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, 2001.

                     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)

                136 Freeway Drive East, East Orange, NJ 07018
                ---------------------------------------------
                  (Address of principal executive offices)

       Registrant's Telephone Number, including Area Code: 973-266-7020

       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: $4,556,691.

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, 2002 was $1,477,872.

As of April 10, 2001, the number of shares outstanding of the Registrant's
common stock was 37,187,456 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:

     * Growth will be limited by Rascals' ability to obtain additional
       capital;
     * Our debts exceed the book value of our assets;
     * 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 substan
tially 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.  We are under con
        tract to open hotel-based Rascals Comedy Clubs in West
        Chester, PA and in Cherry Hill, NJ during 2002.

        In addition, there are fourteen 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.  Our business plan
        contemplates a total of 18 Rascals locations under our direction by
        the end of 2003.

     2. We have recently signed our first licensing agreement with an
        investment group who plan to open a club in Jersey City, NJ in
        September 2002.  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.  At the present time, "The
        Rascals Comedy Hour" is being 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 400 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.
Each of our New Jersey clubs includes 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 2001 totaled approximately $31,000.  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 since 1983.  It consists of a 4,000 sq. ft. lower level comedy room
with a seating capacity of 375, a 2,000 sq. ft. ground floor restaurant with a
seating capacity of 135, and a 1,000 sq. ft. bar with a seating capacity of
60.  It sits on 1.4 acres of land, with parking for over 200 cars.  The club
presents at least one show daily, with two shows on Friday and Saturday.  The
restaurant is open daily for lunch and dinner.

     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 enter
tainers are booked, we utilize the 1,000 seat ballroom at the Hotel.

     Rascals Comedy Club at the Sheraton Springfield at Monarch Place
(Springfield, MA).  This facility also opened late in 2001.  It consists of a
comedy room with a seating capacity of 140 in which we produce six shows per
week.  The 600 seat hotel ballroom is available to us for major shows, and we
have used it four times in the past six months, each time for over 500 guests.

     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 each of our New Jersey 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 East 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.

     Already in 2002 we have contracted to locate a Rascals Comedy Club in
the Holiday Inn in West Chester, PA and another in the Hilton Hotel in Cherry
Hill, NJ.  We are currently in negotiations with a number of other hotels who
are asking us to locate clubs on their premises, and are investigating related
possibilities at sites throughout the U.S.

     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.

     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.

     Recently we began to market the Rascals Platinum V.I.P. Card.  For an
annual fee of $350, a Rascals Platinum V.I.P. Card entitles the holder to
priority reservations, reserved seating, and, subject to certain restrictions,
free admission to our shows nationwide.  Since the program was initiated in
February 2002, we cannot predict at this time how successful it will be as a
marketing vehicle.

Rascals Comedy Library

     Between 1985 and 1992 Rascals developed a library of videotapes of the
comedy performances at its West Orange club.  The videotapes, which include
more than 400 hours of performances, were made and produced by Rob Perna d/b/a
Stand and Deliver Productions.  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 and Stand and Deliver the right to reproduce and market the
videotapes.  Between themselves, Rascals and Stand and Deliver have agreed to
share ownership of the videotapes equally.

     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, therefore,
have recently been 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 the past five months, iN-DEMAND has 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 and Stand and Deliver.


     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 in the past year has had noteworthy
success marketing VHS videos.  Razor & Tie has advanced to Rascals its budget
for producing two home videos of performances in the Rascals library, which
Razor & Tie will market through direct response channels. To the extent that
direct response marketing is successful, Razor & Tie will then introduce the
videos into retail stores.  The agreement provides that Razor & Tie will 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.

     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 has 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 125 individuals, of whom 31 are full-time
employees.  The other 94 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 February 2002 the executive offices of Rascals International, Inc.
have been  located in East Orange, New Jersey.  The offices in which we are
located are leased to Transportation Logistics Int'l, Inc.  Transportation
Logistics also provides certain services and shares certain equipment with
Rascals.  The Chairman and principal shareholder of Transportation Logistics
Int'l, Inc. is Michael Margolies, who is Rascals' Vice Chairman.  A facilities
sharing agreement is under negotiation; but the terms have not yet been
determined.

  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

  In February  2002 Rascals commenced action in the Superior Court for the
State of New Jersey against P.A. Whelan and Company, Inc.  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.

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 under the trading symbol "RASC.OB."  Prior to that
time, our common stock was listed only on the Pink Sheets.  The following
table sets forth the bid prices quoted for our common stock on the either the
OTC Bulletin Board or the Pink Sheets during the two years ended December 31,
2001.


                                         Bid
                                 --------------------
Period:                          High             Low
-----------------------------------------------------
Jan. 1, 2000 - Mar. 31, 2000    $ 1.75          $  .25
Apr. 1, 2000 - June 30, 2000    $  .50          $  .13
July 1, 2000 - Sep. 30, 2000    $  .50          $  .13
Oct. 1, 2000 - Dec. 31, 2000    $  .50          $  .03

Jan. 1, 2001 - Mar. 31, 2001    $  .40          $  .04
Apr. 1, 2001 - June 30, 2001    $  .35          $  .09
July 1, 2001 - Sep. 30, 2001    $  .40          $  .06
Oct. 1, 2001 - Dec. 31, 2001    $  .17          $  .07



     (b) Shareholders

     Our shareholders list contains the names of 193 registered shareholders
of record.  The number of beneficial shareholders who hold their shares in
street name is much greater and cannot be determined at this time.

     (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

     The operations of Rascals during 2001 consisted primarily of its two New
Jersey restaurant/clubs, from which all of our 2001 revenue was obtained.
Although some expenses were incurred in connection with the development of the
Phoenix and Springfield hotel-based clubs, and some income was realized from
our discontinued operation in the Miami area, results for 2001 can be
considered predictive only of our stand-alone club operations.  During 2002 we
expect to realize revenue and expense from all aspects of our new business
plan - the two stand-alone clubs as well as several hotel-based clubs, home
video sales, pay-per-view sales, etc.  So our financial results for 2002 will
be fundamentally different from our results for 2001.

     For 2001 Rascals reported revenue and expenses which were both
substantially lower than revenue and expenses reported for 2000.  However,
included in the 2000 statement of operations was $713,723 in revenue and
$892,530 in expenses contributed by Rascals' restaurant/club in the Miami
area.  That club was closed in November 2000, and will have no further effect
on Rascals' financial results.  Excluding the results from the Miami
operation, Rascals realized in 2000 $4,324,353 in revenue and $3,890,468 in
costs and expenses, all attributable to its two New Jersey restaurant/clubs.

     Revenue from the New Jersey clubs increased by 5.4 percent from 2000 to
2001, despite the 9-11 terrorist attacks, which had an adverse effect on the
entertainment industry in the New York metropolitan area.  During the same
period the direct expenses of operating our two clubs fell by 4.3%.  The
reduction was primarily due to the fact that the related parties who were the
landlords of the premises in which our New Jersey clubs operate waived the
rental payments for 2001.  However, even if the contracted rent had been
accrued, the direct expenses of those operations would have increased by only
3.7% from 2000 to 2001.  The fact that the growth in expenses lagged the
growth in revenue reflected the results of our efforts to improve operating
efficiency at those facilities.

     Although the New Jersey properties each produced profits in 2001,
Rascals' corporate parent incurred  expenses which offset the profits of the
operating subsidiaries, resulting in a net loss for the year of $353,597.
Those corporate-level expenses included the expenses attributable to
developing the hotel-based clubs in Phoenix and Springfield as well as
executive payroll and professional fees.  In 2002 we expect that revenue from
our hotel-based operations will serve to offset the start-up costs of new
hotel-based clubs.  On the other hand, we expect to report executive payroll
and management fees in 2002 that are in excess of those we reported in 2001.
This will occur 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 will cause us to incur additional expenses for stock-based
compensation during 2002.  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, is likely to result in expenses for professional
fees during 2002 that  exceed our professional fees in 2001.

