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


                                   FORM 10-KSB

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

                     For the fiscal year ended May 31, 2003


                                   NELX, INC.
                                 -------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
<S>                                      <C>                                   <C>
======================================== ===================================== =====================================
                Kansas                                 0-21210                              84-0922335
                ------                                 -------                              ----------
---------------------------------------- ------------------------------------- -------------------------------------
    (State or other jurisdiction of            (Commission File Number)         (IRS Employer Identification No.)
            incorporation)
======================================== ===================================== =====================================
</TABLE>


               300 Summers Street, Suite 970, Charleston WV 25301
                   ------------------------------------------
               (Address of principal executive offices) (Zip Code)


       Registrant's telephone number, including area code: (304) 343-8171
                                                           --------------

          Securities registered under Section (b) of the Exchange Act:

                                      NONE

          Securities registered under Section (g) of the Exchange Act:

                          COMMON STOCK $.0001 PAR VALUE

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the proceeding
12 months (or for such shorter  period that the  registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.

                                  Yes x No ___

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to

<PAGE>

the best of the  registrant's  knowledge,  in  definitive  proxy or  information
amendment to this Form 10-KSB. [x]

State the issuer's revenues for the most recent fiscal year.  $344,621

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified  date  within the past 60 days.  As of last trade on August 28,  2003:
$2,414,349 (80,478,289 shares at $.03 / share)

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date:  120,708,509  common  shares as of
August 28, 2003.



















                                       2

<PAGE>

                                TABLE OF CONTENTS

                                     PART I
                                                                            Page
                                                                            ----
Item 1. Description of Business...............................................4

Item 2. Description of Property...............................................4

Item 3. Legal Proceedings.....................................................5

Item 4. Submission of Matters to a Vote of Security Holders...................5

                                     PART II

Item 5. Market for Common Equity and Related
        Stockholder Matters...................................................5

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

Item 7. Financial Statements..................................................10

Item 8. Changes In and Disagreements with Accountants
        on Accounting and Financial Disclosure................................11

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control
        Persons; Compliance With Section 16(a) of the
        Exchange Act..........................................................11

Item 10.Executive Compensation................................................13

Item 11.Security Ownership of Certain Beneficial Owners
        and Management........................................................14

Item 12.Certain Relationships and Related Transactions........................15

Item 13.Exhibits, and Reports on Form 8-K.....................................16





                                       3
<PAGE>

                                     PART I

ITEM 1. BUSINESS

NELX, Inc.  ("NELX" or the "Company") was incorporated in the State of Kansas in
March 1983 as Nelson Exploration, Inc. for the purpose of acquiring, dealing in,
and if warranted, developing oil and gas properties. In October 1993 the Company
changed its name to NELX,  Inc. In previous  years,  the Company  owned  certain
non-producing oil and gas properties as well as various real estate  properties.
Due to continuing lack of capital  partners for oil and gas  exploration  and/or
real estate development, in fiscal year 1997 the Company turned its attention to
divesting  its  interests  in said  properties.  For the next three  years,  the
principal  activities  of the Company  involved  disposing  of assets,  settling
claims and liabilities  and considering  potential  business  combinations  with
related or  complementary  businesses.  During  fiscal year 2001,  the Company's
principal  assets  consisted of a leasehold  interest in an undeveloped  mineral
spring in Arkansas and certain oil and gas properties  located in West Virginia.
The oil and gas properties were sold in May 2001.

On May 29, 2001,  the Company  acquired two  businesses,  FS  Investments,  Inc.
("FSI") and Jacobs & Company  ("Jacobs & Co." or  "Jacobs"),  in exchange for 75
million shares of common stock of NELX. The  transaction  was accounted for as a
recapitalization of FSI and Jacobs & Co. effected by a reverse acquisition.  For
accounting purposes,  NELX was treated as the acquiree, and no goodwill or other
intangible asset was recorded.

FSI,  incorporated  in 1997 in West  Virginia,  is a  holding  company  that was
organized to develop  surety  business  through the formation or  acquisition of
subsidiaries   engaged  in  the  issuance  of  surety  bonds  collateralized  by
investment accounts that are professionally  managed by Jacobs & Co. Through its
wholly-owned  subsidiary,  Triangle Surety Agency, Inc. ("Triangle Surety"), FSI
is actively  engaged in the placement with insurance  companies of surety bonds,
with an emphasis on clients engaged in regulated industries.

