U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   Form 10-KSB
(Mark One)

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

     [X] TRANSITION REPORT UNDER SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 [No Fee Required]

        For the transition period from January 1, 2000 to June 30, 2000.

                        Commission file number 000-30468

                               CELEXX CORPORATION
        (Exact name of small business issuer as specified in its charter)

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


                          7251 West Palmetto Park Road,
                                    Suite 208
                               Boca Raton, Florida, 33433
                    (Address of principal executive offices)

                                  561-395-1920
                           (Issuer's telephone number)

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

         Securities registered under Section 12(g) of the Exchange Act:
                          Common Stock, $.001 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.

Yes _X_ No ___

Check if 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  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

ISSUER'S REVENUES FOR ITS MOST RECENT FISCAL YEAR:  $3,565,274

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant on September 21, 2000 was approximately $6,240,000 (based on the last
sale price as reported on the over-the-counter Bulletin Board).

     The number of shares  outstanding of each of the issuer's classes of common
equity as of September  21,  2000:  Common  Stock,  $.001 Par Value - 24,019,696
shares

        DOCUMENTS INCORPORATED BY REFERENCE: NONE

   Transitional Small Business Disclosure Format (check one): Yes __ No _X

<PAGE>



                               CELEXX CORPORATION

                 June 30, 2000 Transition Report on Form 10-KSB

                                      INDEX

                                     Part I

Item 1.   Description of Business............................................. 3
Item 2.   Description of Property............................................ 14
Item 3.   Legal Proceedings.................................................. 14
Item 4.   Submission of Matters to a Vote of Security Holders................ 15



                                     Part II

Item 5.   Market for Common Equity and Related Stockholder Matters........... 16
Item 6.   Management's Discussion and Analysis or Plan
          of Operations...................................................... 17
Item 7.   Financial Statements....................................... F-1 - F-19
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.................. 22

Item 10.  Executive Compensation............................................. 24
Item 11.  Security Ownership of Certain Beneficial Owners and
          Management......................................................... 27
Item 12.  Certain Relationships and Related Transactions..................... 28

                                     Part IV

Item 13.  Exhibits and Reports on Form 8-K................................... 29





                                       2


<PAGE>





                                     PART I

Item 1.

DESCRIPTION OF BUSINESS

THIS ANNUAL REPORT ON FORM 10-KSB CONTAINS FORWARD-LOOKING  STATEMENTS THAT HAVE
BEEN MADE PURSUANT TO THE PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995. THESE FORWARD-LOOKING  STATEMENTS ARE BASED ON MANAGEMENT'S CURRENT
EXPECTATIONS,  ESTIMATES AND PROJECTIONS, BELIEFS AND ASSUMPTIONS. WORDS SUCH AS
"ANTICIPATES,"  "EXPECTS," "INTENDS," "PLANS," "BELIEVES," "SEEKS," "ESTIMATES,"
VARIATIONS OF SUCH WORDS AND SIMILAR  EXPRESSIONS  ARE INTENDED TO IDENTIFY SUCH
FORWARD-LOOKING  STATEMENTS.  THESE  STATEMENTS  ARE NOT  GUARANTEES  OF  FUTURE
PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT
ARE DIFFICULT TO PREDICT;  THEREFORE,  ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE  EXPRESSED OR FORECASTED  IN ANY SUCH  FORWARD-LOOKING  STATEMENTS.  THESE
RISKS AND  UNCERTAINTIES  INCLUDE THOSE  DISCUSSED  BELOW UNDER "BUSINESS - RISK
FACTORS"  ON PAGES 11  THROUGH  14 AND  ELSEWHERE  IN THIS FORM  10-KSB.  UNLESS
REQUIRED BY LAW, THE COMPANY  UNDERTAKES NO  OBLIGATION  TO UPDATE  PUBLICLY ANY
FORWARD-LOOKING  STATEMENTS,  WHETHER  AS A RESULT  OF NEW  INFORMATION,  FUTURE
EVENTS OR  OTHERWISE.  HOWEVER,  READERS  SHOULD  CAREFULLY  REVIEW THE  FACTORS
DISCUSSED IN OTHER REPORTS OR DOCUMENTS THAT THE COMPANY FILES FROM TIME TO TIME
WITH THE SECURITIES AND EXCHANGE COMMISSION,  PARTICULARLY THE QUARTERLY REPORTS
ON FORM 10-QSB AND ANY CURRENT REPORTS ON FORM 8-K.

OVERVIEW

On June 9,  2000,  our Board of  Directors  approved  the  change of our  fiscal
year-end from a year ended on December 31, which was the fiscal year end used in
our last Annual  Report on Form 10-KSB  filed with the  Securities  and Exchange
Commission  to the new fiscal year end of June 30. This report for the six-month
period  ended June 30,  2000  covers the  transition  period.  Unless  otherwise
indicated,  references  to fiscal 1999 mean the fiscal year ended  December  31,
1999, and fiscal 2000 will refer to the six months ended ending June 30, 2000.

CeleXx  Corporation  ("CeleXx",  the "Company" or "we") was organized  under the
laws of the State of Nevada on  February  19,  1997,  under the name,  "Spectrum
Ventures,  Inc." In February 1999,  the Company  merged with Cobra  Technologies
International, Inc., a Delaware corporation with the Company surviving. The name
of the  surviving  corporation  was changed to Cobra  Technologies,  Inc. and in
August 1999 and November 1999 was further  changed to CobraTec,  Inc. and CeleXx
Corporation, respectively.

On February 18, 1999,  the  shareholders  of Spectrum  Ventures,  Inc.  voted to
acquire all of the outstanding common stock of Cobra Technologies International,
Inc., a newly-formed Delaware corporation ("Cobra  International"),  pursuant to
an  Agreement  and Plan of  Reorganization  in  exchange  for  4,500,000  of the
Company's stock.

Effective  May  25,  1999,  the  Company   acquired  through  its  wholly  owned
subsidiary,  Pinneast.com, Inc. ("Pinneast"),all of the outstanding common stock
of Pinnacle East,  Inc. a South Carolina  corporation,  pursuant to an Agreement
and Plan of Reorganization for a value of $900,000. Payment consisted of 500,000
shares of CeleXx  common stock and  $100,000 in cash,  that as of June 30, 2000,
$58,500 had been paid. Stephen  Lounsberry and Mitchell N. Smith,  President and
Vice President of Pinneast,  respectively,  also owning 100% of the  outstanding
capital stock of Pinneast, received 275,000 and 225,000 common shares of CeleXx,
respectively.  All key  management  personnel  were  retained and signed  3-year
employment agreements.

                                       3
<PAGE>

The  Company's  second  acquisition,  Computer  Marketplace,  Inc.  ("CMI")  was
completed on April 14, 2000, pursuant to an Agreement and Plan of Reorganization
for a value of $ 4,300,000.  Payment  consisted  of  1,400,000  shares of CeleXx
common stock, payment of $1,500,000 in cash and a promissory note for $1 million
at 6%, payable in equal installments at the first and second anniversaries.  All
key management personnel were retained and signed 3-year employment agreements.

CeleXx  Corporation  to date  has a  short  operating  history,  and  since  its
inception has generated losses from operations on a consolidated basis amounting
to  $4,730,858.  At  present,  the  only  material  businesses  that  have  been
successfully  combined with the Company are Pinneast and CMI.  While the Company
plans to continue to acquire existing businesses in accordance with its business
plan,  there can be no  assurances  that the Company will be  successful  in its
acquisition plans or in securing financing to acquire such operating companies.

To date,  the Company has not earned a profit and can give no  assurances if and
when it will become  profitable.  Similarly,  because of its  limited  operating
history and  accumulated  losses,  the  Company's  ability to attract  desirable
businesses for acquisition could be limited. Moreover, there can be no assurance
that such  acquisition  candidates,  if found,  could be  acquired  under  terms
acceptable to the Company. Consequently, failure to complete future acquisitions
could limit the  Company's  ability to expand in  accordance  with its  business
plan.

In the second quarter of 2000, CeleXx structured its existing business into four
(4) operating groups.

GENERAL

CeleXx  Corporation  is  an  integrated   management  company  involved  in  the
acquisition,  consolidation,  integration and management of private  Information
Technology (IT)  businesses.  The  headquarters  organization  provides  overall
management and direction for the operating  entities,  essentially  leaving them
free of many of  administrative  encumbrances  such as human resource  planning,
finance and accounting, to concentrate on their core businesses.

CeleXx's  operations  are  organized  into four groups  according  to  function:
Integrated Solutions,  Performance Media, Information  Engineering,  and Special
Applications.  Each Group is under the  direction of a Group  President,  who is
responsible for the day to day management and direction of operations within the
Group,  and  for  coordinating  the  Group's  functions  to  ensure  a  seamless
integration with the other operating groups;  thereby,  giving our customers all
the benefits of an enterprise-wide IT service provider.

The Performance Media Group (PMG) develops high-end  multimedia  applications in
all the major  formats  delivering  e-Education,  Distance  Learning,  and other
interactive  Web-based solutions.  In addition,  PMG delivers technical training
and  support  to  clients,   and   supports   the   assessment,   customization,
implementation  and  delivery  of other  major  providers'  Learning  Management
Systems (LMS).  E-education is the culmination of internally  based training and
learning using the Internet.

Revenues  within the Celexx  Performance  Media Group and  contracts  for future
business have  increased  substantially  since 1999. PMG continues to develop in
the areas of corporate training,  Distance Learning and e-Education  markets. In
December 1999, for example,  the Group signed an open-ended contract to web-host
Dow Chemical's worldwide computer based training programs.

                                       4
<PAGE>

The Integrated Solutions Group (ISG) integrates new systems with legacy systems;
new and legacy systems with the Internet;  provides network engineering;  custom
configuration   of  multiple   systems;   and  provides   integration,   design,
customization and  implementation of computer  telephony networks and voice over
Internet Protocol (VoIP) applications.

Revenues  within the Integrated  Solutions  Group also continue to increase with
the increased contractual services with Sudexho-Marriott,  Investors Bank, Cisco
and other major clients for which the Company is providing custom systems and/or
solutions. In addition, the Company is partnering with Hewlett-Packard,  Exodus,
Citrix and other major OEMs and solutions providers.

The  Information  Engineering  Group (IEG)  includes the  development of complex
electronic  databases  and  specialized   engineering   functions  in  graphics,
facilities management and wireless technologies to provide customers with highly
specialized  solutions  in the  handling  of  large-scale  data.  Currently,  no
revenues  have been earned  through IEG. The Company had  contracted  to acquire
Moore  Resource  Systems,  Inc.,  a private  company  and  provider of data base
integration  services  to the oil and gas energy  sector,  based in Canada.  The
closing for this  transaction was scheduled to occur prior to September 1, 2000,
however,  after extensive  negotiations  and the effects of a low stock price on
the Company stock and related  non-completion  of financing the  transaction was
cancelled.  Management  of the  Company  determined  that it was not in the best
interest of the Company's shareholders to continue with this acquisition at this
time until the  Company's  stock  price  becomes  more  favorable.  The  Company
presently continues  discussions with Moore Resource Systems and other potential
target  acquisitions for this group.  There can be no assurance that the Company
will be in a position to attract sufficient capital or that such capital will be
available  to the Company on  favorable  and  desirable  terms to complete  this
acquisition.  If the Company is  unsuccessful in its attempt to raise growth and
working capital at rates that are acceptable to the Company, and cannot complete
this acquisition its prospects for growth could be greatly diminished.

The  Special   Applications   Group  (SAG)   encompasses   the  development  and
distribution   of  specialized   products,   custom   engineering  and  software
development,  and "help desk" operations.  At present,  the Company has one such
product, Dealer2Dealer, a web-based solution for tracking the inventories of new
and used automobiles. This group has earned no revenues.

The field of Information  Technology (IT) has grown in tandem with the worldwide
proliferation of computerization over the last two decades, and has expanded its
rate of  growth  with the  commercialization  and  universal  acceptance  of the
Internet and  corporate  Intranets  over the last five years.  Several  sources,
including International Data Corporation (IDC), concur that the number of online
users will grow from about 150  million  worldwide  now to about 500  million by
2003.  This  projected  growth is expected,  in turn, to fuel the demand for new
computer  products  and  services  and create new market  opportunities  in this
field.

According  to IDC,  business-to-business  e-commerce  is one of fastest  growing
sectors of  e-commerce  and is  expected  to exceed  $179  billion  by 2001.  To
capitalize on this growth,  many  businesses  are expanding and upgrading  their
Internet and networking infrastructures.  The industry is highly competitive and
is characterized by numerous small companies, many offering proprietary products
and services.  Although  there are a few  significant  players,  such as IBM and
Cisco,  as yet,  no clear  leader has  emerged.  The company  currently  holds a
negligible market share in this field, and currently has neither the capital nor
technical resources to capture meaningful market share.  Nevertheless,  revenues
from this source are growing.

IDC is a leading provider of information  technology data, industry analysis and
strategic and tactical guidance to builders,  providers and users of information

                                       5
<PAGE>

technology.  IDC is based in Framingham,  Massachusetts and maintains offices in
more than 40 countries around the world.

MANAGEMENT AND STRATEGY

The core management of CeleXx is composed of individuals experienced in finance,
accounting,  and Information  Systems.  Members of our management team have been
employed by or have been  consultants  to startup  companies  and  multinational
corporations such as IBM,  McGraw-Hill and Xerox for more than two decades.  Our
President,  Treasurer and Chief Financial  Officer have all been involved in the
financial and business aspects of mergers and acquisitions,  as well as with the
investigation  and business  analysis of prospective  acquisitions  at Xerox and
McGraw-Hill, and for many smaller entrepreneurial firms.

The core strategy of our company is to acquire  complementary  businesses in the
information  technology  industry  that add value by  increasing  market  share,
revenues,  or profits,  or by reducing  operating  costs,  or by  enhancing  the
Company's ability to perform in the market place. We must caution, however, that
the achievement of these targets is highly dependent upon current  management as
well as upon the  Company's  ability to  attract  new  capital.  There can be no
assurance  that we will be in a position to attract  sufficient  capital or that
such capital will be available to the Company on favorable and desirable  terms.
If the  Company  is  unsuccessful  in its  attempt to raise  growth and  working
capital at rates that are  acceptable  to the Company,  its prospects for growth
could be greatly diminished.

To date,  CeleXx has  focused on service and  solution  companies  that  provide
customers with systems and network integration,  the Internet,  and computer and
web based training. Companies in systems engineering, systems design, e-commerce
platform  development,  and network  consulting  are the most desired  potential
acquisition  candidates for CeleXx.  Through the  acquisition of CMI, CeleXx has
also become  involved in developing  and delivering  telecommunications  systems
such as  telephone  routers,  networked  e-mail  systems,  and remote  telephone
diagnostic systems.  Today,  telephony integration  represents almost 20% of our
revenues.

One important criterion for acquisition is the potential synergy of the business
to be acquired  with those that already exist within the CeleXx  structure.  CMI
and Pinneast,  for example, share a number of their larger clients. CMI provides
hardware,  systems,  and  services to several of these  clients  while  Pinneast
provides  training and e-Education to assure that users understand and take full
advantage  of the systems  that CMI has  provided.  CeleXx  generally  looks for
companies  that will add $5 million to $15 million,  or more to revenue;  and/or
companies that have been profitable on a pretax, pre-interest basis. Acquisition
valuations  are  often  based  on an EBIT  multiple  of four (4) to  six(6).  In
addition,  the companies  must have at least a three-year  history with recently
audited financial  information and a strong management team. CeleXx requires top
management to stay with the company after the  acquisition and ties a portion of
the final purchase price to future  performance.  In any event,  CeleXx reserves
the right to negotiate the purchase price and terms of an acquisition,  and may,
from time to time,  elect to acquire a business  with a history of losses if, in
the opinion of the management and the board of directors of the Company, such an
acquisition  might add value to the  Company  and/or  holdings  under the CeleXx
umbrella.

CORPORATE STRUCTURE

Our Group  structure,  which was  instituted  during the second quarter of 2000,
combines and integrates  the best practices of our operations and  establishes a
solid  platform  for growth in a world that is becoming  increasingly  dependent

                                       6
<PAGE>

upon the Internet,  corporate intranets, wide area networking and the electronic
exchange of information.

