SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                            _____________________

                                 FORM 10-KSB

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

    For the fiscal year ended December 31, 2002.

                     OR

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

    For the transition period from ____________ to ___________



                       Commission File No. 0-33145

                       RASCALS INTERNATIONAL, INC.
            ----------------------------------------------------
           (Exact name of the Registrant as specified in Charter)

      Delaware                                          84-1195628
 ----------------------------------------------------------------------------
 (State or other jurisdiction                 (I.R.S. Employer ID Number)
  of incorporation or organization)

           414 Eagle Rock Avenue, Suite 308, West Orange, NJ 07052
           -------------------------------------------------------
                   (Address of principal executive offices)

       Registrant's Telephone Number, including Area Code: 973-243-8080

     Securities Registered Pursuant to Section 12(b) of the Act: None
     Securities Registered Pursuant to Section 12(g) of the Act:

                  Common Stock, $.001 par value per share

     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 at least the past 90 days.    Yes [X]   No  [ ]

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

     State the issuer's revenues for its most recent fiscal year: $4,375,194

     State the aggregate market value of the voting stock held by non-
affiliates of the Registrant.  The aggregate market value shall be computed
by reference to the price at which the stock was sold, or the average bid and
ask prices of such stock, as of a specified date within 60 days prior to the
date of filing.

     The aggregate market value of the Registrant's common stock, $.001 par
value, held by non-affiliates as of April 10, 2003 was $137,183.

     As of April 10, 2001, the number of shares outstanding of the Registrant's
common stock was 99,277 shares, $.001 par value.

Transitional Small Business Disclosure Format:    Yes [ ]  No  [X]

                DOCUMENTS INCORPORATED BY REFERENCE: None

<PAGE>
           FORWARD-LOOKING STATEMENTS: NO ASSURANCES INTENDED

     This Report contains certain forward-looking statements regarding
Rascals International, its business and financial prospects.  These statements
represent Management's present intentions and its present belief regarding the
company's future.  Nevertheless, there are numerous risks and uncertainties
that could cause our actual results to differ from the results suggested in
this Report.  Among the more significant factors are:

     *  Rascals lacks the capital necessary to expand its operations.
        Our debts exceed the book value of our assets.
     *  Rascals is currently in default in making payments to its secured
        creditors.
     *  We have initiated a substantially new business plan which may
        encounter obstacles that cannot be foreseen.
     *  Rascals may not be able to attract the skilled managers it will need
        in order to expand its operations efficiently.

     Because these and other risks may cause Rascals' actual results to
differ from those anticipated by Management, the reader should not place undue
reliance on any forward-looking statements that appear in this Report. Readers
should also take note that Rascals will not necessarily make any public
announcement of changes affecting these forward-looking statements, which
should be considered accurate on this date only.

                              PART 1

Item 1.  BUSINESS

The Business Plan

     Rascals International, Inc. is the successor to a business operation
commenced in 1983.  Rascals began with a comedy club and restaurant in West
Orange, New Jersey, which remains the flagship of our operations.  Through
2000 the West Orange "Rascals" and a sister club/restaurant of the same name
in the New Jersey resort area of Ocean Township were the source of
substantially all of Rascals' revenue.  Nevertheless the success of those
clubs in booking and promoting both headliners and rising stars in the field
of stand-up comedy made Rascals a name known throughout the comedy industry.
Most of today's stars of stand-up comedy made their way to fame appearing at
a Rascals Comedy Club.

     In recent years Rascals has acquired new management, a new business
plan, and a new determination to exploit the value of the "Rascals" name as
leverage for the growth of our company.  Our first effort involved the
establishment of a "Rascals Comedy Club" in the Miami area, which copied in
essence the operations of our two New Jersey clubs.  The expense, however,
involved in outfitting a new facility and pushing traffic to a new site
exceeded the capacity of our financial resources, and the Miami club was
closed in 2000.  Spurred on by that experience, however, we have formulated a
business plan designed to give Rascals a nationwide presence with a minimum of
capital investment.  The plan contemplates that we will develop a network of
"partners" who recognize the value of the "Rascals" name and our entertainment
offerings in attracting consumers of comedy.  In exchange for the opportunity
to market to these consumers, our "partners" will provide the other resources
necessary to business success.

     The plan to "go national" with the "Rascals" name can be understood in
four discernable, albeit interrelated, aspects:

     1.         We are underway with a program of establishing "Rascals
                Comedy Clubs" in premier hotels in cities throughout the
                U.S.  During 2001 we opened a Rascals in the Crowne Plaza
                Hotel in Phoenix, and another in the Sheraton Springfield
                at Monarch Place in Springfield, MA (the Springfield
                Rascals has since closed).  During 2002 we opened a
                Rascals Comedy Club at the Hilton Hotel in Cherry Hill,
                NJ.

                In addition, there are numerous other hotel locations which
                have expressed a desire to open a Rascals Comedy Club in their
                hotels.  In each of these arrangements the hotel provides the
                facility (rent-free) and operates the food and beverage
                service.  We provide the show and the promotion only, keep all
                admission proceeds, and receive a share of the food and
                beverage gross revenue.

     2.         During 2002 we signed our first agreement to license the
                name "Rascals Comedy Club."  The licensee is an investment
                group who plan to open a club in Jersey City, NJ.  In
                exchange for the right to call their club a "Rascals
                Comedy Club," the licensee will pay us a licensing fee and
                a percentage of gross revenue for 20 years.  Our agreement
                provides that, for an additional weekly fee, we will book
                the entertainment for the club.

     3.         As our clubs become a national presence, the
                identification of the "Rascals" name with quality comedic
                entertainment becomes enhanced.  This enriches the
                opportunities for cross-marketing of Rascals'
                entertainment in a variety of media.  From time to time
                during 2002, "The Rascals Comedy Hour" was offered in 35
                million homes on pay-per-view television.  In addition, we
                are under contract with major media distributors to market
                "Rascals" comedy on the Internet, on home video through
                direct response marketing, and on the in-house television
                channels in 140,000 Hilton hotel rooms.

     4.         As cross-marketing opens channels of distribution for
                Rascals comedy, the value of our library of comedy tapes
                is enhanced.  Within that library are over 200 hours of
                recorded performances by major comedic entertainers, such
                as Tim Allen, Rosie O'Donnell and Drew Carey, before they
                became famous.  In exchange for the opportunity to appear
                at Rascals Comedy Club, these entertainers yielded to
                Rascals the right to market video recordings of their
                performances at Rascals.  This library of videotapes
                provides Rascals the raw materials from which we can
                manufacture a limitless supply of comedy products in every
                audio-visual medium.

Rascals Comedy Clubs

     At the present time there are four Rascals Comedy Clubs in operation.
Two of our New Jersey clubs include an attached restaurant and bar owned and
operated by Rascals.  At our two hotel-based clubs food and beverage service
is provided by the host hotel.  Comedy shows at our clubs generally consist of
three performers: one nationally-known headliner, a featured act and a comic
master of ceremonies.  Our ticket prices range from $8.00 to $35.00, and are
determined by the fees we commit to pay the entertainers.  Those fees may on
occasion include a percentage of our ticket revenues.

     Entertainers are booked for our clubs by independent booking agents.
Most of our bookings at present are made by Top Draw Entertainment.  Our
relationship with Top Draw is at will.  Our fees to Top Draw are based on
services provided, and during 2002 totaled approximately $30,000.  As the
number of our clubs increases, Rascals should become even more attractive to
entertainers due to our ability to offer "block booking."  In a block booking
arrangement, we commit to multiple dates at multiple locations in exchange for
a reduced fee per show.

     The four Rascals Comedy Clubs now in operation are:

     Rascals Comedy Club (West Orange, NJ).  This facility has been in
operation as a restaurant and comedy club since 1983. Late in 2002, however,
the property on which it is located was sold, and as a result the West Orange
facility will cease operations at the end of June 2003.  We have located two
potential replacement sites where we could reopen the club within a few
months.

     Rascals Comedy Club (Ocean Township, NJ).  This facility, located at the
Jersey Shore, was opened in 1987.  It consists of a 2,000 sq. ft. comedy room
with a seating capacity of 275, a 2,000 sq. ft. ground floor restaurant with a
seating capacity of 150, and a 1,000 sq. ft. bar with a seating capacity of
50.  It sits on 2.3 acres of land, with parking for 160 cars.

     Rascals Comedy Club at the Crowne Plaza Hotel (Phoenix, AZ).  This
facility, which opened late in 2001, consists of a comedy room with a seating
capacity of 300 in which we produce seven shows per week.  When major
entertainers are booked, we utilize the 1,000 seat ballroom at the Hotel.

     Rascals Comedy Club at the Hilton (Cherry Hill, NJ)..  This facility
opened in December 2002.  It consists of a comedy room with a seating capacity
of 308 in which we produce six shows per week.

     Each of our clubs is managed by an on-site manager, who is responsible
for supervising operations and assuring compliance with Rascals' guidelines
for club operations.  In addition, at  our New Jersey restaurant/clubs we also
operate a restaurant and bar, so the manager is also responsible for
purchasing, inventory control, and supervision of the kitchen and wait staff.
One particular responsibility of our on-site managers at the New Jersey clubs
is to assure compliance with State and local regulations governing the sale of
alcoholic beverages.  All on-site managers report to our Director of
Operations, who operates from Rascals' corporate headquarters in West Orange,
New Jersey.

     Our agreements with the hotels which host our newer clubs allocate to
Rascals the responsibility for booking, marketing and producing the comedy
shows, and allocate to the hotel the responsibility for food and beverage
service.  Rascals promotes the shows through local media, sells the tickets,
and retains 100% of the revenue from ticket sales, from which it pays fees to
the entertainers and to the Rascals personnel involved in producing the show.
The hotel collects payment for food and beverage service, and is responsible
for supervising the kitchen and wait staff, who are hotel employees.  The
hotel is also responsible for compliance with liquor laws.  Our agreements
provide for a percentage of food and beverage revenue to be paid by the hotel
to Rascals.