     Offsetting the additional corporate-level expenses that we will incur in
2002 will be the several new streams of revenue that we have initiated this
year.  During 2002 we will, for the first time,  realize revenue from at least
five hotel-based clubs, from sales of home video programs, from advertising on
WindowsMedia.com, from television pay-per-view, and from several other uses of
the Rascals comedy library.  Each of these revenue streams will come to us
with only modest expenses attached, so that the greater portion of this new
revenue will serve to improve Rascals' "bottom line."

     We expect that, as our new business plan is implemented, we will realize
growth and improved financial results.  Because the plan relies in all of its
aspects on "partners" to bear the greater part of the financial burden, the
growth of our expenses during this period of expansion should be controllable.
In addition, the development of additional comedy clubs should afford us
economies of scale.  For example, the ability to offer comedians block
bookings throughout our clubs should enable us to negotiate lower fees.  Our
goal, then, will be to carefully balance the growth of overhead expenses
against the growth of revenue.  If we are successful in accomplishing that
goal, the expansion called for in our new business plan should produce
significant profitability.

Liquidity and Capital Resources

     When 2001 began, Rascals had a working capital deficit of $1,373,157 and
limited sources of credit.  When 2001 ended, Rascals still had no sources of
credit, and its working capital deficit was $1,794,626, a $421,469 decrease
from the previous year.  One primary reason that Rascals was able to sustain
its operations despite a working capital deficit was the willingness of the
then-owners of our New Jersey facilities to forego rent payments, which
enabled us to apply the cash generated from our operations to past debts.
Nevertheless, the fact that we have carried on for an extended period with
negative working capital is also indicative of a strength at the core of the
Rascals operations.  While we do not mean to suggest that the working capital
deficit is not an impediment to Rascals' near-term health, our ability to
sustain our operations to this point suggests that we have the resources to
carry on until the benefits expected from our new business plan put us in a
position to eliminate the burden of paying prior years' debts.

     In the first months of 2002 we have been devoting considerable effort to
ameliorating our debt situation.  We have been in negotiations with our
largest creditor, the State of New Jersey, to whom we owe over $270,000 in
taxes from prior years, and we have been making payments on an affordable five
year payment plan, subject to completion of a formal settlement agreement.  We
have also reached an agreement with the largest creditor remaining from our
discontinued Miami-area operation, which will eliminate that debt in April
with a final payment of $10,000.  In addition, we have persuaded a number of
entities which invested in Rascals debt instruments to convert their debt into
equity.

     Rascals is a guarantor of the $2,250,000 loan that is secured by a
mortgage on the properties in West Orange and Ocean Township where our
restaurant/clubs operate.  At the end of 2001 it became necessary to refinance
that loan.  The refinancing was obtained only because Michael Margolies and
his wife and Eduardo Rodriguez and his wife agreed to personally guarantee the
obligation.

     In 2002 we are implementing a business plan designed to facilitate rapid
growth with only modest financial commitment by Rascals.  For example, our new
program of locating the Rascals Comedy Clubs in existing hotels means that we
can generally establish a new club with a net cash outlay of less than
$130,000.  Similarly, our licensing agreements with major media distributors
require virtually no financial commitment by Rascals, and have potential to
produce considerable revenue.  The plan, if successful, will be our path from
negative working capital to a solid balance sheet.


Item 7.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

     None.


Item 8.   FINANCIAL STATEMENTS

     The Company's financial statements, together with notes and the Report
of Independent Certified Public Accountants, are set forth immediately
following Item 13 of this Form 10-KSB.



                                  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         40      Chairman, Chief Executive     1998
                                   Officer, Chief Financial
                                   Officer
Michael Margolies         74      Vice Chairman, Secretary,     2001
                                   Director
Gary Marks                43      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 past 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 international 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 2001 by Section 16(a) of the Exchange Act, except as follows: each of
the three members of our Board of Directors failed to file a Form 3 when it
was due.

Item 10.  EXECUTIVE COMPENSATION

     This table itemizes the compensation we paid to Eduardo Rodriguez, who
served as our Chief Executive Officer during 2001.  There was no officer whose
salary and bonus for services rendered during the year ended December 31, 2001
exceeded $100,000.


                                                       Other
                        Year           Salary       Compensation
------------------------------------------------------------------
Eduardo Rodriguez.......2001         $   74,400     $ 22,000(1)
                        2000             54,000           --
                        1999            106,154           --
          ____________________________
(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.

     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 1,000,000 shares of common stock to the Margolies Family Trust
and 500,000 shares to Mr. Margolies.

     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

     On March 18, 2002, Rascals' Board of Directors adopted a Restricted
Stock Grant Program (the "Program") pursuant to which 8,750,000 shares of
Common Stock were reserved.  In April 2002 the restricted shares were and
issued as follows:

     Eduardo Rodriguez  -   5,000,000 shares
     Michael Margolies  -   3,500,000 shares
     Gary Marks         -     250,000 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

     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.

     3.  The shares granted under the Program cannot be sold, assigned,
pledged, transferred or hypothecated in any manner, by operation of law or
otherwise, other than by writ or the laws of descent and distribution, and
shall not be subject to execution, attachment or similar process.  The only
exception to this restriction is the pledge by Mr. Rodriguez of his shares to
secure the mortgage on Rascals' New Jersey restaurant/clubs.  These
restrictions will lapse with respect to any At-Risk Shares that are not
forfeited as described above.  In addition, the restrictions will lapse with
respect to all unforfeited shares if in any year Rascals' revenue exceeds
$7,500,000.

     4.  The restrictions shall also lapse as to all shares granted to a
Grantee on the first to occur of (i) the termination of that Grantee's
employment with the Company by reason of his disability, (ii) the Grantee's
death, (iii) termination of the Grantee's employment by the Company without
good reason, or (iv) a change of control of the Company.  The Program defines
"Change of Control" as an acquisition by a person or group of more than 50% of
the Company's outstanding shares, a transfer of the Company's property to an
entity of which the Company does not own at least 50%, or the election of
directors constituting a majority of the Board who have not been approved by
the existing Board.

     During any tax year in which a Grantee realizes taxable income by reason
of the lapse of the restrictions on the shares granted under the Program, the
Company shall pay to such Grantee a "Gross-Up Bonus" in cash equal to the
aggregate of (i) the additional federal, state and local income taxes incurred
by Grantee as a result of realization of such taxable income, and (ii) the
federal, state and local income tax incurred by the Grantee as a result of the
Gross-Up Bonus.  In no event shall the Gross-Up Bonus exceed the aggregate of
(i) the amount of the tax deduction for which the Company receives a benefit
for the tax year of the Company beginning during the tax year of the Grantee
in which he realizes taxable income by virtue of the lapse of the restrictions
referred to above, and (ii) the amount of the tax deduction for which the
Company receives a benefit for such tax year of the Company by virtue of the
Gross-Up Bonus.

     There is no requirement under law for the Board of Directors to obtain
shareholder approval of the Program.  Accordingly, the Board did not seek such
approval.  The failure to obtain shareholder approval will adversely affect
Rascals only if in any year the total compensation paid by Rascals to any of
its officers (including taxable "compensation" occurring by reason of the
lapse of restrictions on shares granted under the Program) exceeded
$1,000,000.  In that case Rascals would not be able to take a deduction on its
tax return for the excess compensation by reason of its failure to obtain
shareholder approval of the Program.  The Board of Directors decided, however,
that the likelihood of total compensation to any Grantee exceeding $1,000,000
is sufficiently small that it did not warrant obtaining shareholder approval
for the Program.

