<PAGE>

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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-Q

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

    For the Quarter Ended September 30, 2001      Commission File Number: 0-9628
                                              or

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

    For the transition period from [             ]  to  [                 ]


                        ANCHOR PACIFIC UNDERWRITERS, INC.
             (Exact name of registrant as specified in its charter)

               Delaware                                94-1687187
      (State or other jurisdiction of               (I.R.S. Employer
      incorporation or organization)                Identification No.)

       610 West Ash Street, Suite 1500                     92101
                San Diego, CA                            (Zip Code)
   (Address of principal executive offices)

       Registrant's telephone number, including area code: (619) 557-2777


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

                                      None

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

                          Common stock, $.02 par value

    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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

    As of April 30, 2002, the Registrant had 4,709,904 shares of common stock
and 1,853,300 shares of preferred stock outstanding.

                     This document is comprised of 19 pages

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

<PAGE>

                        ANCHOR PACIFIC UNDERWRITERS, INC.

                                      INDEX

<TABLE>
<S>                                                                                             <C>
Part I.   FINANCIAL INFORMATION

          Item 1.   Financial Statements:

                    Consolidated Balance Sheets, September 30, 2001 and December 31, 2000        1

                    Consolidated Statements of Operations for the
                    three months ended September 30, 2001 and 2000,
                    and for the nine months ended September 30, 2001
                    and 2000                                                                     2

                    Consolidated Statements of Cash Flows for the nine months ended
                    September 30, 2001 and 2000                                                  3

                    Notes to Consolidated Financial Statements                                   4

          Item 2.   Management's Discussion and Analysis of Financial
                    Condition and Results of Operations                                         12

          Item 3.   Quantitative and Qualitative Disclosures About Market Risk                  16

Part II.  OTHER INFORMATION

          Item 1.   Legal Proceedings                                                           17

          Item 2.   Changes in Securities                                                       17

          Item 3.   Defaults Upon Senior Securities                                             17

          Item 4.   Submission of Matters to a Vote of Security Holders                         18

          Item 5.   Other Information                                                           18

          Item 6.   Exhibits and Reports on Form 8-K                                            18
</TABLE>

<PAGE>

PART I - FINANCIAL INFORMATION

Item 1: Financial Statements:

               Anchor Pacific Underwriters, Inc. and Subsidiaries
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                    September 30,      December 31,
                                                                                        2001               2000
                                                                                   --------------     --------------
<S>                                                                                <C>                <C>
                                   Assets
Current Assets:
   Cash and cash equivalents                                                       $     247,913      $           -
   Accounts receivable (less allowance for doubtful accounts of $7,500 in 2001
   and 2000)                                                                             949,241            407,616
   Prepaid expenses and other current assets                                              31,968             90,099
                                                                                   --------------     --------------
Total current assets                                                                   1,229,122            497,715

Property and equipment, net                                                              650,839            421,535
Intangible assets, net                                                                   506,408                  -
Other                                                                                    112,651             76,538
                                                                                   --------------     --------------

Total assets                                                                       $   2,499,020      $     995,788
                                                                                   ==============     ==============


                    Liabilities and Deficiency in Assets
Current Liabilities:
   Cash overdraft                                                                  $           -      $     138,695
   Accounts payable                                                                      709,708            432,752
   Accrued expenses                                                                    1,235,979            391,643
   Accrued legal expenses                                                                435,000            435,000
   Short-term borrowings owed to related parties                                         920,465            793,394
   Current portion of long-term debt, including $3,409,000 and $1,500,000 in
      2001 and 2000, respectively, owed to related parties                             5,031,255          2,604,761
   Current portion of capital lease obligations                                          116,347            107,417
                                                                                   --------------     --------------
Total current liabilities                                                              8,448,754          4,903,662

Capital lease obligations, net of current portion                                        161,138            232,453
                                                                                   --------------     --------------

Total liabilities                                                                      8,609,892          5,136,115
                                                                                   --------------     --------------

Deficiency in Assets:
  Preferred stock - $.02 par value; 2,500,000 shares authorized; 1,853,300
  shares issued and outstanding as of September 30, 2001 and December 31, 2000            37,066             37,066
  Common stock - $.02 par value; 50,000,000 shares authorized; 4,709,922 and
  4,709,931 shares issued and outstanding as of September 30, 2001 and December
  31, 2000, respectively                                                                  94,201             94,201
  Additional paid-in capital                                                           6,158,787          6,158,787
  Accumulated deficit                                                                (12,400,926)       (10,430,381)
                                                                                   --------------     --------------
Total deficiency in assets                                                            (6,110,872)        (4,140,327)
                                                                                   ==============     ==============
Total liabilities and deficiency in assets                                         $   2,499,020      $     995,788
                                                                                   ==============     ==============
</TABLE>

       See accompanying notes

                                       1

<PAGE>

               Anchor Pacific Underwriters, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                Three Months                      Nine Months
                                                             Ended September 30,               Ended September 30,
                                                     -------------------------------     ------------------------------
                                                         2001              2000              2001             2000
<S>                                                  <C>               <C>               <C>              <C>
Revenues:
   Service fees                                      $   1,048,482     $          -      $  3,404,063     $          -
                                                     --------------    -------------     -------------    -------------

Operating expenses:
    Salaries, commissions and employee benefits            540,638                -         2,099,561                -
    Selling, general and administrative expenses           459,004                -         1,325,433                -
    Depreciation and amortization                           24,598                -            71,200                -
    Amortization of goodwill and intangible assets          13,687                -            41,061                -
                                                     --------------    -------------     -------------    -------------
Total operating expenses                                 1,037,927                -         3,537,255                -
                                                     --------------    -------------     -------------    -------------
Income (loss) from continuing operations
    before other income(expense) and income taxes           10,555                -          (133,192)               -

Other income (expense):
    Interest expense                                      (104,634)         (68,179)         (322,766)        (178,498)
    Other                                                        -              119             3,263            1,719
                                                     --------------    -------------     -------------    -------------
Total other expense                                       (104,634)         (68,060)         (319,503)        (176,779)
                                                     --------------    -------------     -------------    -------------

Loss from continuing operations before income taxes        (94,079)         (68,060)         (452,695)        (176,779)
Provision for income taxes                                       -            1,500                 -            7,710
                                                     --------------    -------------     -------------    -------------
Loss from continuing operations                      $     (94,079)    $    (69,560)     $   (452,695)    $   (184,489)
                                                     --------------    -------------     -------------    -------------

Discontinued operations:
    Loss from operations                                  (460,533)        (333,814)       (1,057,963)      (1,238,880)
    Loss on disposal                                             -                -          (459,887)               -
                                                     --------------    -------------     -------------    -------------
Loss from discontinued operations                         (460,533)        (333,814)       (1,517,850)      (1,238,880)
                                                     --------------    -------------     -------------    -------------

Net loss                                             $    (554,612)    $   (403,374)     $ (1,970,545)    $ (1,423,369)
                                                     ==============    =============     =============    =============

Net loss per share:
     From continuing operations                      $       (0.02)    $      (0.02)     $      (0.10)    $      (0.04)
     From discontinued operations                            (0.10)           (0.07)            (0.32)           (0.26)
                                                     --------------    -------------     -------------    -------------
Basic and diluted net loss per common share          $       (0.12)    $      (0.09)     $      (0.42)    $      (0.30)
                                                     ==============    =============     =============    =============

Weighted average number of common shares
     outstanding                                         4,709,922        4,710,042         4,709,922        4,710,042
</TABLE>