     The primary advantage of a hotel-based club for Rascals is the
efficiency of initiating the club's operations.  Since we are moving into an
established facility, we are required to make only the minimal capital
investment necessary to outfit the comedy room in Rascals' trademark decor.
In addition, since the hotels in which we locate are already known as
entertainment locations in their communities (even if only as a restaurant
location), the expense incurred in "attracting traffic" to the site is
generally not much greater than the expense we incur in promoting shows at our
established sites.  Our estimate is that our capital commitment to a new
hotel-based facility, including the working capital required until the club
achieves positive cash flow, will generally not exceed $130,000.
Occasionally, however, a particular site will be appropriate for a "premier"
build-out, which will require a larger investment.  This was the case with our
new club in Cherry Hill, where we installed cherrywood paneling and a state-
of-the-art sound system.

     We market our shows through traditional local media: newspaper and radio
advertisements, local cable TV commercials, and radio promotions, often
involving the performers that will be appearing.  In addition, tickets to all
four of our club locations can be purchased at our Website:
www.rascalscomedyclub.com.

Rascals Comedy Library

     Between 1985 and 1992 Rascals developed a library of videotapes of the
comedy performances at its West Orange club.  The performers on the videotapes
include many who achieved stardom: Denis Leary, Drew Carey, Jeff Foxworthy,
Rosie O'Donnell, Tim Allen, Ray Romano and others.  In exchange for the
opportunity to appear at Rascals Comedy Club, each of these performers signed
a release giving Rascals the right to reproduce and market the videotapes.
Until 2002 the videotapes were co-owned by Rascals and Rob Perna d/b/a Stand
and Deliver.  In 2002 we divided the library, with Rascals retaining over 200
hours of performances.

     Our library provides an inventory of raw material which Rascals intends
to use to develop products and content in a variety of media.  At the same
time, although Rascals is not currently adding to its library of videotapes,
the ongoing operations of our comedy clubs is a potential source of additional
valuable media content.  A considerable portion of our energies during 2002,
therefore, were devoted to developing outlets for marketing Rascals' comedy
outside of our clubs.  To date, we have relationships established with
powerful marketing partners in four media:

     Television Pay-Per-View and Video-On-Demand.  In the Fall of 2001 we
entered into a marketing agreement with iN-DEMAND L.L.C. to market up to 12
programs produced by Rascals.  IN-DEMAND is the nation's leading provider of
pay-per-view and video-on-demand programming, serving over 1,800 affiliated
systems with approximately 28 million addressable households subscribing.  In
each of five months in early 2002, iN-DEMAND broadcast on seven or eight
occasions a 55 minute program taken from Rascals' library - one new program
each month.  The agreement provides that approximately 40% of the gross
receipts from the broadcasts will be paid to Rascals.  The broadcasts were
suspended later in 2002, as we negotiated with Stand and Deliver a division of
the library.  We expect iN-DEMAND to commence broadcasts again later in 2003.

     VHS Recordings.  In March 2002 we entered into a Memorandum of
Understanding with Razor & Tie Direct L.L.C.  Razor & Tie is a music producer
with a considerable market presence which has had noteworthy success marketing
VHS videos.  Razor & Tie advanced to Rascals $50,000 in exchange for our
agreement to produce two home videos of performances in the Rascals library,
which Razor & Tie agreed to market through direct response channels. The
agreement provided that, to the extent that direct response marketing was
successful, Razor & Tie would then introduce the videos into retail stores.
The agreement provides that Razor & Tie would pay to Rascals and Stand and
Deliver 50% of the net profits from sales of the videos.  Rascals has given
Razor & Tie a one year exclusive license to market the Rascals library in home
video format.  Razor & Tie can extend the license to five years by paying
Rascals a $200,000 advance, provided that it has introduced at least one
Rascals video into retail distribution.  To date, Razor & Tie has not
introduced any video into retail distribution.

     Dedicated Hotel Room Broadcasts.  In April 2002 we entered into an
agreement with InnMedia, L.L.C.  InnMedia is the leading media content
provider for the hospitality industry.  InnMedia agreed to include programs
from Rascals' library on the dedicated television channels that its clients
broadcast to the guest rooms in their hotels.  Currently, InnMedia's clients
broadcast to 140,000 hotel rooms, which represents a potential market of 2.5
million guests per month.  The agreement provides that InnMedia will pay
Rascals 40% of the gross receipts from this service.

     Internet Advertising.  Early this year Rascals was accepted into the
Microsoft Windows Media Streaming Advertising Program. Rascals provides one
minute video clips from its library, which are broadcast on WindowsMedia.com.
Microsoft will pay Rascals 50% of the online advertising revenue earned during
broadcast of the clips.  In addition, the broadcasts will provide millions of
WindowsMedia users with exposure to Rascals' programming.  Those who become
interested in enjoying more of our programs will be able to access the Rascals
Website through the Windows Media Player 7 Media Guide

Employees

     The Company currently employs 130 individuals, of whom 25 are full-time
employees.  The other 105 employees are primarily hosting staff, wait staff,
bartenders, and kitchen employees who work during the performances at our
clubs.  None of our  employees is represented by a union.  We believe that our
relations with our employees are good.

Insurance

     As a dispenser of alcoholic beverages, Rascals is subject to state
liquor liability ("dram shop") laws.  These laws vary from state to state. In
general, dram shop laws  impose liability on the proprietor of an
establishment for damage caused by a customer of the establishment, if the
service of alcoholic beverages by the establishment to that customer was a
cause of the damage and the establishment service was negligent or otherwise
culpable.  Since alcoholic beverages are served in all of our clubs, it is
particularly important that we maintain insurance against liability.

     At the present time, Rascals is insured by a policy which provides
$2,000,000 general aggregate liability coverage. as well as a $10,000,000
commercial umbrella policy.  The annual premium for our insurance, which
includes this liability insurance, is $29,650.

Item 2. PROPERTIES

  Since January 2003 the executive offices of Rascals International, Inc.
have been  located in an office facility in West Orange, New Jersey.  Our
lease for the facility terminates on December 31, 2005.  We pay a monthly
rental of $2,994 for the office facility.

  Rascals' restaurant and club facilities in West Orange and Ocean
Township are leased to subsidiaries of Rascals by holding companies.  The
owners of the holding companies are members of the families of Eduardo
Rodriguez and Michael Margolies.  Rascals pays monthly rental of approximately
$26,000 for the two facilities.  Further description of these arrangements is
contained in "Certain Relationships and Related Transactions."

  Our other two comedy clubs are located in hotels, which provide the
comedy room to us free of charge.  Our plan is to expand by establishing more
of these hotel-based clubs.  Therefore, we believe that our present leased
facilities will be adequate for our needs for the foreseeable future.

Item 3. LEGAL PROCEEDINGS

  Rascals International, Inc. v. P.A. Whalen and Company, Inc..  (Superior
Court, State of New Jersey).  This action commenced in February 2002.  The
action alleges that Whelan breached a consulting and marketing contract with
Rascals. Rascals is demanding that the contract be rescinded.  Whelan has
counterclaimed alleging breach of the same contract by Rascals, and demanding
damages of $99,260.

  William Hannah v. Rascals International, Inc., Eduardo Rodriguez,
Michael Margolies and Gary Marks.  (Court of Chancery, State of Delaware).
This action commenced in February 2003.  The plaintiff is a shareholder
claiming to represent the shareholders of Rascals as a class.  He is also
proceeding derivatively on behalf of Rascals against the members of the Board
of Directors.  The complaint alleges (a) that the directors breached their
fiduciary duties in connection with the reverse split of common stock effected
in March 2003, (b) that the reverse split as originally structured violated
the procedural requirements of Delaware corporation law, and (c) that the
directors have engaged in various acts of self-dealing in violation of their
fiduciary duties.  The complaint demands that the reverse split be enjoined,
that the alleged acts of self-dealing be voided, that there be an accounting
and constructive trust imposed on the fruits of the self-dealing, and damages
in an unspecified amount.  Rascals and its directors have not yet answered the
complaint, but believe that the allegations are without merit.  After the
complaint was filed, Rascals restructured the reverse split to comply with
Delaware corporation law.  Settlement negotiations have been ongoing, and we
believe that the matter has been resolved without cost to Rascals other than
legal fees which will be determined by the Court.

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

  None


                             PART II

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

  (a) Market Information

  Since mid-December, 2001 our common stock has been listed for quotation
on the OTC Bulletin Board.  It is currently listed under the trading symbol
"RSCA.OB."  Prior to the reverse split of common stock in March 2003 it was
listed under the trading symbol "RASC.OB."  The following table sets forth the
bid prices quoted for our common stock on the OTC Bulletin Board during the
two years ended December 31, 2002.  All prices have been adjusted to reflect
the 1-for-500 reverse split of common stock effected on March 28, 2003.




                                      Bid
                               ----------------
Period:                         High        Low
-------------------------------------------------
Jan. 1, 2001 - Mar. 31, 2001   $ 200.00  $  20.00
Apr. 1, 2001 - June 30, 2001   $ 175.00  $  45.00
July 1, 2001 - Sep. 30, 2001   $ 200.00  $  30.00
Oct. 1, 2001 - Dec. 31, 2001   $  85.00  $  35.00


Jan. 1, 2002 - Mar. 31, 2002   $  65.00  $  35.00
Apr. 1, 2002 - June 30, 2002   $  40.00  $  20.00
July 1, 2002 - Sep. 30, 2002   $  25.00  $   5.00
Oct. 1, 2002 - Dec. 31, 2002   $  35.00  $   2.50


  (b) Shareholders

  Our shareholders list contains the names of 98 registered shareholders
of record.  Based on recent requests for materials that we mailed to
shareholders, we believe that the number of beneficial shareholders exceeds
800.

  (c)  Dividends

  The Company has never paid or declared any cash dividends on its Common
Stock and does not anticipate doing so in the foreseeable future.  The Company
intends to retain any future earnings for the operation and expansion of the
business.  Any decision as to future payment of dividends will depend on the
available earnings, the capital requirements of the Company, its general
financial condition and other factors deemed pertinent by the Board of
Directors.

