
development costs during the year ended June 30, 2000 and will amortize such
costs over 30 months on a straight line basis. These costs were sold as part of
the ValueFlash asset sale.

STOCK BASED COMPENSATION

The Company accounts for employee stock options in accordance with APB Opinion
No. 25, "Accounting For Stock Issued to Employees" and has adopted the
disclosure-only option under SFAS No. 123 for compensation to employees and
directors. The Company accounts for non-employee stock transactions in
accordance with SFAS NO. 123 and ETIF 96-18.

INCOME TAXES

The Company files consolidated income tax returns.

The Company follows the asset and liability method of accounting for income
taxes by applying statutory tax rates in effect at the balance sheet date to
differences among the book and tax bases

                                      F-10
<PAGE>

of assets and liabilities. The resulting deferred tax liabilities or assets are
adjusted to reflect changes in tax laws or rates by means of charges or credits
to income tax expense. A valuation allowance is recognized to the extent a
portion or all of a deferred tax asset may not be realizable.

LOSS PER COMMON SHARE

Basic loss per share is computed using the weighted average number of shares of
common stock outstanding during the period.

All potential common shares have been excluded from the computation of diluted
loss per share as their effect would be antidilutive and, accordingly, there is
no reconciliation of basic and diluted loss per share for each of the periods
presented.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of accounts receivable, accounts payable and accrued expenses
approximate their fair values on the short-term maturity of these instruments.

CONCENTRATION OF CREDIT RISK

Included in cash escrow is a $1,250,000 installment due on the sale agreement of
the ValueFlash assets, which is to be released periodically over the a eighteen
month period. Occasionally, the Company has cash held in excess of $100,000,
which exceeds the FDIC insurance limits and is therefore uninsured.

NEW ACCOUNTING DEVELOPMENTS

In June 2001, the FASB issued SFAS No. 141, "Business Combination", SFAS No.
142, "Goodwill and Other Intangible Assets" and SFAS No. 143, "Accounting for
Asset Retirement Obligations",. SFAS No. 141 requires the use of the purchase
method of accounting and prohibits the use of the pooling-of-interest method of
accounting for business combinations initiated after June 30, 2001. It also
requires that the Company recognize acquired intangible assets apart from
goodwill. SFAS No. 142 requires, among other things, that companies no longer
amortize goodwill, but instead test goodwill for impairment at least annually.
In addition, SFAS No. 142 requires that the Company identify reporting units for
the purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. SFAS No. 143
establishes accounting standards for recognition and measurement of a liability
for an asset retirement obligation and the associated asset retirement cost,
which will be effective for financial statements issued for fiscal years
beginning after June 15, 2002. The adoption of SFAS No. 141, SFAS No. 142 and
SFAS No. 143 is not expected to have a material effect on the Company's
financial position, results of operations and cash flows.

                                      F-11
<PAGE>

NOTE 3 - SALE OF VALUEFLASH ASSETS

On June 13, 2001, the Company sold predominately all of the assets of ValueFlash
plus the assumption of certain liabilities for $3,500,000 in cash. Pursuant to
the terms of the sale agreement, $1,250,000 was placed in escrow awaiting the
resolution of certain contingencies. Should the respective contingencies be
resolved timely, the escrow cash from closing is to be released as follows;
$500,000 nine months from closing, $250,000 twelve months from closing and
$500,000 eighteen months from closing. In addition to the sale of the ValueFlash
assets, the Company licensed the patented technology of ValueFlash to the
purchaser for a term of three years, which automatically renews unless
terminated by either party within 90 days of the renewal date. The license
agreement requires certain reseller fees to be paid for CD's replicated or
shipped, hosting fees or a " mastering fee". The license agreement provides for
a first right of refusal upon the sale of such patent for the technology.

The gross sales attributed to the ValueFlash assets sold for fiscal 2001 and
2000 was $5,419,000 and $153,000, respectively.

NOTE 4 - NOTE RECEIVABLE

The Company has provided for a consultant to the Company to exercise his right
to purchase 350,000 shares of common stock in the Company at $.75 per share or
$262,500. The Company has recorded two note receivables for total monies due on
December 31, 2000 which bears interest at 6% per annum. A $7,500 payment has
been received on account on the two notes due. The remaining balance of $255,000
was reserved against during the fiscal year ended June 30, 2001 due to the
uncertainty of collecting such monies.