      See accompanying notes

                                       2

<PAGE>

               Anchor Pacific Underwriters, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                             Nine Months
                                                                                         Ended September 30,
                                                                                  --------------------------------
                                                                                      2001               2000
<S>                                                                               <C>               <C>
Operating activities:
Net loss                                                                          $  (1,970,545)    $  (1,423,369)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
      Depreciation                                                                      246,887           184,312
      Amortization of goodwill                                                           41,061            49,532
      Loss on write-down of internal-use software and other assets from
          discontinued operations                                                       285,842                 -
Changes in items affecting operations, net of effects of acquisition in 2001
      Accounts receivable                                                               408,375           162,040
      Prepaid expenses and other current assets                                         265,131            86,772
      Other assets                                                                      (36,113)          (12,997)
      Decrease in cash overdraft                                                       (138,695)          (55,926)
      Accounts payable and accrued expenses                                           1,121,292          (641,598)
                                                                                  --------------    --------------
Net cash provided by (used in) operating activities                                     223,235        (1,651,234)
                                                                                  --------------    --------------

Investing activities:
Purchases of property and equipment                                                    (499,693)         (273,463)
Cash paid for acquisitions                                                           (1,524,469)                -
                                                                                  --------------    --------------
Net cash used in investing activities                                                (2,024,162)         (273,463)
                                                                                  --------------    --------------

Financing activities:
Preferred stock issued                                                                        -         2,000,000
Preferred stock issuance costs                                                                -           (36,412)
Borrowings on long-term debt                                                          2,226,139           770,000
Repayments on long-term debt                                                           (299,645)                -
Repayments on short-term borrowings to related parties                                 (409,000)                -
Borrowings on short-term borrowings with related parties                                593,731                 -
Repayments on long-term liabilities and capital lease obligations                       (62,385)         (771,591)
                                                                                  --------------    --------------
Net cash provided by financing activities                                             2,048,840         1,961,997
                                                                                  --------------    --------------

Net increase in cash and cash equivalents:                                              247,913            37,300
Beginning of period                                                                           -                 -
                                                                                  --------------    --------------
End of period                                                                     $     247,913     $      37,300
                                                                                  ==============    ==============

Supplemental cash flow information:
Cash paid during the period for interest                                          $     185,370     $     165,139
Cash paid during the period for income taxes                                      $           -     $       6,210

Supplemental disclosure of noncash investing
    activities related to acquisitions:
Fair value of assets acquired                                                     $   1,477,000
Fair value of liabilities assumed                                                             -
Note payable                                                                           (500,000)
Purchase price in excess of net assets acquired                                         523,000
Fees - transaction                                                                       24,469
                                                                                  --------------
Cash paid for acquisitions                                                        $   1,524,469
                                                                                  ==============
</TABLE>

   See accompanying notes

                                       3

<PAGE>

               ANCHOR PACIFIC UNDERWRITERS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                               September 30, 2001

NOTE 1 - BASIS OF PRESENTATION
------------------------------

     The accompanying consolidated balance sheet as of September 30, 2001,
consolidated statements of operations for the three months ended September 30,
2001 and 2000, consolidated statements of operations for the nine months ended
September 30, 2001 and 2000, and consolidated statements of cash flows for the
nine months ended September 30, 2001 and 2000 have been prepared by Anchor
Pacific Underwriters, Inc. (unless otherwise noted, "the Company," "Anchor
Pacific," "Anchor," "we," "APU," "us," or "our," refers to Anchor Pacific
Underwriters, Inc.) and have not been audited. The consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United Sates of America for interim financial information and
the instructions to Form 10-Q and Article 10 of Regulation S-X. These
consolidated financial statements, in our opinion, include all adjustments
necessary for a fair presentation of the consolidated financial position,
results of operations, and cash flows for all periods presented. The
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in our annual
Report on Form 10-K filed for the year ended December 31, 2000, which provides
further information regarding our significant accounting policies and other
financial and operating information. Interim operating results are not
necessarily indicative of operating results for the full year or any other
future period.

     The consolidated financial statements include the accounts of APU and its
wholly owned subsidiaries, Ward Benefits Administrators & Insurance Services,
Inc. ("WBAIS"), formerly known as Harden & Company Insurance Services, Inc.,
Harden & Company of Arizona ("Harden-AZ") and Spectrum Managed Care of
California, Inc. ("Spectrum CA"). Commencing in mid-2000 WBAIS and Harden-AZ
operated under the common business name "Ward Benefits Administrators" (WBAIS
and Harden-AZ may collectively be referred to as "WBA" or the "WBA companies").
All significant intercompany accounts and transactions have been eliminated.

     The preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires us to
make estimates and assumptions that may affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities, and the
reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.

     During 1998, 1999 and 2000, the Company has incurred substantial operating
losses and has used approximately $2,783,000 of cash in its operations. At
September 30, 2001, the Company had negative working capital of $7,219,632 and a
deficiency in assets of $6,110,872. The Company is in violation of the terms of
substantially all of its debt. Over the last year, the Company has received
financing from its majority shareholder, Ward North America Holding, Inc.
("WNAH"). Management has been notified by WNAH that it does not intend to
provide any further financing in support of the Company's operations. Effective
January 1, 2002, the Company discontinued the WBA companies' plan administration
business (Note 9). The Company's consolidated financial statements have been
reclassified to reflect the discontinuation of WBA's operations. Accordingly,
the revenues and operating and other expenses of WBA have been reported as
"Discontinued Operations."

     Management is attempting to develop a plan to restructure Anchor's debt,
raise additional working capital, and continue to operate Spectrum CA; the
Company's managed care subsidiary (Note 4). The assets and business of Anchor
and Spectrum CA are encumbered by collateral security interests granted for
loans made by Anchor's commercial bank and Legion Insurance Company ("Legion"),
both of which are in default. Neither Anchor nor Spectrum CA has capital
resources sufficient to cure the loan defaults and, as a result, their assets
could be subjected to foreclosure by either secured lender. Anchor and Spectrum
CA also owe significant sums to other unsecured creditors and lenders, including
the Novaeon, Inc. bankruptcy estate and WNAH and its subsidiaries including Ward
North America, Inc. ("WNA"). In the event a secured creditor of Anchor or
Spectrum CA commences legal action to collect its debt or enforce its security
interests or the Company suffers an adverse outcome in its pending litigation,
it is foreseeable that Anchor, and/or Spectrum CA would file for Chapter 11
bankruptcy protection to preserve their assets and ongoing operations.

                                       4

<PAGE>

     In 2002, WBAIS plans to make a general assignment of its assets for the
benefit of creditors to facilitate a workout of its debt under an arrangement
that is similar to bankruptcy liquidation. The assignee under such an assignment
is granted rights under state law similar to those of a federal bankruptcy
trustee, including the right to take possession of a debtor's assets, recover
avoidable transfers of property for the benefit of all creditors, pursue and
compromise claims on behalf of the debtor, and administer the equitable
distribution of the debtor's assets among its creditors.

     The continuation of the Company as a going concern is dependent on the
successful implementation of a refinancing plan and the retention of Spectrum
CA's managed care operations. Any such refinancing plan will likely require
Anchor's debt to be restructured or all or portions of it converted to Anchor
equity securities. Any such plan will also likely require the Company to raise
substantial additional working capital. There can be no assurance that such a
plan will be developed and successfully implemented.

NOTE 2 - REVENUE RECOGNITION
----------------------------

Continuing Operations

     Revenue from continuing operations consists of service fees for managed
care services performed by Spectrum CA telephonic medical case management and
field medical case management. Such services are performed under various fee
arrangements, including flat fees for specified procedures and on an hourly fee
basis. Fee income is recognized when services are rendered.

Discontinued Operations

     Third-party administrative services were provided through WBA. Revenue
consisted primarily of fees charged for the administration of fully insured and
self-insured health plans. Fee income was recognized when services were
rendered.

NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
-----------------------------------------

     The Financial Accounting Standards Board ("FASB") has issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments. SFAS
No. 133, which is effective for the Company beginning January 1, 2001, requires
that entities recognize all derivatives as either assets or liabilities on the
balance sheet, and measure those instruments at fair value. The Company does not
presently engage in any hedging activities to compensate for the effect of
exchange rate fluctuations on the net assets or operating results of its foreign
subsidiaries. The adoption of SFAS No. 133 did not have a material impact on the
Company's consolidated results of operations, financial position, or cash flows.

     In June 2001, the FASB issued SFAS No. 141, "Business Combinations," and
No. 142, "Goodwill and Other Intangible Assets." These Statements change the
accounting for business combinations and goodwill. SFAS No.141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. The adoption of SFAS No. 141 did not have a material impact
on the Company's consolidated results of operations, financial position, or cash
flows. SFAS No. 142 changes the accounting for goodwill and certain intangible
assets from an amortization method to an impairment-only approach. The Company
has not yet determined whether the adoption of SFAS No. 142 will have a material
impact on the Company's consolidated results of operations, financial position,
or cash flows.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual, and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business (as previously
defined in that opinion). SFAS No. 144 will be adopted January 1, 2002. The
Company has not yet determined whether the adoption of SFAS No. 144 will have a
material impact on the Company's consolidated results of operations, financial
position, or cash flows.

                                       5

<PAGE>

NOTE 4 - ACQUISITION
--------------------

     In January 2001, Anchor entered the managed care service business by
purchasing substantially all of the assets and business of Novaeon, Inc.
("Novaeon" and the "Novaeon Assets") from Novaeon's Chapter 11 bankruptcy
estate. Prior to its bankruptcy, Novaeon performed utilization review, peer
review, pre-certification, medical bill review and both telephonic and field
medical case management services on a national basis.

     The purchase of the Novaeon Assets was consummated pursuant to an asset
purchase agreement between the parties dated December 28, 2000 (the "Novaeon
Asset Purchase Agreement"), the terms of which were approved by the Bankruptcy
Court for the Eastern District of Pennsylvania (Bankruptcy No. 00-18821 BIF).
The purchase price under the Novaeon Asset Purchase Agreement was payable at the
closing by a cash down payment of $1,500,000 and delivery of Anchor's contingent
promissory note in the principal amount of $3,500,000 (the "Novaeon Note") due
on April 30, 2002. APU transferred the Novaeon assets to a newly created
subsidiary, Spectrum CA. The terms of the Novaeon Note provide for the principal
amount to be reduced on a dollar-for-dollar basis in the event the business
operated by Anchor using the Novaeon Assets realizes less than $10,000,000 in
revenue during the calendar year 2001. In no event, however, shall the principal
amount of the Novaeon Note be reduced below $500,000. For the year ended
December 31, 2001, Spectrum CA reported revenues of $4,673,678, resulting in
reduction of the principal amount of the Novaeon Note to $500,000. Anchor
accounted for the Novaeon acquisition using the purchase method of accounting.
The tangible assets and goodwill recorded at acquisition were $1,477,000 and
$547,000, respectively, taking into consideration the reduction in purchase
price described above. Goodwill is being amortized over 10 years.

     The Company is currently in negotiations with Novaeon to amend the payment
date of the Novaeon Note into several payments over an extended period of time.

     In order to finance the Novaeon acquisition and provide working capital for
its new managed care service business, Anchor obtained a secured convertible
loan from Legion in the amount of $2,000,000 (the "Legion Loan") due on December
31, 2001. Anchor used $1,500,000 of the Legion Loan proceeds for the required
down payment. The balance of the proceeds was later transferred to Anchor to pay
back part of the line of credit outstanding and short-term borrowings with WNAH.
The note evidencing the Legion Loan (the "Legion Note") provided for its
automatic redemption in exchange for the issuance of Anchor equity securities
upon the completion by the Company of an equity offering by June 30, 2001
resulting in gross proceeds of at least $3,000,000. The repayment of the Legion
Loan is secured by a security interest in favor of Legion encumbering all the
Novaeon Assets pursuant to the terms of a Security Agreement between the parties
dated January 12, 2001.

     The Legion Loan was obtained through the cooperation and assistance of
WNAH. As a condition of making the Legion Loan, Legion required WNAH to enter
into a Note Purchase Agreement dated January 12, 2001 (the "Legion Note Purchase
Agreement"). The Legion Note Purchase Agreement granted Legion the option to
cause WNAH to purchase the Legion Note from Legion in the event Anchor failed to
complete an equity offering by June 30, 2001. The consideration for the purchase
of the Legion Note under the Legion Note Purchase Agreement is the issuance of
WNAH common stock having an aggregate value of $2,000,000 (plus the sum of
unpaid interest under the Legion Note) at an agreed value of $4 per share.

     In conjunction with the Legion Note Purchase Agreement, Anchor and WNAH
entered into an assignment and assumption agreement dated January 12, 2001 in
which Anchor agreed that in the event that (i) Anchor failed to complete a
$3,000,000 equity offering by June 30, 2001 and (ii) Legion exercised its option
to cause WNAH to purchase the Legion Note under the Legion Note Purchase
Agreement, WNAH, as the transferee holder of the Legion Note, would have the
right to acquire all of the equity securities of Spectrum CA from Anchor in
exchange for the cancellation and release of all Anchor's repayment obligations
under the Legion Note and the assumption by WNAH of all Anchor's repayment
obligations to Novaeon's bankruptcy estate under the Novaeon Note.

     Anchor was unable to complete a $3,000,000 equity offering or repay the
Legion Note by June 30, 2001 as contemplated at the time of the Novaeon
acquisition. The Legion Note was subsequently amended by the parties to extend
the maturity date to December 31, 2001. The Legion Note Purchase Agreement was
also

                                       6

<PAGE>

amended by Legion and WNAH to extend its term to coincide with the amended
maturity date under the Legion Note. The term of the amended Legion Note
Purchase Agreement lapsed on December 31, 2001. The Legion Note has not been
repaid by Anchor. Anchor has had discussions with Legion regarding the extension
or amendment of the Legion Note. There can be no assurance that amended terms
favorable to Anchor will result from these efforts.

     Legion was placed into Rehabilitation by court order under Pennsylvania
insurance law on April 1, 2002. As of that date, the Pennsylvania Insurance
Commissioner assumed possession and control of all Legion's assets and business
to protect the interests of Legion's policyholders. Anchor is seeking to conduct
negotiations with the Pennsylvania Insurance Commissioner regarding an extension
of the Legion Note's maturity and the amendment of other terms.

     The following table presents the unaudited pro forma results from
continuing operations assuming we had acquired Novaeon at the beginning of
fiscal 2001. Novaeon experienced a substantial change in business in 2000 as
result of its bankruptcy; therefore, the revenue and operating results from 2000
are not comparable to Spectrum CA's operating results in 2001. This information
may not necessarily be indicative of our future combined results.

<TABLE>
<CAPTION>
                                            Pro forma Results    Pro forma Results for
                                           for the Three Month      the Nine Month
                                               Period Ended          Period Ended
                                            September 30, 2001    September 30, 2001
                                                   2001                  2001
                                           -------------------   ---------------------
<S>                                        <C>                   <C>
Revenues from continuing operations             $1,048,482           $ 3,611,063
                                           ===================   =====================
Loss from continuing operations                 $  (94,079)          $  (478,156)
                                           ===================   =====================
Basic and diluted loss per share from
continuing operations                           $    (0.02)          $     (0.10)
                                           ===================   =====================
</TABLE>

NOTE 5 - TERM BANK LOAN
-----------------------

     On September 30, 1999, the Company entered into a term loan ("Secured Bank
Loan") of $931,485 with a bank, combining the balances owing on an existing term
loan and a $250,000 bank loan. The basic terms of the Secured Bank Loan are (a)
monthly interest payments equal to bank's prime rate, plus 2.5% (b) a maturity
date of October 7, 2002 and (c) monthly principal payments in installments of
$16,500 which began on November 7, 1999. The Secured Bank Loan is secured by
certain receivables, property and equipment, and other assets. The loan
agreement with the bank contains certain restrictive covenants that, among other
things, require Anchor to maintain certain levels of net worth and cash flow (as
defined), and prohibits the payment of dividends. Anchor was not in compliance
with these covenants at September 30, 2001. All amounts have been classified as
current liabilities. The total amount due as of September 30, 2001 was $551,986.