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

Results of Operations

     At the beginning of 2002 Rascals embarked on a new business plan.  While
our business through 2001 consisted entirely of the operation of stand-alone
restaurant/comedy club facilities, in 2002 we began to develop alternative
locations for Rascals' comedy by organizing hotel-based clubs and by granting
licenses to utilize the name "Rascals."  We also began to develop multiple
channels of distribution for the comedic entertainment produced in our clubs,
such as home video sales and pay-per-view sales.  As the year progressed,
however, it became apparent that our efforts in developing and managing these
multiple channels of distribution, though profitable, were not cost-effective.
These distribution channels that we developed early in 2002 remain in place,
and we expect them to be a source of revenue in the future.  However, in the
third quarter of 2002 we refocused our attention on the development of new
Rascals clubs, both hotel-based and licenses.  Our focus today is on
developing a sufficient number of clubs to achieve an efficient level of
operations.

     The results of our hotel-based operations, which commenced in the Fall
of 2001, have been mixed to date.   Our hotel-based club in Phoenix, AZ has
made a modest contribution to our revenue and incurred relatively
insignificant losses, as start-up expenses such as marketing offset the
initial revenues. Our hotel-based club in Springfield, MA, on the other hand,
failed to meet our expectations and was closed in May 2002.   However, because
we had only a very modest capital investment in the Springfield club, we were
able to quickly cut our losses without damage to the Company's balance sheet.
Our experience in Springfield, though disappointing, lent support to our
rationale for entering into hotel-based relationships.  The operations require
only a modest capital investment, and the measure of their success can be
determined relatively quickly.

     The most recent result of our new plan was the opening in December 2002
of a new Rascals club in the prestigious Hilton Hotel in Cherry Hill, NJ.
David Brenner, well-known comic and TV personality, headlined at the opening
of this new club on December 12, 13 and 14.  We are also in final negotiation
with a casino in Atlantic City for a Rascals comedy club.

     The transitions in our business plan during 2002 resulted in a marked
disparity between revenues and expenses.  Since our new operations are only in
their early stages, we continued to realize substantially all of our net sales
from our two New Jersey restaurant/comedy club facilities, and these generate
a modest profit.  Our gross profit for 2002 was $587,166.  However, that gross
profit was not sufficient to support the corporate activities involved in
developing our new business plan.  These widespread efforts to implement new
revenue sources  resulted in general and administrative expenses during 2002
of $1,986,530, an increase of $808,765 from 2001, when we were only beginning
to restructure our operations.  As a result of this increase in general and
administrative expenses and a $181,498 reduction in revenues, our pretax loss
increased by $1,063,732 to $1,416,849.

     The increase in general and administrative expense was the result,
primarily, of expenses attributable to developing new revenue sources as well
as management payroll, professional and consulting fees.  In 2002 we are
reporting management payroll and consulting fees that are in excess of those
we reported in 2001.  This has occurred in part because of the expansion of
our management team and in part because the complexity of our new business
plan requires that we obtain the assistance of experienced consultants in
implementing the plan.  Both of these situations have caused us to incur
additional expenses for stock-based compensation during 2002.  Fortunately,
these expenses have not affected our cash accounts.  In addition, the fact
that Rascals became an SEC reporting company in December 2001, which enabled
us to have our stock listed on the OTC Bulletin Board, resulted in expenses
for professional fees during 2002 that exceeded our professional fees in 2001.
Finally, we incurred a $101,000 expense attributable to our grant of common
stock warrants to induce a debt-holder to convert its debt to common stock.

     In 2003 we expect a far greater percentage of our revenue to arise from
new operations.  This will occur in part because our West Orange club is
scheduled to close at the end of June.  In recent years that club had produced
over 60% of our annual revenue.  We are in the final phase of selecting the
site on which to reopen the club, but expect that revenues from this operation
will be reduced for the year.  At the same time, however, we are now realizing
revenue from our Cherry Hill hotel-based operation which, albeit far less in
amount than revenue from West Orange, produce far greater gross profit
margins.  We expect that other new club sites, now under negotiation, will
open later in 2003 and begin to contribute to revenue, although initial
operations are not likely to be profitable due to start-up costs.  So we
expect that 2003 will be another year of transition.  Our goal is to return to
profitability in 2004.

Liquidity and Capital Resources

     Despite the loss incurred in 2002, our activities during 2002 did not
cause any substantial deterioration to our balance sheet.  Our working capital
deficit increased from ($1,794,626) at December 31, 2001 to ($2,130,649), and
our shareholders equity decreased by $157,064 to a deficit of ($1,587,899).
The relative stability in our working capital and stockholder equity positions
was produced by a number of events:

     *  We issued 7,860,000 shares of common stock to secure the services of
        consultants.  The market value of those shares has been recorded as
        an asset called "prepaid consulting."  The asset will be written-down
        and expensed over the life of the several consulting agreements.
        $220,000 that will be expensed during the next twelve months has been
        recorded as a current asset, improving working capital.

     *  We reached a settlement with the State of New Jersey that resolved
        our obligation for past-due taxes.  The settlement calls for us to
        pay approximately $5,800 per month over a five year period.  This
        enabled us to re-classify $242,000 from current accounts payable to
        non-current "notes payable."

     *  We reached agreement with the holders of short-term notes and other
        obligations having a principal balance of $304,000 to convert the
        notes and obligations into Rascals common stock.

     *  We settled our obligation to the landlord of our closed Miami-based
        property.  We had accrued an expense of $137,000 in connection with
        that liability.  The settlement required payment of only $20,000.
        Accordingly, we recorded a $117,000 reduction in accrued expense,
        which offset other accrued expenses.

     Notwithstanding these adjustments to support our working capital
position, our operations during 2002 consumed $755,199 in cash.  Since we
began 2002 with virtually no cash, our continued operations required that we
borrow the funds needed by our operations.  For this reason in November we
borrowed $659,361 from Marod Holdings LLC and Rodmar Holdings LLC, two
entities which are controlled by our executive officers.  To secure the debt
Rascals gave the two entities a secured interest in Rascals' restaurant/clubs,
subordinate to the security position of the mortgage lender on the Ocean
facility, and a conditional option to purchase the clubs at fair market value
in the event of a default.  In addition, in December 2002 our subsidiary which
operates the Rascals Comedy Club in Cherry Hill borrowed $200,000 for its
operations from an outside lender.  The loan to Rascals Cherry Hill was
guaranteed by Rascals as well as by Marod Holdings, Rodmar Holdings and our
two executive officers.

     At the present time, our notes to Marod and Rodmar and the note given by
Rascals Cherry Hill are in default.  As a result of the default by Rascals
Cherry Hill, the lender has obtained an interest in that subsidiary.  In
addition, the mortgage on our Ocean facility, which is guaranteed by Rascals,
is in default due to Rascals' inability to pay rent to Rodmar Holdings LLC,
which owns the premises and is the primary obligor on the mortgage. We are
actively seeking outside financing, and we are cautiously optimistic that the
promise inherent in our business plan will enable us to obtain the necessary
financing.  However, if we are unable to obtain outside financing, it is
unlikely that we will be able to continue our operations as currently
constituted.

Critical Accounting Policies and Estimates

     In preparing our financial statements we are required to formulate
working policies regarding valuation of our assets and liabilities and to
develop estimates of those values.  In our preparation of the financial
statements for 2002, there was only estimate made which was (a) subject to a
high degree of uncertainty and (b) material to our results.  That was our
determination, detailed in Note 6 to the Consolidated Financial Statements,
that we should record a valuation allowance for the full value of the deferred
tax asset created by our net operating loss carryforward.  The primary reason
for the determination was our lack of certainty as to if and when Rascals
would commence profitable operations.

     We have made no material changes to our critical accounting policies in
connection with the preparation of financial statements for 2002

Item 7. FINANCIAL STATEMENTS

     The Company's financial statements, together with notes and the Report
of Independent Certified Public Accountants, are set forth immediately
following Item 14 of this Form 10-KSB.


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.

     This table identifies our management team.  Directors serve until the
next annual meeting of shareholders and until their successors are elected and
qualify.  Officers serve at the pleasure of the Board of Directors.

                      Director
Name                  Age            Position with the Company         Since
------------------------------------------------------------------------------
Eduardo Rodriguez     41             Chairman, Chief Executive         1998
                                      Officer, Chief Financial
                                      Officer
Michael Margolies     75             Vice Chairman, Secretary,         2001
                                      Director
Gary Marks            44             Director                          2000


     Eduardo Rodriguez has served as Chief Executive Officer of Rascals since
1998.  Immediately prior to joining Rascals, Mr. Rodriguez served as President
of Lancaster Consultants, Inc., a company involved in financial management and
consulting.

     Michael Margolies became Vice Chairman and Secretary of Rascals in
January 2002, after having served on our Board of Directors for the prior
year.  Since 1998 Mr. Margolies has been employed as Chief Executive Officer
of Transportation Logistics Int'l, Inc. (OTC Bulletin Board: TRPL.OB), which
provides logistics and logistic-related services.  Mr. Margolies previously
served as Chief Executive Officer of U.S. Transportation Systems, Inc. from
its creation in 1975.  USTS was a NASDAQ-listed holding company involved in a
diversified group of transportation-related businesses (e.g. bus charters,
freight-hauling, bus leasing, limousines, etc.).   Mr. Margolies left USTS in
1998 when it was sold to Precept Business Services, Inc. for approximately $43
million.

     Gary Marks is currently Executive Vice President of I.D. Systems, Inc.
in Hackensack, New Jersey.  Prior to joining I.D. Systems, Mr. Marks held
senior technology marketing positions at Cybertel, Conner Peripherals, SyQuest
and Western Digital.

Compliance with Section 16(a) of the Exchange Act

     None of the directors, officers or beneficial owners of more than 10% of
Rascals's common stock failed to file on a timely basis reports required
during 2002 by Section 16(a) of the Exchange Act, except as follows: Messrs.
Rodriguez and Margolies each failed to file three reports on Form 4 when due.