These groups, and the companies within the groups,  share many similar customers
and  provide  value-added  products  and  services  that are  complementary  but
non-competitive within the CeleXx family.

THE CELEXX PERFORMANCE MEDIA GROUP

Pinneast was formed in January 1994 in order to capitalize on the growing demand
for  computer-based  alternatives to instructor lead training.  As the anchor of
the CeleXx  Performance  Media  Group (PMG) it provides  our  customers,  mainly
Fortune 500 companies,  with customized  interactive (i.e., can be controlled by
the user) multimedia (i.e., combining text, graphics and motion) training design
and development services.  Toward this end, PMG evaluates the specific practices
and  procedures a client might be using,  and then details a plan for developing
training programs that address the client's specific requirements.  For the most
part, these training  programs are designed to fill specific needs; for example,
to help employees  improve  performance  (productivity);  to help employees gain
awareness of certain issues,  their causes, and cures (e.g., sexual harassment);
to help employees avoid common accidents or to comply with certain  governmental
regulations  such as OSHA; to teach new skills  (e.g.,  how to operate a certain
machine);  or to teach general skills (e.g.,  computing).  PMG also develops and
produces  marketing tools (e.g.,  promotional  material,  video  demonstrations,
etc.) for customers to distribute in the form of CD ROMS or via the Internet.

Today,  PMG's  clients  include a broad  base of  industrial  companies,  banks,
financial  institutions,   government  agencies  and  educational  institutions.
Prominent  among its clients are Dow Chemical,  for which PMG produces and hosts
(maintains the site for) world-wide  Web-based training  programs;  The US Army,
for which PMG develops a wide array of training  programs  related to the proper
use and maintenance of weapons  systems;  Delta Airlines,  for which PMG designs
and  produces  safety  training  programs;  and Bank of  America,  for which PMG
develops  financial  training  programs.  All of  PMG's  programs  are  high  in
multimedia (text,  video,  graphics and motion) content and are delivered to the
end user via CD ROMs,  the  Internet  (World  Wide Web),  or  private  corporate
intranets (Internet based links for a specific company or group).

Operations  currently within Performance Media Group generated about $200,000 in
revenue  during  their  first year,  primarily  from its first  customer,  Fleet
Mortgage,  and from a local grocery  chain,  Harris Teeter  Grocers.  During the
second year, a two-year, $800,000 contract with Hoechst Chemical was established
to provide OSHA mandated training to its Hoechst Chemical's employees.  PMG also
continued to expand within the financial community by generating  contracts with
several banks and insurance companies.

In 1996, PMG (through  Pinneast)  expanded its distance learning and e-Education
deployment as it delivered an Internet-accessed  medical support program, called
Learners Toolkit for Open Time, for the Thomas Jefferson University Hospital. By
1998,  the revenue base had expanded to more than  $800,000 and  contracts  with
companies  throughout a variety of industries and government  organizations were
established.  In 1999, PMG signed an open-ended  contract to host Dow Chemical's
worldwide computer based training programs.

While the PMG group has been particularly successful with companies in a few key
industries such as finance,  insurance,  transportation and  manufacturing,  the
scope  of  its  services  can be  applied  to  most  businesses  and  government
organizations. Generally, however, its customers need to be large enough to have
ongoing  training  and  training  support  programs  for  their  employees.  PMG
maintains a customer retention rate in excess of 80%.

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<PAGE>

PMG's products fall into three main categories: training, distance learning, and
marketing.  E-education  products include custom  computer-based  training (CBT)
programs,  custom  web-based  training  (WBT)  programs,  instructional  design,
instructor-lead  training,  learning  management systems (LMS) and consultation.
PMG's marketing products include:  interactive marketing CD-ROMs,  corporate web
page development, e-commerce systems, site development, and consultation.

In developing  and  producing  training  programs for its clients,  PMG combines
business  performance  consulting,  instructional  design,  graphic  design  and
animation,  computer  methodologies and media  technologies to meet the specific
performance  improvement  (productivity) needs of its clients. The solutions and
training programs are delivered via CD-ROM or the Web. Furthermore,  the Company
markets and  distributes  its  products  and  services  through  trade  sources,
customer referrals and direct marketing.

PMG's  instructional  design  philosophy and approach  focus on helping  clients
improve employee  performance  through training.  The interactive  nature of the
program permits the user (learner) to stop,  start, or repeat any portion of the
program  he or she may  desire,  at any  time.  PMG's  approach  to  interactive
multimedia  design  addresses  multiple  learning  styles in an  attempt to more
effectively  reach the diverse  audiences for which these programs are intended.
Secondly,  our interactive multimedia programs engage the learner with simulated
performance-based  routines,  enhanced by  corrective  feedback that is directly
applicable to the learner's real world performance responsibilities.

The  instructional  material  is  designed  to  engage  or link the  learner  to
interactive  multimedia so that real world knowledge,  skills and  methodologies
are  practiced  and  developed  and,  thus,  become  directly   transferable  to
on-the-job performance.  In addition to designing from the learner's performance
perspective and needs, PMG designs  training  programs within the context of the
client's  business  objectives  and  priorities so that  individual  performance
improvements are relevant: they impact overall business performance.

The CeleXx Performance Media Group currently has 24 employees.

THE CELEXX INTEGRATED SOLUTIONS GROUP

Computer  Marketplace,  Inc.  (CMI) was  acquired in April  2000,  to become the
flagship of the CeleXx  Integrated  Solutions  Group  (ISG).  At the time of its
acquisition,  CMI, located in Tewksbury,  Massachusetts,  was a sixteen-year-old
network solution and system design company, founded in 1983.

Today, the CeleXx  Integrated  Solutions Group focuses on providing Fortune 1000
companies,  government  agencies and  educational  institutions  with networking
solutions, systems integration,  and computer telephony integration.  Within the
Group is broad and diversified client list ranging from major telecommunications
companies to public school systems  throughout  North America.  ISG's  customers
include:  America On-Line,  Lucent Technologies,  AT&T, J.C. Penny, Bell Canada,
The Prudential Insurance Companies, the Boston Public Schools, Sprint Corp., IBM
Global  Services,  USA Group,  USA Bank,  and Hewlett  Packard  Co.,  among many
others.  ISG services these customers by designing,  installing and implementing
local area network (LAN) and wide area network  (WAN)  systems,  by  customizing
software  on  clients'  existing  computer  networks  allowing  the  client  the
transmission of telephone  conversation via the internet for long distance calls
and computer related maintenance functions.  In 1998, CMI reported $16.7 million
in revenues,  with pretax  earnings of  approximately  $922,000.  For the fiscal
years ended,  February 1999 and 2000, CMI reported revenues of $16.7 million and
$15.8  million  and  pretax   earnings  of  $921  thousand  and  $364  thousand,
respectively.  For the period from March 1, 2000 to June 30, 2000,  CMI had $2.9
million in revenues and pretax earnings of approximately $62 thousand.

                                       8
<PAGE>

CMI got started in 1983 as a retail  operation  and  rapidly  grew to five store
locations.  In 1990,  management  undertook  a major  restructuring  in order to
capitalize on the growing demand for software, systems and solutions rather than
just hardware.  Management  also  recognized the opportunity to utilize this new
focus to expand its market  nationwide and establish an international  presence.
Consequently,   the  company  shifted  its  focus  from  individuals  and  small
operations  to businesses  and  eliminated  the retail side of the business.  It
moved its  operations  into a single  location  and began  advertising  in local
business journals. In addition,  CMI developed new marketing strategies focusing
on system  integration,  services  and Fortune 1000  companies.  Within the last
several years, CMI expanded its network solutions  business and entered into the
growing  field of  telecommunications.  Today,  the company is divided  into two
basic divisions: Networking and Telephony.

Today,  the CeleXx  Integrated  Solutions  Group  provides  its  customers  with
complete,  ready-to-run  networks  using  Novell and Windows NT  platforms.  ISG
assesses a customer's needs, determines the appropriate configuration, purchases
the necessary  software and hardware and then assembles and tests the components
at the customer's site. While certain large  installations can run as high as $1
million or more, the average order for a network solution is about $200,000. ISG
takes  care of all  aspects  of the  installation,  from  delivery  and setup to
completing the necessary  licensing and warranty  procedures.  ISG also provides
its customers with systems operation training,  vendor updates and upgrades,  as
well as a 24-hour Help Service.

Today,  CMI  is  also  engaged  in  helping  its  customers  capitalize  on  the
capabilities  of the  Internet.  More  specifically,  CMI is  helping  customers
implement  voice over IP  (Internet  Protocol)  technology,  which is a low cost
alternative to standard  telephone  service.  This is  accomplished  through the
design and implementation of customized software on a client's existing computer
network, or on a new network,  allowing the client the transmission of telephone
conversation  via the  Internet  for  long  distance  calls.  Network  contracts
represent approximately 50% of the company's revenues.

Over  the last few  years,  services  have  also  been  expanded  to  include  a
trademarked  "Share-A-Network  Engineer" program,  which provides customers with
the benefits of an on-call  Certified Network Engineer who can work closely with
the  customers'  Information  Services (IS)  department  but does not need to be
employed  on  a  fulltime  basis.  The  Share-A-Network  Engineer  program  is a
cost-effective  way for the smaller  customer to receive the technical  benefits
that their larger counterparts receive. This segment of the business is expected
to grow as the Group expands its network solutions  services to companies in the
SMR (small and medium enterprise) marketplace.

CMI  also  provides  its   customers   with  systems  and  solutions  for  their
telecommunications  needs. The telephony division, formed about three years ago,
assists major telecommunications systems providers, such as AT&T, Cisco, Lucent,
Qwest and Sprint,  in assisting their clients to more  effectively  manage their
call routing  systems.  ISG brings in the  relevant  equipment,  configures  the
networking  functions in terms of software and hardware,  installs the necessary
telephony software,  conducts in-depth testing of the systems, and ships a ready
to use system to the end-user  site.  End  customers  include  airlines,  banks,
insurance companies, investment firms and customer-oriented organizations across
the US and Canada.  Orders  average  about  $400,000  and are usually  fulfilled
within 4 weeks.  Occasionally,  orders are received  from Europe and the typical
user is a Fortune 500 company.

Currently, the CeleXx Integrated Solutions Group has 42 employees.

                                       9
<PAGE>

CELEXX CANADA, LTD.

CeleXx  Canada,  Ltd.  was  established  as a wholly owned subsidiary during the
current period for the purpose of acquiring Canadian businesses under the CeleXx
umbrella.  Presently the subsidiary is inactive.

On April 7, 2000, the Company completed a financing  agreement with Birch Circle
LLC ("Birch"),  a private  investment  banking firm,  based in  Connecticut  and
raised  $3,500,000  for the Company  through the sale of shares of the Company's
Series  A  Convertible  Preferred  Stock  ("Preferred  Shares"),  receiving  net
proceeds  of  $3,144,727.   Approximately  $1.6  million  of  the  net  proceeds
(including   accounting  and  attorney's   fees)  had  been  earmarked  for  the
acquisition  of CMI. The  Preferred  Shares will pay dividends at the rate of 6%
per annum, and the dividend may be paid in cash or common shares of the Company,
at the option of the  Company.  If the Company  elects to pay  dividends  on the
Preferred  Shares in  common  shares,  the  number  of  common  shares  shall be
determined by dividing the cash amount of the dividend by the  conversion  price
of the  Preferred  Shares.  The  conversion  price means the lower of: (a),  the
average  closing bid price on the day  immediately  preceding the closing of the
transaction or (b), 80 % of the 5-day trading  average  closing bid price of the
common shares prior the date of conversion.

Within 45 days of the closing,  the Company was required to file a  registration
statement with the Securities & Exchange Commission (SEC) covering the resale of
the common shares upon conversion,  to permit their resale without  restriction.
The Company filed a Form SB-2 registration on June 22,2000 for 11,172,222 shares
of common stock issuable upon  conversion of the 6% Convertible  Preferred Stock
at a conversion  price of $1.06 per share.  The number of shares of common stock
registered  were pursuant to the terms of a  Registration  Agreement  that was a
part of the financing  agreement  and, is an  approximation  which is based on a
hypothetical  conversion  of such shares.  The actual number of shares of common
stock that would be issuable  upon  conversion  is  determined  by a  conversion
formula,  which,  in part,  cannot  be  determined  on the date  thereof.  As of
September  21, 2000,  the Company has received  notices of  conversion  from the
preferred  stock  holder  to  convert  $128,000,   including  accrued  interest,
approximating 123,000 shares of common stock.

The Company will have the right, in its sole discretion,  to redeem, in cash, in
whole or in part, the number of shares submitted for conversion.  The redemption
price  shall be 125% of the average  closing  bid price for the day  immediately
preceding  the date of  redemption  multiplied by the number of shares of common
stock  issued  upon  conversion.  In  addition,  the  Company  may,  in its sole
discretion,  redeem in cash, and in whole or in part, all unconverted  shares at
the  rate of 125% of the  principal  amount.  However,  the  Company  must  give
investors 30 days notice prior to such redemption.

RISK FACTORS

IN ADDITION TO OTHER INFORMATION IN THIS FORM 10-KSB, THE FOLLOWING RISK FACTORS
SHOULD BE  CAREFULLY  CONSIDERED  IN  EVALUATING  THE COMPANY  AND ITS  BUSINESS
BECAUSE  SUCH  FACTORS  CURRENTLY  HAVE  A  SIGNIFICANT  IMPACT  OR  MAY  HAVE A
SIGNIFICANT  IMPACT ON THE COMPANY'S  BUSINESS,  OPERATING  RESULTS OR FINANCIAL
CONDITION.  ACTUAL RESULTS COULD DIFFER  MATERIALLY  FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS FORM 10-KSB AS A RESULT OF THE RISK
FACTORS DISCUSSED BELOW AND ELSEWHERE IN THIS FORM 10-KSB.

UNCERTAINTY OF FUTURE PROFITABILITY; NEED FOR ADDITIONAL FUNDS

The Company's recent  operations for the year ended December 31, 1999 and period
from January 1, 2000 to June 30, 2000, have consumed substantial amounts of cash
and have generated net losses of $1,906,397 and  $3,195,341,  respectively,  and
accumulated a deficit of $ 5,463,859 at June 30, 2000. The Company believes that
it will require  additional  cash  infusions  from a private  placement or other

                                       10
<PAGE>

equity  financing to meet the Company's  projected  working  capital,  projected
acquisitions and other cash requirements in fiscal 2001.

The sale or issuance of additional  equity or convertible  debt securities could
result in  additional  dilution to the Company's  stockholders.  There can be no
assurance that additional financing,  if required, will be available when needed
or, if available,  will be on terms acceptable to the Company.  Any inability to
satisfy  the  Company's  operating  cash needs or the  inability  to finance the
purchase  of goods sold to others  could have a material  adverse  effect on the
Company's business, financial condition and results of operation.

Additionally,   the  Company's   acquisition  pricing  have  generally  included
contingent  consideration  to the  selling  individuals  based on  future  stock
pricing  performance.  The  success  of this  strategy  depends  not only on the
performance  of the  businesses  and overall  Company  results of earnings  but,
reception and effect by the investment  community on the Company's  stock in the
open market. Stock performance at pricing below the Company's negotiated pricing
guarantee to selling shareholders of acquired entities could potential result in
additional dilution to existing shareholders.

POTENTIAL FLUCTUATIONS IN OPERATING RESULTS

Since the Company recognizes IT services revenue only when personnel are engaged
on client projects,  the relative utilization of such personnel directly affects
the Company's  operating  results.  In addition,  a majority of the Company's IT
operating expenses,  particularly personnel and related costs, are substantially
fixed  in  advance  of  any  particular  period.  As  a  result,  variations  in
utilization of personnel may materially affect the Company's  operating results.
Termination or completion of  engagements in the Company's IT services  business
or failure to obtain  additional  engagements in its IT services  business could
have a material adverse effect on the Company's  business,  financial  condition
and results of operations.