     The balance of the Secured Bank Loan was subsequently reduced to $377,986
as of March 31, 2002 through additional principal payments required by Comerica
Bank (the "Bank") as consideration under that certain Forbearance Agreement and
Amendment to Promissory Note and Conditional Consent to Subsidiary Transactions
dated January 2, 2002 executed between Anchor and the Bank (the "Forbearance
Agreement"). The Forbearance Agreement amended the repayment terms of the
Secured Bank Loan making it payable in monthly amortized installments of
principal in the amount of $20,000, plus applicable interest for that month,
with a balloon payment of $257,986 due on October 5, 2002. The Forbearance
Agreement also evidenced the Bank's forbearance of Anchor's financial covenant
defaults under the Secured Bank Loan until January 31, 2002 and the Bank's
consent to the cessation and wind down of WBAIS's business. As a condition of
its forbearance, the Bank sought and obtained the execution and delivery of an
Unconditional Guaranty of the Secured Bank Loan by WNAH. The repayment of the
Secured Bank Loan is further secured by a blanket security interest in favor of
the Bank encumbering the assets of Anchor and its subsidiaries.

NOTE 6 -CONVERTIBLE DEBENTURES
------------------------------

Series B Convertible Debentures

     During 1998, Anchor raised $215,000 from five members of the Board of
Directors and other qualified investors by offering 10% Convertible Subordinated
Debentures Series B (the "Series B Debentures"). The basic

                                       7

<PAGE>

terms of the Series B Debentures were (a) 10% interest, payable semi-annually in
arrears (b) two year maturity (c) conversion price of $0.50 per share (d)
"Piggyback" registration rights for three years (e) for each $5,000 of Series B
Debentures acquired, an investor received a five-year warrant to acquire 2,000
shares of Anchor common stock at an exercise price of $0.50 per share (f)
subordination provisions that subordinate the Series B Debentures to Anchor's
"Senior Debt" (as defined in the Series B Debentures). In early 1999, Anchor
raised an additional $50,000 and redeemed one debenture for $15,000. On March
15, 2000, Anchor redeemed $130,000 of the Series B Debentures. In late 2000,
Anchor redeemed $45,000 of the outstanding Series B Debentures. At September 30,
2001, Anchor was in default on the outstanding balance of $75,000 in Series B
debentures, which has been classified as current in the accompanying balance
sheet as of September 30, 2001.

Series D Convertible Debentures

     During 1999, Anchor raised $244,000 from other qualified investors by
offering 10% Convertible Subordinated Debentures, Series D (the "Series D
Debentures"). The basic terms of the Series D Debentures were (a) 10% interest,
payable semi-annually in arrears (b) two year maturity (c) conversion price of
$0.50 per share (d) "Piggyback" registration rights for three years (e) for each
$5,000 of Series D Debentures acquired, an investor received a five year warrant
to acquire 3,000 shares of Anchor common stock at an exercise price of $0.50 per
share and (f) subordination provisions that subordinates the Series D Debentures
to Anchor's "Senior Debt" (as defined). At September 30, 2001, Anchor was in
default on the entire $244,000 in Series D Debentures, which have been
classified as current in the accompanying balance sheet as of September 30,
2001.

Series E Convertible Debentures

     In late 1999, Anchor raised $400,000 from WNAH by offering 10% Convertible
Subordinated Debentures, Series E (the "Series E Debentures"). The basic terms
of the Series E Debentures were (a) 10% interest, payable semi-annually in
arrears (b) two year maturity (c) conversion price of $0.50 per share (d)
"Piggyback" registration rights for three years (e) for each $5,000 of Series E
Debentures acquired, WNAH received a five year warrant to acquire 3,000 shares
of Anchor common stock at an exercise price of $0.50 per share and (f)
subordination provisions that subordinates the Series E Debentures to Anchor's
"Senior Debt" (as defined). The Series E Debentures are superior to all other
debentures of the Company, including without limitation those Series B and D
debentures, and shall constitute "Senior Debt" for purposes of those debentures.
During 2000, Anchor raised an additional $100,000 from WNAH through the Series E
offering, subject to the terms and provisions described above, bringing the
total outstanding Series E debentures to $500,000. At September 30, 2001, Anchor
was in default on the entire $500,000 in Series E Debentures, which have been
classified as current in the accompanying balance sheet as of September 30,
2001.

NOTE 7 - CONVERTIBLE LOAN FACILITY
----------------------------------

     A $1,000,000 convertible loan facility (the "Convertible Loan") was made
available immediately following the closing of the purchase of the Series A
Preferred shares by WNAH. The Convertible Loan is convertible, at WNAH's option,
into Series A Preferred shares, which are further convertible into a number of
shares of common stock. These shares of common stock, when added to the shares
of common stock issued or issuable pursuant to the Series E Debentures (not
including the warrants accompanying the Series E Debentures) and other shares of
Series A Preferred issued to WNAH, would constitute 73.5% of Anchor's common
stock on a fully-diluted basis following such conversion, assuming the maximum
amount of $1,000,000 was borrowed and converted by Anchor pursuant to the
Convertible Loan. Anchor was in default on the balance of $999,000, which has
been classified as current in the accompanying balance sheet as of September 30,
2001.

NOTE 8 - COMPUTATION OF NET LOSS PER SHARE
------------------------------------------

     Basic net loss per common share is presented in conformity with SFAS No.
128, "Earnings per Share," for all periods presented. Basic net loss per share
is computed using the weighted-average number of outstanding shares of common
stock.

     Diluted net loss per share is computed using the weighted-average number of
shares of common stock outstanding and, when dilutive, rights to purchase common
stock under outstanding options, warrants, and conversion rights, potential
common shares from options and warrants to purchase common stock using the
treasury method and from convertible debt and equity securities using the as-if
converted basis. All common shares issuable under outstanding vested options,
warrants, and conversion rights, have been excluded from the computation of
diluted net loss per share for 2001 and 2000 because the effect would have been
anti-dilutive.

                                       8

<PAGE>

     The following table provides a reconciliation of the numerators and
denominators used in calculating basic and diluted loss per share:

<TABLE>
<CAPTION>
                                                        Three Month Period Ended       Nine Month Period Ended
                                                               September 30                  September 30
                                                                (unaudited)                   (unaudited)
                                                       ---------------------------  --------------------------------
                                                           2001           2000           2001              2000
                                                       ------------   ------------  --------------    --------------
<S>                                                    <C>            <C>           <C>               <C>
Loss from continuing operations                        $   (94,079)   $   (69,560)  $    (452,695)    $    (184,489)
Loss from discontinued operations                         (460,533)      (333,814)     (1,517,850)       (1,238,880)
                                                       ------------   ------------  --------------    --------------
Net loss                                               $  (554,612)   $  (403,374)  $  (1,970,545)    $  (1,423,369)
                                                       ============   ============  ==============    ==============
Basic and diluted loss from continuing operations
    per share                                          $     (0.02)   $     (0.02)  $       (0.10)    $       (0.04)
Basic and diluted loss from discontinued
    operations per share                                     (0.10)         (0.07)          (0.32)            (0.26)
                                                       ------------   ------------  --------------    --------------

Basic and diluted net loss per share                   $     (0.12)   $     (0.09)  $       (0.42)    $       (0.30)
                                                       ============   ============  ==============    ==============
Weighted-average number of shares outstanding:           4,709,922      4,710,042       4,709,922         4,710,042
                                                       ============   ============  ==============    ==============
</TABLE>

NOTE 9 - DISCONTINUED OPERATIONS
--------------------------------

     Revenue losses from terminating and non-renewing accounts of the WBA
companies accelerated rapidly after 2000 and management was unable to reduce
operating costs sufficiently to mitigate declining revenue. The WBA companies'
clients continued to be generally dissatisfied with WBA's limited data reporting
capabilities and inability to provide system features available to them from
other vendors such as direct internet access to plan and benefits information
for employers, covered employees and medical providers. Ongoing efforts by
Anchor's management and Board of Directors to secure additional equity and/or
debt capital were unsuccessful. In June 2001, Anchor's Board of Directors
determined it was doubtful that sufficient working capital could be obtained to
address the WBA companies' rising debt and complete the turn-around of their
employee benefits plan administration business.