Item 10.  EXECUTIVE COMPENSATION

     This table itemizes the compensation we paid to Eduardo Rodriguez, who
served as our Chief Executive Officer during 2002.  There was no officer whose
salary and bonus for services rendered during the year ended December 31, 2002
exceeded $100,000.

                                                     Other
                           Year       Salary         Compensation
                           -------------------------------------------------
Eduardo Rodriguez.......   2002      $40,000          $ 10,800(1)
                           2001       74,400            22,000(1)
                           2000       54,000                --
                           ______________________


(1) Represents premiums paid for health insurance and payments made to supply
    Mr. Rodriguez with an automobile.

     Employment Agreements; Affiliation Agreement

     In connection with the refinancing of the mortgages on Rascals' two New
Jersey restaurant/clubs on December 31, 2001, Rascals entered into employment
agreements with Eduardo Rodriguez, its Chief Executive Officer, and Michael
Margolies, its Vice Chairman and Secretary.  The refinancing is described in
"Certain Relationships and Related Transactions" below.

     Rascals' employment agreement with Eduardo Rodriguez provides that Mr.
Rodriguez will serve as President of Rascals during the term of the agreement,
which ends on December 31, 2006.  Mr. Rodriguez covenants in the agreement
that he will not compete with Rascals for one year after termination of his
employment.  The agreement further provides that Rascals will pay Mr.
Rodriguez an annual salary of $250,000, and will spend up to $12,000 per year
to provide him an automobile.  In the event of Mr. Rodriguez' death or
disability, Rascals commits to pay him or his estate an amount equal to one
year's salary.  During 2002 Rascals paid Mr. Rodriguez only $40,000 in salary,
and Mr. Rodriguez has waived any further obligation by Rascals for
compensation for his services during 2002.

     Rascals' employment agreement with Michael Margolies provides that Mr.
Margolies will serve as Vice Chairman and Secretary during the term of the
agreement, which ends on December 31, 2006.  Mr. Margolies covenants in the
agreement that he will not compete with Rascals for one year after termination
of his employment.  The agreement further provides that Rascals will pay Mr.
Margolies an annual salary of $150,000.  In the event of Mr. Margolies' death
or disability, Rascals commits to pay him or his estate an amount equal to one
year's salary.  In order to induce Mr. Margolies to enter into the agreement,
Rascals issued 2,000 shares of common stock to the Margolies Family Trust and
1,000 shares to Mr. Margolies.  In September 2002 the Margolies Family Trust
and Mr. Margolies surrendered those shares to Rascals.  During 2002 Rascals
paid no salary to Mr. Margolies, and Mr. Margolies has waived any further
obligation by Rascals for compensation for his services during 2002.

     At the same time as the employment agreements, an "Affiliation
Agreement" was made among Rascals, Mr. Rodriguez and Mr. Margolies.  The
stated consideration for Rascals' covenants in the Affiliation Agreement was
Mr. Margolies' agreement to participate in the refinancing of the New Jersey
mortgages.  The Affiliation Agreement provides, with respect to both Mr.
Rodriguez and Mr. Margolies, that as long as he or his family own one percent
of Rascals, he will be nominated at any election of Board members.  The
Affiliation Agreement further provides that until December 31, 2006 the salary
and benefits paid to Mr. Margolies will equal no less than 60% of the salary
and benefits paid to Mr. Rodriguez; that Rascals will not issue stock to Mr.
Rodriguez or Mr. Margolies or their families without the consent of the other;
and that neither Mr. Rodriguez nor Mr. Margolies will sell any Rascals shares
without affording the sale opportunity to the other of them.

     Restricted Stock Grant Program and Surrender of Shares

     On March 18, 2002, Rascals' Board of Directors adopted a Restricted
Stock Grant Program (the "Program") pursuant to which 17,500 shares of Common
Stock were reserved.  In April 2002 the restricted shares were  and issued as
follows:

         Eduardo Rodriguez       - 10,000 shares
         Michael Margolies       -  7,000 shares
         Gary Marks              -    500 shares

     The shares issued under the Program are subject to the following
restrictions:

     1.  After this fiscal year and each of the following four fiscal years
(2002 through 2006) one-fifth of the shares granted (the "At-Risk Shares")
will be forfeited if Rascals' revenue during the year does not exceed the
following thresholds:

         2002  - $ 3,500,000
         2003  - $ 4,500,000
         2004  - $ 5,500,000
         2005  - $ 6,500,000
         2006  - $ 7,500,000

     On September 30, 2002 Messrs. Rodriguez and Margolies surrendered to
Rascals the shares issued to them under the Program.

     Stock Options

     None of our officers or directors holds any options to purchase Rascals
securities.

     Compensation of Directors

     Our directors are reimbursed for out-of-pocket expenses incurred on our
behalf, but receive no additional compensation for service as directors.

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth information known to us with respect to
the beneficial ownership of our common stock as of the date of this prospectus
by the following:

     *  each shareholder known by us to own beneficially more than 5% of our
        common stock;

     *  each officer named in the Executive Compensation table above.

     *  each of our directors; and

     *  all directors and executive officers as a group.

     There are 99,277 shares of our common stock outstanding on the date of
this Report.  Except as otherwise indicated, we believe that the beneficial
owners of the common stock listed below have sole voting power and investment
power with respect to their shares,  subject to community property laws where
applicable.  Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission.

     In computing the number of shares beneficially owned by a person and the
percent ownership of that person, we include shares of common stock subject to
options or warrants held by that person that are currently exercisable or will
become exercisable within 60 days. We do not, however, include these
"issuable" shares in the outstanding shares when we compute the percent
ownership of any other person.

                         Amount and
                         Nature of
Name and Address         Beneficial      Percentage
of Beneficial Owner(1)   Ownership(2)    of Class
-----------------------------------------------------------
Eduardo Rodriguez        37,654(3)        37.9%

Michael Margolies        33,213(4)        33.5%

Gary Marks                  750            0.8%

All Officers and Directors
 As a Group (3 persons)  44,404(3)(4)     44.7%

Don Jackler               7,500            7.6%
 246 East 51st Street
 New York, NY 10022
____________________________________

(1)  The address of each shareholder is c/o Rascals International, Inc., 414
     Eagle Rock Avenue, West Orange, NJ 07052
(2)  All shares are owned of record unless otherwise indicated.
(3)  The shares beneficially owned by Mr. Rodriguez include:
   - 13,606 shares owned of record by Rodmar Holdings, LLC and 13,606 shares
     owned of record by Marod Holdings, LLC.  Mr. Rodriguez is one of the two
     Managers of Rodmar and of Marod.  Mr. Rodriguez' wife owns a 50%
     interest in Rodmar and a 50% interest in Marod in trust for their minor
     children;
   - 10,441 shares pledged to Hudson United Bank to secure the mortgage loan
     on Rascal's Ocean, New Jersey premises; and
   - 100 shares held by minor children of Mr. Rodriguez.
(4)  The shares beneficially owned by Mr. Margolies include:
   - 4,000 shares owned of record by The Margolies Family Trust.  The Trustee
     of the Margolies Family Trust is Mr. Margolies' spouse, and the
     beneficiaries of the Trust are Mr. Margolies' spouse and children; and
   - 13,606 shares owned of record by Rodmar Holdings, LLC and 13,606 shares
     owned of record by Marod Holdings, LLC.  Mr. Margolies is one of the two
     Managers of Rodmar and of Marod.  The Margolies Family Trust owns a 50%
     interest in Rodmar and a 50% interest in Marod.

Equity Compensation Plan Information

   The information set forth in the table below regarding equity compensation
plans (which include individual compensation arrangements) was determined as
of December 31, 2002.


                               Number of                      Number of
                               securities to   Weoghted       securities
                               be issued upon  average        remaining
                               exercise of     exercise       available
                               outstanding     price of       for future
                               options,        outstanding    issuance
                               warrants        options,       under equity
                               and             warrants       compensation
                               rights          and rights     plans

----------------------------------------------------------------------------
Equity compensation plans
approved by security
holders..........                 0               --              0


Equity compensation plans
not approved by security
holders*....                      0               --          6,380



Total..............               0               --          6,380


*  Our Board of Directors has adopted three equity compensation plans without
   shareholder approval.  The three plans are identical in their material
   terms.  They permit the Board to award to employees, directors or
   consultants (other than consultants whose services to Rascals are related
   to capital-raising transactions) stock, restricted stock, stock options or
   performance shares.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Refinance

     On December 31, 2001, the management and affiliates of Rascals completed
a refinancing of the mortgages on the properties in West Orange, New Jersey
and Ocean Township, New Jersey on which Rascals Comedy Clubs are located (the
"Realty").  The refinanced mortgage loan was a two-year loan in the principal
amount of $2,250,000.  As a condition to its willingness to complete the
refinancing, the mortgagee received personal guarantees of the loan from
Michael Margolies and his wife and Eduardo Rodriguez and his wife.

     In order to induce Mr. Margolies and his wife to assist in the
refinancing, including giving a personal guarantee of the mortgage loan,
Rascals and Mr. Rodriguez entered into an Affiliation Agreement with Mr.
Margolies.  The agreement is described above in "Management - Employment
Agreements; Affiliation Agreement."  In addition, Mr. Margolies acquired the
greater part of the interest that Mark Magnusson had held in Rascals and all
of his interest in the Realty.  Specifically:

     *  Mr. Magnusson agreed to the assignment of the Realty by Comrest and
        W.H.R. Realty, two general partnerships comprised of Mr. Magnusson
        and Eduardo Rodriguez, Rascals President, to Marod Holdings, L.L.C.
        ("Marod") and Rodmar Holdings, L.L.C. ("Rodmar").  The members of
        Marod and Rodmar are Mr. Rodriguez' spouse (in trust for their minor
        children) and the Margolies Family Trust.  The Managers of Marod and
        Rodmar are Messrs. Eduardo Rodriguez and Michael Margolies, who are
        members of Rascal's Board).  In consideration of his agreement to
        the transfer, the Margolies Family Trust paid Mr. Magnusson $24,000
        and promissory notes for $56,000.

     *  Rascals, Marod and Rodmar agreed that the leases of the Realty to
        Rascal's subsidiaries will continue in effect and unchanged.