     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 37,187,456 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                    10,220,833(3)         27.5%

Michael Margolies                     6,500,000(4)         17.5%

Gary Marks                              375,000             1.0%

All Officers and Directors
 As a Group (3 persons)              17,095,833(3)(4)      46.0%
     ____________________________________

(1)  Except as noted, the address of all shareholders is c/o Rascals
     International, Inc., 136 Freeway Drive East, East Orange, NJ 07018
(2)  All shares are owned of record unless otherwise indicated.
(3)  Includes 5,000,000 shares subject to the terms of the Restricted
     Stock Grant Program.  (See description of restrictions in Item 10
     above).  Includes 5,220,833 shares pledged to Hudson United Bank
     to secure the mortgage loan on Rascal's West Orange and Ocean
     premises.  (See "Certain Relationships and Related Transactions"
     below.)  Also includes 50,000 shares held by minor children of Mr.
     Rodriguez.
(4)  Includes 3,500,000 shares subject to the terms of the Restricted Stock
     Grant Program.  (See description of restrictions in Item 10 above).  Also
     includes 1,000,000 shares owned 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.

Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     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 is 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 two million 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.

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 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-j 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-k Restricted Stock Grant Program - filed herewith.

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

(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.

     (c) Reports on Form 8-K

     Report dated December 31, 2001, reporting the refinancing of the
mortgages on the Company's New Jersey facilities and related transactions with
Michael Margolies.


                        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, 2001, and the related
consolidated statements of operations, stockholders' equity (deficit), and
cash flows for the years ended December 31, 2001 and 2000.  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 audit.

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 provides 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, 2001, and
the consolidated results of their operations and their cash flows for the years
ended December 31, 2001 and 2000, in conformity with accounting principles
generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared 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 raise 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       Rosenberg Rich Baker Berman & Company
April 12, 2002




<PAGE>
            Rascals International, Inc. and Subsidiaries
                     Consolidated Balance Sheet
                          December 31, 2001


         Assets
Current Assets
 Cash (Notes 1 and 9)                       $     6,953
 Accounts receivable (Notes 1 and 9)             46,822
 Inventory (Notes 1 and 9)                       53,816
 Prepaid expenses (Note 9)                       52,310
                                              ---------
    Total Current Assets                        159,901

Property and equipment, net (Notes 1 and 2)     151,346

Other Assets
 Liquor licenses, net of accumulated
  amortization of $88,494 (Note 1)              201,360
 Security deposits                                9,403
 Other assets                                     1,683
                                              ---------
    Total Other Assets                          212,446
                                              ---------
    Total Assets                                523,693
                                              =========

      Liabilities and Stockholders' Deficit
Current Liabilities
 Accounts payable and accrued
  expenses (Note 9)                           1,363,932
 Notes payable (Note 3)                         520,310
 Deferred income and credits
  (Notes 1, 8 and 9)                             70,285
                                              ---------
    Total Current Liabilities                 1,954,527
                                              ---------
Commitments and Contingencies (Note 7)

Stockholders' Deficit
 Common stock, authorized 50,000,000 shares,
  $.001 par value, 15,827,422 shares issued
  and outstanding (Notes 1 and 4)                15,827
 Additional paid-in capital                   2,439,293
 Accumulated deficit                         (3,850,872)
 Deferred compensation                          (35,082)
                                              ---------
     Total Stockholders' Deficit             (1,430,834)
                                              ---------
     Total Liabilities and Stockholders'
      Deficit                               $   523,693
                                              =========




See notes to the consolidated financial statements.



              Rascals International, Inc. and Subsidiaries
                 Consolidated Statements of Operations



                                           Year Ended December 31,
                                         ---------------------------
                                             2001            2000
                                           ---------       ---------

Net Sales                                $ 4,556,691     $ 5,038,076
                                           ---------       ---------

Costs and Expenses
 Cost of sales                             1,741,488       2,170,006
 Restaurant operating expenses             1,909,773       2,033,136
 Rent expense - related party (Note 5)             -         312,000
 Rent expense                                 12,096         185,346
 Depreciation and amortization
  (Notes 1 and 2)                             59,782          82,510
                                           ---------       ---------
    Total Costs and Expenses               3,723,139       4,782,998
                                           ---------       ---------
Gross Profit                                 833,552         255,078
                                           ---------       ---------

General and Administrative expenses
 General and administrative expenses       1,150,079       1,182,884
 Stock based compensation (Note 7)            15,590         374,340
                                           ---------       ---------
    Total General and Administrative
     Expenses                              1,165,669       1,557,224
                                           ---------       ---------
(Loss) From Operations                      (332,117)     (1,302,146)
                                           =========       =========
Other Income (Expense)
 Interest expense                            (21,000)        (49,129)
 Loss on abandonment of assets                     -        (227,638)
                                           ---------       ---------
    Total Other (Expense)                    (21,000)       (276,767)
                                           ---------       ---------
(Loss) Before Income Tax Provision          (353,117)     (1,578,913)
Provision for Income Taxes (Note 1 and 6)        480               -
                                           ---------       ---------
Net Loss                                 $  (353,597)    $(1,578,913)
                                           =========       =========

Earnings per share (Note 1)
 Earnings (Loss) Per Common Share        $     (0.03)    $     (0.14)
 Earnings Per Share - Assuming Dilution  $     (0.03)    $     (0.14)

Weighted Average Number of Common
 Shares Outstanding                       15,103,798       11,125,658



See notes to the consolidated financial statements.



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


<TABLE>
                                                                                         Total
                                Common Stock        Additional  Accumulated              Stockholders'
                            ----------------------  Paid-in     Earnings     Deferred    Equity
                             Shares         Amount  Capital     (Deficit)    Compensaton (Deficit)
------------------------------------------------------------------------------------------------------
<S>                         <C>           <C>       <C>         <C>          <C>         <C>
Balance - December 31, 1999  10,021,860  $  10,022  $1,249,446  $(1,918,362)  $(421,114)  $(1,080,008)

Stock Issued for Purchase
 of Asset                         8,500          8       1,692            -           -         1,700
Stock Issued for Conversion
 of Debt                      3,452,062      3,452     708,544            -           -       711,996
Stock Issued for Services       220,000        220      49,780            -           -        50,000
Issuance of Common Stock        500,000        500      99,500            -           -       100,000
Amortization of Deferred
 Compensation                         -          -           -            -     370,422       370,442
Net Loss                              -          -           -   (1,578,913)          -    (1,578,913)
                             ------------------------------------------------------------------------
Balance - December 31, 2000  14,202,422     14,202   2,108,962   (3,497,275)    (50,672)   (1,424,783)
                             ------------------------------------------------------------------------
Amortization of Deferred
 Compensation                         -          -           -            -      15,590        15,590
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)  $ (35,082)  $(1,430,834)
                             ========================================================================


</TABLE>

See notes to consolidated financial statements.