     In late 2001, management determined WBAIS could not remain in business and
service its customers beyond the first quarter of 2002 without an infusion of
substantial additional working capital. WBAIS determined it was unlikely that
sufficient working would be available to it in that time frame, if ever.
Management concluded that WBAIS would have no choice but to abandon its service
contract obligations and cease operations if an acceptable alternative was not
found. In order to avoid the imminent breach of its remaining service agreements
and preserve the value of its business for the benefit of the company and its
creditors, and its parent shareholder, WBAIS entered into an agreement with
Loomis Benefits West, Inc. ("LBW") dated January 1, 2002 (the "Commission
Arrangement").

     The Commission Arrangement provides for WBAIS and its affiliates to
introduce benefit plan administration customers to LBW for a ten-year period
commencing on January 1, 2002. In exchange for the referrals and the prospect of
ongoing referrals, LBW agreed to pay WBA: (a) monthly "Base Revenue Commissions"
equal to 4% of LBW's "Base Gross Revenue" during 2002 - 2003 and 6% of LBW's
Base Gross Revenue during 2004 - 2011; and (b) quarterly "Business Development
Consideration" in the amount of 10% of LBW's "Gross Revenue" derived from
"Referred Customers" during 2002 - 2011. "Gross Revenue" under the Commission
Arrangement means commissions and administration fees earned by LBW on a cash
basis less brokerage fees and commissions payable to other brokers, refunds,
rebates, credits, etc. "Base Gross Revenue" is defined as "Gross Revenue" less
"Gross Revenue" derived by LBW from "Referred Customers". "Referred Customers"
are defined as LBW customers that were not previously customers of WBAIS and
that become customers of LBW after January 1, 2002 through the direct or
indirect referral of WBAIS or an affiliate.

         The Commission Arrangement also requires WBAIS to indemnify LBW and its
affiliates from future claims brought by its creditors and other claimants for
claims relating to or arising from obligations or acts of WBAIS. In addition to
the Commission Arrangement, WBAIS agreed to sell LBW a portion of its furniture
located in its

                                       9

<PAGE>

Portland, Oregon office and LBW agreed to reimburse WBAIS for certain employee
compensation and benefits expenses paid by WBAIS in December 2001 and January
2002.

     In 2002, the WBAIS plans to make a general assignment of assets for the
benefit of creditors to facilitate a workout of debt under an arrangement that
is similar to bankruptcy liquidation. The assignee under such an assignment is
granted rights under state law similar to those of a federal bankruptcy trustee,
including the right to take possession of a debtor's assets, recover avoidable
transfers of property for the benefit of all creditors, pursue and compromise
claims on behalf of the debtor, and administer the equitable distribution of the
debtor's assets among its creditors.

     Pursuant to Accounting Principles Board Opinion No. 30, "Reporting the
Results of Operations -Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," the Company's Consolidated Financial Statements have been
reclassified to reflect the discontinuing of WBA's operations. Accordingly,
revenues and operating and other expenses of WBA have been segregated in the
Consolidated Statements of Operations as Discontinued Operations.

     For the three and nine months ended September 30, 2001 and 2000,
respectively, the following is summarized financial information for the
discontinued operations:

<TABLE>
<CAPTION>
                                                Three Month Period Ended         Nine Month Period Ended
                                                      September 30                     September 30
                                                  2001           2000             2001              2000
                                             -------------   -------------   --------------   -------------
<S>                                          <C>             <C>             <C>              <C>
Service revenues                             $  1,014,227    $  2,151,792    $   4,061,386    $  6,888,802
                                             =============   =============   ==============   =============

Loss from operations of discontinued
business                                     $   (460,533)   $   (333,814)   $  (1,057,963)   $ (1,238,880)
Loss on disposal of discontinued
operations during phase-out period                      -               -         (459,887)              -
                                             -------------   -------------   --------------   -------------

Loss from discontinued operations (after
applicable income taxes of $0 and $0)        $   (460,533)   $   (333,814)   $  (1,517,850)   $ (1,238,880)
                                             =============   =============   ==============   =============
</TABLE>

     Loss on disposal of discontinued business during phase out period includes
estimated costs associated with the wind down of WBA and estimated referral fees
from LBW. The costs include future office lease and operating lease obligations
of approximately $428,000, fixed asset write-downs of $42,000 and other
operating costs of approximately $40,000. The referral fees included in the loss
are estimated at $50,000 for 2002.

NOTE 10 - COMMITMENTS AND CONTINGENCIES
---------------------------------------

Anchor

     On May 15, 2002 Anchor and its majority shareholder, WNAH, settled
litigation pending before the Superior Court of Contra Costa, California, Case
Number COO-03258, with two of Anchor's former executive officers and its former
auditing firm. The litigation arose from various actions and events occurring in
1999 and 2000. Certain bifurcated claims ordered to arbitration by the court had
previously resulted in a September 2001 arbitration award against Anchor in the
approximate amount of $304,000 in favor of its former chief executive officer.
Under the terms of a global settlement, Anchor and WNAH jointly agreed to pay
Anchor's former chief executive officer the sum of $365,000 with $240,000 of
such amount being provided by their employee practices liability insurer. All
causes of action plead against all corporate and individual defendants and
cross-defendants were dismissed with prejudice under the settlement with no
admission of fault or liability by any party

     Management is not aware of any other litigation to which Anchor is
currently a party or to which any property of Anchor is subject, which might
materially adversely affect the financial condition or results of operations of
Anchor.

The WBA Companies
     Harden-AZ and WBAIS are defendants in a number of lawsuits seeking damages
for alleged professional

                                       10

<PAGE>

negligence or breach of contract in the performance of their employee benefit
plan administration services. These matters are of a nature and type that
typically arise from time to time in the normal course of business, and, except
for claims that are strictly contractual in nature, are covered under
professional liability policies effective during the years in which the alleged
acts or omissions occurred. Although the pending professional negligence and
employee liability claims against the WBA companies are, for the most part,
covered by insurance, management is concerned that available cash resources in
the future will be insufficient to satisfy the deductible payment obligations
under the affected insurance policies, resulting in the termination of the
policies by the insurers for breach of the insurance contracts. There can be no
assurance that the companies will be able to maintain their insurance coverage
in the future.

     WBAIS is a defendant in an administrative proceeding before the Oregon
Bureau of Labor and Industries filed on March 1, 2001. The claimant in the
matter was an employee of WBAIS that was involuntarily terminated in October
2000 for excessive absenteeism. The claimant alleges the termination was in
violation of the federal Family Medical Leave Act, the Oregon Family Medical
Leave Act and the Americans with Disabilities Act. The claim is covered under
Anchor's blanket employee practices liability insurance policy and its potential
liability for defense and indemnity costs is limited to the policy's per claim
deductible of $50,000.