     *  The Margolies Family Trust purchased four thousand shares of Rascals
        common stock from Mark Magnusson for $96,000.

     *  Comrest and W.H.R. Realty, the previous landlords of the Realty,
        released Rascals from past debts, primarily unpaid rental, totaling
        approximately $570,000.

     *  Rascals reaffirmed the agreement it had made with Mr. Magnusson
        dated January 24, 2001, and agreed to commence paying Mr. Magnusson
        $1,500 per week without interest until the debt of $114,000 is
        satisfied.

     Sale and Lending

     On September 26, 2002 Marod Holdings, LLC sold to Commerce Bank the land
and buildings at 425 Pleasant Valley Way in West Orange, New Jersey.  D.E.M.,
Amusements, Inc., a subsidiary of Rascals, by lease from Marod Holdings,
currently carries on the operation of a restaurant and comedy club on those
premises.  By arrangement with Commerce Bank, D.E.M. Amusements, Inc. will
continue to carry on that business until June 2003, at which time D.E.M.
Amusement's lease for the premises will expire.

     Marod utilized a portion of the proceeds of the sale of the West Orange
property to reduce the principal amount of the mortgage held by Hudson United
Bank on the West Orange premises as well as on the premises in Ocean.   The
mortgage loan encumbering the properties was reduced from a principal amount
of approximately $2,250,000 to a principal amount of approximately $1,250,000.
The loan is currently being paid on a twenty year amortization schedule, but
the unpaid balance of the loan will be due on December 31, 2003.

     Upon completion of the sale of the West Orange property, Marod Holdings
assigned to Rodmar Holdings a beneficial interest in a portion of the proceeds
from the sale.  Marod Holdings and Rodmar Holdings subsequently loaned to
Rascals a total of $659,361.  Rascals utilized the proceeds of the loan
primarily to reduce its outstanding payables.

     In consideration of the loan, Rascals entered into a Loan Agreement and
a Pledge Agreement with Rodmar Holdings and Marod Holdings, and Rascals
executed a Promissory Note in favor of Rodmar Holdings and Marod Holdings.
The Promissory Note is in the principal amount of $641,204 and bears interest
at twelve percent per annum.  The Promissory Note calls for payment of $25,000
per month, commencing on January 2, 2003, with payment of the unpaid balance
of the Note on December 31, 2003. Rascals is currently in default, having
failed to make the first four payments due under the Note.

     Rascals'obligations under the Promissory Note are secured by a Pledge
Agreement.  In the Pledge Agreement, Rascals pledges as collateral for the
Promissory Note its interest in the outstanding shares of D.E.M. Amusements,
Inc. and its interest in the outstanding shares of Rascals Comedy Club Stage
Door Grill, Inc.  The security interest in the collateral obtained by Rodmar
Holdings and Marod Holdings in the Pledge Agreement is expressly subordinated
to the security interest held by Hudson United Bank.  The Pledge Agreement
contains standard provisions affording to Rodmar Holdings and Marod Holdings,
in the event of a default by Rascals in making payments due under the
Promissory Note, the rights of a secured creditor under the New Jersey Uniform
Commercial Code.

     The Loan Agreement provided for the sale to each of Rodmar Holdings and
Marod Holdings of fifteen thousand shares of Rascals common stock for a price
of $15,000 total.  The Loan Agreement requires Rascals to keep its properties
fully insured while the Promissory Note is outstanding, and that during that
period it will not, without the approval of Rodmar Holdings and Marod
Holdings, encumber its properties, sell its accounts, sell its assets, pay any
dividends, or retire any of its stock.  The Loan Agreement provides that in
the event of a default under the Promissory Note, that Rodmar Holdings and
Marod Holdings may, in lieu of commencing foreclosure procedures under the
Pledge Agreement, purchase D.E.M. Amusements, Inc. and Rascals Comedy Club
Stage Door Grill, Inc. from Rascals for fair market value, to be determined in
accordance with a formula specified in the Loan Agreement.

Item 13.  EXHIBIT LIST AND REPORTS ON FORM 8-K

     (a) Financial Statements

Report of Independent Auditors                         F-1

Consolidated Balance Sheets                            F-2

Consolidated Statements of Operations                  F-3

Consolidated Statements of Shareholders' Equity        F-4

Consolidated Statements of Cash Flows                  F-5

Notes to Consolidated Financial Statements             F-7

     (b) Exhibit List

3-a       Articles of Incorporation, as amended through December 11, 2001. (1)

3-b       By-laws. (1)

10-a      Lease Agreement dated January 1, 1999 for premises at 1500 Highway
          #35, Ocean, New Jersey. (1)

10-b      Lease Agreement dated January 1, 1999 for premises at 425 Pleasant
          Valley Way, West Orange, New Jersey. (1)

10-c      Promissory Note from Rodmar Holdings, L.L.C. and Marod Holdings,
          L.L.C. to Hudson United Bank dated December 31, 2001. (2)

10-d      Pledge and Security Agreement between Rascals International, Inc. and
          Hudson United Bank dated December 31, 2001. (2)

10-e      Guaranty Agreement dated December 31, 2001 among Michael Margolies,
          Elaine Margolies, Eduardo Rodriguez, Lynn Rodriguez, D.E.M.
          Amusements, Inc., Rascals Comedy Club Stage Door Grill, Inc., Rascals
          Enterprises, Inc., Rascals International, Inc. and Hudson United
          Bank. (2)

10-f      Affiliation Agreement dated December 31, 2001 among Rascals
          International, Inc., Edward Rodriguez and Michael Margolies. (2)

10-g      Employment Agreement - Michael Margolies dated January 1, 2002. (2)

10-h      Employment Agreement - Eduardo Rodriguez dated January 1, 2002. (2)

10-i.     Loan Agreement dated November 6, 2002 among the Registrant, Rodmar
          Holdings, LLC and Marod Holdings, LLC. (3)

10-j.     Promissory Note dated November 6, 2002 issued by the Registrant in
          favor of Rodmar Holdings, LLC and Marod Holdings, LLC. (3)

10-k.     Pledge Agreement dated November 6, 2002 among the Registrant, Rodmar
          Holdings, LLC and Marod Holdings, LLC. (3)

10-l      2001 Stock and Stock Option Plan - filed as an exhibit to the
          Registration Statement on Form S-8 (333-76220) and incorporated
          herein by reference.

10-m      2002 Stock and Stock Option Plan - filed as an exhibit to the
          Registration Statement on Form S-8 (333-85004) and incorporated
          herein by reference.

10-n      2002 Equity Incentive Plan - filed as an exhibit to the Registration
          Statement on Form S-8 (333-101513) and incorporated herein by
          reference.

10-o      Restricted Stock Grant Program - filed as an exhibit to the Annual
          Report on Form 10-KSB for the year ended December 31, 2001 and
          incorporated herein by reference.

21   Subsidiaries -  Rascals Enterprises, Inc.
                     Rascals Comedy Club Stage Door Grill, Inc.
                     D.E.M. Amusements, Inc.
                     Rascals Cherry Hill, Inc.

99  Section 906 certification - filed herewith
______________________________

(1) Filed as an exhibit to the Company's Registration Statement on Form 10-
    SB and incorporated herein by reference.
(2) Filed as an exhibit to the Company's Current Report on Form 8-K dated
    December 31, 2001 and incorporated herein by reference.
(3) Filed as an exhibit to the Company's Current Report on Form 8-K dated
    November 6, 2002 and incorporated herein by reference.

     (c) Reports on Form 8-K

     Report dated November 6, 2002, reporting the sale of property in West
Orange and loan of proceeds to Rascals.

ITEM 14. CONTROLS AND PROCEDURES

    Eduardo Rodriguez, our Chief Executive Officer and Chief Financial
Officer, performed an evaluation of the Company's disclosure controls and
procedures within 90 days prior to the filing date of this report.  Based on
his evaluation, he concluded that the controls and procedures in place are
sufficient to assure that material information concerning the Company which
could affect the disclosures in the Company's quarterly and annual reports is
made known to him by the other officers and employees of the Company, and that
the communications occur with promptness sufficient to assure the inclusion of
the information in the then-current report.

    There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect those controls
subsequent to the date on which Mr. Rodriguez performed his evaluation.



                        Independent Auditors' Report

To the Stockholders and Board of Directors of
Rascals International, Inc. and Subsidiaries


     We have audited the accompanying consolidated balance sheet of
Rascals International, Inc. and Subsidiaries as of December 31, 2002, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the years ended December 31, 2002 and 2001.  These
consolidated financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

     We conducted our audits in accordance with auditing standards
generally accepted in the United States of America.  Those standards require
that we plan and perform the audits to obtain reasonable assurance about
whether the consolidated financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements.  An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall consolidated 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 Rascals International, Inc. and Subsidiaries as of December 31,
2002, and the consolidated results of their operations, stockholders' equity
(deficit) and their cash flows for the years ended December 31, 2002 and 2001,
in conformity with accounting principles generally accepted in the United
States of America.

     The accompanying consolidated financial statements have been repared
assuming Rascals International, Inc. and Subsidiaries will continue as a going
concern.  As discussed in Note 1, the Company has suffered recurring losses
from operations and has a net capital deficiency that raises substantial
doubt about its ability to continue as a going concern.  Management's plans
in regard to these matters are also described in Note 1.  The consolidated
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.