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


                                                 Year Ended December 31,
                                               --------------------------
                                                 2001               2000
                                               -------             ------
Cash Flows From Operating Activities
 Net (Loss)                                     $(353,597)      $(1,578,913)
 Adjustments to Reconcile Net Loss to Net
  Cash Used by Operating Activities
  Depreciation and amortization                    59,782            82,510
  Stock issued for services                             -            50,000
  Amortization of deferred compensation            15,589           370,442
  Loss of abandonment of assets                         -           227,638
  Other current assets                             (1,683)                -
 Decreases (Increases) in Assets
  Accounts receivable                             (27,219)            4,196
  Prepaid expenses                                 13,579            (2,699)
  Inventory                                        (5,285)           (2,772)
  Security deposits                                (1,913)           23,522
 Increases (Decreases) in Liabilities
  Accounts payable and accrued expenses           268,063           339,675
  Accrued expenses - related party                      -          (182,004)
  Deferred income and credits                     (64,951)           35,218
                                                 --------          --------
    Net Cash Used by Operating Activities         (97,635)         (633,187)
                                                 --------          --------
Cash Flows From Investing Activities
 Purchase of property and equipment               (22,428)          (29,348)
                                                 --------          --------
Net Cash Used by Investing Activities             (22,428)          (29,348)

Cash Flows From Financing Activities
 Proceeds from convertible notes payable                -           150,000
 Proceeds from notes and loans payable            120,000           200,000
 Payments on capital lease obligation             (12,460)           (6,148)
 Common stock issued                                1,500           300,000
                                                  -------           -------
    Net Cash Provided by Financing Activities     109,040           643,852
                                                  -------           -------
Net Decrease in Cash and Equivalents              (11,023)          (18,683)
Cash and Equivalents at Beginning of Period        17,976            36,659
                                                  -------           -------
Cash and Equivalents at End of Period           $   6,953       $    17,976
                                                  =======           =======


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, 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.

 During the year ended December 31, 2000, $711,996 debt was converted into
3,452,062 shares of common stock.

 During the year ended December 31, 2000, the Company issued 8,500 shares of
common stock valued at $1,700 to purchase equipment.

 During the year ended December 31, 2000, the Company issued 220,000 shares of
common stock with a value of $50,000 for services provided.

 During the year ended December 31, 2000, the Company financed their insurance
policy with a note 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)

Basics of Presentation and Business

     Rascals International, Inc. ("RI") (formerly Porter McLeod National
Retail, Inc.) (the "Company") merged with Rascals Enterprises, Inc. and
Subsidiaries ("REI") on August 9, 1999.  Due to having the larger portion of
the voting rights in the combined corporation, REI is deemed to be the
acquiring company and the transaction is being accounted for as an exchange
of cash for stock by the acquirer.  Rascals Enterprises, Inc. and Subsidiaries
arose from the combination of Rascals Enterprises, Inc. and its 75% owned
subsidiary Rascals Kendall, Inc.  ("RK") with DEM, Inc. d/b/a Rascal's
Restaurant and Lounge ("DEM") and Rascals Stage Door Grill, Inc. ("RSD") which
occurred on August 1, 1999.  Concurrent with the transaction, Porter McLeod
National Retail, Inc. changed its name to Rascals International, Inc.  These
financial statements are presented on a consolidated basis and include the
results of operations of the parent corporation Rascals International, Inc.
and its wholly-owned subsidiaries DEM and RSD and its 75% owned subsidiary RK.

     Summarized results of operations of the separate companies for the years
ended December 31, 2001 and 2000 are as follows:

                                   Total  Assets     Net Sales    Net Income
                                                                    (Loss)
-----------------------------------------------------------------------------
December 31, 2001
  RI                                 $     1,700    $        -   $  (184,466)
  REI                                     28,552             -      (244,739)
  DEM                                    242,364     3,152,818        50,308
  RSD                                    212,027     1,403,873        25,300
  RK                                      39,050             -             -
                                      --------------------------------------
                                     $   523,693    $4,556,691   $  (353,597)
                                      ======================================
December 31, 2000
  RI                                                $        -   $  (487,672)
  REI                                                   13,685      (620,280)
  DEM                                                2,987,360       147,352
  RSD                                                1,323,308       (67,575)
  RK                                                   713,723      (550,738)
                                                     -----------------------
                                                    $5,038,076   $(1,578,913)
                                                     =======================

     REI was incorporated under the laws of the State of Delaware on June 12,
1997 as Rascals Holding Co. and changed is name to Rascals Enterprises, Inc.
on September 10, 1997.  The Company organized a subsidiary company, RK, in
August 1998 to oversee the development and operations of a comedy club/
restaurant in Florida.  The Company owns a 75% interest in RK.  This
establishment was closed in 2000.  REI's activities consisted of the raising
of debt and equity financing.  Its plan was to oversee the operation of two
New Jersey comedy club/restaurants owned and operated by DEM and RSD and the
comedy club/restaurant in Florida,  as well as develop other comedy/
entertainment clubs nationwide.

     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 50% of the rights to Rascal's Comedy Library.  This
library contains over 400 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.  With a new program each month, sales are brisk,
and Rascals receives 40% of gross revenue.

     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.

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, 2001, 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 $7,286 and
$7,246 for the years ended December 31, 2001 and 2000, respectively.

Advertising

     The Company expenses advertising costs as incurred.  Advertising costs
for the years ended December 31, 2001 and 2000 were $86,913 and $132,610,
respectively.

Concentration of Credit Risk

     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, 2001.
The Company is also subject to credit risk on accounts receivable.  The Company
does not require collateral to support accounts receivable or financial
instruments subject to credit risk.

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 per common share represents the amount of earnings for the period
available to each share of common stock outstanding during the reporting
period.  Diluted earnings per share reflects the amount of earnings 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 per share does not assume
conversion, exercise, or contingent issuance of securities that would have an
antidilutive effect on earnings per share.

     Potential future dilutive securities include 100,000 shares issuable
under outstanding warrants as of December 31, 2001.

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.


PROPERTY AND EQUIPMENT (NOTE 2)

     A summary of property and equipment is as follows:

     Machinery and Equipment          $   377,062
     Leasehold Improvements               293,305
     Furniture and Fixtures               126,138
                                          -------
     Total                                796,505
     Less:  Accumulated Depreciation      645,159
                                          -------
                                      $   151,346
                                          =======

     Depreciation expense was $51,956 and $80,505 for the years ended December
     31, 2001 and 2000, respectively.

NOTES PAYABLE (NOTE 3)

     Notes payable are as follows:


      6% convertible debentures, due January 2002, interest
        payable quarterly.                                   $ 150,000
      Note payable, due March 15, 2001 at 12% interest per
        annum, personally guaranteed by the company
        president.  This note was extended (See Note 7)        200,000
      Note payable, due February 2002 at 10% interest.
        These notes were subsequently extended through
        May 15, 2002.                                          120,000
      Note payable, due July, 2002 at 10.50%, collateralized
        by an insurance policy.                                 50,310
                                                               -------
      Total                                                    520,310
      Less: current maturities                                 520,310
                                                               -------
      Notes Payable, net of Current Maturities               $       -
                                                               =======

CONVERSION OF LOANS PAYABLE (NOTE 4)

     The Company received non-interest bearing short-term loans aggregating
$50,000 which were converted into 250,000 shares of common stock during the
year ended December 31, 2000.


TRANSACTIONS WITH RELATED PARTIES (NOTE 5)

     Facilities Rental

     The companies lease their facilities from entities which have interests
similar to the major stockholders of the companies.  During the year ended
December 31, 2001 the landlord agreed to waive rent for the year.  Total rent
expense to the entities during the years ended December 31, 2001 and 2000 was
$0 and $312,000, respectively.

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

     Services

     The Company paid $4,900 to a company owned by the Company's president
during the year ended December 31, 2000 for various services.


INCOME TAXES (NOTE 6)

     Provision for income taxes consist of the following:


                                                 December 31,
                                              -----------------
                                              2001         2000
                                              ----         ----
  Currently Payable
   Federal                                   $    -       $    -
   State                                        480       $    -
                                              -----        -----
   Total                                     $  480       $    -

  Deferred
   Federal                                   $    -       $    -
   State                                          -            -
                                              -----        -----
   Total                                          -            -

   Totals                                    $  480       $    -
                                              =====        =====


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


     Federal and State Net Operating Losses         $ 2,794,000
     Deferred Items                                      34,000
                                                      ---------
     Totals                                           2,828,000
     Less:  Valuation Allowance                      (2,828,000)
                                                      ---------
     Net Deferred Tax Asset                         $         -
                                                      =========


     The Company has net operating loss carryforwards for federal income tax
purposes of approximately $7,413,000 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 and $354,000 in 2021.  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, 2001, the valuation allowance increased $354,000 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, 2001 and 2000 is as follows:


                                                    December 31,
                                                -------------------
                                                 2001         2000
                                                 ----         ----

Statutory (Benefit)                           $ (120,360)  $ (536,831)
Loss for Which No Benefit was Received           112,947      528,192
Non Deductible Expenses                            7,413        8,639
                                                 -------      -------
Effective Rate                                $        -   $        -
                                                 =======      =======


COMMITMENTS (NOTE 7)

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.