     The WBA companies anticipate that trade creditors will initiate
considerable additional litigation in 2002 and beyond due to the companies'
significant trade debt balances. Both companies lack sufficient cash resources
to satisfy these trade debts and any lawsuit filed against the companies will
further adversely affect their ability to satisfy creditor claims.

Spectrum CA
     Management is not aware of any lawsuits to which Spectrum CA is currently a
party or to which any property of Spectrum CA is subject which might materially
adversely affect its financial condition or results of operations.


NOTE 11 - SUBSEQUENT EVENTS
---------------------------

Legion Insurance Company
     On April 1, 2002, Legion, a shareholder of WNAH was placed into voluntary
rehabilitation by the Commonwealth Court of Pennsylvania. Beginning on April 1,
2002, Legion will operate in run-off under the control of the Insurance
Commissioner of the Commonwealth of Pennsylvania as Rehabilitator. Legion will
not write any new insurance policies.

     Legion is the holder of Anchor Pacific's $2 million secured convertible
loan. Spectrum CA performs managed care services for Legion. Legion represented
21% of the Company's service revenue in the year ended 2001. The Company had an
accounts receivable balance due from Legion programs of approximately $146,000
at September 30,2001 and $157,000 at December 31, 2001. Management is uncertain
as to the effect of Legion's voluntary rehabilitation on its business.

                                       11

<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Background
     Anchor's financial condition continued to deteriorate during 2001. The
Company reported a deficiency of assets of $6,110,872 and negative working
capital of $7,219,632 as of September 30, 2001. Ongoing operating losses and
inadequate working capital led to the wind down and closure of the WBA
companies' benefits plan administration business operations by January 2002. As
a result of discontinuing WBA's operations, the results of operations of WBA
have been segregated in the Consolidated Statement of Operations as discontinued
operations and previously reported financial statements have been restated.
Without the business of WBA, Anchor did not have continuing operations in 2000.

     In January 2001, Anchor entered the managed care service business by
purchasing substantially all of the assets and business of Novaeon, Inc. from
Novaeon's Chapter 11 bankruptcy estate and formed a new subsidiary, Spectrum CA.
Spectrum CA's principal business activity is managing the medical and disability
care received by injured employees receiving workers' compensation benefits and
employee and dependent participants in group accident and health benefits plans.
These services are performed by licensed registered nurses or certified
rehabilitation vocational counselors employed by Spectrum CA as case managers.
Spectrum CA's client base consists of employers and employer groups that self
insure their workers' compensation risks, workers compensation insurers, and
national and regional third-party workers compensation claims administrators,
including WNA.

     Spectrum CA currently performs telephonic case management and utilization
services at nine locations throughout the United States, with its principal
facility located in Exton, Pennsylvania. Spectrum CA shares office space with
Ward North America, Inc. at three of the locations. Dedicated Spectrum CA case
management and utilization review units occupy space within five offices of its
largest third-party claims administration client. Spectrum CA represents the
continuing operations of Anchor in 2001.

     Anchor and Spectrum CA presently lack sufficient working capital to meet
their respective delinquent and maturing debt obligations. The Company's outside
auditors accordingly noted in their report on the Company's December 31, 2000
financial statements that this fact, among others, raises substantial doubt
about the Company's ability to continue as a going concern.

     Negotiations involving Comerica Bank, Legion, the Pennsylvania Insurance
Commissioner as Rehabilitator of Legion, and the Novaeon, Inc. Chapter 11
bankruptcy estate, among others, are ongoing regarding a number of matters
critical to the continued financial viability of Spectrum CA and Anchor. These
matters include: (a) Comerica Bank's extension of the Forbearance Agreement
relating to Anchor's covenant defaults under the Secured Bank Loan beyond
January 31, 2002 and the extension of the Loan's maturity date beyond October 5,
2002; (b) the extension of the Legion Loan's maturity date beyond December 31,
2001; and (c) the amendment of the Novaeon Note to provide for periodic payments
beyond April 30, 2002. Recently, Comerica Bank sought and obtained WNAH's
guarantee of Anchor's obligations under the Secured Bank Loan. Despite the
guarantee provided by WNAH, there can be no assurance that Comerica Bank will
extend the term of the Forbearance Agreement beyond January 31, 2002 or agree to
amend the Secured Bank Loan's maturity date as sought by Anchor. In the event
these debt agreements are not successfully re-negotiated, Anchor's assets,
including its ownership interest in Spectrum CA, and Spectrum CA's ownership of
its assets and business, would likely be subject to the Bank's foreclosure
rights under the Secured Bank Loan and Legion's foreclosure remedies as a
secured creditor under the Legion Loan.

     Should any of the above or other possible contingencies occur, Anchor and
Spectrum CA could be deprived of substantially all of their assets and
businesses.

     The Company is considering a number of refinancing alternatives to address
its debt and enable Anchor to remain in business and grow Spectrum CA's managed
care business. Critical components of any resulting plan will likely require the
restructuring of debt and the conversion of all, or significant portions, of
debt held by affiliated and unaffiliated creditors to Anchor or Spectrum CA
equity securities. Management anticipates any such plan will also require Anchor
and/or Spectrum CA to raise substantial additional working capital. Management
is also evaluating the potential benefits of a Chapter 11 bankruptcy filing by
Anchor and/or Spectrum CA to protect the assets of those companies from creditor
attachments and allow them to seek to restructure debt, resolve litigation, and
raise working capital. There can be no assurance that Anchor and Spectrum CA
will be able to accomplish these objectives and remain in business.

                                       12

<PAGE>

Results of Continuing Operations - Three Months Ended September 30, 2001 and
2000

     Results of continuing operations consist of the operations of Spectrum CA
and the general and administrative costs and interest expense of Anchor.
Spectrum CA was formed out of the acquisition of the assets of the bankruptcy
estate of Novaeon, Inc. in January 2001. Novaeon, Inc. experienced a substantial
change in business in 2000 as result of its bankruptcy, therefore there are no
comparable operating results from 2000 that would provide relevant comparison to
Spectrum CA's operating results in 2001.

Revenues

     Total Revenues. Total revenues were $1,048,482 for the three months ended
September 30, 2001. The revenues continued to decline this period as a result of
losses of approximately 5 customer accounts representing 40% of Novaeon's
business that was obtained in the Novaeon Asset acquisition. Some of the losses
were offset by new customers that Spectrum CA gained as a direct result of its
affiliation with WNA.

Expenses

     Total Operating Expenses. Total operating expenses were $1,037,927 for the
three-months ended September 30, 2001. The expenses consisted mainly of employee
compensation and benefits of $540,638, rent expense of $103,452 and corporate
overhead charges of $104,849. Total operating expenses decreased $294,311 from
the three months ended June 30, 2001 in response to the loss of several customer
accounts.

     Employee Compensation and Benefits. Employee compensation and benefits were
$540,638 for the three months ended September 30, 2001. Spectrum CA had an
average of 49 employees during this period, a decrease of 18% or 11 employees
from the three months ended June 30, 2001. Spectrum CA reduced its headcount in
response to the loss of customer accounts.

     Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $459,004 for the three months ended September 30,
2001. These expenses consist mainly of rent expense of $103,452, corporate
overhead charge from WNAH of $104,849 and professional fees of $82,240. Spectrum
CA has approximately 9 locations in the United States. In the three months ended
September 30, 2001 Spectrum CA reduced its office space in several of its
locations to correspond with its headcount reductions. Spectrum CA is charged
approximately 10% of its revenue by WNAH for corporate services such as
accounting, legal, human resources and IT provided by WNAH. Professional fees
includes cost for outside legal costs and audit fees.

     Depreciation. Depreciation was $24,598 for the three months ended September
30, 2001. The expense relates to the $320,000 of equipment acquired in the
Novaeon asset purchase.