NOTE 5 -  ACQUISITION AND PURCHASE OF ASSETS

On July 8, 1998, the Company entered into an agreement, subsequently amended
(the "Agreement"), based on terms previously agreed upon with Kelly Music &
Entertainment, Inc. ("KME"), to acquire the minority interest of CDK LLC for
$5,171,000. The consideration was (1) the retirement of $600,000 of notes
accounted for as a stock subscription (2) issuance of 1,883,635 shares of the
Company's common stock and (3) a cash payment of $65,000. The amendment provided
for the waiver of previously agreed upon registration rights on common stock in
excess of 250,000 shares, terminated any and all demand registration rights with
certain stockholders of KME and released the Company from any and all claims,
liabilities, demands and causes of action known or unknown that KME could assert
in the future, as defined.

The Company accounted for the acquisition as a purchase. The Company valued the
minority interest based on the shares issued at the market price of the stock
after considering a 15% market discount for the shares that had no stated
registration rights requirement. The estimated fair value of the tangible assets
acquired of $700,000 approximated the book value of such assets. The excess
consideration over the estimated fair value of the net assets acquired of
$4,471,000 has been recorded as cost in excess of fair value of net assets
acquired and is being amortized on a straight-line basis over five years.

                                      F-12
<PAGE>

NOTE 5 - FURNITURE AND EQUIPMENT

Furniture and equipment consist of the following at June 30, 2001:

       Furniture                                           $      5,000
       Equipment                                                584,000
       Leasehold improvements                                     8,000
                                                           ------------
                                                                597,000
       Less: accumulated depreciation and amortization          373,000
                                                           ------------
                                                           $    224,000
                                                           ============

Depreciation expense for the years ended June 30, 2001 and 2000 was $211,000 and
$165,000, respectively.

NOTE 6 - LONG-TERM DEBT

In June 1999, the Company entered into a term loan with a lender. Borrowings
aggregating $175,000 under the agreement, which are collateralized by the
equipment and cash collateral provided by the Company's CEO, are repayable in
monthly installments of approximately $3,500, including interest at 7.86%
through March 2004. As of June 30, 2001 the loan balance and cash collateral are
approximately $113,000.

NOTE 7 - SUBORDINATED CONVERTIBLE DEBENTURES

6.00% SUBORDINATED CONVERTIBLE DEBENTURES

During the period September 4, 1998 through January 21, 1999, the Company issued
$600,000 in 6% Subordinated Convertible Debentures due September 1, 2003 with
detachable five-year warrants (the "Notes") to purchase 60,000 shares of common
stock of the Company at an exercise price of $3.00 per share. The Notes are
immediately convertible into common stock of the Company at an effective
conversion price of the lower of (i) 70% of the average current market price of
the Company's common stock during the five days preceding the date of the
original issuance, or (ii) 75% of the average current market price during the
five-day trading period ending one trading day preceding the date the Notes are
converted. The agreement contains antidilution provisions whereby the conversion
price is subject to (downward) adjustment in certain circumstances. The Company
may redeem the Notes at any time for 120% of the principal amount of the Notes
plus accrued interest. The Notes are subordinated to the claims and rights of
all Senior Debt, as defined by the underlying agreement. In addition, the
agreement contains covenants limiting the Company's ability to pay dividends,
incur new debt, enter into certain transactions and reacquire common or
preferred stock of the Company. If an event of default occurs beyond a stated
cure period the notes shall become payable at the option of the holder.

                                      F-13
<PAGE>

In connection with the agreement, the Company recorded a discount on the Notes
in the aggregate amount of $238,000 resulting from the allocation of proceeds of
$203,000 to a beneficial conversion feature and the fair value of the underlying
warrants of $35,000. Due to the immediate conversion rights under the agreement,
the discount attributed to the beneficial conversion feature was expensed on the
date of issuance. The carrying value of the Notes is being accreted to the face
value of $600,000 using the interest method over the life of the Notes. The
accretion in fiscal 2001 and 2000 was $9,000 and $3,000, respectively.

In connection with the sale of the Notes, the Company incurred fees of $60,000
and issued five-year warrants to purchase 30,000 shares of the Company's common
stock at $3.00 per share. The Company computed the approximate fair value of the
warrants issued to be $19,650 using the Black-Scholes method.