     During the year ended December 31, 2001, the landlord waived the rent due
under the lease agreement for the year.

     The Company entered into a lease in September 2000 for office space in
New Jersey under an operating lease for a period of 3 years commencing
September 1, 2000.

     Minimum future rental payments under noncancellable  operating leases as
of December 31, 2001, are as follows:



                                                            Related
                                            Unrelated        Party
                                         ---------------  -------------

Year Ending December 31,
     2002                                  $  37,304       $  312,000
     2003                                     18,062          312,000
     2004                                      1,596                -
                                              ------          -------
     Total Minimum Future Rentals          $  56,962       $  624,000
                                              ======          =======

     Total non-related party rent expense was $12,096 and $185,346 for the
years ended December 31, 2001 and 2000, respectively.

Guarantor

     DEM and SDG are guarantors of the mortgage debt on the West Orange
building in which it operates and substantially all of the Company's assets
are pledged as collateral on the debt.  The mortgage debt is owned by a
commonly controlled company and amounted to $2,250,000 at December 31, 2001.
No reserve for loss has been provided in the financial statements.

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:

      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 50,000 warrants to purchase the Company's
common stock at $2.00 per share and 50,000 warrants to purchase the Company's
common stock at $1.50 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, 2001 and 2000.

Sales and Marketing Agreement

     In November 1999, the Company entered into a five (5) year agreement with
a consultant to be responsible for the establishment of co-development,
management agreements and the sale of franchise agreements.  As compensation
for its services, the consultant will be paid 15% percent of the initial
franchise fee or development along with a monthly fee of 1% of the revenue on
franchised and Company managed units during the initial term of the initial
franchise or management agreement and any revenues thereof.  In addition,
during the first 60 months of the agreement, the Company will issue 10 year
common stock options to purchase 15,000 shares of the Company's common stock
at then current market price for each franchise agreement or management
agreement.  As of December 31, 2001, the Company had not entered into any
franchise or management agreements.

Business Advisory Consulting Agreement

     In September 1999, the Company entered into a six month consulting
agreement for business management services, marketing consultation and
advisory services.  In consideration for such services, the Company agreed to
deliver options to purchase 450,000 shares of the Company's common stock at a
price of 250,000 shares at $1.00, 100,000 shares at $3.00 and 100,000 shares
at $4.00 per share for a total fair value of $717,500.  The options may not
be exercised after September 2000.  The agreement also called for the payment
of a sliding scale fee based on any outside business investment made or
business combination effected.  No finders fees were earned under the contract.
The Company recorded amortization of $0 and $358,750 in the statement of
operations for the years ended December 31, 2001 and 2000, respectively.

Note Payable

     The Company entered into an agreement to extend their $200,000 note
payable.  In accordance with the agreement, the Company will issue 200,000
shares of common stock to satisfy the past due interest of $18,000 under the
terms of the agreement, if the shares sell for less than $18,000 net of
commissions, Rascals will make up the difference in cash.  If the shares sell
for an average price in excess of $0.15, the monies received in excess of
$27,000 will be applied to reduce the principal amount of the loan still
outstanding.

     In addition as an integral part of the restructuring of the loan, the
note holder will convert $50,000 of the $200,000 principal amount in exchange
for 500,000 shares of Rascals common stock.

     Rascals guarantees that the note holder will receive at least a total of
$50,000 net of commissions from the sale of the 500,000 shares.  In the event
they receive proceeds in excess of $75,000, such excess will be applied to
reduce the principal balance of the $150,000 remaining principal loan or such
reduced principal amount which may result from the sale of the initial 200,000
shares of Rascals common stock.

     Assuming that the note holder received the full benefit contemplated by
the agreement from the sale of the 200,000 shares and the 500,000 shares the
note holder agrees to convert a second $50,000 into the number of shares of
Rascals common stock that would be appropriate to be calculated on the basis
of the previous month's average price.  A similar conversion program will be
employed to restructure or reduce the then remaining $100,000 principal
balance.


DEFERRED INCOME AND CREDITS (NOTE 8)

     The Company sells comedy tickets in advance for certain performances as
well as gift certificates.  Additionally, the Company accepts prepayment for
food and beverages from a diners club in exchange for providing discounts to
the club's cardholders.  The deferred income and credits recorded by the
Company consisted of the following:


Deferred Income for Advance Tickets and Gift Certificates Sold     $ 38,770
Credits to be Provided on Diners Club                                31,515
                                                                     ------
   Total                                                           $ 70,285
                                                                     ======


FAIR VALUE OF FINANCIAL INSTRUMENTS (NOTE 9)

     The carrying amount of cash, accounts receivables, 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 10)

     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 11)

     Effective December 21, 2001, the Company adopted the 2001 Stock and Stock
Option Plan ("The 2001 Plan").  Under the 2001 plan the Company may grant up
to 4 million shares of common stock.  Subject to the terms of the 2001 plan,
options may be granted to eligible persons at any time and from time to time,
and under such terms and conditions as determined by the 2001 plan committee.
The committee may grant incentive stock options or nonqualified stock options
or a combination thereof.  The exercise price of each incentive stock option
is equal to one hundred percent of the fair market value of a common share on
the date the option is granted.  The exercise price of a nonqualified stock
option shall be determined by the committee.  The 2001 plan is effective through
December 20, 2011.  As of December 31, 2001 no options were granted under the
2001 plan.

     A summary of the status of the Company's warrants as of December 31, 2001
and changes during the year then ended is presented below:



                                   Shares       Weighted Average Exercise Price
-------------------------------------------------------------------------------
Outstanding at beginning of year   100,000          $ 1.75
Granted                                  -               -
Exercised                                -               -
Expired                                  -               -
                                   -------            ----
Outstanding at end of year         100,000          $ 1.75
                                   =======            ====

    A summary of the Company's stock options as of December 31, 2001 and the
changes during the year ended is presented below:

                                   Shares       Weighted Average Exercise Price
-------------------------------------------------------------------------------
Outstanding at beginning of year         -               -
Granted                                  -               -
Exercised                                -               -
Expired                                  -               -
                                   -------            ----
Outstanding at end of year               -               -
                                   =======            ====


NEW ACCOUNTING PRONOUNCEMENTS (NOTE 12)

     In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) 141 "Business Combinations", and SFAS
142 "Goodwill and Other Intangible Assets".  SFAS 141 requires business
combinations initiated after June 30, 2001 to be accounted for using the
purchase method of accounting.  It also specifies the type of acquired
intangible assets that are required to be recognized and reported separately
from goodwill.  SFAS 142 will require that goodwill and certain intangibles
no longer be amortized, but instead tested for impairment at least annually.
SFAS 142 is required to be applied starting with fiscal years beginning after
December 15, 2001, with early application permitted in certain circumstances.
The Company plans to adopt both of these new standards though its impact
expected on future financial statements is not known or reasonably estimable.


SUBSEQUENT EVENTS (NOTE 13)

     Subsequent to the year end the Company adopted the 2002 Stock and Stock
Option Plan ("The 2002 Plan").  Under the 2002 plan the Company may grant up
to 6 million shares of common stock.  Subject to the 2002 plan, options may
be granted to eligible persons at any time and from time to time and under
such terms and conditions as determined by the 2002 plan committee.  The
committee may grant incentive stock options or nonqualified stock options or
a combination thereof.  The exercise price of each incentive stock option is
equal to one hundred percent of the fair market value of a common share on the
date the option is granted.  The exercise price of a nonqualified stock option
shall be determined by the committee.  The plan is effective through December
31, 2011.