     Amortization of Goodwill. Amortization of goodwill was $13,687 for the
three months ended September 30, 2001. At September 30, 2001, goodwill is
comprised solely of the goodwill recorded as a result of the Novaeon purchase,
and is being amortized over 10 years. Goodwill represents the excess of the cost
of acquisitions over the fair value of net assets acquired of Novaeon.

     Interest Expense. Interest expense increased $36,455 or 54%, to $104,634
for the three months ended September 30, 2001 from $68,179 for the three months
ended September 30, 2000. The increase was due to the issuance of the Novaeon
note and the Legion loan as well as the convertible loan facility provided by
WNAH.

     Income Tax Expense. Income tax expense decreased $1,500 or 100%, to $0 for
the three months ended September 30, 2001 from $1,500 for the three months ended
September 30, 2000.

Results of Continuing Operations - Nine Months Ended September 30, 2001 and 2000

Revenues

     Total Revenues. Total revenues were $3,404,063 for the nine months ended
September 30, 2001. The revenues continued to decline this period as a result of
losses of approximately 5 customer accounts representing

                                       13

<PAGE>

40% of Novaeon's business that was obtained in the Novaeon Asset acquisition.
Some of the losses were offset by new customers that Spectrum CA gained in the
third quarter of 2001 as a direct result of its affiliation with WNA.

Expenses

     Total Operating Expenses. Total operating expenses were $3,537,255 for the
nine months ended September 30, 2001. The expenses consisted mainly of employee
compensation and benefits of $2,099,561, rent expense of $414,890 and corporate
overhead charges of $335,050. Total operating expenses decreased towards the
later half of the period in response to the loss of several customer accounts.

     Employee Compensation and Benefits. Employee compensation and benefits were
$2,099,561 for the nine months ended September 30, 2001. Spectrum CA had an
average of 59 employees during this period. Spectrum CA reduced its headcount
34% from 74 employees in January to 49 employees at September 30, 2001. The
reduction is in response to the loss of customer accounts.

     Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $1,325,433 for the nine months ended September 30,
2001. These expenses consist mainly of rent expense of $414,890, corporate
overhead charge from WNAH of $335,050 and professional fees of $153,012.
Spectrum CA has approximately 9 locations in the United States. Spectrum CA is
charged approximately 10% of its revenue by WNAH for corporate services such as
accounting, legal, human resources and IT provided by WNAH. Professional fees
includes cost for outside legal costs and audit fees.

     Depreciation. Depreciation was $71,200 for the nine months ended September
30, 2001. The expense relates to the $320,000 of equipment acquired in the
Novaeon asset purchase.

     Amortization of Goodwill. Amortization of goodwill was $41,061 for the nine
months ended September 30, 2001. At September 30, 2001, goodwill is comprised
solely of the goodwill recorded as a result of the Novaeon purchase, and is
being amortized over 10 years. Goodwill represents the excess of the cost of
acquisitions over the fair value of net assets acquired of Novaeon.

     Interest Expense. Interest expense increased $144,268 or 81%, to $322,766
for the nine months ended September 30, 2001 from $178,498 for the nine months
ended September 30, 2000. The increase was due to the issuance of additional
debentures, the convertible loan facility and the Novaeon note.

     Income Tax Expense. Income tax expense decreased $7,710 or 100%, to $0 for
the nine months ended September 30, 2001 from $7,710 for the nine months ended
September 30, 2000.

Results of Discontinued Operations - Three Months Ended September 30, 2001 and
2000

Revenues

     Total revenues decreased $1,137,565 or 52%, to $1,014,227 for the three
months ended September 30, 2001 from $2,151,792 for the three months ended
September 30, 2000. This decrease was attributable to declining revenue in WBA's
California and Arizona offices, resulting from the closure of its Concord,
California offices, and customer services deficiencies that caused a loss in
business.

Loss from discontinued operations

     Loss from discontinued operations increased $126,719 or 38%, to $460,533
for the three months ended September 30, 2001 from $333,814 for the three months
ended September 30, 2000. This increase is comprised of the decrease in revenue
described above, coupled with a smaller decrease in operating expenses of
$1,014,251, made up of a drop in salary and compensation costs and general and
administrative expenses due to the closure of WBA's Arizona office.

                                       14

<PAGE>

Results of Discontinued Operations - Nine Months Ended September 30, 2001 and
2000

Revenues

     Total revenues decreased $2,827,416 or 41%, to $4,061,386 for the nine
months ended September 30, 2001 from $6,888,802 for the nine months ended
September 30, 2000. This decrease was attributable to declining revenue in WBA's
California and Arizona offices, resulting from the closure of its Concord,
California offices, and customer service deficiencies that caused a loss in
business.

Loss from discontinued operations

     Loss from discontinued operations increased $278,970 or 23%, to $1,517,850
for the nine months ended September 30, 2001 from $1,238,880 for the nine months
ended September 30, 2000. The increase in the loss for the nine months ended
September 30, 2001, is the result of an additional $459,887 of expenses relating
to the disposal of WBA, coupled with the decrease in revenue and an offsetting
decrease of operating expenses of $3,011,077. The operating expenses decrease is
the result of reductions in salary and compensation expense from the closure of
WBA's Concord, California office and Scottsdale, Arizona office. In addition,
WBAIS determined that certain software and associated hardware was impaired and
recorded an impairment charge of $285,842 related to these assets during the
nine months ended September 30, 2001.

Liquidity and Capital Resources

     Anchor has a significant negative net worth and negative working capital,
and is in default of the terms of substantially all of its debt. The Company
will require funds in excess of those presently available to satisfy its
projected working capital and debt service needs in the normal course of
business over the next twelve months. The Company received periodic demand loan
advances from WNAH during 2000 to support its operations. WNAH ceased its
advances to Anchor in February 2001. There can be no assurance that Anchor will
be able to obtain additional working capital on acceptable terms, if at all. The
Company is also seeking to restructure the terms of its secured debt with its
commercial bank and Legion. There can be no assurance that such debt will be
restructured to provide terms sought by the Company. In the event Anchor is
unable to raise additional working capital and successfully restructure its debt
obligations, the Company's assets and the assets of its subsidiaries will remain
subject to possible foreclosure by one or more secured creditors. If such were
to occur, the Company and its subsidiaries could be forced to discontinue all
operations and/or seek bankruptcy protection.

     Anchor reported net cash flows provided by operations of $223,235 for nine
months ended September 30, 2001, compared to net cash flows used by operations
of $1,651,234 for the same period in 2000. During the first nine months of 2001
Anchor incurred a net loss of $1,970,545 including non-cash items of
depreciation of $246,887, amortization of $41,061 and a write-down of
internal-use software of $285,842 coupled with an increase in accounts payable
and accrued expenses of $1,121,292 as a result of delayed payment on accounts
payable due to a lack of working capital and the accrual of disposal costs
related to the divestiture of WBA. During the first quarter of 2000, Anchor met
its operating needs from several sources, including the use of proceeds received
from the sale Series A Preferred Stock, the use of proceeds from the sale of
Series E Debentures and the loan facility and advances from WNAH.

     Net cash used in investing activities was $2,024,162 and $273,463 for the
nine months ended September 30, 2001 and 2000, respectively. This included
$1,524,469 used to acquire the assets of Novaeon and $499,693 used primarily for
software development and systems implementation. The 2000 expenditures consist
primarily of software development and systems implementation to update the
eligibility and claims processing system.