The Company  believes  that  future  operating  results  will also be subject to
fluctuations due to a variety of factors, many of which are beyond the Company's
control.  Such  factors may  include,  but are not  limited  to,  demand for the
Company's  technology or services,  availability  of skilled sales and technical
personnel,  introduction  or  enhancement  of  technologies  or  services by the
Company or its  competitors,  market  acceptance  of new  technology  or service
offerings,  technological  changes,  increased  competition,  litigation  costs,
results of litigation, and general economic conditions.

WE  HAVE  SUBSTANTIAL COMPETITION IN THE INFORMATION TECHNOLOGY SERVICE SOLUTION
BUSINESS

We cannot know that we will have the financial resources, technical expertise or
marketing and support  capabilities  to compete  successfully in the Information
Technology  business.  System  integration  and  e-commerce  will result in even
greater competition.  Inasmuch as there are no significant barriers to entry, we
believe  that  competition  in this market will  intensify.  We believe that our
ability to compete successfully will depend on a number of factors, including:

THE  COMPANY'S  PRESENT AND  POTENTIAL  COMPETITORS  CAN BE DIVIDED INTO SEVERAL
GROUPS

Computer hardware and service vendors and/or manufacturers; Internet integrators
and web presence  providers;  large information  consulting  service  providers;
telecommunications   companies;  Internet  and  online  service  providers;  and
software vendors.  Almost all of the Company's current and potential competitors
have longer operating clients and significantly  greater  financial,  technical,
marketing and public relation resources than the Company and could

                                       11
<PAGE>

decide at any time to  increase  their  resource  commitments  to the  Company's
target  market.   As  a  strategic   response  to  changes  in  the  competitive
environment,  the Company may from time to time make  certain  pricing,  service
technology or marketing  decisions or business or technology  acquisitions  that
could  have a  material  adverse  effect on the  Company's  business,  financial
condition,  results  or  operations  and  prospects.  Competition  of  the  type
described  above  could  materially  adversely  affect the  Company's  business,
results of operations, financial condition and prospects.

In  addition,  the  Company's  ability to generate  new clients will depend to a
significant  degree  on the  quality  of  its  products  and  services  and  its
reputation among its clients and potential clients, compared with the quality of
its services provided by, and the reputations of, the Company's competitors.  To
the  extent  the  Company   loses   clients  to  its   competitors   because  of
dissatisfaction  with the  Company's  services,  or its  reputation is adversely
affected for any other reason,  the Company's  business,  result of  operations,
financial condition and prospects could be materially adversely affected.

There are relatively low barriers to entry into the Company's business.  Because
firms such as the Company rely on the skill of their  personnel  and the quality
of their client service, they have no patented technology that would preclude or
inhibit  competitors from entering their markets.  The Company is likely to face
additional  competition  from new entrants into the market in the future.  There
can be no  assurance  that  existing or future  competitors  will not develop or
offer services that provide significant  performances,  price, creative or other
advantages  over  those  offered  by the  Company,  which  could have a material
adverse effect on its business,  financial condition,  results of operations and
prospects.

We may not have the resources  required for us to respond  effectively to market
or  technological  changes or to compete  successfully  with  current and future
competitors. Increased competition may result in price reductions, reduced gross
margins and loss of market  share,  any of which  could have a material  adverse
effect on our  business,  operating  results or financial  condition.  We cannot
assure you that we will be able to  successfully  compete against our current or
future  competitors  or that  competitive  pressures  will not  have a  material
adverse effect on our business, operating results and financial condition.

MANAGEMENT OF ACQUIRED BUSINESSES

The Company's acquisitions have placed, and are expected to continue to place, a
significant strain on its managerial and operational resources.  To manage these
acquired  businesses and others that may be acquired in the future,  the Company
must continue to implement and improve its operational, management and financial
systems and to train and manage its employee base. The Company  expects that its
operational,  management and financial systems will face additional strains as a
result of possible acquisitions in the future.

INTEGRATION OF ACQUISITIONS

As part of its business strategy, the Company may seek out business combinations
with other Internet or IT Services companies. Such business combinations involve
a number of risks,  including,  without limitation,  difficulty assimilating the
operations and personnel,  expenditure of management time,  expenses  associated
with the  transactions,  additional  expenses  associated  with  amortization of
acquired  intangible  assets,  the  implementation and maintenance of standards,
controls,  procedures,  and  policies,  the  impairment  of  relationships  with
employees  and  customers  as a  result  of the  integration  of new  management
personnel,   and  potential   unknown   liabilities   associated  with  acquired
businesses.  To the extent that any of the companies  that the Company  acquires
fail,  the Company could be required to write-off the amount of the  investment.

                                       12
<PAGE>

There can be no assurance  that the Company  will be  successful  in  addressing
these risks or any other problems  encountered in connection  with such business
combinations.

DEPENDENCE ON KEY PERSONNEL

The Company's  performance is substantially  dependent on the performance of its
senior management and key success depends substantially on the continued efforts
of its senior  management  team.  The  Company  does not carry key  person  life
insurance on any of its senior management personnel. The loss of the services of
any of its  executive  officers  or other key  employees  could  have a material
adverse effect on the business, financial condition and results of operations of
the Company. The Company's future success also depends on its continuing ability
to  attract  and  retain  highly  qualified  sales,   technical  and  managerial
personnel.  Competition  for such  personnel  is  intense  and  there  can be no
assurance that the Company will be able to retain its key managerial,  sales and
technical  employees  or that it will be able to attract  and retain  additional
highly qualified sales,  technical and managerial  personnel in the future.  The
inability to attract and retain the necessary  sales,  technical and  managerial
personnel  could have a material  adverse  effect upon the  Company's  business,
financial condition, and results of operation.

CONCENTRATION OF STOCK OWNERSHIP

As of September 21, 2000, the present  directors,  executive  officers,  greater
than  5%  stockholders,   and  their  respective  affiliates   beneficially  own
approximately  50% of the  outstanding  common  stock  of the  Company  ("Common
Stock").  As of September 21, 2000,  Doug H. Forde,  the Company's  Chairman and
CEO, and Lionel Forde,  Director and Vice President,  together  beneficially own
approximately 35% of the outstanding Common Stock of the Company. As a result of
their   ownership,   the  directors,   executive   officers,   greater  than  5%
stockholders,  and their respective affiliates  collectively are able to control
all matters requiring stockholder approval,  including the election of directors
and  approval of  significant  corporate  transactions.  Such  concentration  of
ownership may also have the effect of delaying or preventing a change in control
of the Company.

VOLATILITY OF STOCK PRICE

The trading price of the Company's  Common Stock has been and may continue to be
subject to wide fluctuations in response to a number of events and factors, such
as quarterly variations in operating results, changes in financial estimates and
recommendations   by  securities   analysts,   the  operating  and  stock  price
performance  of  other  companies  that  investors  may deem  comparable  to the
Company,  and news  reports  relating  to trends in the  Company's  markets.  In
addition,  the stock market, in general, and the market prices for IT companies,
in particular,  have experienced volatility that often has been unrelated to the
operating  performance  of such  companies.  These  broad  market  and  industry
fluctuations  may adversely  affect the trading  price of the  Company's  Common
Stock, regardless of the Company's operating performance.

RISKS RELATING TO SMALL COMPANY STOCKS

The Company's Common Stock trades on the  over-the-counter  Bulletin Board under
the  symbol  "CLXX".   The  Securities  and  Exchange   Commission  has  adopted
regulations  which generally  define a penny stock to be any security that has a
market  price (as  defined)  of less than  $5.00 per  share,  subject to certain
exceptions  including listing on the NASDAQ Small Cap Market.  The shares of our
common  stock may be deemed to be penny  stocks and thus will become  subject to
rules that impose additional sales practice  requirements on brokers/dealers who
sell such securities to persons other than established  customers and accredited
investors.  Consequently,  the "penny  stock"  rules may restrict the ability of
broker/dealers to sell the common stock and may affect the ability of purchasers
to sell the common stock in a secondary market.

                                       13
<PAGE>

Item 2.

DESCRIPTION OF PROPERTY

The Company  currently  leases  approximately  3,000 square feet of office space
located at 7251 West  Palmetto Park Road,  Boca Raton,  Florida as its corporate
headquarters.  Early in the year 2001,  the Company  plans to relocate  from its
current Boca Raton  location to its new  corporate  headquarters,  consisting of
approximately  5,000  square  feet,  in Coral  Springs,  Florida.  The terms and
conditions  of our lease include our move to the new  location.  Presently,  the
monthly rent is $5,900 and the lease terminates in 2004.

Pinneast  leases  building  space at 1221 Sunset  Blvd.,  West  Colombia,  South
Carolina  under a three 3 year  lease  that  requires  minimum  annual  payments
totaling approximately $25,000.

CMI leases building and office space totaling approximately 8,000 square feet at
885 Main  Street,  Tewksbury,  Massachusetts  under a five (5) year  lease  that
requires minimum annual payments totaling  approximately  $72,000.  The lease is
entered with a realty company owned by David Burke,  Sr., a Director and officer
of the Company.

Item 3.

LEGAL PROCEEDINGS

On August 1,  2000 the  Company  was  served in a lawsuit  filed by  E-Pawn.com,
Inc.("EPWN")  in the  Circuit  Court of the 15th  Judicial  Circuit,  Palm Beach
County, Florida. The case is styled E-Pawn.com,  Inc. vs. CeleXx Corporation and
Douglas H. Forde, Case no. CL007436AN.  The lawsuit alleges causes of action for
breach of contract, fraud and breach of fiduciary duty. EPWN is seeking damages,
specific performance and an injunction.  This matter began on or about March 10,
2000, when the Company's  ("Celexx"  and/or the "Company")  president  signed an
omnibus agreement with E-Pawn.com,  Inc.  (EPWN:OTCBB)("E-Pawn")  whereby, under
certain conditions: (a) E-Pawn was to purchase 1,000,000 shares of Celexx common
stock at $5.00  per  share  in cash,  (b)  Celexx  would  receive  payments  for
management  fees as the  appointed  manager  of E-Pawn  and,  (c) upon the final
funding of  1,000,000  shares of Celexx  Common  Stock at $5.00 per share E-Pawn
would have the option to exchange $50 million in market  value of E-Pawn  common
stock for $50 million in market value of Celexx common stock. The closing of the
above  transactions  was to occur on or  before  March  31,  2000.  At  E-Pawn's
request,  in April 2000 an amendment to the  agreement was signed to provide for
the exchange of 1,000,000 restricted shares of Celexx common stock for 1,000,000
shares of freely  trading common stock of E-Pawn to satisfy the cash payment for
the  1,000,000  Celexx  shares.  The option  arrangement  was also amended to be
completed  with an exchange of 10 million shares of E-Pawn shares for 12 million
shares of Celexx  common stock.  Celexx  issued the  1,000,000  shares of common
stock to E-Pawn on April 13, 2000 and received  1,000,000 shares of free trading
E-Pawn  shares from a  stockholder  of E-Pawn.  Celexx  also loaned  $500,000 to
E-Pawn in the form of an unsecured,  short-term  demand loan.  The agreement and
amendments were at all times subject to various approvals,  including the Celexx
Board of Directors.  The granting of the $50 million stock  exchange  would have
represented a change in control and, as a merger  transaction,  required  Celexx
shareholder approval.



                                       14


<PAGE>

The Company's  counsel has opined that the above  transaction was void ab initio
(from the beginning).  In response to the Company's action, E-Pawn has commenced
suit to enforce only those sections of the agreement that are favorable to them.
The Company has moved to dismiss the lawsuit and  vigorously  defend the action.
Celexx's  counsel  believes  that the lawsuit is frivolous and is of the opinion
that  the  Company  will  prevail.  Notwithstanding,   E-Pawn  has  acknowledged
receiving  from the  Company  $500,000.  Accordingly,  the  Company  recorded  a
provision for potential uncollectibilty of this loan to E-Pawn.

CeleXx and E-Pawn  agreed in  principle  to settle the lawsuit that E-Pawn filed
against  Celexx and any claims that the  companies may have with respect to each
other. The settlement will include unconditional releases and will be subject to
documentation and delivery of all considerations. The settlement includes, among
other  things,  the  issuance  of  an  additional  2,000,000  shares  of  Celexx
restricted common stock to E-Pawn (E-Pawn already has 1,000,000 shares).  Celexx
will also cancel the $500,000 debt that is due from E-Pawn and return  1,000,000
freely tradable shares of E-Pawn that it currently holds.  Celexx in return will
receive 5,250,000 restricted shares of common stock of E-Pawn.

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

Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On July 8, 2000,  the Company  held an Annual  Meeting of  stockholders.  At the
meeting,  the  stockholders  voted  on the  following  proposals:  (I) to  elect
directors to serve for the ensuing year or until their respective successors are
duly elected and qualified.  The nominees were Doug Forde, David Langle, Vincent
Caminiti,  Lionel Forde, David Burke, Sr., Moty Herman and William Lerner,  (ii)
to  ratify  the  appointment  of  Feldman  Sherb  & Co.,  P.C.,  as  independent
accountants of the Company for the fiscal years ending December 31, 1999 and six
months  ended June  30,2000,  (iii) to amend the  articles of  incorporation  to
increase  the number of  authorized  shares of common stock from  20,000,000  to
100,000,000 and designate  20,000,000 shares of blank check preferred stock, and
(iii)to  amend the  Company's  1999 Stock  Option Plan to increase the number of
shares issuable under the Plan.

Doug Forde, David Langle,  Vincent Caminiti,  Lionel Forde, and David Burke, Sr.
were  elected as directors  whose terms expire in 2003.  Moty Herman and William
Lerner were  elected as  directors  whose terms  expire in 2002.  The  foregoing
directors were elected by the following number of votes:

                                       15


<PAGE>

NOMINEE                             FOR                       AGAINST/ABSTAIN

------------------              -----------                ---------------------
Doug Forde                       8,721,558                          -0-

David Langle                     8,721,558                          -0-

Vincent Caminiti                 7,096,725                   1,624,833

Lionel Forde                     8,671,558                      50,000

David Burke, Sr.                 8,721,558                          -0-

Moty Herman                      8,721,558                          -0-

William Lerner                   8,721,558                          -0-


The  stockholders  ratified  the  appointment  of Feldman  Sherb & Co.,  P.C. as
independent  accountants  of the company for the fiscal years ended December 31,
1999 and June 30, 2000,

                                    FOR                       AGAINST/ABSTAIN

                               -----------               -----------------------
                                 8,720,708                         850


The shareholders approved to amend the articles of incorporation to increase the
number of authorized  shares of common stock from  20,000,000 to 100,000,000 and
designate 20,000,000 shares of blank check preferred stock

                                    FOR                       AGAINST/ABSTAIN

                               -----------               -----------------------
                                8,721,558                           -0-

The  shareholders  approved  to amend the  Company's  1999 Stock  Option Plan to
increase  the  number  of shares  issuable  under  the Plan  from  1,000,000  to
4,500,000 shares.

                                    FOR                       AGAINST/ABSTAIN

                               -----------               -----------------------
                               8,721,558                           -0-


                                     PART II

Item 5.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

SINCE  NOVEMBER  4, 1999 our  Common  Stock has  traded on the  over-the-counter
Bulletin Board under the symbol "CLXX", and commenced its trading on October 16,
1998. Prior to November 4, 1999 our common stock traded under the symbol "CBRA".
The following table sets forth,  for the period since October 1998, the high and
low bid quotations for our Common Stock for the periods indicated as reported by
the OTC Bulletin Board.  The quotations  represent prices between dealers and do
not include retail  mark-up,  markdown or  commissions or necessarily  represent
actual transactions.


                                       16
<PAGE>

PERIOD                                                HIGH                   LOW
---------                                             ----                   ---
October 16, 1998 - December 31, 1998                 $.625                 $0.06
January 1, 1999 - March 31, 1999                     $6.00                $0.875
April 1, 1999 - June 30, 1999                        $1.53                $0.875
July 1, 1999 - September 30, 1999                    $1.15                 $0.63
October 1, 1999-December 31, 1999                    $0.83                 $0.45
January 1, 2000- March 31, 2000                      $4.13                 $0.56
April 1, 2000- June 30, 2000                         $2.68                $0.812
July 1, 2000- September 28, 2000                     $1.19                $0.375

The  transfer  agent for the  Company's  Common  Stock is  American  Registrar &
Transfer Company, 342 East 900 South Street, Salt Lake City, Utah 84111.