Jacobs  & Co.,  incorporated  in  1988  in West  Virginia,  is a SEC  registered
investment advisory firm whose executive offices are located in Charleston, West
Virginia.  Jacobs & Co.  provides  fee based  investment  advisory  services  to
institutions  and  individuals,  including the Jacobs & Company Mutual Fund (the
"J&C Fund" or the "Fund"),  which was  organized in June 2001 as a series of the
Advisors Series Trust.

Since the May 29, 2001 business combination,  the Company has expanded its focus
to include the ongoing  business and  activities  of FSI and Jacobs,  namely the
surety business and investment  management and related services.  The Company is
headquartered  in  Charleston,  West  Virginia,  and  through  its  wholly-owned
subsidiaries, employs a total of eight (8) employees, of which five (5) are full
time employees.

ITEM 2. PROPERTIES

Through its wholly-owned  subsidiary,  Crystal Mountain Water, Inc. ("CMW"), the
Company has an undeveloped  leasehold interest in a mineral water spring located
near Hot Springs,  Arkansas. Under this leasehold arrangement,  CMW is obligated
for minimum lease payments in the amount of  approximately  $150 per month until
October  2006,  with  automatic  options  to extend  the  leasehold  for two (2)
additional  ten-year terms extending  through October 2026. CMW has the right to
cancel the lease upon sixty (60) days written  notice at any time.  The property
is presently not being  actively  explored or developed.  During the 2002 fiscal
year,  management  evaluated the lease and  determined the  development  was not

                                       4
<PAGE>

currently feasible.  Accordingly, the Company recorded an impairment of $116,661
to its  investment in the lease.  Opportunities  will continue to be explored as
they arise with respect to the development or sale of the leasehold interest.

ITEM 3. LEGAL PROCEEDINGS

During 2000, the Company's subsidiary, FSI, negotiated for the acquisition of an
insurance  company located in Kentucky.  Prior to closing the  transaction,  the
sellers  refused  to go forward  with the  transaction.  FSI  brought a cause of
action in the United States District Court for the Eastern  District of Kentucky
for breach of contract  seeking  damages.  The  defendant  filed a  counterclaim
against FSI for fraud in the  inducement  and  negligent  misrepresentation.  In
March  2002,  the United  States  District  Court for the  Eastern  District  of
Kentucky  issued an order for summary  judgement in favor of the defendants with
respect to FSI's cause of action.  In exchange for FSI's agreement not to appeal
the  decision,  the  defendants  dropped their  counterclaim  and the matter was
dismissed.


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

None

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's  common stock is traded in the  over-the-counter  market under the
symbol NLXI (OTC Bulletin Board Symbol). The table below sets forth the high and
low price information for the Company's common stock for the periods  indicated.
Such prices are inter-dealer  prices,  without mark-up,  mark-down or commission
and may not represent actual transactions.

                                         High                      Low
                                         -----                     ----

Fiscal Year Ended May 31, 2003

         4th Quarter                      .07                       .03
         3rd Quarter                      .035                      .011
         2nd Quarter                      .04                       .015
         1st Quarter                      .04                       .02


Fiscal Year Ended May 31, 2002

         4th Quarter                      .05                       .03
         3rd Quarter                      .05                       .03
         2nd Quarter                      .07                       .025
         1st Quarter                      .10                       .025

As of August 28,  2003,  there were  approximately  540 holders of record of the
Company's common stock.

                                       5
<PAGE>

The Company has neither declared nor paid any cash dividends on its common stock
during  the last  two  fiscal  years,  and it is not  anticipated  that any such
dividend will be declared or paid in the foreseeable future.

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

Basis of Financial Reports
--------------------------

For the three years  preceding its acquisition of FSI and Jacobs & Co. in May of
2001, the Company had no substantial continuing business operations. During this
time, the Company focused its efforts on the liquidation of non-producing assets
and  settlement  of  existing  obligations.   Loan  advances  from  a  principal
shareholder and director financed deficits in working capital. Additionally, the
Company  searched for potential  equity partners or business  combinations  that
would  be  complementary  to  its  historic  business  and  that  could  enhance
shareholder value.