     Net cash provided by financing activities for the nine months ended
September 30, 2001 was $2,048,840 primarily from the issuance of the $2,000,000
Legion Loan, $593,731 from operating charges and advances from the subsidiaries
of WNAH, $90,000 from the Convertible Loan, $136,139 from increases in other
debt, reduced by repayments of: $409,000 in short-term advances to WNAH,
$148,500 on the outstanding Secured Bank Loan, $91,000 on the Convertible Loan,
$60,145 on other debt and $62,385 on capital lease obligations. The cash
provided by financing activities for the nine months ended September 30, 2000
was comprised primarily of the net proceeds of $1,963,588 received from the
issuance of preferred stock to WNAH and $770,000 received from the issuance of
convertible debentures reduced primarily by payments on long-term liabilities
and capital lease obligations of $771,591.

                                       15

<PAGE>

     Short-term borrowings, current portion of long-term debt and current
portion of capital lease obligations at September 30, 2001 totaled $6,068,067 in
the aggregate (as compared to $3,505,572 at December 31, 2000), and primarily
consisted of: (a) $551,986 due under the Secured Bank Loan; (b) $999,000 due
WNAH under the convertible loan facility, (c) $819,000 of the debentures; (d)
$2,000,000 due on the Legion note; (e) $500,000 due on the Novaeon note; (f)
$116,347 in current capital lease obligations; (g) $161,269 of other debt and
(i) $920,465 of borrowings from related parties.

     At September 30, 2001, capital lease obligations less the current portion
discussed above, totaled $161,138 as compared to $232,453 at December 31, 2000.

     Anchor has not paid cash dividends in the past and does not expect to pay
cash dividends in the foreseeable future.

Forward-Looking Information

     This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of that term under the Private Securities Litigation Reform
Act of 1995. Additional written or oral forward-looking statements may be made
by Anchor from time to time, in filings with the Securities and Exchange
Commission or otherwise. Statements contained herein that are not historical
facts are forward-looking statements made pursuant to the safe harbor provisions
referenced above. For example, discussions concerning Anchor's ability to create
new products and services, and expansion of Anchor through internal growth of
existing and new products and services, may involve forward-looking statements.
In addition, when used in this discussion, the words, "anticipates," "expects,"
"intends," "plans" and variations thereof and similar expressions are intended
to identify forward-looking statements.

     Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified, based on current
expectations. Consequently, future events and actual results could differ
materially from those set forth in, contemplated by, or underlying the
forward-looking statements contained in this Quarterly Report. Statements in
this Quarterly Report, particularly in the Notes to Financial Statements and
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations describe certain factors, among others, that could contribute to
or cause such differences. Such forward-looking statements involve risks and
uncertainties, and actual results could differ from those described herein.
While the statements represent management's current judgment as to the near-term
future prospects of its business, such risks and uncertainties could cause
actual results to differ from the above statements. While the statements
represent management's current judgment as to the near-term future prospects of
its business, such risks and uncertainties could cause actual results to differ
from the above statements. Factors, which could cause actual results to differ,
include the following: controlling operating costs; the impact of competitive
products, pricing and services; the availability of capital to finance
operations and future expansion; and unanticipated regulatory changes. Other
risk factors are detailed in Anchor's filings with the Securities and Exchange
Commission. Anchor assumes no obligation to update forward-looking statements.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

     The Company does not maintain any long-term investments, nor does the
Company foresee being in the position of acquiring any long-term investments
within the next year. Due to only having short-term investments with maturities
of 90 days or less, Anchor is not subject to the risk involved with market
interest rates changes.

     Anchor does not engage in trading market risk sensitive instruments and
does not purchase as investments, hedges, or for purposes other than trading,
financial instruments that are likely to expose the Company to market risk,
whether it be from interest rate, foreign currency exchange, commodity price, or
equity price risk. The Company has not entered into forward or futures contract
or swaps, nor has it purchases options.

                                       16

<PAGE>

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Anchor

     On May 15, 2002 Anchor and its majority shareholder, WNAH, settled
litigation pending before the Superior Court of Contra Costa, California, Case
Number COO-03258, with two of Anchor's former executive officers and its former
auditing firm. The litigation arose from various actions and events occurring in
1999 and 2000. Certain bifurcated claims ordered to arbitration by the court had
previously resulted in a September 2001 arbitration award against Anchor in the
approximate amount of $304,000 in favor of its former chief executive officer.
Under the terms of a global settlement, Anchor and WNAH jointly agreed to pay
Anchor's former chief executive officer the sum of $365,000 with $240,000 of
such amount being provided by their employee practices liability insurer. All
causes of action plead against all corporate and individual defendants and
cross-defendants were dismissed with prejudice under the settlement with no
admission of fault or liability by any party.

     Management is not aware of any other litigation to which Anchor is
currently a party or to which any property of Anchor is subject, which might
materially adversely affect the financial condition or results of operations of
Anchor.

The WBA Companies

     Harden-AZ and WBAIS are defendants in a number of lawsuits seeking damages
for alleged professional negligence or breach of contract in the performance of
their employee benefit plan administration services. These matters are of a
nature and type that typically arise from time to time in the normal course of
business, and, except for claims that are strictly contractual in nature, are
covered under professional liability policies effective during the years in
which the alleged acts or omissions occurred. Although the pending professional
negligence and employee liability claims against the WBA companies are, for the
most part, covered by insurance, management is concerned that available cash
resources in the future will be insufficient to satisfy the deductible payment
obligations under the affected insurance policies, resulting in the termination
of the policies by the insurers for breach of the insurance contracts. There can
be no assurance that the companies will be able to maintain their insurance
coverage in the future.

     WBAIS is a defendant in an administrative proceeding before the Oregon
Bureau of Labor and Industries filed on March 1, 2001. The claimant in the
matter was an employee of WBAIS that was involuntarily terminated in October
2000 for excessive absenteeism. The claimant alleges the termination was in
violation of the federal Family Medical Leave Act, the Oregon Family Medical
Leave Act and the Americans with Disabilities Act. The claim is covered under
Anchor's blanket employee practices liability insurance policy and its potential
liability for defense and indemnity costs is limited to the policy's per claim
deductible of $50,000. The WBA companies anticipate that trade creditors will
initiate considerable additional litigation in 2002 and beyond due to the
companies' significant trade debt balances. Both companies lack sufficient cash
resources to satisfy these trade debts and any lawsuit filed against the
companies will further adversely affect their ability to satisfy creditor
claims.

Spectrum CA

     Management is not aware of any lawsuits to which Spectrum CA is currently a
party or to which any property of Spectrum CA is subject which might materially
adversely affect its financial condition or results of operations.

Item 2.  Changes in securities and use of proceeds

None.

Item 3.  Defaults Upon Senior Securities

None.

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<PAGE>

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

None.

Item 5.  Other Information

None.

Item 6.  Exhibits and Reports on Form 8-K

A.  Exhibits

B.  Reports on Form 8-K

None

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<PAGE>

                                   SIGNATURES

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

                                            Anchor Pacific Underwriters, Inc.
                                            (Anchor)


Date:  May 30, 2002                    By:     /s/ Gerard A.C. Bakker
                                          --------------------------------------
                                                   Gerard A.C. Bakker
                                                        President
                                               (Principal Executive Officer)

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this report has been signed by the following persons on behalf of
the Anchor and in the capacities and on the dates indicated.

                                            ANCHOR PACIFIC UNDERWRITERS, INC.




Date:  May 30, 2002                          /s/ Gerard A.C. Bakker
       -----------------------------        ------------------------------------
                                             Gerard A.C. Bakker
                                             President and Director

Date:  May 30, 2002                          /s/ Jeffrey S. Ward
       -----------------------------        ------------------------------------
                                             Jeffrey S. Ward
                                             Chairman, Chief Executive Officer
                                               and Director

Date:  May 30, 2002                          /s/ Kevin P. Jasper
       -----------------------------        ------------------------------------
                                             Kevin P. Jasper
                                             Director and Secretary

Date:  May 30, 2002                          /s/ Russell Whitmarsh
       -----------------------------        ------------------------------------
                                             Russell Whitmarsh
                                             Director

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