     Subsequent to year end the Company issued 186,000 shares of common stock
to a consultant for prior services.

     Subsequent to year end the Company entered into several consulting
agreements which extended over a period of time.  The Company issued 5,180,000
shares of common stock as compensation.

     Subsequent to year end the Company issued 333,334 shares of common stock
for the conversion of a $50,000 convertible debenture.  In addition the
Company issued another 166,700 shares of the Company's common stock for
$25,000.

     Subsequent to year end the Company entered into an agreement with the
$100,000 convertible debenture holder to convert the debt into 500,000 shares
of common stock.  In addition the Company agreed to grant options to purchase
additional shares of common stock as follows: one year option to purchase
500,000 shares at an exercise price of ten cents ($.10), a two year option to
purchase 500,000 shares at twenty cents ($.20) and a three year option to
purchase 500,000 shares at thirty cents ($.30).

     Subsequent to year end the Company issued 1,500,000 shares of common
stock to one of its executives in accordance with his employment agreement.

     On March 18, 2002, Rascals' Board of Directors adopted a Restricted Stock
Grant Program (the "Program") pursuant to which 8,750,000 shares of Common
Stock were reserved. In April 2002 the restricted shares were issued.

     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

     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.

     3. The shares granted under the Program cannot be sold, assigned, pledged,
        transferred or hypothecated in any manner, by operation of law or
        otherwise, other than by writ or the laws of descent and distribution,
        and shall not be subject to execution, attachment or similar process.
        The only exception to this restriction is the pledge by the President
        of his shares to secure the mortgage on Rascals' New Jersey restaurant/
        clubs.  These restrictions will lapse with respect to any At-Risk
        Shares that are not forfeited as described above. In addition, the
        restrictions will lapse with respect to all unforfeited shares if
        in any year Rascals' revenue exceeds $7,500,000.

     4. The restrictions shall also lapse as to all shares granted to a Grantee
        on the first to occur of (i) the termination of that Grantee's
        employment with the Company by reason of his disability, (ii) the
        Grantee's death, (iii) termination of the Grantee's employment by the
        Company without good reason, or (iv) a change of control of the Company.
        The Program defines "Change of Control" as an acquisition by a person
        or group of more than 50% of the Company's outstanding shares, a
        transfer of the Company's property to an entity of which the Company
        does not own at least 50%, or the election of directors constituting a
        majority of the Board who have not been approved by the existing Board.

        During any tax year in which a Grantee realizes taxable income by
        reason of the lapse of the restrictions on the shares granted under
        the Program, the Company shall pay to such Grantee a "Gross-Up Bonus"
        in cash equal to the aggregate of (i) the additional federal, state
        and local income taxes incurred by Grantee as a result of realization
        of such taxable income, and (ii) the federal, state and local income
        tax incurred by the Grantee as a result of the Gross-Up Bonus. In no
        event shall the Gross-Up Bonus exceed the aggregate of (i) the amount
        of the tax deduction for which the Company receives a benefit for the
        tax year of the Company beginning during the tax year of the Grantee in
        which he realizes taxable income by virtue of the lapse of the
        restrictions referred to above, and (ii) the amount of the tax
        deduction for which the Company receives a benefit for such tax year
        of the Company by virtue of the Gross-Up Bonus.





                            SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the Regis
trant 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 16, 2002 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


              *  *  *  *  *     *  *  *  *  *      *  *  *  *  *


<PAGE>
                                                       EXHIBIT 10-K

                       RASCALS INTERNATIONAL, INC.
                     RESTRICTED STOCK GRANT PROGRAM

1.  Purpose.

    The purpose of this Restricted Stock Grant Program (the "Program") is
(i) to benefit RASCALS INTERNATIONAL, INC., a Delaware corporation (the
"Corporation"), by providing the Corporation with an incentive arrangement
that may be used to retain in the employ of the Corporation certain persons of
training, experience and ability, and (ii) to provide such persons with a
greater proprietary interest in and concern for the welfare of the Corporation
by providing them with an opportunity to acquire common stock, par value $.001
per share, of the Corporation ("Common Stock'), pursuant to an award of
restricted stock ("Restricted Stock") described herein.

2.  Administration.

     (a)The program shall be administered by a committee (the "Committee")
consisting of the members of the Board of Directors of the Corporation who are
not Grantees (as defined in Paragraph 4).  At any time when there are no
members of the Board of Directors who are not Grantees, the Board of Directors
shall be the Committee.  Subject to the express provisions of the Program, the
Committee shall have the power to interpret any provision of the Program, to
adopt, amend and rescind rules, regulations, terms, notices and agreements
relating to the Program and shares of Restricted Stock granted thereunder, and
to make all other determinations and take all other action that it deems
necessary or advisable for the administration of the Program.

     (b)A majority of the members of the Committee shall constitute a
quorum, and all determinations of the Committee shall be made by a majority of
its members.  Any determination of the Committee under the Program may be made
without notice or meeting of the Committee, by a writing signed by a majority
of the Committee members.

     (c)The determinations of the Committee on all matters regarding the
Program shall be conclusive.  A member of the Committee shall be liable only
for actions taken or determinations made in bad faith.

3.  Shares Reserved Under the Program.

    There is hereby reserved for issuance as shares of Restricted Stock
under the Program an aggregate of 8,750,000 shares of Common Stock, which may
be authorized but unissued shares or shares now or hereafter held in the
treasury of the Corporation.  In the event that any share of Restricted Stock
under the Program is forfeited pursuant to the Program for any reason, such
share, or the forfeited portion thereof, shall be retained by the Corporation
and shall not thereafter be subject to new grants of shares of Restricted
Stock under the Program.

4.  Grantees.

    Within the limits and pursuant to the terms of the Program, the Commit
tee shall make grants of shares of Restricted Stock to Eduardo Rodriguez,
Michael Margolies and Gary Marks  (hereinafter individually referred to as
"Grantee" and collectively referred to as "Grantees") as set forth in Para
graph 5 hereof.

5.  Grants; Forfeiture.

    (a) Immediate upon the adoption of this Program, the Committee shall
grant to the Grantees shares of Restricted Stock as follows:

    Grantee                 Granted Shares
    ---------------------------------------
    Eduardo Rodriguez        5,000,000
    Michael Margolies        3,500,000
    Gary Marks                 250,000

     (b) Shares of Restricted Stock granted under the Program shall be
governed by an agreement (a "Restricted Stock Agreement") in such form
consistent with the Program as the Committee shall from time to time deter
mine.  Subject to the provisions herein and to the provisions of any related
Restricted Stock Agreement, shares of Restricted Stock shall be granted to
Grantees, without other payment therefor, as a bonus for services previously
rendered to the Corporation.  Within 10 days after a grant of shares of
Restricted Stock under the Program, the Corporation shall issue, in the name
of each Grantee, stock certificates representing the total number of shares of
Restricted Stock granted to the Grantee.

     (c) To the extent that the restrictions set forth in Paragraph 7 hereof
have not lapsed in accordance with the provisions of Paragraph 8 hereof,
shares of Restricted Stock granted under the Program shall be forfeited to the
Corporation upon the Grantee's termination of employment with the Corporation
and the cessation of his position on the Board of Directors.