During the period from issuance to June 30, 2000, $345,000 in debentures plus
accrued interest of $3,000 was converted into 480,172 shares of the Company's
common stock.

During fiscal 2001, $90,000 in debentures plus accrued interest was converted
into 681,384 shares of the Company's common stock.

5.75% SUBORDINATED CONVERTIBLE DEBENTURE convert as to Preferred Stock

On February 2, 1999, the Company issued a $1,500,000, 5.75% Subordinated
Convertible Debenture due February 1, 2009 with detachable four-year warrants
(the "Debenture") to purchase 100,000 shares of common stock of the Company at
an exercise price of $1.75 per share. The Debenture is immediately convertible
into common stock of the Company at an effective conversion price of the lower
of (i) $1.30, or, (ii) subsequent to November 1, 1999, 75% of the average
current market price during the five-day trading period ending one trading day
preceding the date the Debenture is converted (limited to a minimum conversion
price of $.60 through July 1, 2000). The agreement contains antidilution
provisions whereby the conversion price is subject to (downward) adjustment in
certain circumstances. The Company, at its option, may convert the Debenture
into shares of 5.75% Convertible Preferred Stock having the same rights as the
Debenture. In October 1999, the Company exercised their right to call the
outstanding debentures in exchange for Preferred Stock. In addition, the
agreement contains covenants limiting the Company's ability to pay dividends,
incur new debt, enter into certain transactions and reacquire common or
preferred stock of the Company.

In connection with the agreement, the Company recorded a discount on the
Debenture in the aggregate amount of $756,000, resulting from the allocation of
proceeds of $663,000 to a beneficial conversion feature and the fair value of
the underlying warrants of $93,000. The fair value allocated to the warrants was
determined based on the estimated fair value of the debt using an effective
interest rate of 14% and the fair value of the warrants using the Black-Scholes
option-pricing model. Due to the immediate conversion rights under the
agreement, the discount attributed to the beneficial conversion feature was
expensed on the date of issuance.

                                      F-14
<PAGE>

In connection with the sale of the Debenture, the Company incurred fees of
$135,000 and issued 16,667 shares of the Company's common stock having a market
value of $31,250.

In fiscal June 30, 2001, 50,000 shares of preferred stock was converted into
79,605 shares of common stock.

NOTE 8 - INCOME TAXES

Temporary differences which give rise to deferred taxes are summarized as
follows:
                                                       2001           2000
                                                  ------------   ------------
   Deferred tax assets:
     Net operating loss and other carryforwards   $  2,567,000   $  4,062,000
     Less valuation allowance                       (2,567,000)    (4,062,000)
   Net deferred tax asset                         $          -   $          -

The Company has recorded a full valuation allowance to reflect the estimated
amount of deferred tax assets that may not be realized.

The Company's effective income tax rate differs from the statutory Federal
income tax rate as a result of the following:
                                                       2001           2000
                                                   ------------   ------------
   Tax benefit at statutory rate                   $ (2,840,000)  $ (2,399,000)
   Nondeductible expense/nontaxable (income)-net      2,350,000        340,000
   State benefit, net of federal tax effect             (50,000)      (282,000)
   Valuation allowance on net operating loss            540,000      2,341,000
                                                   $          -   $          -

The provision for Federal income taxes has been determined on the basis of a
consolidated tax return. At June 30, 2001, the Company had a net operating loss
carry forward for Federal income tax reporting purposes amounting to
approximately $6,580,000, expiring from 2018 through 2020. The Internal Revenue
Code of 1986, as amended, limits the amount of taxable income the Company may
offset with net operating loss carry forwards in any single year. No Federal
taxes were paid in the years ended June 30, 2001 and 2000.