We have never paid cash  dividends on our Common Stock.  We presently  intend to
retain future earnings,  if any, to finance the expansion of our business and do
not anticipate that any cash dividends will be paid in the  foreseeable  future.
The future  dividend policy will depend on our earnings,  capital  requirements,
expansion plans, financial condition and other relevant factors.

The approximate number of record holders of the Common Stock as of September 22,
2000,  were 265. The Company  believes that the actual number of shareholders is
significantly  larger  because there are several  brokerage and clearing  houses
that hold shares on behalf of many beneficial holders of its Common Stock.

Item 6.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The  following  is  Management's  discussion  and  analysis of the  consolidated
financial  condition and results of operations of the Company. It should be read
in conjunction with the audited  consolidated  financial  statements and related
notes included elsewhere in this Form 10-KSB. When used in this discussion,  the
words  "estimate,"  "project," and similar  expressions are intended to identify
forward-looking  statements.  Such  statements  are subject to certain risks and
uncertainties  that could cause actual results to differ  materially  from those
projected,  including,  but  not  limited  to,  those  discussed  in  "Item  1 -
Description  of Business - Risk  Factors" and  elsewhere in this Form 10-KSB and
from time to time in the Company's  periodic reports.  Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date hereof. The Company undertakes no obligation to publicly release the
result of any revisions to those forward-looking statements which may be made to
reflect  events  or  circumstances  after  the date  hereof  or to  reflect  the
occurrence of unanticipated events.

OVERVIEW

Effective  January 1, 2000 the Company  changed its fiscal year from December 31
to June 30.  Accordingly,  the  discussion of financial  results set forth below
compares the six-month  period ended June 30, 2000 to the six-month period ended
June 30, 1999, the twelve months ended December 31, 1999 and for the period July
10, 1998 (inception) to December 31, 1998.

                                       17
<PAGE>

CeleXx  Corporation  is  an  integrated   management  company  involved  in  the
acquisition,  consolidation,  integration and management of private  Information
Technology (IT) businesses.  In general,  these businesses provide services such
as engineering  design and layout for the installation of network  systems,  Web
site development,  computer hardware and software integration,  and training and
ongoing technical support to client companies.  In certain situations,  however,
computer  hardware  and  software  may be sold as  part of the  overall  service
solution.

The Company's recent  operations have consumed  substantial  amounts of cash and
have generated net losses and an accumulated  deficit. The Company believes that
it will  require  a cash  infusion  from a  private  placement  or other  equity
financing to meet its  projected  working  capital and other cash  requirements.
Absent such  additional  cash infusion from a private  placement or other equity
financing,  the Company's  continued existence is in substantial doubt. The sale
of additional equity or other securities could result in additional  dilution to
the  Company's  stockholders.  There can be no  assurance  that such  additional
financing can be obtained on acceptable terms, if at all.

RESULTS OF OPERATIONS

Comparison of six months ended June 30, 2000 to six months ended June 30, 1999

The Company's total revenue increased  $3,339,243,  or 1,477%,  from $226,031 in
1999 to 2000 as a  result  of its  acquisitions  of  Pinneast  in May  1999  and
CMI in April 2000.

Gross  profit  decreased  to 28% in 2000 from 58% in 1999.  This  decrease  is a
result of the lower margins generated from the network systems business of CMI.

Operating  expenses  which  consist  of  selling,  general,  and  administrative
("SG&A")  expenses  increased  $2,877,106  or 350% to  $3,699,639 in 2000 from $
822,533 in 1999.  As a percentage  of sales,  SG&A  expenses  were 104% of total
sales in 2000 compared with 364% of sales in 1999. The increase in SG&A expenses
is primarily due to the  recognition  of $1,758,782 in  non-recurring,  non-cash
compensation expense for the issuance of stock for services rendered,  increases
in  salaries,  professional  expenses  and  transaction  costs  associated  with
on-going  acquisitions  and capital raising  efforts,  along with an increase in
consulting  and travel  expenses,  and the   inclusion of SG&A  expenses for the
Company's  two  acquisitions  of  approximately  $1,200,000.   Depreciation  and
amortization   expenses  for  2000  and  1999  were  $  156,708  and  $  15,524,
respectively.  The depreciation  and amortization  expenses are primarily due to
the acquisitions of Pinneast.com,  Inc. and Computer Marketplace,  Inc. in 2000.
The Company recorded no income tax expenses.  At June 30, 2000,the Company has a
consolidated  federal and state net operating loss carryforward of approximately
$5,418,000, expiring between the years of 2014 and 2020.

Comparison of Fiscal Year 1999 to Fiscal Year 1998

The Company's  total revenue  increased $ 680,989,  or 100%, from $ 0 in 1998 to
1999 as a result of its first acquisition of Pinneast in May 1999.

Gross profit increased to 48% in 1999 from 0% in 1998. This increase is a result
of an increase in the  percentage of IT revenue  derived from it's the Company's
sole operating unit during this period.

Operating  expenses  which  consist  of  selling,  general,  and  administrative
("SG&A") expenses  increased by $1,758,171 or 556% to $ 2,074,292 in 1999 from $
316,121 in 1998.  As a percentage  of sales,  SG&A  expenses  were 304% of total
sales in 1999 compared  with no sales in 1998.  The increase in SG&A expenses is
primarily  due to  increases  in  salaries,  professional  expenses and non-cash
transaction costs associated with on-going

                                       18
<PAGE>

acquisitions and capital raising  efforts,  along with an increase in consulting
and travel expenses.  Depreciation  and  amortization  expenses for 1999 totaled
$125,920. The Company had no depreciation and amortization expenses in 1998. The
depreciation and  amortization  expenses are primarily due to the acquisition of
Pinneast.com,  Inc. In 1999,  the Company  recorded no income tax  expenses.  At
December  31,  1999,the  Company  has a federal  and state  net  operating  loss
carryforward of approximately $2,223,000.

FUTURE ASSESSMENT OF RECOVERABILITY AND IMPAIRMENT OF GOODWILL

In connection with its various  acquisitions,  the Company recorded goodwill and
other  intangibles,  that are being  amortized on a  straight-line  basis over a
period of 7 to 10 years, its estimated period over which the Company is expected
to benefit from such intangible  assets. At June 30, 2000 and December 31, 1999,
the  unamortized  goodwill and other  intangibles  combined were $ 3,999,251 and
$1,114,579,  respectively (which represented 49% and 75% of total assets and 91%
and  148%  of  stockholders'  equity,  respectively).  Goodwill  arises  when an
acquirer  pays  more for a  business  than the fair  value of the  tangible  and
separately  measurable  intangible  net assets of the  business.  For  financial
reporting purposes,  goodwill and all other intangible assets are amortized over
the  estimated  period  benefited.  The  Company  has  determined  the  life for
amortizing  goodwill based upon several  factors,  the most significant of which
are the relative size,  historical  financial viability and growth trends of the
acquired  companies and the relative lengths of time such companies have been in
existence.

Management of the Company  periodically reviews the Company's carrying value and
recoverability of unamortized  goodwill and other intangibles.  If the facts and
circumstances  suggest that the goodwill and other  intangibles may be impaired,
the carrying value of such assets will be adjusted accordingly,  and will result
in an immediate charge against income during the period of the adjustment and/or
the length of the remaining  amortization  period may be  shortened,  which will
result  in an  increase  in the  amount of  amortization  during  the  period of
adjustment  and each period  thereafter  until fully  amortized.  Once adjusted,
there  can be no  assurance  that  there  will not be  further  adjustments  for
impairment and  recoverability  in future periods.  Of the various factors to be
considered  by  management of the Company in  determining  whether  goodwill and
other  intangibles  is impaired,  the most  significant  will be (i) losses from
operations,  (ii) loss of customers and (iii) industry  developments,  including
the Company's  ability to maintain its market share,  development of competitive
products or services and imposition of additional regulatory requirements.

LIQUIDITY AND CAPITAL RESOURCES

Historically,  the Company has satisfied its cash  requirements  primarily  from
private equity  issuances and loans from certain officers and  shareholders.  In
the  six-month  period  June 30,  2000,  the Company  secured its cash  infusion
primarily  from a capital  raising of $3,500,000  from the sale of shares of the
Company's Series A Convertible Preferred Stock, netting $3,144,727 after related
costs. The Company's cash balance at June 30, 2000 was $522,471.

During the six months  ended June 30,  2000,  net cash  provided by financing of
$2,285,448 exceeded cash used in operating  activities and investing  activities
combined of $1,900,659, resulting in an increase of $384,789 in cash. During the
fiscal  year ended  December  31,  1999,  net cash  provided  by  investing  and
financing activities of $1,191,110 exceeded cash used in operating activities of
$1,053,428, resulting in a $137,682 increase in cash.

The Company's operating entity,  Pinneast.com,  has three working capital credit
lines  with a U.S.  bank  totaling  $300,000.  At June  30,  2000  approximately
$221,000 was due and  outstanding.  The three lines are secured by substantially
all of the Company's assets and mature in the years 2000 and 2003. The Company's

                                       19
<PAGE>

CMI  subsidiary  has a line of  credit  of up to  $3,000,000  that  is used  for
merchandise purchases,  and is secured by accounts receivable and inventory.  As
of June 30,  20000 the unused  balance  on the line of credit was  approximately
$2,000,000.  The Company is currently  evaluating the replacement of these lines
with alternative asset financing.

On April 7, 2000, the Company completed a financing  agreement with Birch Circle
LLC ("Birch"),  a private  investment  banking firm,  based in  Connecticut  and
raised  $3,500,000  for the Company  through the sale of shares of the Company's
Series A Convertible  Preferred Stock ("Preferred  Shares").  Approximately $1.9
million of the net proceeds  (including  commissions,  accounting and attorneys'
fees) were utilized for the acquisition of CMI.

The  Preferred  Shares will pay  dividends at the rate of 6% per annum,  and the
dividend may be paid in cash or common  shares of the Company,  at the option of
the Company.  If the Company elects to pay dividends on the Preferred  Shares in
common  shares,  the number of common shares shall be determined by dividing the
cash amount of the dividend by the conversion price of the Preferred Shares. The
conversion  price means the lower of: (a), the average  closing bid price on the
day  immediately  preceding the closing of the  transaction  or (b), 80 % of the
5-day trading  average  closing bid price of the common shares prior the date of
conversion.

Within 45 days of the closing,  the Company was required to file a  registration
statement with the Securities & Exchange Commission (SEC) covering the resale of
the common shares upon conversion,  to permit their resale without  restriction.
The Company filed a Form SB-2 registration on June 22,2000 for 11,172,222 shares
of common stock issuable upon  conversion of the 6% Convertible  Preferred Stock
at a conversion  price of $1.06 per share.  The number of shares of common stock
registered  were pursuant to the terms of a  Registration  Agreement  that was a
part of the financing  agreement  and, is an  approximation  which is based on a
hypothetical  conversion  of such shares.  The actual number of shares of common
stock that would be issuable  upon  conversion  is  determined  by a  conversion
formula,  which,  in part,  cannot  be  determined  on the date  thereof.  As of
September  21, 2000,  the Company has received  notices of  conversion  from the
preferred  stock  holder  to  convert  $128,000,   including  accrued  interest,
approximating 123,000 shares of common stock.

FACTORS AFFECTING OPERATING RESULTS

The Company's recent  operations during the six month period ended June 30, 2000
and years ended December 31, 1999 and 1998 have consumed  substantial amounts of
cash and have  generated  net losses of  $3,195,341,  $1,906,397  and $ 316,121,
respectively,  and  accumulated  a deficit  of$5,463,859  at June 30, 2000.  The
Company  believes that it will require  additional cash infusions from a private
placement or other  equity  financing to meet the  Company's  projected  working
capital and other cash requirements in 2001.

Since the Company recognizes IT services revenue only when personnel are engaged
on client projects,  the relative utilization of such personnel directly affects
the Company's  operating  results.  Variations in  utilization  of personnel may
materially  affect  the  Company's  IT  services  business  or failure to obtain
additional engagements in its IT services business could have a material adverse
effect on the Company's business, financial condition and results of operations.

The Company's acquisitions have placed, and are expected to continue to place, a
significant strain on its managerial and operational resources.  To manage these
acquired  businesses and others that may be acquired in the future,  the Company
must continue to implement and improve its operational, management and financial
systems  and to train and  manage its  employee  base.  As part of its  business

                                       20
<PAGE>

strategy,  the Company may seek out additional business  combinations with other
Internet or IT Services companies.  To the extent that any of the companies that
the Company acquires fail, the Company could be required to write off the amount
of the investment.

YEAR 2000 COMPLIANCE

The Year 2000 Issue is the result of computer  programs  being written using two
digits  rather  than four to  define  the  applicable  year.  Absent  corrective
actions,  programs with date sensitive  logic may recognize a date using "00" as
the year 1900 rather than the year 2000.  This could result in a system  failure
or miscalculations  causing  disruptions of operations,  including,  among other
things, a temporary inability to process transactions,  send invoices, or engage
in similar normal business activities.

The total  cost  associated  with  required  modifications  to become  Year 2000
compliant has not been material to our financial  position to date. Our internal
operations and business are also dependent upon the computer-controlled  systems
of third parties such as our  suppliers,  clients and other  service  providers.
While problems may arise in the future and we cannot assure you that we will not
have a Year 2000 problem,  we are unaware of any material impact on our business
caused by a Year 2000 problem  either in our systems or those of third  parties.
The above description of the Year 2000 issue contains forward-looking statements
including, without limitation,  statements relating to our expectations that are
made  pursuant  to  the  "safe  harbor"  provisions  of the  Private  Securities
Litigation  Reform  Act of 1995.  Readers  are  cautioned  that  forward-looking
statements  contained in the Year 2000 Issue should be read in conjunction  with
the  Company's  disclosures  under the heading:  "CAUTIONARY  STATEMENT  FOR THE
PURPOSES OF THE 'SAFE HARBOR'  PROVISIONS OF THE PRIVATE  SECURITIES  LITIGATION
REFORM ACT OF 1995" as stated in the forefront of this filing.










                                       21


<PAGE>
Item 7.

                       INDEX TO FINANCIAL STATEMENTS

CELEXX CORPORATION and Subsidiaries

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

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

Consolidated Statements of Operations........................................F-4

Consolidated Statement of Stockholders' Equity (Deficit).....................F-5

Consolidated Statements of Cash Flows........................................F-6

Notes to Consolidated Financial Statements............................F-7 - F-19





                                      F-1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
CeleXx, Corporation
Boca Raton, Florida

     We have  audited the  accompanying  consolidated  balance  sheets of CeleXx
Corporation and Subsidiaries, as of June 30, 2000 and December 31, 1999, and the
related  consolidated  statements of operations,  stockholders' equity (deficit)
and  cash  flows  for the six  months  ended  June 30,  2000 and the year  ended
December 31, 1999 and the period July 10, 1998 (inception)  through December 31,
1998.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
CeleXx Corporation and Subsidiaries,  as of June 30, 2000 and December 31, 1999,
and the  consolidated  results of their  operations and their cash flows for the
six months  ended June 30,  2000,  the year ended  December 31, 1999 and for the
period July 10, 1998  (inception)  through December 31, 1998, in conformity with
generally accepted accounting principles.