     (d) On May 1, 2003 and on May 1 of each of the four years subsequent to
2003 (each May 1 being a "Forfeiture Date"), each of the Grantees shall
forfeit to the Corporation the number of Restricted Shares identified below as
"At-Risk Shares"unless the  Corporation shall have recorded revenue during the
preceding fiscal year which exceeded the threshold specified below:


Year Ended      Revenue      At-Risk Shares  At-Risk Shares   At-Risk Shares
December 31     Threshold    Rodriguez       Margolies        Marks
----------------------------------------------------------------------------
 2002          $ 3,500,000    1,000,000       700,000          50,000
 2003          $ 4,500,000    1,000,000       700,000          50,000
 2004          $ 5,500,000    1,000,000       700,000          50,000
 2005          $ 6,500,000    1,000,000       700,000          50,000
 2006          $ 7,500,000    1,000,000       700,000          50,000

     (e) Notwithstanding the provisions of Section 5(d) above, Restricted
Shares shall not be subject to forfeiture if the restrictions on said Shares
have lapsed pursuant to Section 8 hereof prior to the date for forfeiture
specified herein.

     (f) A Grantee shall deliver a certificate for any forfeited shares to
the Corporation promptly after the date of forfeiture.  Notwithstanding the
failure of a Grantee to deliver the certificate for forfeited shares, the
Corporation may cause its stock transfer agent to cancel the certificates on
the Corporation's stock records as of the date of forfeiture or thereafter.

6.  Adjustment Provisions.

     The aggregate number of shares of Restricted Stock that may be forfeited
under the provisions of Paragraph 5 hereof may be appropriately adjusted as
the Committee may determine for any increase or decrease in the number of
shares of issued Common Stock resulting from a subdivision or consolidation of
shares, whether through reorganization, recapitalization, stock split, stock
distribution or combination of shares, the payment of a share dividend or any
other increase or decrease in the number of such shares outstanding effected
without receipt of consideration by the Corporation.  Adjustments under this
Paragraph 6 shall be made according to the sole discretion of the Committee,
and its decisions shall be binding and conclusive.

7.  Transfer Restrictions.

     Subject to the provisions of Paragraph 8, none of the shares of Re
stricted Stock granted under the Program shall be sold, assigned, pledged,
transferred or hypothecated in any manner, by operation of law or otherwise,
other than by will or the laws of descent and distribution, and shall not be
subject to execution, attachment or similar process.  Each certificate
evidencing shares of Restricted Stock issued under the Program shall bear a
legend indicating that the transferability of such shares is restricted by and
subject to the terms and conditions imposed under the Program.  As an excep
tion to the foregoing restriction, however, the shares issued to Eduardo
Rodriguez may be pledged to Hudson United Bank as required by the Pledge and
Security Agreement dated December 31, 2001, provided that all other covenants
and restrictions set forth in this Program shall remain binding upon the
shares.

8.  Lapse of Restrictions.

     (a) On each of the Forfeiture Dates identified in Section 5(d) hereof,
if the "At-Risk Shares" subject to forfeiture on that Forfeiture Date are not
forfeited, then the restrictions set forth in Paragraph 7 above shall lapse
with respect to those At-Risk Shares.  In addition, if in any fiscal year
prior to fiscal year 2006 the Corporation records revenue in excess of
$7,500,000, then on the Forfeiture Date following that fiscal year the
restrictions shall lapse with respect to all of the Restricted Shares granted
hereunder.  Upon the lapsing of restrictions pursuant to this Section 8(a),
the shares with respect to which the restrictions have lapsed shall cease to
be shares of Restricted Stock for purposes of the Program.

     (b) Notwithstanding anything contained herein to the contrary, to the
extent that the restrictions set forth in Paragraph 7 above have not lapsed in
accordance with the provisions of subparagraph (a) hereof, and to the extent
that such restrictions are not related to shares of Restricted Stock that
previously have been forfeited to the Corporation pursuant to Paragraph 5
hereof, such restrictions shall lapse, at which time such shares shall cease
to be shares of Restricted Stock for purposes of the Program on the first to
occur of (i) the termination of the Grantee's employment with the Corporation
by reason of his Disability, (ii) the date of the Grantee's death, (iii) the
Grantee's Termination Without Good Reason, or (iv) a Change of Control.

     (c) For purposes of the Program, the following terms shall have the
meanings stated:

     "Disability" means a physical or mental condition that, in
     the opinion of a physician selected by the Committee, has rendered
     a Grantee unable to perform his usual duties or any comparable
     duties for the Corporation for a period of at least 180 days.

       "Termination Without Good Reason" means any termination of a
     Grantee's full-time salaried employment with the Corporation (i)
     by the Corporation for any reason other than (A) the willful and
     continued failure by a Grantee to substantially perform the duties
     reasonably attendant to his role as an employee and, if applica
     ble, an officer of the Corporation after a written demand for
     substantial performance is delivered to him by the Corporation
     that specifically identifies the manner in which the Corporation
     believes that the Grantee has not substantially performed such
     duties, (B) the willful engaging by the Grantee in gross miscon
     duct materially and demonstrably injurious to the Corporation, (C)
     the Grantee's conviction of a crime involving fraud or moral
     turpitude, or (D) a material breach by the Grantee of the
     Noncompetition Agreement or Confidentiality Agreement as set forth
     in Paragraphs 14 and 15 hereof; or (ii) by the Grantee because of
     (A) a substantial diminution of his duties, (B) a substantial
     reduction of his compensation, or (C) a breach by the Corporation
     of any material provision of any employment agreement between the
     Grantee and the Corporation.  For purposes of this definition, no
     act, or failure to act on the Grantee's part, shall be considered
     "willful" unless done, or omitted to be done, by him not in good
     faith and without reasonable belief that his action or omission
     was in the best interest of the Corporation and its subsidiaries.

     "Change of Control" means the earliest of (i) the day on
     which any entity, person, or group (other than a Grantee or the
     Grantees) becomes the beneficial owner, as that term is defined in
     Rule 13d-3 under the Securities Exchange Act of 1934, as amended,
     of more than 50% of the outstanding capital stock of the
     Corporation entitled to vote for the election of directors
     ("Voting Stock"); (ii) the effective time of a transfer of all or
     substantially all of the property of the Corporation other than to
     an entity of which the Corporation owns at least 50% of the Voting
     Stock; or (iii) the election to the Board, without the
     recommendation or approval of the incumbent Board, of a number of
     directors constituting a majority of the number of directors of
     the Corporation then in office.

     (d) Subject to the provisions of subparagraph (c) hereof but
notwithstanding anything else contained herein to the contrary, shares of
Restricted Stock awarded under the Program may be (i) tendered in response to
a tender offer for or a request or invitation to tenders of outstanding Common
Stock of the Corporation, or (ii) may be surrendered in a merger,
consolidation or share exchange involving the Corporation, provided that the
security and/or other consideration received in exchange therefor shall be
subject to the restrictions and conditions applicable to the shares of
Restricted Stock at the time of tender or surrender, and to future lapse in
accordance with the terms of the Program.
      (e) In the event of any change in the outstanding Common Stock
resulting from a subdivision or consolidation of shares, whether through
reorganization, recapitalization, share split, reverse share split, share
distribution or combination of shares or the payment of a share dividend, the
shares of Restricted Stock shall be treated in the same manner in any such
transaction as other Common Stock.  Any Common Stock or other securities
received by the Grantee with respect to the shares of Restricted Stock in any
such transaction shall be subject to the restrictions and conditions set forth
herein.

9.  Dissolution or Liquidation.

     Upon the dissolution or liquidation of the Corporation, each Grantee's
rights with respect to shares of Restricted Stock that are subject to
forfeiture, as of the date of the occurrence of such event, shall terminate
and be forfeited and neither the Grantee nor his heirs, personal
representatives, successors or assigns shall have any future rights with
respect to any such shares.  Notwithstanding the foregoing, the Committee, in
its discretion, may (i) adjust the terms of any share of Restricted Stock to
give the holder thereof the opportunity to participate in any distribution on
Common Stock related to the dissolution or liquidation, or (ii) otherwise
provide for a distribution to any holder of any share of Restricted Stock
affected by the dissolution or liquidation.