NOTE 9 -  STOCKHOLDERS' EQUITY

a.    On October 1, 1999, the Company gave notice to the holders of the
      $1,500,000 5.75% Subordinated Convertible Debentures and exercised its
      right to call the outstanding Debentures in exchange for $1,500,000 of
      5.75% Convertible Preferred Stock. Under the terms of the Debentures, the
      Convertible Preferred Stock shall have: (1) liquidation preferences equal
      to the principal amount of the Debenture, (2) a 5.75% cumulative annual
      dividend payable quarterly, (3) rights to convert into shares of Common
      Stock at the same conversion rate as the Debentures and (4) the same
      redemption rights at the option of the

                                      F-15
<PAGE>

      Company. The Company has paid dividends for these debenture holders in the
      amount of $8,000, during the year ended June 30, 2000. An amount of
      $140,000 of preferred dividends not declared has accumulated and is unpaid
      as of June 30, 2001.

b.    During the year ended June 30, 2000, the Company executed the following
      summarized equity transactions;

      o     The Company sold 5,585,000 shares of common stock and common stock
            warrants or options for $2,448,000, net of the costs to raise such
            equity.

      o     In October 1999, the Company exercised their right to call the 5.75%
            convertible  debentures and converted such debentures to Convertible
            Cumulative 5.75% Preferred Stock. See 9(a) above for further
            discussions.

      o     During the year, $20,000 of 6% convertible debentures were converted
            into 29,000 shares of common stock.

      o     The Company issued 1,254,000 shares of common stock for the exercise
            of stock options and common stock warrants, which resulted in
            $575,000 of net proceeds to the Company.

      o     During the year, the Company issued 315,000 shares of common stock
            and certain stock options and warrants valued at $1,013,000, which
            $35,000 remains unearned as of June 30, 2000. The common stock
            issued was valued at the fair value of the common stock when the
            Company was obligated to issue the common stock. The common stock,
            options and warrants were valued utilizing the Black-Scholes
            option-pricing model.

      o     There were 6,000 shares of common stock issued to certain
            shareholders for a late registration penalty. There is no effect on
            equity for such common shares issued, since a value attributed to
            the common stock would be a reduction to equity for the costs to
            register such common shares resulting in the penalty.

      o     A newly formed majority-owed subsidiary (ValueFlash) sold 20% of its
            shares to unrelated individuals for $2,500,000 and issued stock
            options and warrants for services. The result was an equity gain on
            the sale of the subsidiary stock in the amount of $2,012,000. A
            value for the stock options and stock warrants issued was recorded
            at $965,000, which $715,000 remains unearned as of June 30, 2000.
            The common stock options and warrants were valued utilizing the
            minimum-value method, since such equity rights have no market. See
            Note 9(f) below for further discussions.

c.    During the year ended June 30, 2001, the Company executed the following
      summarized equity transactions;

      o     The Company sold 7,368,421 shares of common stock for $1,400,000,
            after several modifications to the existing sale agreement for a
            potential equity raise during the year of $2,800,000.

                                      F-16
<PAGE>

      o     The ValueFlash subsidiary sold 275,000 shares of common stock during
            the year for $491,000 net of costs to raise such funds.

      o     During the year 50,000 shares of preferred stock was converted into
            79,605 shares of common stock.

      o     Debenture holders converted $101,000 of debentures and accrued
            interest into 681,384 shares of common stock.

      o     During the year the ValueFlash subsidiary issued 120,000 warrants
            for services and 2,500,000 performanced based options at an exercise
            price of $1.50 per warrant or option.

      o     The Company assigned 800,000 and 200,000 options to the CEO of the
            Company and an unrelated entity in ValueFlash respectivley for loans
            made to Company. These options previously held by the Company have
            an exercise price of $1.50 for the purchase of each ValueFlash share
            of common stock.

      o     The Company issued 950,000 shares of common stock and 5,000,000
            options to employees and consultants at prices ranging from $.16 to
            $.50. The Company recorded $1,794,000 expense for the issuance of
            such shares and options to consultants.

d.    WARRANTS

Warrant activity for each of the two years ended June 30, 2001 and 2000 is
summarized as follows:

                                                         Weighted-
                                                          Average
                                        Shares         Exercise Price
                                   ---------------    ---------------
   Outstanding at June 30, 1999          1,212,414    $           .99
        Granted                          1,195,056               1.04
        Exercised                          (58,916)               .66
        Expired or cancelled                     -
                                   ---------------    ---------------
   Outstanding at June 30, 2000          2,353,554               1.04
        Granted
        Exercised
        Expired or cancelled              (285,714)               .82
                                   ---------------    ---------------
   Outstanding at June 30, 2001          2,067,840    $          1.06
                                   ===============    ===============