Bridgewater, New Jersey
April 10, 2003


               Rascals International, Inc. and Subsidiaries
                         Consolidated Balance Sheet
                             December 31, 2002



Assets

 Current Assets
  Cash (Note 1)                         $   31,075
  Deferred charge - current (Note 2)        18,200
  Inventory (Note 1)                        44,259
  Prepaid consulting (Note 3)              220,000
  Prepaid expenses                          10,021
                                         ---------
  Total Current Assets                     323,555

Property and equipment, net
 (Notes 1 and 4)                           137,260

Other Assets
 Liquor licenses, net of accumulated
  amortization of $92,995 (Note 1)         158,105
 Deferred charge, net of current
  portion (Note 2)                         203,127
 Security deposits                          10,343
 Prepaid consulting, net of current
  portion (Note 3)                         275,915
                                         ---------
 Total Other Assets                        647,490
                                         ---------
 Total Assets                            1,108,305
                                         =========

Liabilities and Stockholders' Deficit
 Current Liabilities
  Accounts payable and accrued expenses  1,627,376
  Due to related parties (Note 7)          659,361
  Due to officer (Note 7)                   53,843
  Notes payable (Note 5)                    77,000
  Deferred income (Notes 1 and 10)          36,624
                                         ---------
 Total Current Liabilities               2,454,204

 Notes payable, net of current portion
  (Note 3)                                 242,000
                                         ---------
 Total Liabilities                       2,696,204

Commitments and Contingencies (Note 9)           -

Stockholders' Deficit
 Common stock, authorized 50,000,000
  shares, $.001 par value, 60,787
  shares issued and outstanding
  (Notes 1, 3 and 6)                            61
 Additional paid-in capital              3,680,001
 Accumulated deficit                    (5,267,961)
                                         ---------
 Total Stockholders' Deficit            (1,587,899)
                                         ---------
 Total Liabilities and Stockholders'
  Deficit                              $ 1,108,305
                                         =========



See notes to the consolidated financial statements.



              Rascals International, Inc. and Subsidiaries
                  Consolidated Statements of Operations


                                          Year Ended December 31,

                                          2002             2001
                                       ---------------------------
Net Sales                            $ 4,375,194       $ 4,556,691

Costs and Expenses
 Cost of sales                         1,535,084         1,741,488
 Restaurant operating expenses         1,886,013         1,909,773
 Rent expense - related party (Note 7)   312,000                 -
 Depreciation and amortization
  (Notes 1 and 4)                         54,931            59,782
                                       ---------         ---------
 Total Costs and Expenses              3,788,028         3,711,043

Gross Profit                             587,166           845,648

General and Administrative expenses
 General and administrative expenses   1,779,663         1,162,175
 Stock based compensation (Note 3)       206,867            15,590
                                       ---------         ---------
 Total General and Administrative
  Expenses                             1,986,530         1,177,765

(Loss) From Operations                (1,399,364)         (332,117)

Other Income (Expense)
 Interest expense                        (30,372)          (21,000)
 Other income                             12,887                 -
                                       ---------         ---------
 Total Other (Expense)                   (17,485)          (21,000)

(Loss) Before Income Tax Provision    (1,416,849)         (353,117)

Provision for Income Taxes
 (Note 1 and 8)                              240               480
                                      ----------         ---------
Net Loss                             $(1,417,089)      $  (353,597)
                                      ==========         =========

Earnings (Loss) Per Share (Note 1)
 Earnings (Loss) Per Common Share    $    (27.07)      $    (11.71)
                                      ==========         =========

Earnings Per Share-Assuming Dilution $    (27.07)      $    (11.71)
                                      ==========         =========


Weighted Average Number of Common
 Shares Outstanding                       52,359            30,208





See notes to the consolidated financial statements.



              Rascals International, Inc. and Subsidiaries
         Consolidated Statements of Stockholders' Equity (Deficit)





                                       Additional  Accumulated  Total
                      Common Stock     Paid-in     (Deficit)    Stockholders'
                    Shares     Amount  Capital     Earnings     Equity (Deficit)
-------------------------------------------------------------------------------
Balance-
 December 31, 2000  14,202,422  $14,202 $2,108,962   $(3,497,275) $(1,374,111)

Issuance of
 Common Stock        1,500,000    1,500          -             -        1,500
Stock Issued for
 Loan Extension         50,000       50      9,950             -       10,000

Stock Issued for
 Services               75,000       75      9,300             -        9,375

Related Party Debt
 Forgiveness                 -        -    311,081             -      311,081

Net Loss                     -        -          -      (353,597)    (353,597)
                    ---------------------------------------------------------
Balance-
 December 31, 2001  15,827,422   15,827 $2,439,293  $ (3,850,872) $(1,395,752)
                    ---------------------------------------------------------
Issuance of Common
 Stock               1,416,700    1,417    110,033             -      111,450

Stock Issued for
 Loan Extension        186,000      186     22,134             -       22,320

Stock Issued for
 Services           11,730,000   11,730    906,342             -      918,072

Stock issued for
 conversion of debt
 and accrued
 interest              833,334      833    166,667             -      167,500


Stock issued for
 officer compensation  400,000      400      5,200             -        5,600

Retroactive effect of
 500:1 reverse common
 stock split
                   (30,332,669) (30,332)    30,332             -            -

Net Loss                     -        -          -    (1,417,089)  (1,417,089)
                  -----------------------------------------------------------
Balance-
 December 31, 2002      60,787 $     61 $3,680,001   $(5,267,961) $(1,587,899)
                  ===========================================================



See notes to consolidated financial statements.

               Rascals International, Inc. and Subsidiaries
                   Consolidated Statements of Cash Flows


                                          Year Ended December 31,
                                           2002            2001
                                         -------------------------

Cash Flows From Operating Activities
 Net (Loss)                              $ (1,417,089)  $  (353,597)
 Adjustments to Reconcile Net Loss to
  Net Cash Used by Operating Activities
  Depreciation and amortization                62,109        59,782
  Stock issued for services                   278,292             -
  mortization of deferred compensation        206,867        15,589
  Decreases (Increases) in Assets
   Deferred charges                          (221,327)            -
   Prepaid expenses                            42,289        13,579
   Other current assets                             -        (1,683)
   Inventory                                    9,557        (5,285)
   Security deposits                              743        (1,913)

  Increases (Decreases) in Liabilities
   Accounts payable and accrued expenses      317,021       268,063
   Deferred income and credits                (33,661)      (64,951)
                                             --------        ------
  Net Cash Used by Operating Activities      (755,199)      (70,416)
                                             --------        ------

Cash Flows From Investing Activities
  Purchase of property and equipment          (40,845)       (22,428)
                                             --------        -------

  Net Cash Used by Investing Activities       (40,845)       (22,428)

Cash Flows From Financing Activities
  Prepayment of notes payable                 (51,310)             -
  Proceeds from notes and loans payable             -        120,000
  Payments on capital lease obligation              -        (12,460)
  Common stock issued                         111,450          1,500
  Proceeds from related party                 659,361              -
  Proceeds from officer, net                   53,843              -
                                             --------        -------
  Net Cash Provided by Financing Activities   773,344        109,040
                                             --------        -------
Net Decrease in Cash and Equivalents          (22,700)       (11,023)

Cash and Equivalents at Beginning of Period    53,775         17,976
                                             --------        -------
Cash and Equivalents at End of Period       $  31,075      $   6,953
                                             ========        =======


See notes to consolidated financial statements.

              Rascals International, Inc. and Subsidiaries
                  Consolidated Statements of Cash Flows



SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION



 Cash paid during the year for:
      Interest                              $       -       $ 15,727
                                             ========         ======

      Income taxes                          $     480       $      -
                                             ========         ======


SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

During the year ended December 31, 2002, the Company converted notes
payable of $150,000 as well as accrued interest of $17,500 into common stock.

During the year ended December 31, 2001, the Company issued 125,000 shares of
common stock for services valued at $19,375.

During the year ended December 31, 2001, a company owned by similar
interests forgave debt in the amount of $311,081.

During the year ended December 31, 2001, the Company defaulted on their
capital lease agreement.  The Company entered into a  settlement agreement
for $76,000, which has been reclassified into accounts payable.














See notes to consolidated financial statements.



               Rascals International, Inc. and Subsidiaries
               Notes to the Consolidated Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (NOTE 1)

Basis of Presentation and Business

     Rascals International, Inc. was organized as a Delaware corporation in
1992.  It is currently engaged in the business of operating three comedy clubs
in the State of New Jersey.  Each club is owned and operated by one of three
subsidiaries of Rascals International, Inc.: Rascals Stage Door Grill, Inc.,
D.E.M., Inc. and Rascals Cherry Hill, Inc.  The business plan of Rascals
International, Inc. contemplates that it will develop other comedy clubs
nationwide, as well as develop ancillary methods of distributing comedic
entertainment, such as pay-per-view, Internet, home video, etc.

     These financial statements are presented on a consolidated basis and
include the results of operations of the parent corporation, Rascals
International, Inc., the three subsidiaries aforementioned, and Rascals
Kendall, Inc., a 75%-owned subsidiary which owned and operated a now-closed
club in Kendall, Florida.

     The accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and
the satisfaction of liabilities and commitments in the normal course of
business.  As reflected in the consolidated financial statements, the Company
has incurred recurring net losses from operations, an accumulated deficit,
and recurring negative cash flows from operations.  These factors all raise
substantial doubt about the ability of the Company to continue as a going
concern.

     The Company is currently employing the following strategies in order to
achieve profitability over the next 2 to 3 years.

     The profitability of each individual club location will be reviewed.
If management determines that profitability cannot be achieved at any given
location, then action will be taken to relocate or sell the location.

     The Company has invested considerable time and effort into television
and Internet related projects.  Revenues plan to be generated through Internet
activities in the form of Pay Per View Comedy Webcasts, the sale of
merchandise over the Internet and most significantly by the sale of
advertising space.  The Company has already begun to see modest sales from
these ventures and has established the groundwork to enable it to generate
significant revenues in the future.  The Company owns the rights to Rascal's
Comedy Library.  This library contains over 200 hours of comedy footage of
now famous comedians taped while performing at Rascals.  Revenues will be
generated through broadcast of this library over the Internet, production of
video tapes to be sold at the clubs and over the Internet and by sale of video
clips for use in approved third party advertising and productions.  IN-Demand,
a major television pay-per-view organization, put Rascals Comedy Hour
availability into 35 million homes in November of 2001.

    The Company is currently in the process of raising money in the investment
community to help fund corporate activities and the expansion of the comedy
club chain and growth of its Internet activities.  These financial statements
do not include any adjustments that might result from the outcome of these
uncertainties.

     Principles of Consolidation

     The accompanying consolidated financial statements include the accounts of
the Company and its majority owned subsidiaries.  All intercompany
transactions and balances have been eliminated in consolidation.