10.  Leave of Absence.

     The Committee shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Program in respect of any
leave of absence taken by any Grantee.  Without limiting the generality of the
foregoing, the Committee shall be entitled to determine (i) whether or not any
such leave of absence shall constitute a termination of employment within the
meaning of the Program, and (ii) the impact, if any, of any such leave of
absence on shares of Restricted Stock theretofore granted under the Program to
any Grantee who takes such leave of absence.

11.  Death.

     In the event of a Grantee's death, any shares of Restricted Stock or
Gross-Up Bonus (as defined in Paragraph 12) due under the Program shall be
turned over by the Corporation to the duly appointed and qualified executor or
other personal representative of the Grantee to be distributed in accordance
with the Grantee's will or applicable intestacy law; or in the event that
there shall be no representative duly appointed or qualified within six months
after the date of death of such deceased Grantee, then to such persons as, at
the date of his death, would be entitled to share in the distribution of such
deceased Grantee's personal estate under the provisions of the applicable
statute then in force governing the descent of intestate property in the
proportions specified in such statute.

12.  Bonus.

     During any tax year of a Grantee in which he realizes taxable income by
virtue of the lapse of restrictions set forth in Paragraph 7 above on shares
of Restricted Stock granted to him under the Program, the Corporation shall,
at any time during such year, pay to such Grantee a bonus ("Gross-Up Bonus")
in cash equal to the aggregate of (i) the additional federal, state and local
income taxes incurred by the Grantee as a result of such taxable income, and
(ii) the federal, state and local income tax incurred by the Grantee as a
result of such Gross-Up Bonus; provided, however, that in no event shall the
amount of such Gross-Up Bonus exceed the aggregate of (i) the amount of the
tax deduction for which the Corporation receives a benefit for the tax year of
the Corporation ending during the tax year of the Grantee in which he realizes
taxable income by virtue of the lapse of the restrictions set forth in
Paragraph 7 above, and (ii) the amount of the tax deduction for which the
Corporation receives a benefit for such tax year of the Corporation by virtue
of the Gross-Up Bonus.

13.  Withholding Taxes.

     Whenever a withholding tax obligation arises in connection with the
lapse of restrictions on shares of Restricted Stock granted to a Grantee
pursuant to the Program, the Corporation shall have the right to require the
Grantee to remit to the Corporation an amount sufficient to satisfy all
federal, state and local withholding tax requirements at the time such
obligation arises and to withhold from other amounts payable to the Grantee,
as compensation or otherwise, as necessary.

14.  Noncompetition Agreement.

     As a condition precedent to the grant of shares of Restricted Stock to a
Grantee under the Program, the Grantee shall agree that, except in the event
of his Termination Without Good Reason, at no time during the period
commencing on the date of grant to a Grantee of shares of Restricted Stock
under the Program and ending on the date one year following the termination of
the Grantee's employment with the Corporation for any reason except
Termination Without Good Reason, shall the Grantee;

         (i) engage in, work for, own, manage, operate, control or
     participate in the ownership, management, operation or control of, or be
     connected with, or have any financial interest in, any individual,
     partnership, firm, corporation or institution that is engaged in the
     business of operating comedy clubs and that has a place of business
     within one hundred (100) miles of a  place of business of the
     Corporation; or
        (ii) interfere with the relationship between the Corporation and any
     of its employees, agents or representatives.

15.  Confidentiality Agreement.

      (a) As a condition precedent to the grant of shares of Restricted
Stock to a Grantee under the Program, the Grantee shall agree that he will
not, without the prior written consent of the Corporation, at any time after
the date hereof, disclose or permit to be disclosed to any third party, by any
method whatsoever, any material Confidential Information of the Corporation
for any purpose adverse to the interests of the Corporation.  For purposes of
the Program, "Confidential Information" shall include, but shall not be
limited to, any and all records, notes, memoranda, data, ideas, processes,
methods, techniques, systems, formulas, patents, models, devices, programs,
computer software, writings, research, personnel information, customer
information, the Corporation's financial information, plans, or any other
information of whatever nature in the possession or control of the Corporation
that has not been published or disclosed to the general public, or that gives
to the Corporation an opportunity to obtain an advantage over competitors who
do not know of or use it.  The Grantee shall further agree that if his
employment with the Corporation is terminated for any reason, he will leave
with the Corporation, and will not take originals or copies of, any and all
records, papers, programs, computer software and documents and all matter of
whatever nature that bears Confidential Information of the Corporation.
      (b) The foregoing subparagraph shall not be applicable if and to the
extent the Grantee is required to testify in a judicial or regulatory
proceeding pursuant to an order of the judge or an administrative law judge
issued after the Grantee and his legal counsel urge that the aforementioned
confidentiality be preserved.
      (c)The foregoing covenant will not prohibit the Grantee from
disclosing Confidential Information of the Corporation to third parties to the
extent that such disclosure is necessary or appropriate in the performance of
his duties inherent in his employment with the Corporation.

16.  Relief.

     In the event of a breach, or a threatened or intended breach, by a
Grantee of the agreements in Paragraph 14 or 15, the Corporation shall be
entitled, in addition to remedies available to the Corporation at law or
equity, to injunctions, both preliminary and permanent, enjoining such breach
or threatened or intended breach.

17.  Rights as Stockholder.

     Each Grantee shall be entitled to all of the rights of a stockholder
with respect to shares of Restricted Stock granted to him under the Program,
unless and until such shares are forfeited pursuant to the terms of the
Program, including the right to vote such shares and to receive dividends and
other distributions payable with respect to such shares since the date of
grant of such shares.

18.  Tenure.

     Nothing in the Program or any Restricted Stock Agreement entered into
pursuant to the Program shall confer on any Grantee the right to continue in
the employment of the Corporation or affect any right that the Corporation may
have to terminate the employment of such Grantee or that the Grantee may have
to terminate his employment with the Corporation.

19.  Termination and Amendment of Program.

     The Committee may amend, alter or terminate the Program, but no
amendment, alteration or termination shall be made that would materially and
adversely affect the rights of any Grantee who had theretofore acquired or
become entitled to shares of Restricted Stock under the Program, without such
Grantee's consent, and except that no amendment or alteration shall be made
that, without the approval of the stockholders, would (i) change the Grantees,
(ii) increase the aggregate number of shares that may be issued under the
Program, except as provided in Paragraph 6 hereof, or (iii) materially
increase the benefits accruing to Grantees under the Program.

20.  Severability.

     If any clause, phrase or portion of the Program or other application
thereof to any person or circumstance, shall be invalid or unenforceable under
any applicable law, such event shall not affect or render invalid or
unenforceable the remainder of the Program and shall not affect the
application of any clause, provision or portion of the Program to other
persons or circumstances.

21.  Government Regulations.

     Notwithstanding any of the provisions hereof, or of any share of
Restricted Stock granted hereunder, the obligation of the Corporation to issue
and deliver certificates evidencing shares of Restricted Stock shall be
subject to all applicable laws, rules and regulations and to such approvals by
any governmental agencies or national securities exchanges as may be required,
including, without limitation, the obligation of the Corporation to have a
registration statement, or statements, that complies with the provisions of
the Securities Act of 1933, as amended, in effect with respect to such shares
at the time of such issuance and delivery unless the Corporation receives
evidence satisfactory to it that such issuance and delivery, in absence of
such an effective registration statement or statements, would not constitute a
violation of the terms and provisions of such Act.

22.  Applicable Law.

     All questions pertaining to the validity, construction and
administration of the Program and shares of Restricted Stock granted hereunder
shall be determined in conformity with the laws of the State of Delaware.

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