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

New York, New York
September 29, 2000

(October 17,2000 with
respect to Note 14)



<PAGE>

                             CELEXX CORPORATION AND SUBSIDIARIES


                                 CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>


                                                                                                       June 30,         December 31,
                                                                                                         2000               1999
                                                                                                 --------------      ---------------
                                     ASSETS
                                    --------
<S>                                                                                             <C>                  <C>

CURRENT ASSETS:
    Cash                                                                                          $     522,471         $   137,682
    Accounts receivable                                                                               2,212,298              76,923
    Inventory                                                                                           422,744                   -
    Prepaid taxes                                                                                       207,082                   -
    Other current assets                                                                                 26,745              18,245
                                                                                                 --------------      ---------------
    TOTAL CURRENT ASSETS                                                                              3,391,340             232,850
                                                                                                 --------------      ---------------
FURNITURE AND EQUIPMENT, net                                                                            291,780              39,575

MARKETABLE SECURITIES                                                                                   437,000                   -

GOODWILL, net                                                                                           536,233              94,167

INTANGIBLE ASSETS, net                                                                                3,463,018           1,020,412

OTHER ASSETS                                                                                             53,008              93,250
                                                                                                 --------------      ---------------
                                                                                                  $   8,172,379       $   1,480,254
                                                                                                 ==============      ===============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

CURRENT LIABILITIES:


    Accounts payable and accrued expenses                                                     $       1,347,472 $           270,000
    Note payable-related party                                                                        1,041,500             100,000
    Line of credit - short term portion                                                               1,093,811             178,247
    Advances from shareholder                                                                           100,886               9,013
    Deferred revenue                                                                                    112,596              87,384
                                                                                                  --------------      --------------
    TOTAL CURRENT LIABILITIES                                                                         3,696,265             644,644
                                                                                                  --------------      --------------
LINE OF CREDIT - long term portion                                                                       71,631              80,295

COMMITMENTS AND CONTINGENCIES                                                                                 -                   -

STOCKHOLDERS' EQUITY:
    Preferred stock, $001 par value, 20,000,000 shares authorized;
       350 shares of $10,000 stated value cumulative Series A issued and outstanding                          -                   -
    Common stock, $.001 par value, 100,000,000 shares authorized;
       15,619,696 and 10,907,058  shares issued and outstanding                                          15,620              10,907
    Additional paid-in capital                                                                       12,547,805           3,216,926
    Unamortized stock compensation                                                                   (1,132,083)           (250,000)
    Other comprehensive loss - unrealized loss on marketable securities                              (1,563,000)                  -
    Accumulated deficit                                                                              (5,463,859)         (2,222,518)
                                                                                                  --------------      --------------
     TOTAL STOCKHOLDERS' EQUITY                                                                       4,404,483             755,315
                                                                                                  --------------      --------------
                                                                                              $       8,172,379   $       1,480,254
                                                                                                 =================   ===============
</TABLE>


                       See notes to consolidated financial statements.

                                       F-3

<PAGE>
                       CELEXX CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                                                               July 10, 1998
                                                       Six Months Ended  Six Months Ended    Year Ended        (Inception) to
                                                         June 30, 2000    June 30, 1999    December 31, 1999  December 31, 1998
                                                       ----------------  ----------------  -----------------  -----------------
                                                                          (unaudited)
<S>                                               <C>                        <C>                 <C>                      <C>

REVENUE                                             $       3,565,274    $      226,031    $       680,989    $              -

COST OF REVENUE                                             2,533,929            94,196            353,140                   -
                                                       ---------------   ---------------  -----------------   -----------------

GROSS PROFIT                                                1,031,345           131,835            327,849                   -

OPERATING EXPENSES                                          3,699,639           822,533          2,074,292             316,121
                                                       ---------------   ---------------  -----------------   -----------------

LOSS FROM OPERATIONS                                       (2,668,294)         (690,698)        (1,746,443)           (316,121)

OTHER EXPENSES:
    Interest expense                                           27,047                 -             68,754                   -
    Provision for uncollectible loan receivable               500,000                 -                  -                   -
    Settlement of litigation                                        -                 -             91,200                   -
                                                       ---------------   ---------------  -----------------   -----------------

TOTAL OTHER EXPENSES                                          527,047                 -            159,954                   -
                                                       ---------------   ---------------  -----------------   -----------------

NET LOSS                                            $      (3,195,341)   $     (690,698)   $    (1,906,397)   $       (316,121)

    Dividends on preferred stock                               46,027                 -                  -                   -
                                                       ---------------   ---------------  -----------------   -----------------

NET LOSS APPLICABLE TO COMMON SHAREHOLDERS          $      (3,241,368)   $     (690,698)   $    (1,906,397)   $       (316,121)
                                                       ===============   ===============  =================   =================

NET LOSS                                            $      (3,195,341)   $     (690,698)   $    (1,906,397)   $       (316,121)

OTHER COMPREHENSIVE LOSS:
   Unrealized holding loss arising during the period
      from marketable securities                           (1,563,000)                -                  -                   -
                                                       ---------------   ---------------  -----------------   -----------------

COMPREHENSIVE LOSS                                  $      (4,758,341)   $     (690,698)   $    (1,906,397)   $       (316,121)
                                                       ===============   ===============  =================   =================



NET LOSS PER COMMON SHARE - basic                   $           (0.24)   $        (0.10)   $         (0.23)   $          (0.07)
                                                       ===============   ===============  =================   =================

WEIGHTED AVERAGE COMMON SHARES
    OUTSTANDING - basic                                    13,725,970         6,956,951          8,357,005           4,500,000
                                                       ===============   ===============  =================   =================




</TABLE>





                 See notes to consolidated financial statements.

                                       F-4
<PAGE>

               CELEXX CORPORATION AND SUBSIDIARIES


            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>



                                   Convertible Preferred Stock    Common Stock
                                   --------------------------- ---------------   Additional
                                        Number of              Number of           Paid-in
                                        Shares      Amount     Shares    Amount    Capital
                                        --------   --------  ---------- -------- ----------
<S>                                         <C> <C>       <C>        <C>       <C>

Balance July 10, 1998 (Inception)             -  $    -     4,500,000  $ 4,500  $ (4,500)

Capital Contributions                         -       -             -        -   216,121

Net loss                                      -       -             -        -         -
                                        --------   --------  ---------- -------- ----------
Balance, December 31, 1998                    -       -     4,500,000    4,500   211,621

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

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

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

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

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

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

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

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

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

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

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

Net loss                                      -       -             -        -         -
                                        --------   --------  ---------- ------ ------------
Balance, December 31, 1999                    -       -    10,907,058   10,907 3,216,926

Shares issued for services                    -       -     2,290,555    2,291  3,148,974

Sale of convertible preferred stock         350       -             -        -  2,634,327

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

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

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

Accrual of preferred stock dividend payable   -       -             -        -          -


Unrealized loss on marketable securities      -       -             -        -          -

Net loss                                      -       -             -        -          -
                                        --------   --------  ---------- -------- ----------
Balance, June 30, 2000                      350     $ -    15,619,696  $15,620 $12,547,805
                                         =========  ====== ==========  ======== ===========
</TABLE>


                 See notes to consolidated financial statements.

                                       F-5

<PAGE>
                       CELEXX CORPORATION AND SUBSIDIARIES


            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                                   (Continued)

<TABLE>
<CAPTION>

                                                              Unamortized    Other                       Total
                                                  Deferred      Stock    Comprehensive  Accumulated  Stockholders'
                                                  Financing  Compensation     Loss        Deficit     Equity (Deficit)
                                                  --------   ------------  ----------     --------    ----------------
<S>                                           <C>            <C>          <C>        <C>            <C>    <C>

Balance July 10, 1998 (Inception)               $    -         $   -        $    -     $        -     $          -

Capital Contributions                                -             -             -              -          216,121

Net loss                                             -             -             -       (316,121)        (316,121)
                                                ----------  -------------  ----------    ---------    ----------------
Balance, December31, 1998                            -             -             -       (316,121)        (100,000)

Shares issued in conjunction with merger             -             -             -             -                -

Issuance of common stock for exchange                -             -             -             -          (159,629)

Acquisition of subsidiary                            -             -             -             -           749,750

Retirement of related party debt                     -             -             -             -           448,641

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

Sale of common stock                                 -             -             -             -           860,250

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

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

Shares issued to retire debt                         -             -             -             -           184,000

Shares issued in legal settlement                    -             -             -             -            91,200

Shares issued for services                           -             -             -             -           162,500

Net loss                                             -             -             -    (1,906,397)       (1,906,397)
                                             ----------- --------------  ---------- ------------    ----------------
Balance, December 31, 1999                    (250,000)            -             -    (2,222,518)          755,315

Shares issued for services                    (260,400)   (1,132,083)            -             -         1,758,782

Sale of convertible preferred stock            510,400             -             -             -         3,144,727

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

Sale of common stock                                 -             -             -             -            10,000

Acquisition of subsidiary                            -             -             -             -         1,540,000

Accrual of preferred stock dividend payable          -             -             -       (46,000)          (46,000)


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

Net loss                                             -             -             -    (3,195,341)       (3,195,341)
                                             ----------- --------------  ---------- ------------    ----------------
Balance, June 30, 2000                         $    -    $(1,132,083)  $(1,563,000) $(5,463,859)     $   4,404,483
                                              =========  ============  ===========  ============    ================

</TABLE>

                 See notes to consolidated financial statements.

                                       F-5





<PAGE>
                      CELEXX CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                                    July 10, 1998
                                                     Six Months Ended     Six Months Ended       Year Ended         (Inception) to
                                                     June 30, 2000        June 30, 1999        December 31, 1999  December 31, 1998
                                                      ---------------          ------------      ---------------     ---------------
                                                                            (unaudited)
<S>                                                    <C>                   <C>              <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                             $ (3,195,341)         $  (690,698)      $   (1,906,397)    $      (316,121)
                                                      ---------------          ------------      ---------------     ---------------
    Adjustments to reconcile net loss to net cash
       used in operations:
         Amortization and depreciation                        156,708               15,524              125,920                  -
         Common stock issued for interest                           -                    -               49,000                  -
         Common stock issued in legal settlement                    -                    -               91,200                  -
         Common stock issued for services                   1,758,782              200,000              557,500                  -
         Provision for uncollectible loan receivable          500,000                    -                    -                  -
    Changes in assets and liabilities net of effects
         from acquisition:
       Accounts receivable                                    116,951               77,980              118,531                   -
       Inventory                                              187,951                    -                    -                   -
       Other current assets                                    (8,500)             (95,122)                   -                   -
       Other assets                                                 -              (96,000)             (42,850)                  -
       Accounts payable and accrued expenses                  409,946              (11,477)            (133,716)                  -
       Deferred revenue                                        12,082                6,000               87,384                   -
                                                      ---------------          ------------      ---------------     ---------------
                                                            3,133,920               96,905              852,969                   -
                                                      ---------------          ------------      ---------------     ---------------
NET CASH USED IN OPERATING ACTIVITIES                         (61,421)            (593,793)          (1,053,428)                  -
                                                      ---------------          ------------      ---------------     ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Cash acquired in acquisition                              533,159                8,251                8,251                   -
    Marketable securities                                           -              (51,000)                   -                   -
    Loan receivable to third party                           (500,000)                   -                    -                   -
    Cash utilized in acquisition                           (1,650,450)                   -                    -                   -
    Acquisition of software marketing rights                        -                    -             (112,554)                  -
    Deferred acquisition costs                                      -                    -              (50,000)                  -
    Capital expenditures                                     (221,947)             (40,986)             (34,148)                  -
                                                      ---------------          ------------      ---------------     ---------------
NET CASH USED IN INVESTING ACTIVITIES                      (1,839,238)             (83,735)            (188,451)                  -
                                                      ---------------          ------------      ---------------     ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Sale of common stock                                       10,000              890,250              890,250                   -
    Net proceeds from sale of convertible preferred stock   3,144,727                    -                    -                   -
    Capital contributions                                           -              197,365                    -             216,121
    Line of credit, net                                      (848,570)             (70,286)              14,902                   -
    Borrowings from related parties                           (58,500)                   -              492,654             100,000
    Increase (decrease) in due to related parties              37,791              (56,225)             (18,245)                  -
                                                      ---------------          ------------      ---------------     ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                   2,285,448              961,104            1,379,561             316,121
                                                      ---------------          ------------      ---------------     ---------------
NET INCREASE IN CASH                                          384,789              283,576              137,682                   -
CASH - beginning of period                                    137,682                    -                    -                   -
                                                      ---------------          ------------      ---------------     ---------------
CASH - end of period                                     $    522,471       $      283,576     $        137,682    $              -
                                                   ===================  ===================   ==================  ==================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid during the year for interest         $           12,579 $                  - $             19,754 $                 -
                                                   ===================  ===================   ==================  ==================
    Noncash investing and financing activities:

       Note payable issued in acquisition          $        1,000,000   $          100,000 $            100,000 $                 -
                                                   ===================  ===================   ==================  ==================
       Common stock issued for acquisitions        $        1,540,000   $          500,000 $            500,000 $                 -
                                                   ===================  ===================   ==================  =================
       Conversion of debt to common Stock          $                -   $                - $            583,640 $                 -
                                                   ===================  ===================   ==================  ==================
       Fair value of assets acquired (accounts receivable,
         property and equipment and customer lists)$         3,450,360  $           248,381 $            248,381 $                 -
                                                   ===================  ===================   ==================  ==================
       Liabilities assumed in acquisition
       (accounts payable, and line of credit)       $        2,011,124  $           487,727 $            487,727 $                 -
                                                   ===================  ===================   ==================  ==================
</TABLE>
                 See notes to consolidated financial statements.
                                       F-6





<PAGE>
                       CELEXX CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND
                  1999 (UNAUDITED) AND THE YEAR ENDED DECEMBER
                31, 1999 AND THE PERIOD JULY 10, 1998 (INCEPTION)
                            THROUGH DECEMBER 31, 1998

1.       ORGANIZATION

         CeleXx   Corporation   ("CeleXx"  or  the   "Company")  was  originally
         incorporated    as    Cobra    Technologies     International,     Inc.
         ("International")  as a  Delaware  corporation   on  July  10,  1998 to
         acquire,  develop,  integrate and manage select private businesses that
         produce,  service,  maintain  or support the  information  technologies
         industry.

         On February 18, 1999,  International was acquired by Spectrum Ventures,
         Inc.  ("Spectrum"),  a Nevada  corporation,  for  4,500,000  shares  of
         Spectrum stock (the "Exchange"). The Exchange was completed pursuant to
         the  Agreement  of  Merger  between  International  and  Spectrum.  The
         Exchange  has been  accounted  for as a reverse  acquisition  under the
         purchase method for business combinations. Accordingly, the combination
         of  the  two   companies   is   recorded  as  a   recapitalization   of
         International,  pursuant  to  which  International  is  treated  as the
         continuing entity. Subsequent to the Exchange, with the approval of the
         Board of Directors,  Spectrum  changed its name to Cobra  Technologies,
         Inc. On August 3, 1999,  Cobra  Technologies,  Inc. changed its name to
         CobraTec,  Inc. On November 4, 1999 CobraTec,  Inc. changed its name to
         CeleXx.

         On February 18, 1999,  prior to the merger with Spectrum,  the Board of
         Directors  of  Spectrum  declared  a 1:24  reverse  stock  split  which
         resulted in 713,475 shares outstanding. All periods presented have been
         retroactively restated to give effect to this reverse stock split.

         Additionally, on February 18, 1999 the Company issued 200,000 shares of
         its common stock as part of the merger agreement with Spectrum in order
         to receive a release from an acquisition agreement between Spectrum and
         Commercial  Computer Systems,  Inc. These shares have been treated as a
         cost of the merger with Spectrum.

         On May 25, 1999 CeleXx  acquired  through its wholly owned  subsidiary,
         Pinneast.com, Inc. ("Pinneast"), all the outstanding shares of Pinnacle
         East, Inc., a South Carolina Corporation, engaged in the development of
         multimedia  educational programs for industry and government.  Pinneast
         was acquired for 500,000 shares of CeleXx's common stock and a $100,000
         note payable due in May 2000.  Subsequent to the acquisition,  Pinnacle
         East, Inc. was liquidated.

                                       F-7


<PAGE>



         On April 14, 2000, CeleXx acquired Computer Marketplace,  Inc. (`CMI"),
         a  Massachusetts  company  engaged in systems  engineering,  design and
         maintenance of computer network  systems.  The  consideration  paid was
         1,400,000  shares  of the  Company's  common  stock and  $1,500,000  at
         closing and a note payable for $1,000,000 bearing interest at 6% due in
         two equal annual installments on the anniversary of the closing date.

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

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

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

         E.    Income taxes - Income taxes are accounted for under  Statement of
               Financial  Accounting  Standards No. 109,  "Accounting for Income
               Taxes,"  which is an asset and  liability  approach that requires
               the  recognition of deferred tax assets and  liabilities  for the
               expected  future  tax  consequences  of  events  that  have  been
               recognized in the Company's financial statements or tax returns.