                                      F-17
<PAGE>

Information, at date of issuance, regarding stock warrant grants during the two
years ended June 30, 2001 and 2000.
                                                        Weighted-     Weighted-
                                                         Average       Average
                                                        Exercise        fair
                                             Shares      Price          value
                                          ------------ ------------ ------------
Year ended June 30, 2000
Exercise price exceeds market price           200,000   $    1.50    $    1.00
Exercise price equals market price            975,056   $     .97    $     .80
Exercise price is less than market price       20,000   $     .66    $     .56

Year ended June 30, 2001
Exercise price exceeds market price                 -   $       -    $       -
Exercise price equals market price                  -   $       -    $       -
Exercise price is less than market price            -   $       -    $       -

The following table summarizes information about warrants outstanding and
exercisable at June 30, 2001:

                                                 Outstanding
                                -----------------------------------------------
                                                   Weighted-        Weighted-
                                                    Average          Average
                                                   Remaining        exercise
                                     Shares      life in years        price
                                --------------- --------------- ---------------
      Range of exercise prices
      $.60 to $.85                    682,840         1.51         $    .65
      $1.00 to $1.25                  995,000         1.95         $   1.01
      $1.50 to $1.75                  300,000         2.42         $   1.58
      $2.00 to $3.00                   90,000         2.17         $   3.00
                                ---------------
                                    2,067,840
                                ===============

All of the above warrants are exercisable, with the exception of 562,500
warrants exercisable at a $1.00 which vest ratably through July 2002.

Certain warrant agreements contain a cashless exercise provision whereby the
warrants may be exercised solely by the surrender of the warrants, and without
the payment of the exercise price in cash, for that number of warrant shares
determined by dividing the difference of the market price of the shares of
common stock issuable upon exercise of the warrants and the warrant exercise
price by the market price of the common stock on the date of exercise. At June
30, 2001, 677,500 warrants were outstanding with cashless provisions.

                                      F-18
<PAGE>

e.    STOCK OPTION PLANS

In 1998, the Company adopted the 1998 Equity Incentive Plan (the "Plan") for
employees, officers, consultants and directors of the Company, pursuant to which
the Company may grant incentive stock options, nonqualified stock options, stock
appreciation rights, restricted stock or deferred stock. The total number of
shares of the Company's common stock available for distribution under the Plan
is 3,000,000. The option period during which an option may be exercised shall
not exceed ten years from the date of the grant and will be subject to such
other terms and conditions of the Plan. The Plan will terminate automatically on
June 30, 2008.

The Company accounts for its stock option plan under APB Opinion No. 25,
"Accounting for Stock Issued to Employees", under which no compensation expense
is recognized. The Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation', for disclosure purposes; accordingly, no compensation expense is
recognized in the results of operations for options granted at fair market value
as required by APB Opinion No. 25.

Stock option activity for each of the two years ended June 30, 2001 and 2000 is
summarized as follows:
                                                                   Weighted
                                                                    Average
                                                    Shares      Exercise Price
                                                --------------  --------------
               Outstanding at June 30, 1999          1,612,500  $          .67
                    Granted                          7,708,000             .94
                    Exercised                       (3,650,000)            .59
                    Expired or cancelled               (32,500)           1.00
                                                --------------  --------------
               Outstanding at June 30, 2000          5,638,000            1.14
                    Granted                          6,400,000             .12
                    Exercised                                -               -
                    Expired or cancelled               (65,000)           1.16
                                                --------------  --------------
               Outstanding at June 30, 2001         11,973,000  $          .78
                                                ==============  ==============

                                      F-19
<PAGE>

Information, at date of issuance, regarding stock option grants during the two
years ended June 30, 2001 and 2000.
                                                         Weighted-    Weighted-
                                                          Average      Average
                                                         Exercise       Fair
                                             Shares        Price       Value
                                          ------------ ------------ ------------
Year ended June 30, 2000:
Exercise price exceeds market price         3,398,000      $1.15        $ .95
Exercise price equals market price          1,710,000      $ .81        $ .80
Exercise price is less than market price    2,600,000      $ .84        $ .62

Year ended June 30, 2001
Exercise price exceeds market price         1,250,000      $ .60        $ .50
Exercise price equals market price          5,150,000      $ .25        $ .21
Exercise price is less than market price            -      $   -        $   -

The following table summarizes information about warrants outstanding and
exercisable at June 30, 2001:

<TABLE><CAPTION>
                                               Outstanding and exercisable
                             ---------------------------------------------------------------
                                                Weighted-       Weighted-
                                                 Average         Average
                                  Number        remaining       Exercise         Number
                               Outstanding    life in years      Price         Exercisable
                             --------------- --------------- --------------- ---------------
<S>                         <C>             <C>             <C>             <C>
  Range of exercise prices:
  $.16 to $.75                     6,450,000       3.70         $     .30         6,450,000
  $1.00                            4,758,000       3.14         $    1.00         4,537,500
  $1.69                              500,000       3.83         $    1.69           500,000
  $2.25 to $3.00                     265,000       3.83         $    2.96           115,000
                             ---------------                                 ---------------
                                  11,973,000                                     11,602,500
                             ===============                                 ===============
</TABLE>

For disclosure purposes in accordance with SFAS No. 123, the fair value of each
stock option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
stock options granted during the years ended June 30, 2001 and 2000: annual
dividends of $0.00, expected volatility of 97% for the Company's options and .1%
volatility for the ValueFlash options for 2001 and 97% for 2000, risk-free
interest rate of 4.3% in 2001 and 5.7% in 2000 and expected life of five years
for all grants. If the Company recognized compensation cost for the vested
portion of the employee stock option plan in accordance with SFAS No. 123, the
Company's pro-forma net loss and loss per share would have been as follows for
the years ended June 30, 2001 and 2000:

                                      F-20
<PAGE>

                                       2001                2000
                                 ---------------     ---------------
   Net loss
      As reported                $    (7,372,000)    $    (7,118,000)
      Pro-forma                       (9,698,000)        (11,356,000)
   Net loss per common share
      As reported                $          (.33)    $          (.40)
      Pro-forma                             (.44)               (.66)


The compensation expense attributed to the issuance of the non-employee stock
options will be recognized as they are earned. These stock options are
exercisable for five years from the grant date.

The employee stock option plan stock options are exercisable for five years from
the grant date and vest over various terms from the grant date to five years.

f.          STOCK OPTIONS - VALUEFLASH

The Company has also issued stock options in its majority owned subsidiary
ValueFlash. The SFAS No. 123 disclosure for the pro-forma loss has been included
in Note (c) above with the pro-forma loss for options issued by the Company.

The following tables summarize the changes in options outstanding and the
related price ranges for shares in the subsidiary ValueFlash common stock:

            Employee Stock Option Plan:

                                                                Weighted
                                                                 Average
                                               Shares         Exercise Price
                                          ---------------    ---------------
      Outstanding at January 13, 2000                   -                  -
           Granted                              6,838,000    $          1.46
           Exercised                                    -                  -
           Expired or cancelled                         -                  -
                                          ---------------    ---------------
      Outstanding at June 30, 2000              6,838,000               1.46
           Granted                                250,000               1.50
           Exercised                                    -                  -
           Expired or cancelled                (5,063,000)              1.50
                                          ---------------    ---------------
      Outstanding at June 30, 2001              2,025,000    $          1.43
                                          ===============    ===============

                                      F-21
<PAGE>

            Non-Employee Stock Option:

                                                                Weighted
                                                                 Average
                                               Shares         Exercise Price
                                          ---------------    ---------------
      Outstanding at January 13, 2000                   -    $             -
           Granted                             12,331,000               1.91
           Exercised                                    -                  -
           Expired or cancelled                         -                  -
                                          ---------------    ---------------
      Outstanding at June 30, 2000             12,331,000               1.91
           Granted                              3,120,000               1.58
           Exercised                                    -                  -
           Expired or cancelled                  (918,000)              2.00
                                          ---------------    ---------------
      Outstanding at June 30, 2001             14,533,000    $          1.85
                                          ===============    ===============

Information, at date of issuance, regarding stock option grants during the year
ended June 30, 2001 and the period ended June 30, 2000.