     Cash and Cash Equivalents

     Cash equivalents are comprised of certain highly liquid investments with
a maturity of three months or less when purchased.  At December 31, 2002, the
Company had no cash equivalents.

     Inventories

     Inventories consist of food, beverages and supplies.  Inventories are
stated at the lower of cost, determined by the first-in, first-out method, or
market.

     Property and Equipment, Depreciation and Amortization

     Property and equipment is presented at cost.  Depreciation is computed
utilizing the straight-line method over the estimated useful lives of the
assets: 5-15 years for Machinery and Equipment and Furniture and Fixtures.
Amortization of leasehold improvements is computed utilizing the straight-
line method over the lesser of the remaining lease term or the useful life of
the leasehold.

     Liquor Licenses

     The liquor licenses are amortized over their useful lives of 40 years
utilizing the straight-line method.  Amortization expense was $6,278 and
$7,286 for the years ended December 31, 2002 and 2001, respectively.

     Advertising

     The Company expenses advertising costs as incurred.  Advertising costs
for the years ended December 31, 2002 and 2001 were $82,277 and $86,913,
respectively.

     Concentrations

     The Company maintains cash balances at two financial institutions in New
Jersey.  The balances are insured by the Federal Deposit Insurance Corporation
up to $100,000.  All cash balances were fully insured at December 31, 2002.

     Use of 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 revenues and expenses during the
reporting period.  Actual results could differ from those estimates.

     Earnings (Loss) Per Share

     Earnings/(loss) per common share represents the amount of earnings/(loss)
for the period available to each share of common stock outstanding during the
reporting period.  Diluted earnings/(loss) per share reflects the amount of
earnings/(loss) for the period available to each share of common stock
outstanding during the reporting period, while giving effect to all dilutive
potential common shares that were outstanding during the period, such as
common shares that could result from the potential exercise or conversion of
securities into common stock.  The computation of diluted earnings/(loss) per
share does not assume conversion, exercise, or contingent issuance of
securities that would have an antidilutive effect on earnings/(loss) per
share.

     Potential future dilutive securities include 3,200 shares issuable under
outstanding warrants as of December 31, 2002.  Rascals International, Inc.
and Subsidiaries Notes to the Consolidated Financial Statements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

     Income Taxes

     The Company accounts for income taxes using the liability method.  Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using tax rates and laws expected to be in
effect when the differences are expected to reverse.  Valuation allowances
are provided against deferred tax assets for which it is "more likely than
not" the assets will not be realized.

     Revenue Recognition

     Revenue from restaurants are recognized when services are provided.
Revenues from the comedy clubs are recognized when the show is performed.
The Company is paid by cash or credit card when services are provided,
therefore, there are no accounts receivable or allowance for doubtful accounts
at the date of these financial statements.

     Reclassification

     Certain accounts in the prior years financial statements have been
reclassified for comparative purposes to conform to the presentation in the
current year financial statements.

DEFERRED CHARGE (NOTE 2)

     In August 2002 the Company entered into an agreement for its location
in Cherry Hill, New Jersey.  As part of the agreement the Company was
responsible for renovating the existing club. The agreement calls for the owners
of the club to reimburse the Company, for their "investment cost" at 10% of
monthly beverage revenues generated in the showroom during scheduled shows.
The agreement is for five years.  This Deferred Charge is being amortized
over the five year period, with the cost being decreased by any reimbursement.

PREPAID CONSULTING (NOTE 3)

     Prepaid consulting expenses are recorded in connection with common stock
issued to consultants for future services and are amortized over the period
of the agreement, ranging from one to three years.

PROPERTY AND EQUIPMENT (NOTE 4)

     A summary of property and equipment is as follows:

     Machinery and Equipment  $ 415,205
     Leasehold Improvements     293,305
     Furniture and Fixtures     128,841
                               --------
     Total                      837,351

     Less:  Accumulated
            Depreciation        700,091
                               --------
                             $  137,260
                               ========

     Depreciation expense was $54,931 and $51,956 for the years ended
December 31, 2002 and 2001, respectively.

NOTES PAYABLE (NOTE 5)

     Notes payable are as follows:


     Note payable, due November 1, 2008 at 16%
      interest per annum, secured by liquor
      licence on West Orange, NJ club                 $ 119,000

     Note payable, at 18% interest.  Payable as
      follows:
      Effective February 28, 2003, the Company
       shall pay on Monday of each and every week
       thereafter the greater of (a) 90% of pre-tax
       Gross Profit for the prior seven days; or
       (b) 10% of gross receipts for the prior seven
       days; or (c) $2,000.00.  "Gross Profit" is
       defined as the difference between gross
       receipts from all sources and direct
       expense of payroll, promotion and 7% of
       gross receipts due Rascals Cherry Hill.  All
       payments shall be applied first to accrued
       interest, and then to the outstanding Principal
       Amount.  The note is secured by substantially
       all the assets of the Company                    200,000

                                                        -------
     Total                                              319,000


     Less: current maturities                            77,000

                                                        -------
     Notes Payable, net of Current Maturities         $ 242,000
                                                        =======


     Total maturities of long-term debt are as follows:

     Year Ending December 31,

                               2003                   $  77,000
                               2004                     108,000
                               2005                      75,000
                               2006                      25,000
                               2007                      28,000
                               Thereafter                 6,000
                                                       --------
                                                      $ 319,000
                                                       ========

CONVERSION OF LOANS PAYABLE (NOTE 6)

     During the year ended December 31, 2002, notes payable plus accrued
interest in the amount of $167,450 were converted into 1,667 shares of the
Company's common stock.

TRANSACTIONS WITH RELATED PARTIES (NOTE 7)

     Facilities Rental

     The companies lease their facilities from two entities owned by the
families of the Company's executive officers.  During the year ended December
31, 2001 the landlord agreed to waive rent for that year.  Total rent expense
to the entities during the years ended December 31, 2002 and 2001 was $312,000
and $0, respectively.

     In addition to waiving the rent expense for the year ended December 31,
2001, the landlord also agreed to forgive rent prior to 2001, totaling
$311,081.  In accordance with APB 26, the debt was classified as paid in
capital.



                Rascals International, Inc. and Subsidiaries
               Notes to the Consolidated Financial Statements

TRANSACTIONS WITH RELATED PARTIES (NOTE 7), Continued

     Due to Officer

     During the year an officer of the Company loaned the Company $75,000 as
part of a restructure of an existing loan with a note holder.  The note is
non-interest bearing and has no repayment terms.

     Due to Related Party

     During the year, two entities owned by the families of the Company's
executive officers loaned money to the Company from the sale of the West
Orange property. The loan calls for interest at 12% and payments of $25,000
monthly, commencing January 2, 2003 to be applied against accrued interest
first.  The note is due December 31, 2003.

INCOME TAXES (NOTE 8)

     Provision for income taxes consist of the following:

                                          December 31,
                                       2002          2001


Currently Payable
     Federal                          $     -      $     -
     State                                240          480
                                       ------       ------
     Total                            $   240      $   480
                                       ======       ======

     The components of the Company's deferred tax asset is as follows:


     Federal and State Net Operating Losses     $3,503,000
     Deferred Items                                 34,000
                                                 ---------
     Totals                                      3,537,000

     Less:  Valuation Allowance                 (3,537,000)
                                                 ---------
     Net Deferred Tax Asset                     $        -
                                                 =========

     The Company has net operating loss carryforwards for federal income tax
purposes of approximately $8,758,000 of which approximately $2,100,000 expires
in 2009, $300,000 in 2010, $700,000 in 2011, $300,000 in 2012, $1,000,000 in
2018, $1,200,000 in 2019, $1,580,000 in 2020 $354,000 in 2021 and $1,224 in
2002.  Certain of the net operating losses arose prior to various subsidiaries
joining the consolidated group  and are therefore limited in there usage only
against profits of that particular subsidiary.  In addition, a change in
ownership has occurred with respect to approximately $4,000,000 of the net
operating losses and their  usage will be severely restricted under the net
operating loss limitations provided in section 383 of the Internal Revenue
Code.

     Due to the uncertainty of profitable operations, and the restrictions
and limitations on the usage of the Company's net operating losses, a
valuation allowance for the full amount of the deferred tax asset has been
recorded.  At December 31, 2002, the valuation allowance increased $709,000
over the preceding period.

     A reconciliation of the federal statutory tax amount to the Company's
actual tax amount for the year ended December 31, 2002 and 2001 is as follows:


            Rascals International, Inc. and Subsidiaries
           Notes to the Consolidated Financial Statements


INCOME TAXES (NOTE 8) (Continued)



                                           December 31,
                                      2002            2001
                                     ------------------------

Statutory (Benefit)                 $457,000      $ (120,360)
Loss for Which No Benefit was
 Received                           (433,000)        112,947

Non Deductible Expenses              (24,000)          7,413
                                     -------        --------

Effective Rate                      $      -      $        -
                                     =======        ========

COMMITMENTS (NOTE 9)

     Leases

     The companies lease restaurant, office and storage space, parking
facilities, autos, and equipment under operating leases expiring at various
times through the year 2003.  The restaurant, office and storage and parking
facilities are leased from related parties.

     The leases are for 5 years and expire on December 31, 2003. The leases
call for rent of $312,000 annually.  The companies are also responsible for
real estate taxes, insurance and other costs.  The leases provide for 1
additional term of 5 years with rent of at least $312,000 with the actual
rent amount to be negotiated no later than the 54th month of the lease.

     The Company entered into a lease in October 2002 for office space in New
Jersey under an operating lease through December 31, 2005.

     Minimum future rental payments under noncancellable  operating leases as
of December 31, 2002 are as follows:

                                     Unrelated          Related Party
                                     --------------------------------
            Year Ending December 31,
                               2003   $ 35,297          $ 312,000
                               2004     35,297                  -
                               2005     35,297                  -
                                       -------            -------
        Total Minimum Future Rentals  $105,891          $ 312,000


     The lease also contain provisions for contingent rental payments based
upon increases in taxes, insurance, and common area maintenance expense.