                                       F-8


<PAGE>




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

         G.    Net  loss  per  share - The  Company  has  adopted  Statement  of
               Financial  Accounting  Standard  No. 128,  "Earnings  Per Share;"
               specifying   the   computation,   presentation,   and  disclosure
               requirements  of earnings per share  information.  Basic earnings
               per share has been  calculated  based upon the  weighted  average
               number  of  common  shares   outstanding.   Stock  opt  ions  and
               convertible  preferred  stock have been  excluded as common stock
               equivalents  in the diluted  earnings per share  because they are
               either anti-dilutive, or their effect is not material.

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

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


         J.    Intangibles assets - Intangibles assets prinapally  acquired from
               the  acquisitions  of  Pinnacle  East,  Inc.  and  CMI  represent
               goodwill  customer  lists,  trademarks and the  acquirees'  trade
               names. These assets are amortized on a straight line basis over 7
               10 years, . Additionally, the Company recorded the costs incurred
               acquiring the marketing rights to certain software products. This
               license is being amortized over 3 years.

         K.    Impairment of long-lived assets - The Company reviews  long-lived
               assets  for  impairment  whenever  circumstances  and  situations
               change such that there is an indication that the carrying amounts
               may not be recovered. At June 30, 2000, the Company believes that
               there has been no impairment of its long-lived assets.

                                       F-9


<PAGE>




3.       ACQUISITIONS

         The following table summarizes the acquisitions of Pinneast and CMI:

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

        Cash                                         $      -        $1,500,000

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

        Note Payable                                  100,000         1,000,000

        Brokerage and legal costs                           -           200,940

        Contingent consideration
        (see Note 13)                                 226,000                 -
                                                 ------------        -----------


        Total Purchase Price                        1,076,000         4,240,940
        Less: Fair Market value of
        assets acquired                              (248,381)       (3,450,360)
        Liabilities assumed                           487,727         2,011,124
                                                  ------------     -------------

        Cost in excess of net book value
        of assets acquired                         $1,315,346       $ 2,801,704
                                                   ==========       ============

         The cost in excess of  the  net  book value of assets  acquired include
         goodwill lists, trademark and tradename:

         The  final  allocation of the  intangibles  with  respect  to  the  CMI
         acquisition is subject to the Company obtaining independent appraisals.

         The following unaudited pro-forma  information  reflects the results of
         operations  of  the  Company  as  though  the   acquisitions  had  been
         consummated as of January 1, 1998.

                            Six Months Ended June 30     Years Ended December 31
                            ------------------------     -----------------------
                            2000               1999      1999            1998
                            ----               ----      ----            ----
        Revenue             $7,586,276    $6,038,596   $16,980,192 $17,574,262
                            ==========     ==========   ===========  ===========

        Net loss           $(3,177,469)    $(501,078)   $(1,832,431)$  (173,767)
                            ==========     ==========   ===========  ===========

        Net loss per share $    (0.21)     $   (0.08)   $     (0.19)$     (0.02)
                            ==========     ==========   ============ ===========


                                      F-10


<PAGE>



4.       CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

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

         b.       Accounts  receivable - The concentration of credit risk in the
                  Company's  accounts  receivable  is mitigated by the Company's
                  credit   evaluation   process,   credit   limits,   monitoring
                  procedures  and  reasonably  short  term  collections.  Credit
                  losses  have been  within  management's  expectations  and the
                  Company  does  not  require   collateral  to  support  account
                  receivable.  During the six months  ended June 30,  2000,  and
                  1999 and for the year ended  December 31, 1999, two customers,
                  one customer and three  customers, respectively  accounted for
                  approximately 27%, 10% and 42%, respectively, of the Company's
                  revenue,   respectively.    These  customers   accounted   for
                  approximately 22%, 10%  and 34%  respectively of the Company's
                  outstanding accounts receivable.

5.       SEGMENT INFORMATION

         The Company has adopted Statement of Financial Accounting Standards No.
         131,   "Disclosures   about  Segments  of  an  Enterprise  and  Related
         Information" ("SFAS 131"). SFAS 131 establishes standards for reporting
         information regarding operating segments in annual financial statements
         and requires selected information for those segments to be presented in
         interim financial reports issued to stockholders. SFAS also establishes
         standards for related  disclosures  about  products and  services,  and
         geographic areas. Operating segments are identified as components of an
         enterprise  about which  separate  discrete  financial  information  is
         available  for  evaluation  by the chief  operating  decision  maker or
         decision  making group, in making  decisions how to allocate  resources
         and  assess   performance.   To  date,  the  Company  through  its  two
         subsidiaries, has two principal segments, the development of multimedia
         educational  training  programs  for industry  and  government  through
         Pinneast,  and the network  systems and telephony  consulting  division
         through CMI.

         Segment  information  for the six  months  ended  June  30,  2000 is as
         follows:

                                   Multimedia
                                   Education    Network Systems           Total
                                  ------------  ----------------  --------------
         Revenues               $   826,996      $   2,738,278    $   3,565,274
                                  ============  ================  ==============
         Segment (Loss) Profit  $   (71,447)     $      21,126    $     (50,321)
                                  ============  ================  ==============
         Total Assets           $ 1,096,341      $   2,973,501    $   4,069,842
                                  ============  ================  ==============


                                      F-11


<PAGE>





6.       RELATED PARTY TRANSACTIONS

         As of June 30, 2000 and  December  31, 1999  CeleXx owes  $100,886  and
         $9,013, respectively, in advances primarily from one shareholder of the
         Company.  The advances are non-interest  bearing,  uncollateralized and
         have no specified date for repayment.

         At June 30, 2000 and December  31,  1999,  the Company has a short term
         note  due to  the  former  shareholders  of  Pinnacle  East,  Inc.  for
         $41,500.and $100,000,  respectively.  This note was due in May 2000 and
         the Company is presently  renegotiating the terms of repayment with the
         shareholders.

         At June 30, 2000, the Company has a note due to the former shareholders
         of CMI for  $1,000,000.  The note is due in two annual  payments due on
         the  anniversary  of the  closing  of the  CMI  acquisition  and  bears
         interest at 6% per annum.

7.       LINE OF CREDIT

         The Company's Pinneast subsidiary has three credit lines with aggregate
         availability of $300,000.  As of June 30, 2000 Pinneast has $221,125 on
         such lines of credit  which  expire  between July 24, 2000 and November
         10, 2003 and bear  interest at 10.50% per annum.  At December 31, 1999,
         $258,542 was  outstanding  on the above lines of credit.  The lines are
         secured by substantially all the assets of Pinneast.

                                      F-12


<PAGE>




         The  Company's CMI  subsidiary  has a line of credit in an amount up to
         $3,000,000,  which is used to purchase merchandise for resale. Interest
         accrues  at 1% above the prime  interest  rate  from  days  41-60.  The
         amounts  outstanding  under the line of credit are  secured by accounts
         receivable  and  inventory  equal  to 125  percent  of the  outstanding
         balance.  As of June 30,  2000 the  outstanding  balance on the line of
         credit was $944,317.

9.       STOCKHOLDERS' EQUITY

         Common Stock Issuances:

         During the year ended  December  31,  1999 a related  party,  Edinburgh
         Consulting,  converted the $448,640 owed to it for 1,733,333  shares of
         the Company's common stock.  Pursuant to a consulting agreement between
         CeleXx and Edinburgh Consulting,  1,333,333 of these shares were issued
         at $0.10 per share or  $133,333.  The  additional  400,000  shares were
         issued at $0.78 per share or $315,307.

         In November  1998,  CeleXx  entered  into an  agreement  with an entity
         partially  owned by a Director of the Company for financial  consulting
         services.  The Company  paid such entity  500,000  shares of its common
         stock and valued these shares at $0.25 per share and  accordingly,  has
         recorded  compensation  expense of  $125,000.  In  February  1999,  the
         Company  entered  into an  agreement  with a financial  consultant  and
         issued  300,000  shares of its common stock for cash at $0.10 per share
         aggregating  $30,000 and recorded $270,000 in compensation  expense for
         services provided.

         In 1999 the Company  issued  860,250  shares in a private  placement at
         $1.00 per share for total proceeds of $860,250.

         In November 1999, the Company issued 400,000 shares of its common stock
         to a company which provides financial  services.  These services are to
         include  raising  future  equity on behalf of the Company.  The Company
         valued the shares at the fair market  value on the date of issuance and
         recorded deferred financing costs of $250,000. This financing cost will
         be recorded as a reduction to additional  paid-in  capital  pursuant to
         the preferred stock offering in April 2000.

         From November 1999 to December  1999, the Company issued 400,000 shares
         of its  common  stock to a third  party in  order to  satisfy  its debt
         obligations  of $135,000.  These shares were valued at $184,000 and the
         Company recorded $49,000 in interest expense.

         In November 1999, the Company issued 650,000 shares of its common stock
         to two parties,  each of which provided  services to the Company in the
         first  quarter  of 1999.  The  Company  valued  these  shares  $.25 and
         recorded compensation expense of $162,500.

                                      F-13


<PAGE>




         In December 1999, the Company issued 150,000 shares of its common stock
         to settle a judgement brought against the Company. The company recorded
         $91,200 in expense regarding this settlement.

         On  January  26,  2000,  the  Company  issued  450,000  shares  of  its
         restricted  common stock to a consultant  for  services  rendered.  The
         Company recorded  $252,000 in compensation  expense or $0.56 per share,
         which approximates the market value on the date of issuance.

         In March  2000 the  Company  issued  635,555  shares of its  restricted
         common stock to three  consultants for services  rendered.  The Company
         recorded $1,174,866 in compensation expense to record these issuances.

         On  February  15,  2000  the  Company  issued  420,000  shares  of  its
         restricted common stock to two consultants in relation to the preferred
         stock  offering  (see Note 9).  These  shares  were  recorded at market
         value, less a discount for the restrictions on trading,  netted against
         the gross proceeds from the shares issued.

         On April 14, 2000 the  Company  issued  1,400,000  shares of its common
         stock for the acquisition o f Computer MarketPlace, Inc. (see Note 3).

         On April 11, 2000 the Company  issued 22,083 shares of its common stock
         to  employees  of its  Pinneast  subsidiary  for  proceeds  of $10,000.
         Additionally,  the Company issued 110,000 shares of its common stock to
         settle  outstanding  claims  against  Spectrum.  The  Company  recorded
         $209,000 of compensation expense to reflect such issuances.

         Also, on April 11, 2000 the Company issued 650,000 restricted shares of
         its common stock to three financial consultants. These consultants have
         three-year  agreements with the Company.  The Company recorded deferred
         compensation of $1,132,083 to reflect these issuances.

         On April 13, 2000  the Company issued  1,000,000  shares to E-Pawn.com,
         Inc. The Company  received 1,000,000 shares of E-Pawn.com,  Inc. common
         stock in  consideration for these shares.  The investment was valued at
         $2.00 per share of the Company's common stock or $2,000,000. (see Notes
         12 and 15).

         On June 7, 2000,  the Company  issued 25,000  shares of its  restricted
         common  stock  to a  consultant  for  services  rendered,  the  Company
         recorded $20,000 in compensation for this issuance.

                                      F-14


<PAGE>





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

         Preferred Stock Issuance:

         On  April 7,  2000,  the  Company  issued  350  shares  of 6%  Series A
         cumulative convertible preferred stock at $10,000 per share plus common
         stock purchase  warrants and received net proceeds of  $3,144,727.  The
         preferred  shares are convertible at the lower of the closing bid price
         on the day preceding  the closing of a common stock  offering or 80% of
         the  five  day  common  stock  average  price  prior  to  the  date  of
         conversion.   The  shares   are   convertible   immediately   upon  the
         effectiveness  of a  registration  statement.  The Company  maintains a
         redemption option at 125% of the common stock offering price.

         In July 2000 the shareholders of the Company  authorized an increase in
         the  number of  preferred  shares  issuable  from  1,000,000  shares to
         20,000,000  shares,  par  value  $.001,  the  terms  of  which  may  be
         determined  at the time of issuance by the Board of  Directors  without
         further action by the shareholders.

 9.      EMPLOYMENT AGREEMENTS

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

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

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

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

                                      F-15


<PAGE>



10.      STOCK OPTION PLAN

         On March 1, 1999 the Board of Directors (the"Board") adopted the CeleXx
         Corporation 1999 stock option plan. The Board or CeleXx's  compensation
         committee  is  authorized  to issue to  eligible  persons  as defined a
         maximum  amount of 4,500,000  options under such plan. On July 8, 2000,
         the  shareholders of the Company  approved an increase in the number of
         options from  1,000,000 to  4,500,000.  As of June 30, 2000, no options
         had been issued pursuant to the above plan.

11.      INCOME TAXES

         The Company  accounts  for income  taxes under  Statement  of Financial
         Accounting  Standards  No. 109,  "Accounting  for Income  Taxes" ("SFAS
         109").  SFAS 109  requires the  recognition  of deferred tax assets and
         liabilities  for both the expected  impact of  differences  between the
         financial  statements and tax basis of assets and liabilities,  and for
         the  expected  future tax  benefit to be derived  from tax loss and tax
         credit carryforwards.  SFAS 109 additionally requires the establishment
         of a valuation  allowance to reflect the  likelihood of  realization of
         deferred tax assets.

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

                                                                 December 31,
                                                            --------------------
                                            June 30, 2000   1999            1998
                                            -------------   ----            ----
        Taxes benefit computed
        at statutory rate                    $ 1,280,000  $ 763,000   $ 107,000
        Losses for which income tax benefit
             not utilized                     (1,280,000)  (763,000)   (107,000)
                                            ------------   ---------  ----------

        Net income tax benefit               $         -   $      -   $       -
                                            ============   =========  ==========


         The Company has a net  operating  loss  carryforward  for tax  purposes
         totaling  approximately  $5,418,000  at June 30,  2000  expiring in the
         years 2014 through 2020.

         Listed below are the tax effects of the items  related to the Company's
         deferred tax asset:

                                                                  December, 31
                                            June 30, 2000       1999      1998
                                            -------------    --------- ---------
        Taxes benefit of net operating loss
             carryforward                   $ 1,280,000    $763,000   $ 107,000
        Valuation Allowance                  (1,280,000)   (763,000)   (107,000)
                                            ------------    ---------- ---------

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


                                      F-16


<PAGE>



12.      COMMITMENTS AND CONTINGENCIES

         Commitments:

                                    Operating Leases:

         In May 1999 CeleXx  entered into a five-year  lease for office space at
         an annual base rental of $92,500 for the initial year. Such base rental
         shall  increase  by 4% each year.  The lease is to  commence  when such
         premises are  available  for  occupancy.  CeleXx is  currently  leasing
         temporary office space from the same landlord at $5,900 per month. Rent
         expense for the six months ended June 30, 2000 and years ended December
         31, 1999 and 1998 was $33,505, $63,300 and $42,400, respectively.

         The  Company  through  its CMI  subsidiary  leases  building  space  in
         Tewksbury, Massachusetts from a related party, under a five-year lease.
         The leases require minimum annual payments of $72,000 plus  maintenance
         and operating costs over the lease term. Total rent expenses (including
         common  area  maintenance)  for the  period  ended  June  30,  2000 was
         $20,489.

         The Company  through its Pinneast  subsidiary  leases building space in
         Columbia,  South Carolina under a three-year  lease. The lease requires
         minimum  annual  payments of $24,672 and expires on November  30, 2001.
         Total rent expense for the six months ended June 30, 2000 was $12,706.

         The Company  has various  leases for office  furniture  and  equipment,
         which expire between November 2000 through April 2004.

         Minimum future lease commitments are as follows:

         2001            $ 185,100
         2002              102,749
         2003              176,519
         2004              148,597
         2005              142,352
         Thereafter        122,962
                        ----------
                         $ 878,279
                        ==========
          Other Commitments:

         On May 24, 2000 the Board of Directors  resolved to issue 50,000 shares
         of its  common  stock to its  General  Counsel  pursuant  to a retainer
         agreement.  Such shares are to be "locked-up" or unavailable for resale
         over a five-year  term. As of June 30, 2000, the Company had not issued
         the above shares.