                                                        Weighted-   Weighted-
                                                         Average     Average
                                                        exercise      fair
                                              Shares      price      value
                                           ----------- ----------- -----------
Period ended June 30, 2000
  Exercise price exceeds market price        1,250,000    $ 4.00      $   -
  Exercise price equals market price        10,301,000    $ 1.68      $ .40
  Exercise price is less than market price   7,618,000    $ 1.48      $ .88

Year ended June 30, 2001
  Exercise price exceeds market price                -         -      $   -
  Exercise price equals market price         3,370,000    $ 1.57      $ .80
  Exercise price is less than market price           -         -      $   -

The following table summarizes information about warrants outstanding and
exercisable at June 30, 2001:

<TABLE><CAPTION>
                                           Outstanding and exercisable
                             --------------------------------------------------------
                                              Weighted-      Weighted-
                                               average        average
                                 Number       remaining      exercise      Number
                              Outstanding   life in years     price      Exercisable
                             ------------- --------------- ------------ -------------
<S>                          <C>           <C>             <C>          <C>
   Range of exercise prices:
   $1.00 to $1.50               11,525,000        3.80        $ 1.49        6,289,000
   $2.00                         3,783,000        2.38          2.00          783,000
   $4.00                         1,250,000        2.00        $ 4.00                -
                             -------------                              -------------
                                16,558,000                                  7,072,000
                             =============                              =============
</TABLE>
                                      F-22
<PAGE>
The non-employee stock options outstanding of 5,243,000 are fully vested. An
additional 40,000 of stock options will be fully vested by April 15, 2002. The
remaining 8,000,000 of stock options are performance based and are unearned as
of June 30, 2001. The compensation expense attributed to the issuance of these
stock options will be recognized as they are earned. These stock options are
exercisable for five years from the grant date.

The employee stock option plan stock options are exercisable for five years from
the grant date and vest over various terms from the grant date to five years.
Approximately, 5,000,000 employee stock options were cancelled as a result of
the sale of substantially all of the assets and business of Vflash on June 13,
2001.  As of June 30, 2001, 1,829,000 of these stock options were vested.

NOTE 10 - RELATED PARTY TRANSACTIONS

a.    During the years ended June 30, 2001 and 2000 legal services of $170,000
      and $289,000 respectively, were provided by firms (the "Firms") in which
      the Company's CEO and rincipal stockholder is the managing partner.
      Further, the Firm provided office space and accounting services for which
      no fees were paid. During the year ended June 30, 2000, the Company
      recorded an expense of $47,000 for such services. In fiscal 2000, the firm
      received $77,000 as finders fees for equity raised during fiscal 2000.

b.    The Company's CEO exercised 750,000 stock options for $450,000 during
      fiscal 2000.

c.    During the year ended June 30, 2001, the Company assigned 800,000 options
      held by the Company to purchase ValueFlash common stock for $1.50 per
      share as consideration for loaning the Company funds periodically during
      the year.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

a.    FACILITIES

The Company leases office space pursuant to lease agreements, which expire on
April 1, 2003 and April 30, 2010.


The future minimum leases commitments are as follows:


                     ----------------  ----------------
                       June 30, 2002          $ 60,000
                     ----------------  ----------------
                                2003            62,000
                     ----------------  ----------------
                                2004            62,000
                     ----------------  ----------------
                                2005            62,000
                     ----------------  ----------------
                                2006            63,000
                     ----------------  ----------------

                                      F-23
<PAGE>

Rent expense for the years ended June 30, 2001 and June 30, 2000 were $219,000
and $237,000 respectively.

b.    LITIGATION MATTERS

The Company is involved in claims and disputes which arise in the normal course
of business. Management believes that the resolution of these matters will not
have a material adverse effect of the Company's financial position or results of
operations.

NOTE 12  FOURTH QUARTER EVENTS

During the fourth quarter of fiscal 2001, the Company sold prodominately all of
its assets and liabilities which resulted some large transactions being recorded
in the fourth quarter. These transactions are detailed as follows;

o     The Company sold its predominately all of its assets in a subsidiary
      ValureFlash resulting in a $5,411,000 gain on such sale.

o     The Company recorded the writeoff of goodwill and patent costs of
      $3,610,000 due to the lack of sufficient cash flow to support the
      recoverability of such assets, since the ValueFlash assets were sold. The
      business continues to utilize the patented technology, but does not
      generate sufficient cash flow to support the values recorded.

o     Due to the sale of the ValueFlash assets, which included employee
      contracts and other business contracts, the unamortized compensation costs
      were accelerated and written off in the fourth quarter in the amount of
      $1,022,000.




                                      F-24