     Total non-related party rent expense was $3,941 and $12,096 for the
years ended December 31, 2002 and 2001, respectively.

     Financial Consulting Agreements

     In November 1999, the Company entered into a five year agreement with a
consultant to act as a finder for equity and/or debt financing on the Company's
behalf.  Terms of the agreement provide the consultant with the following fee
schedule:


                 Rascals International, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements

COMMITMENTS (NOTE 9) (Continued)

        5% of the first $1,000,000
        4% of the consideration between $1,000,001 and $2,000,000
        3% of the consideration between $2,000,001 and $3,000,000
        2% of the consideration between $3,000,001 and $4,000,000
        1% of such consideration in excess of $4,000,000

     In addition, the Company issued 100 warrants to purchase the Company's
common stock at $1,000 per share and 100 warrants to purchase the Company's
common stock at $750 per share for a total fair value of $77,954.  The
warrants are issued for a 5 year period and vest immediately.  The Company
recorded amortization of $15,590 in the statement of operations in both years
ended December 31, 2002 and 2001.

DEFERRED INCOME AND CREDITS (NOTE 10)

     The Company sells comedy tickets in advance for certain performances as
well as gift certificates.  The deferred income recorded by the Company for
prepaid tickets and gift certificates was $36,624 at December 31, 2002.

FAIR VALUE OF FINANCIAL INSTRUMENTS (NOTE 11)

     The carrying amount of cash,  inventory, prepaid expenses, accounts
payable and deferred income and credits approximates fair value because of
the short maturity of these instruments.  The fair value of the Company's
capital lease obligations approximates its carrying value and is based on the
current rates offered to the Company for debt of the same remaining maturities
with similar collateral requirements.

LIMITATIONS (NOTE 12)

     Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial statement.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgement and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

OPTIONS AND WARRANTS (NOTE 13)

     Effective December 21, 2001, the Company adopted the 2001 Stock and
Stock Option Plan.  During 2002  the Company adopted the 2002 Stock and Stock
Option Plan and the 2002 Equity Incentive Plan. The terms of the Plans are
substantially identical. Under the Plans the Board of Directors is authorized
to  grant up to 28,000 shares of common stock to employees, directors or
consultants.  The grants could be made in the form of outright grants of
stock, grants of restricted stock, grants of qualified or non-qualified
options or grants of performance shares.  Through December 31, 2002 a total
of 21,620 shares had been granted under the Plans, all in the form of stock
grants.  No options have been granted under the Plans.

     A summary of the status of the Company's warrants as of December 31,
2002 and changes during the year then ended is presented below:


                Rascals International, Inc. and Subsidiaries
               Notes to the Consolidated Financial Statements

OPTIONS AND WARRANTS (NOTE 13) (Continued)



                                                     Weighted
                                                     Average
                                                     Exercise
                                          Shares     Price

--------------------------------------------------------------
Outstanding at beginning of year         200        $   875

Granted                                3,000            100

Exercised                                  -              -

Expired
                                       1,000             50
                                       ------          ----
Outstanding at end of year             2,200        $   193
                                       =====           ====

RESTRICTED STOCK GRANT (NOTE 14)

     On March 18, 2002, Rascals' Board of Directors adopted a Restricted Stock
Grant Program (the "Program") pursuant to which 17,500 shares of Common Stock
were reserved. In April 2002 the restricted shares were issued.  In September
2002 17,000 of the restricted shares granted in April 2002 were surrendered
and returned to Rascals.

   The shares issued under the Program are subject to the following
restrictions:

   1.   After 2002 and each of the following four fiscal years (2003 through
2006) one-fifth of the shares granted (the "At-Risk Shares") will be forfeited
if Rascals' revenue during the year does not exceed the following thresholds:


                 2002 - $ 3,500,000
                 2003 - $ 4,500,000
                 2004 - $ 5,500,000
                 2005 - $ 6,500,000
                 2006 - $ 7,500,000

   2.   All shares held by a Grantee shall be forfeited if his employment by
Rascals and his membership on the Board terminates prior to the date the
restrictions lapse.

NEW ACCOUNTING PRONOUNCEMENTS (NOTE 15)

     Standards Implemented

     In April 2002, the Financial Accounting Standards Board (FASB) issued
SFAS No. 145, "Rescission of FASB Statements No. 4,44 and 64, Amendment of
FASB Statement No. 13, and Technical Corrections," effective May 15, 2002.
SFAS No. 145 eliminates the requirement that gains and losses from the
extinguishment of debt be aggregated and classified as an extraordinary item,
net of tax, and makes certain other technical corrections.  SFAS No. 145 did
not have a material effect on the company's Consolidated Financial Statements.







               Rascals International, Inc. and Subsidiaries
              Notes to the Consolidated Financial Statements

NEW ACCOUNTING PRONOUNCEMENTS (NOTE 15), Continued

     In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."  SFAS No. 144 addresses
significant issues relating to the implementation of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of," and develops a single accounting model, based on the
framework established in SFAS No. 121 for long-lived assets to be disposed of
by sale, whether such assets are or are not deemed to be a business.  SFAS
No. 144 also modifies the accounting and disclosure rules for discontinued
operations.  The standard was adopted on January 1, 2002, and did not have
a material impact on the company's Consolidated Financial Statements.

     In July 2001, the FASB issued SFAS No. 141, "Business Combinations,"
and SFAS No. 142, "Goodwill and Other Intangible Assets."  SFAS No. 141
requires the use of the purchase method of accounting for business combinations
and prohibits the use of the pooling of interests method.  Under the previous
rules, the company used the purchase method of accounting.  SFAS No. 141 also
refines the definition of intangible assets acquired in a purchase business
combination.  As a result, the purchase price allocation of current business
combinations may be different than the allocation that would have resulted
under the old rules.  Business combinations must be accounted for using SFAS
No. 141 effective July 1, 2001.

     SFAS No. 142 eliminates the amortization of goodwill, requires annual
impairment testing of goodwill and introduces the concept of indefinite life
intangible assets.  The company adopted SFAS No. 142 on January 1, 2002.
The new rules also prohibit the amortization of goodwill associated with
business combinations that closed after June 30, 2001.  The adoption of SFAS
No. 141 and 142 did not have a material effect on the company's Consolidated
Financial Statements.

    New Standards to be Implemented

    In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations."  SFAS No. 143 provides accounting and reporting
guidance for legal obligations associated with the retirement of long-lived
assets that result from the acquisition, construction or normal operation of
a long-lived asset.  SFAS No. 143 requires the recording of an asset and a
liability equal to the present value of the estimated costs associated with
the retirement of long-lived assets where a legal or contractual obligation
exists.  The asset is required to be depreciated over the life of the related
equipment or facility, and the liability is required to be accreted each year
based on a present value interest rate.  The standard is effective for the
company on January 1, 2003.  The company has reviewed the provisions of this
standard, and its adoption is not expected to have a material effect on the
company's Consolidated Financial Statements.

     In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities."  SFAS No. 146 supersedes EITF
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit and Activity (Including Certain Costs Incurred in a
Restructuring)," and requires that a liability for a cost associated with an
exit or disposal activity be recognized when the liability is incurred.  Such
liabilities should be recorded at fair value and updated for any changes in
the fair value of each period.  The company is currently evaluating the
possible effect on future Consolidated Financial Statements.

            Rascals International, Inc. and Subsidiaries
           Notes to the Consolidated Financial Statements

SUBSEQUENT EVENTS (NOTE 16)

In January 2003, the Company sold 30,000 shares of common stock to the Marod
Holdings, LLC and Rodmar Holdings, LLC for $15,000.  The sale was made
pursuant to the loan agreement in Note 7.

In February 2003, the Company's Board of Directors and shareholders authorized
a 1:500 reverse common stock split.  The reverse split became effective on
March 28, 2003.  Accordingly, all common shares and per share data have been
restated to reflect the reverse split.

In January 2003 the Company issued 1,213 shares of its common stock to
Michael Margolies, its Vice Chairman, as a bonus for services.

In April 2003 the Company issued 7,500 shares of its common stock to an
unrelated party in consideration of services performed for the Company.




<PAGE>
                                 SIGNATURES

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

        Rascals International, Inc.

        By: /s/ Eduardo Rodriguez
        --------------------------------------------
        Eduardo Rodriguez, Chief Executive Officer

   In accordance with the Exchange Act, this Report has been signed below on
April 14, 2003 by the following persons, on behalf of the Registrant and in
the capacities and on the dates indicated.


/s/ Eduardo Rodriguez       Chief Executive Officer, Chief
---------------------       Financial Officer, Chief Accounting Officer
    Eduardo Rodriguez

/s/ Michael Margolies       Director
---------------------
    Michael Margolies


                            Director
    Gary Marks



                                 CERTIFICATION

I, Eduardo Rodriguez, certify that:

         1.  I have reviewed this annual report on Form 10-KSB of Rascals
International, Inc.;

         2.  Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

         3.   Based on my knowledge, the financial statements and other
financial information included in this annual report fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this annual
report;

         4.  The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:

         a)  Designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being
prepared;

         b)  Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and

         c)  Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

         5.  The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's auditors
and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):

         a)  All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for
the registrant's auditors any material weaknesses in internal controls; and

         b)  Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
controls; and

         6.  The registrant's other certifying officers and I have
indicated in this annual report whether or not there were significant changes
in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.

Date: April 14, 2003        /s/ Eduardo Rodriguez
                            Eduardo Rodriguez, Chief Executive Officer
                            and Chief Financial Officer

                *       *       *       *       *




                                  EXHIBIT 99

                    Section 906 Certification

The undersigned officer certifies that this report fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934, and that
the information contained in the report fairly presents, in all material
respects, the financial condition and results of operations of Rascals
International, Inc.

A signed original of this written statement required by Section 906 has been
provided to Rascals International, Inc. And will be retained by Rascals
International, Inc. and furnished to the Securities and Exchange Commission or
its staff upon request.

April 14, 2003                    /s/ Eduardo Rodriguez
                                  ------------------------------------
                                  Eduardo Rodriguez (Chief executive
                                  officer and chief financial officer)