                                      F-17


<PAGE>




         The Company has accrued $226,000 as a contingent payment payable to the
         former  shareholders'  of Pinnacle East, Inc. This accrual was recorded
         pursuant  to the stock  purchase  agreement  between  the  Company  and
         Pinnacle  East,  Inc.  which  required  as a  contingent  cost that the
         Company's average stock price would be $2.50 for the year ending on the
         anniversary of the closing of the acquisition.

         Contingencies:

         On  August 1,  2000 the  Company  and its  president  were  served in a
         lawsuit filed by E-Pawn.com,  Inc. ("E-Pawn") alleging causes of action
         for breach of contract,  fraud and breach of fiduciary duty.  E-Pawn is
         seeking damages,  specific  performance and an injunction.  On or about
         March 10, 2000,  the Company's  president  signed an omnibus  strategic
         alliance agreement with E-Pawn whereby,  under certain conditions:  (a)
         E-Pawn was to purchase 1,000,000 shares of CeleXx common stock at $5.00
         per share in cash;  (b) CeleXx would  receive  payments for  management
         fees as the appointed manager of E-Pawn; and (c) upon the final funding
         of  1,000,000  shares of CeleXx  Common Stock at $5.00 per share E-Pawn
         would have the option to exchange $50 million in market value of E-Pawn
         common  stock for $50 million in market value of CeleXx  common  stock.
         The closing of the above  transactions  was to occur on or before March
         31,  2000.  At  E-Pawn's  request,  in April 2000 an  amendment  to the
         agreement   was  signed  to  provide  for  the  exchange  of  1,000,000
         restricted shares of CeleXx common stock for 1,000,000 shares of freely
         trading  common  stock of E-Pawn to satisfy  the cash  payment  for the
         1,000,000 CeleXx shares.  The option arrangement was also amended to be
         completed with an exchange of 10 million shares of E-Pawn shares for 12
         million  shares  of  CeleXx  common  stock.  Upon  completion  of  this
         exchange,  the agreement also provided for an additional option for one
         year to repeat the share exchange.  CeleXx issued the 1,000,000  shares
         of common  stock to E-Pawn on April  13,  2000 and  received  1,000,000
         shares of free  trading  E-Pawn  shares from a  stockholder  of E-Pawn.
         CeleXx  also  loaned  $500,000  to E-Pawn in the form of an  unsecured,
         short-term  demand loan. The agreement and amendments were at all times
         subject to various approvals,  including the CeleXx Board of Directors.
         The granting of the $50 million stock exchange would have represented a
         change  in  control  and,  as a  merger  transaction,  required  CeleXx
         shareholder approval.



                                      F-18


<PAGE>

The  Company's  counsel has opined that the above  transaction was void
         ab  initio  (from the beginning).  In response to the Company's action,
         E-Pawn has  commenced  suit to  enforce  only  those  sections  of  the
         agreement  that  the Company  believes  are  favorable  to E-Pawn.  The
         Company  has  moved to dismiss the  lawsuit  vigorously  and defend the
         action. CeleXx's  counsel believes that the lawsuit is frivolous and is
         of the opinion  that the Company will prevail.  E-Pawn has acknowledged
         receiving from the  Company $500,000. Accordingly, the Company recorded
         a provision for potential uncollectibility of this loan to E-Pawn.

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

13.      SUBSEQUENT EVENTS

         On July 26, 2000,  the Board of Directors  resolved to issue  7,650,000
         shares of the  Company's  common stock to two  executives.  Such shares
         were issued on September 1, 2000 pursuant to the executives  employment
         agreements  and are  restricted  from  resale  during the term of these
         agreements which are five years.

         On August 23, 2000, the Board of Directors  granted  363,225 options to
         acquire  shares  of the  Company's  common  stock to  employees  of the
         Company's CMI  subsidiary.  These  options were issued  pursuant to the
         Company's stock option plan (See Note 11).

         On September 5, 2000,  the Board of Directors  authorized  the grant of
         2,650,000  options to acquire common stock of the Company to members of
         its executive  management.  These  options were issued  pursuant to the
         Company's stock option plan (See Note 11).

14.      POTENTIAL BORROWINGS:

         (1)   On  October  16,  2000,  the  Company's  Chairman  and  principal
               shareholder  along with four other officers  and/or  shareholders
               provided  the  Company  with a letter  of  guarantee  to  jointly
               consent  to lend the  Company  up to  $1,000,000  on an as needed
               basis for a one year period ending in October 2001,  repayment of
               which will not be required before such date.

         (2)   On October 17, 2000, the Company  received a $10 million  secured
               Revolving  Credit  Agreement  ("Credit  Agreement")  maturing  in
               October 2003 from an asset-based  lender.  Availability under the
               Credit  Agreement  is based on a  formula  of  eligible  accounts
               receivable and inventory and allows for an increase in the credit
               facility to consummate  acquisition  financing within the maximum
               $10 million line. Borrowings bear interest at the Chase Bank rate
               plus 1% per  annum  and are  collateralized  by  essentially  all
               assets of the Company,  such as accounts  receivable,  inventory,
               and general intangibles,  including its subsidiaries.  The Credit
               Agreement  requires,  among  other  conditions,  compliance  with
               certain  covenants.  The  consummation of the credit Agreement is
               subject  to  the  completion  of  the  asset-based  lender's  due
               diligence procedures.

15       SETTLEMENT OF LITIGATION (UNAUDITED)

          On October 10, 2000,  Celexx and E-Pawn  agreed in principle to settle
          the lawsuit that E-Pawn filed  against  Celexx and any claims that the
          Companies  may have with respect to each other.  The  settlement  will
          include  unconditional  releases and will be subject to  documentation
          and delivery of all  considerations.  The settlement  includes,  among
          other things, the issuance of an additional 2,000,000 shares of Celexx
          restricted  common  stock to  E-Pawn  (E-Pawn  already  has  1,000,000
          shares).  Celexx will also cancel the  $500,000  debt that is due from
          E-Pawn and return  1,000,000  freely tradable shares of E-Pawn that it
          currently holds.  Celexx in return will receive  5,250,000  restricted
          shares of common stock of E-Pawn.

                                      F-19




<PAGE>

Item 8.

CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND  FINANCIAL
DISCLOSURE

         None.


                                    Part III

Item 9.

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

The following table sets forth the names, positions with the Company and ages of
the executive  officers and directors of the Company.  Directors will be elected
at the Company's  annual meeting of shareholders and serve for one year or until
their successors are elected and qualify.  Officers are elected by the Board and
their terms of office are, except to the extent governed by employment contract,
at the discretion of the Board.

Executive Officers and Directors

         NAME               AGE         POSITION HELD
         ----               ---         -------------

Douglas H. Forde            58          Chairman,President and CEO

David C. Langle             50          Director, Vice President Finance and CFO

Lionel Forde                56          Director, Vice President and   Treasurer

Vincent Caminiti            48          Director and COO

Moty Hermon                 58          Director

William Lerner              64          Director

David Burke                 57          Director and CEO of CMI

John Straatsma              46          Secretary


DOUGLAS H. FORDE

Mr. Forde has been  Chairman of the Board of Directors  and  President and Chief
Executive  Officer  since August 1999.  From June 1998 until August 1999, he was
Director of Mergers and Acquisitions  for the Company.  From November 1996 until
June 1998, Mr. Forde was Vice President,  Strategic Planning for Computer Access
International,  Inc.  Prior to  November  1996,  Mr.  Forde had been a  business
consultant  to  numerous  companies,  ranging  from the  Fortune  500 to smaller
entrepreneurial  businesses.  He is a graduate of the  University  of the Virgin
Islands,  the  University of Illinois,  and the Bernard M. Baruch College of the
City  University  of New York and holds  degrees  in  accounting,  finance,  and
taxation.

DAVID C. LANGLE

Mr.  Langle is  currently  the  Company's  Vice  President,  Finance,  and Chief
Financial Officer. Mr. Langle joined the Company in March 2000. Prior to joining
the Company,  he was Vice  President and CFO of Terra  Telecommunications  Corp.
since  September  1997. Mr. Langle has also served in various senior  management
capacities as Vice  President,  Chief  Financial  Officer and Director for three
Florida  based  NASDAQ  and OTC  companies.  From  1982 to 1991 Mr.  Langle  was
employed by the Miami  office of Spicer &  Oppenheim,  CPA's,  an  international
accounting  and  consulting  firm  where he  concluded  his  tenure  as an Audit
Partner. He is a CPA and has a Bachelor of Science Degree from the University of
Illinois in Chicago.

LIONEL FORDE

Mr.  Forde  is Vice  President  and  Treasurer,  and a  Member  of the  Board of
Directors of the Company since February 1999.  From November 1997 until February
1999  he  was  President  of  the   international   group  at  Computer   Access
International,  Inc.,  responsible  for developing  markets in the Caribbean and
Latin America.  Prior to that, Mr. Forde was a senior manager in the Color Paper

                                       22
<PAGE>

Products Division at Eastman Kodak Company. He holds an MBA (Honors) degree from
Long Island University and a BS degree in Business  Administration  from Eastern
Illinois University.

VINCENT A. CAMINITI

Mr.  Caminiti is a Vice President,  Chief Operating  Officer and a member of the
Board of Directors of the Company since January of 1999.  Since June of 1998 Mr.
Caminiti  has  devoted  full  time  to  the  business   development   of  CeleXx
Corporation.  Beginning in 1994 through 1998 Mr. Caminiti was Managing  Director
of Rendon International,  Ltd. The Company, with offices in Denver, Los Angeles,
Hong Kong, Moscow and London,  was active in business  consulting for clients in
the Tele-communications and Information Technology fields. The business included
constructing  strategic  business  alliances,  identifying  M&A  candidates  and
developing new market strategies for clients via consultative  agreements,  such
as CBS Television to distribute programming in the Asian markets.

MOTY HERMON

Mr.  Hermon has been a Member of Board of Directors  since  February  1999.  Mr.
Hermon has been an international  investment banker and business  consultant for
the past five years.  From December 1979 to December  1986, he served as General
Manager of Elron,  Inc., a New York Stock Exchange listed company.  Elron is the
largest group of high tech  companies in Israel with  revenues of  approximately
$1.5 billion.  From December 1992 to November 1994, Mr. Hermon was the exclusive
representative  and partner of Prudential  Securities in Israel. He was also the
exclusive  representative and partner of TA Associates from January 1986 to July
1988.  TA  Associates  is a Boston  based  venture  capital  firm with over $1.5
billion  under  management.  Mr.  Hermon holds a BA in Economics  and  Political
Science from Tel-Aviv University.

WILLIAM LERNER

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

DAVID BURKE Sr.

Mr.  Burke was  recently  appointed as a member of the Board of Directors of the
Company and CEO of Computer  Marketplace,  Inc.  (CMI),  a company he founded in
1983. Prior to CMI, Mr. Burke had fifteen years in a career that spanned several
management positions including technical supervisor,  manufacturing  engineering
manager,   production   manager,   and  international  sales  manager  with  the
Metrigraphics  Division  of  Dynamics  Research  Corporation,   a  multinational
manufacturer and distributor of electro-optical products. Mr. Burke received his
technical and business education at Worchester Polytechnic, Lowell Technological
Institute  and Boston  University.  He also  received  specialized  training  in
information systems from Novell, Microsoft, IBM, HP, Compaq and other "Tier One"
microcomputer and software producers.  He is a Member of the American Production
& inventory Control Society. He co-authored "Metriform  Fabrication,  Electronic
Packaging and Production, "May 1981, Chaners Publishing.


                                       23
<PAGE>

JOHN STRAATSMA

Mr.  Straatsma has served as secretary  since  October of 1999.  Since August of
1998,  he has acted as a  consultant  to CeleXx  for  business  development  and
operations.  In September 1995, Mr.  Straatsma  founded,  and since has acted as
president  of  Consultants  Ltd., a company that  performs  consulting  work for
companies  active in the IT industry.  From January 1983 until August 1995,  Mr.
Straatsma  was  president  of Trinidad  Computers  Ltd.,  a company he helped to
found.  His educational  background  includes a Bachelor of Commerce degree from
the University of Guelph, in Guelph,  Ontario,  Canada,  and a Master of Science
degree in Management from Florida International University, Miami, Florida.

Item 10.

EXECUTIVE COMPENSATION

The following table sets forth information  relating to the compensation paid by
CeleXx  during the past fiscal year and for the six month  period ended June 30,
2000  to its Chief Executive Officer and President.  No options were granted to,
and no options  were  exercised  by any of our  executive  officers or directors
during 1999.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>


                                                            Long-Term Compensation

                   Annual Compensation                              Awards          Payouts
----------------------------------------------------------- ----------------------- -----------
      (a)          (b)        (c)       (d)        (e)          (f)         (g)        (h)         (i)
---------------- --------- ---------- --------- ----------- ------------ ---------- ----------- -----------
<S>             <C>       <C>        <C>      <C>         <C>           <C>          <C>      <C>
                                                Other                                           All other
                                                Annual      Restricted                          compensation
    Name &                                      Compensation   Stock     Opinion/Sars  LTIP        ($)
   Principal                Salary     Bonus       ($)       Award(s)       (#)      Payouts
   Position      Year         ($)       ($)                     ($)                    ($)
---------------- --------- ---------- --------- ----------- ------------ ---------- ----------- -----------
Doug Forde       2000*     75,000
President and    1999      34,900
CEO              1998      60,000

David Langle,    2000*     27,250
VP and CFO

Lionel Forde,    2000*     60,000
VP
</TABLE>

* Represents the six month period ended June 30, 2000

STOCK OPTIONS
<TABLE>
<CAPTION>

 OPTION/SAR GRANTS IN LAST FISCAL YEAR

                                    Potential Realizable Value
                                    At Assumed Annual                  Alternative
                                    Rats of Stock Price               to (j) and (k)
   Individual Grants    Appreciation for Option Price              Grant Date   Value
                                                                                Grant Date
                                            5% ($)            10%($)            Present        Value $
                                            (j)               (k)               (l)
------------------------------------------------------------------------------------------------------------------------------------
<S>               <C>     <C>    <C>                                          <C>             <C>

Doug Forde        -0-      -0-      N/A                                         N/A              N/A
David Langle      -0-      -0-      N/A                                         N/A              N/A

Lionel Forde      -0-      -0-      N/A                                         N/A              N/A

</TABLE>

                                       24
<PAGE>

OPTION EXERCISES AND HOLDINGS

The  following  table sets forth  information  with  respect to the  exercise of
options to purchase shares of common stock during the fiscal year ended December
31,  1999,  of each  person  named in the  summary  compensation  table  and the
unexercised options held as of the end of the 1999 fiscal year.

Aggregated Options/SAR Exercises in the last Fiscal year and Fiscal Year End:

OPTION/SAR VALUES

<TABLE>
<CAPTION>


                                                                   Number of
                                                                   Securities
                                                                   Underlying
                                                                   Unexercised             Value of
                                                                   Options/SARs at       Unexercised In-The
                                                                   Fiscal Year-End       Money Options/SARs
                        Shares Acquired on                         Exercisable/             at Fiscal year-end
                        Exercise              Value Realized       Unexercisable         Exercisable/Unexercisable
                        ------------------    --------------       -------------         --------------------------

<S>                       <C>                    <C>                  <C>                 <C>

Name



Doug Forde                  N/A                   N/A                  N/A                   N/A

David Langle                N/A                   N/A                  N/A                   N/A

Lionel Forde                N/A                   N/A                  N/A                   N/A

</TABLE>


EMPLOYMENT AGREEMENTS

DOUGLAS H. FORDE, CHAIRMAN OF THE BOARD AND PRESIDENT

Under the terms of an employment agreement between the Company and Mr. Forde, in
consideration for his services to the Company,  Mr. Forde will receive an annual
base  salary of $150,000 as of January 1, 2000.  Mr.  Forde is also  eligible to
participate in the Company's Incentive Stock Option Plan and stock grants as the
Board of  Directors  may  grant  from time to time.  Effective  June 1, 2000 the
employment  agreement for Mr. Forde ,among other terms,  was amended to increase
his annual base salary to $175,000  ,extended to five years and requiring Keyman
life insurance. On July 26, 2000 the Company's Board of Directors authorized the
grant of 7,000,000  shares of restricted  Company  common stock to Mr. Forde and
subject to a "lock-up" or resale restriction, pursuant to Mr. Forde's employment
agreement.

LIONEL FORDE, VICE PRESIDENT AND DIRECTOR

Under the terms of an employment agreement between the Company and Mr. Forde, in
consideration for his services to the Company,  Mr. Forde will receive an annual
base  salary of $120,000 as of January 1, 2000.  Mr.  Forde is also  eligible to
participate in the Company's Incentive Stock Option Plan.

DAVID C. LANGLE, VICE PRESIDENT, FINANCE, CHIEF FINANCIAL OFFICER AND DIRECTOR

The Company  entered into an employment  agreement with David C. Langle dated as
of June 1, 2000 with a term of five (5)  years.  Mr.  Langle  serves as the Vice
President of Finance and Chief Financial Officer of the Company.  His employment
agreement  provides  compensation  in the form of an annual  base  salary in the
amount of $125,000 per year,  participation  in the  Company's  Incentive  Stock
Option Plan,  and stock grants as the Board of Directors  may grant from time to
time. . On July 26, 2000 the Company's  Board of Directors  authorized the grant
of 650,000  shares of restricted  Company common stock to Mr. Langle and subject
to a  "lock-up"  or resale  restriction,  pursuant  to Mr.  Langle's  employment
agreement.

                                       25
<PAGE>

DAVID BURKE,SR., CHIEF EXECUTIVE OFFICER OF CMI AND DIRECTOR

Pursuant to a three year employment agreement between the Company and Mr. Burke,
in  consideration  for his  services to the  Company,  Mr. Burke will receive an
annual base salary of $150,000 as of April 11, 2000, annual performance  reviews
and Company benefits. Mr. Burke is also eligible to participate in the Company's
Incentive Stock Option Plan.

The Company's subsidiaries have extended Employment Contracts to its various key
management personnel,  aggregativly  $555,000  annually  with terms of three (3)
years, renewable annually thereafter.

1999 STOCK OPTION PLAN

On March 1, 1999 we adopted and  implemented  a Stock Option Plan (the  "Plan").
The Plan increases the  employees',  advisors',  consultants'  and  non-employee
directors'  proprietary  interest in us and aligns more closely their  interests
with the interests of our  shareholders.  The Plan also maintains our ability to
attract and retain the services of experienced  and highly  qualified  employees
and non-employee directors.

Under the Plan, we reserved an aggregate of 1,000,000 shares of common stock for
issuance  pursuant to options granted under the Plan ("Plan  Options").  In June
2000 the shareholders  approved to amend the Company's 1999 Stock Option Plan to
increase  the  number  of shares  issuable  under  the Plan  from  1,000,000  to
4,500,000  shares.  Our  Board  of  Directors  or a  Committee  of the  Board of
Directors  (the  "Committee")  will  administer  the  Plan  including,   without
limitation,  the selection of the persons who will be granted Plan Options under
the Plan,  the type of Plan Options to be granted,  the number of shares subject
to each Plan Option and the Plan Option price.

Plan  Options  granted  under  the Plan may  either  be  options  qualifying  as
incentive stock options ("Incentive  Options") under Section 422 of the Internal
Revenue  Code  of  1986,  as  amended,   or  options  that  do  not  so  qualify
("Nonqualified Options"). In addition, the Plan also allows for the inclusion of
a reload option provision ("Reload Option"), which permits an eligible person to
pay the  exercise  price of the Plan Option with shares of common stock owned by
the eligible  person and receive a new Plan Option to purchase  shares of common
stock equal in number to the tendered shares. Any Incentive Option granted under
the Plan must  provide for an  exercise  price of not less than 100% of the fair
market  value  of the  underlying  shares  on the  date of such  grant,  but the
exercise price of any Incentive  Option granted to an eligible  employee  owning
more than 10% of our  common  stock  must be at least  110% of such fair  market
value as determined  on the date of the grant.  The term of each Plan Option and
the  manner  in which it may be  exercised  is  determined  by the  Board of the
Directors or the Committee, provided that no Plan Option may be exercisable more
than 10 years  after  the date of its  grant  and,  in the case of an  Incentive
Option granted to an eligible employee owning more than 10% of our common stock,
no more than five years after the date of the grant.

The exercise price of  Nonqualified  Options shall be determined by the Board of
Directors or the Committee.

The per share purchase price of shares subject to Plan Options granted under the
Plan may be adjusted in the event of certain changes in our capitalization,  but
any such  adjustment  shall not change the total purchase price payable upon the
exercise in full of Plan Options granted under the Plan.

Our officers,  directors, key employees and consultants and our subsidiaries (if
applicable in the future) will be eligible to receive Nonqualified Options under
the Plan.  Only our officers,  directors and employees who are employed by us or
by any subsidiary thereof are eligible to receive Incentive Options.


                                       26
<PAGE>

All Plan Options are  non-assignable and  nontransferable,  except by will or by
the laws of descent and  distribution,  and during the lifetime of the optionee,
may  be  exercised  only  by  such  optionee.  If an  optionee's  employment  is
terminated for any reason, other than his death or disability or termination for
cause,  or if an  optionee is not an employee of but is a member of our Board of
Directors and his service as a Director is terminated for any reason, other than
death or  disability,  the Plan Option  granted to him shall lapse to the extent
unexercised on the earlier of the expiration  date or 30 days following the date
of termination. If the optionee dies during the term of his employment, the Plan
Option  granted to him shall lapse to the extent  unexercised  on the earlier of
the  expiration  date of the Plan Option or the date one year following the date
of the optionee's  death.  If the optionee is permanently  and totally  disabled
within the meaning of Section 22(c)(3) of the Internal Revenue Code of 1986, the
Plan Option  granted to him lapses to the extent  unexercised  on the earlier of
the  expiration  date of the  option  or one  year  following  the  date of such
disability.

The Board of Directors or the Committee may amend, suspend or terminate the Plan
at any time,  except that no  amendment  shall be made which (i)  increases  the
total number of shares subject to the Plan or changes the minimum purchase price
therefore  (except in either case in the event of adjustments  due to changes in
our capitalization), (ii) affects outstanding Plan Options or any exercise right
thereunder,  (iii) extends the term of any Plan Option beyond ten years, or (iv)
extends the termination date of the Plan.  Unless the Plan has been suspended or
terminated by the Board of Directors,  the Plan shall terminate in approximately
10 years from the date of the Plan's adoption.  Any such termination of the Plan
shall not affect the validity of any Plan Options previously granted thereunder.

On August 23, 2000 and September 5, 2000, the Company granted 363,225  incentive
stock  options  to  various  employees  of CMI  with a three  (3)  year  vesting
schedule, and 2,650,000 to executive management of the Company,  500,000 options
that are  immediately  exercisable and the balance with a three (3) year vesting
schedule. All the foregoing options were granted at the fair market value of the
common stock covered by the options.

Section 16(a) Beneficial Ownership Reporting Compliance

COMPLIANCE

Pursuant to Section 16(a) of the Securities Exchange Act of 1934, each
executive officer, director and beneficial owner of 10% or more of the Company's
Common Stock is required to file certain forms with the  Securities and Exchange
Commission.  A report of beneficial  ownership of the Company's  Common Stock on
Form  3 is  due at  the  time  such  person  becomes  subject  to the  reporting
requirement  and a report  on Form 4 or 5 must be filed to  reflect  changes  in
beneficial  ownership occurring  thereafter.  During the year ended December 31,
1999 and as of June 30, 2000,  none of the executive  officers,  directors,  and
beneficial owners of 10% or more of the Company's Common Stock were current with
these filing requirements.

Item 11.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table sets forth  certain  information  regarding  the Company's
shares  ("Shares") of Common Stock,  par value $.001,  beneficially  owned as of
September 21,2000 for:

Each  shareholder  known by the Company to be the beneficial  owner of five (5%)
percent or more of the Company's outstanding Common Stock, each of the Company's

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<PAGE>

executive officers and directors,  and all executive officers and directors as a
group. In general,  a person is deemed to be a "beneficial  owner" of a security
if that  person  has or shares  the power to vote or direct  the  voting of such
security,  or the power to  dispose  of or to  direct  the  disposition  of such
security.  A person is also deemed to be a beneficial owner of any securities to
which the person has the right to acquire beneficial ownership within sixty (60)
days.  As of  September  21,2000  there were  24,019,696  shares of Common Stock
outstanding.

                                  No. of Shares
                        Shares Beneficially Percentage of         Approximate
     Name (1)                              Owned              Outstanding Shares
---------------------   ---------------------------------     ------------------
Douglas H. Forde(2)(5)               7,464,375                            31.08%
Lionel Forde(3)(5)                   1,025,000                             4.27
Vincent Caminiti                       250,000                             1.04
David Langle                           650,000                             2.71
David Burke, Sr.                     1,400,000                             5.83
Moty Hermon                            500,000                             2.08
William Lerner
Michelle J. Michalow(4)(5)             575,000                             2.39
John W. Straatsma                      250,000                             1.04
All Executive Officers and
  Directors as a group (8 persons)  11,539,375                            48.04%


(1)      Unless  otherwise  indicated,  the  address of each of the  persons set
         forth above is 7251 West Palmetto Park Road, Boca Raton, FL 33433.

(2)      Includes 375,000 shares owned by the spouse and daughter of Mr. Forde.

(3)      Lionel Forde is the brother of Douglas H.Forde. Includes 800,000 shares
         owned by the spouse and family of Mr. Forde.

(4)      Ms. Michalow is a former officer  of CeleXx.  Includes  325,000  shares
         owned by the mother of Ms. Michalow.

(5)      Douglas H.  Forde,  Lionel  Forde and  Michelle J.  Michalow  have each
         pledged 250,000 shares, 100,000 shares and 350,000, respectively,shares
         of restricted Company stock as collateral to the holder of the Series A
         Convertible Preferred Stock.

Item 12.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In November  1998,  we entered into an  agreement  with Girmon  Investment  Co.,
Limited, a company,  which is 33% owned by Moty Hermon, a member of our board of
directors.  The  agreement is for  corporate  finance  advisory  services for an
initial period of 36 months. As consideration  for business,  advisory and other
consulting services performed on our behalf,  Girmon Investment received 500,000
shares of our Common Stock. Each share was valued at $.25 for an aggregate value
of $125,000.

Since February  1998,  Edinburgh  Consulting,  an entity that is wholly owned by
Michelle J.  Michalow,  a former officer of CeleXx,  has loaned us $664,761.  In
December  1998,  Edinburgh  contributed to capital  $216,121.  In February 1999,
pursuant to the terms of a consulting  agreement  between  Edinburgh and CeleXx,
Edinburgh  converted  $133,333 of the outstanding  debt into 1,333,333 shares of
our  common  stock at $.10 per  share.  Additionally,  in March  1999  Edinburgh
converted the remaining $315,307 into 400,000 shares of our common stock at $.78
per share.


                                       28
<PAGE>


In May 1999,  we signed a merger  agreement and took  effective  control of West
Columbia, SC-based Pinneast.com for a combination of cash and stock. In exchange
for all of the outstanding stock of Pinneast,  an aggregate of 500,000 shares of
our common stock was issued to the Pinneast.com  shareholders and a cash payment
of $100,000  (deferred for one year).  The shares of common stock were valued at
$1.50 per share.  Accordingly,  the issuance of these securities was exempt from
registration requirements of the Act pursuant to Section 4(2) of the Act.

Our second acquisition,  Computer Marketplace, Inc. (CMI) was completed on April
11, 2000,  pursuant to an Agreement and Plan of Reorganization  for a value of $
5,000,000. Payment consisted of 1,400,000 shares of our common stock and cash of
$1,500,000  at  closing  and a  promissory  note for $1 million at 6% per annum,
payable in equal installments at the first and second anniversaries. David Burke
Sr., and five (5) other key employees  retained their  positions in CMI pursuant
to 3-year employment contracts. CMI, located in Tewksbury,  Massachusetts,  is a
sixteen-year-old  network solution and systems design company,  founded in 1983.
CMI  focuses on  providing  Fortune  1000  companies,  government  agencies  and
educational  institutions with networking  solutions,  systems integration,  and
computer telephony integration.

During the six month period  ended June 30, 2000  Douglas H. Forde  provided the
Company   with   $100,804   in   advances   that   are   non-interest   bearing,
un-collateralized and have no specified date for repayment.

Douglas H. Forde,  Chairman and CEO was granted  7,000,000  shares of restricted
company common stock by the Board of Directors on July 26, 2000,  pursuant to an
amended  five-year  employment  agreement.  The shares were issued on  September
1,2000.

David C. Langle,  CFO was granted  650,000  shares of restricted  company common
stock by the  Board  of  Directors  on July 26,  2000,  pursuant  to an  amended
five-year employment agreement. The shares were issued on September 1,2000.

Item 13.

EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

The Exhibits listed below are filed or incorporated by reference herein.

                                       29

<PAGE>




                                  EXHIBIT INDEX

Exhibit
Number                       Description of Document

2.1           Plan  of  Reorganization  and  Agreement  of  Merger,    dated
              April 14,2000,  by  and  between  Computer  Marketplace, Inc.,
              David Burke, Sr.,  Betty Des Meules,  Cobra Technologies, Inc.
              and CMI Acquisition Corp.

3.1           By-Laws

3.2           Articles of Incorporation

3.3           Articles of Amendment of Articles of Incorporation

4.1           Stock Option Plan

10.1          Lease Agreement  dated  May 11, 1999,  between Sawgrass Realty
              Holdings, Inc.  and  Celexx    Corporation        (f/k/a Cobra
              Technologies, Inc.)

10.2          Employment Agreement Lionel Forde

10.3          Employment Agreement Doug Forde

10.4          Merger Agreement by and  between Pinneast.com, Inc. and Celexx
              Corporation, dated May 25, 1999

*10.6         Amended Employment Agreement- Douglas H. Forde

*10.7         Employment Agreement - David C. Langle

*10.8         Series A Convertible Stock Purchase Agreement dated as of April 7,
              2000 among Celexx Corporation and Birch Circle LLC

*10.8(a)      Terms of Series A Convertible Preferred Stock

*10.8(b)      Registration  Rights  Agreement pursuant to  Convertible Preferred
              Stock Purchase

*10.8( c )    Security  Agreement  pursuant  to  Convertible   Preferred   Stock
              Purchase

*10.8(d)      Intellectual  Property  Security Agreement pursuant to Convertible
              Preferred Stock Purchase

*10.8(e)      Stock Pledge Agreement

*10.8(f)      Warrant Certificate

*21.1         Subsidiaries of the Company

*27           Financial Data Schedule

*             Incorporated by reference
**            Additional Exhibits to be provided

(b) Reports on Form 8-K.

On June 29,  2000 the Company  filed a report on Form 8-K stating the  Company's
change in fiscal year from a year ended on  December  31, to the new fiscal year
end of June 30.

                                       30
<PAGE>

On August 18, 2000 the Company  filed a report on 8-K/A  reporting an Investment
Agreement with E-Pawn.com, Inc.

SIGNATURES

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

Dated: October 12, 2000                              REGISTRANT:

                                                   CeleXx Corporation

                                                        By: /s/ Douglas H. Forde
                                                         -----------------------
                                                                Douglas H. Forde
                                               President, Chairman of the Board,
                                               and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.

By:           /s/ Doug H. Forde
                                                               November 10, 2000
      ---------------------------------------------------

Doug H. Forde
President, Chairman of the Board,
and Chief Executive Officer
(principal executive officer)

By:           /s/ David C. Langle
                                                               November 10, 2000
      ---------------------------------------------------

David C. Langle
Vice President Finance
And Chief Financial Officer

By:           /s/
         ---------------------------------------------------
          Director

By:           /s/

      ---------------------------------------------------
          Director

By:           /s/

         ---------------------------------------------------
          Director

A copy of the Company's Annual Report on Form 10-KBS for the fiscal period ended
June 30,2000 with exhibits,  may be obtained by any  stockholder of the Company,
without charge, by writing to: CELEXX CORPORATION, Attn: Investor Relations,7251
W. Palmetto Road, Suite 208, Boca Raton, FL 33433