In May 2001,  prior to its acquisition of FSI and Jacobs,  NELX  consummated the
sale of certain oil and gas  properties  located in Roane County,  West Virginia
that NELX had previously  acquired from an affiliate of a principal  shareholder
for a nominal  amount.  As a result,  the Company  realized net proceeds of $1.3
million.  The  consummation  of this  transaction  afforded  NELX the ability to
acquire FSI and Jacobs as it provided a source of capital for the curtailment of
debt and the financing of ongoing operations.

The Company's acquisition of FSI and Jacobs & Co. was accounted for as a reverse
acquisition and a recapitalization of FSI and Jacobs & Co.

Results of Operations for the Year Ended May 31, 2003
-----------------------------------------------------

The Company suffered an operating loss in fiscal 2003 of $703,000. Two principal
factors  influenced  the  results of  operations  for the fiscal  year,  both by
limiting the anticipated growth in revenues of the Company.

First,  the  performance  of the equity markets was negative  notwithstanding  a
rally late in the first quarter of 2003.  While overall the accounts  managed by
Jacobs  & Co.  performed  well  relative  to the  major  indexes,  they  did not
participate fully in the spring rally.

Second,  several of the few remaining  underwriters of permit and  miscellaneous
surety  bonds almost  totally  withdrew  from the  marketplace,  leaving  surety
agencies,  such as Triangle  Surety,  without a product to market and  companies
(except for the most financially able) requiring surety bonds to engage in their
intended business  activities unable to obtain surety bonds hampering pursuit of
their business plans.

Notwithstanding  these extremely troubled times and principally as the result of
Jacobs & Co.'s  marketing  efforts,  the Company was able to increase the assets
under  management of its  investment  advisory  segment,  and slightly  increase
revenues from that source.

Corporate  expenses were significantly down in fiscal 2003, based principally on
the  Company's  having  suffered  the  financial  effects of  strengthening  the

                                       6
<PAGE>

organization,  building  infrastructure  and suffering an  impairment  loss with
respect  to  our  mineral  spring  lease  and  the  expenses  of  an  ultimately
unproductive  litigation  in fiscal  2002.  Somewhat  offsetting  the  impact of
management's  efforts at cost savings was an unanticipated  increase in expenses
associated  with the J&C Fund arising out of a pricing error that, with the help
of  insurance,   the  Company   elected  to  absorb  rather  than  allowing  the
administrator to impose on the Fund shareholders.

While the J&C Fund is responsible for its own operating expenses,  to assure the
viability  of the  Fund  and in  accordance  with  industry  practice,  upon the
organization  of the Fund,  Jacobs & Co., as the investment  adviser,  agreed to
limit the Fund's aggregate annual operating expenses to 2.00% of the average net
assets.  During  fiscal  2003,  Jacobs bore  $52,980 of expenses of the J&C Fund
pursuant  to  its  expense  limitation  agreement,  while  earning  $108,430  in
investment  advisory  fees from the Fund. As the result of the growth in the net
assets of the Fund,  since May,  2002,  investment  advisory  fees have exceeded
Jacobs  &  Co.'s  obligations  under  the  expense  limitation  agreement.  With
continuing  growth  of the  Fund's  net  assets as the  result of the  Company's
marketing  efforts,  management  expects  that in  fiscal  2004  the  Fund  will
contribute significantly to Company revenues.

Comparison of Results of Operations for Fiscal 2003 with Fiscal 2002
--------------------------------------------------------------------

The Company  experienced a loss for the year ended May 31, 2003 in the amount of
$703,152 as compared with a loss of $1,141,755  for its year ended May 31, 2002.
The  substantial  reduction in the loss is  attributable  to a number of factors
that are summarized below.

Revenues for fiscal 2003 were $344,621 versus $370,812 for fiscal 2002. Based on
the extreme  limitations in the  availability  of surety bonds,  revenues of the
Company's  surety  segment  decreased  from $36,918 in fiscal 2002 to $32,538 in
fiscal 2003.  Revenues of the Company's  investment  advisory segment  increased
from $293,163 to $306,259.  This  increase in the  investment  advisory  segment
reflects  a  decrease  in the  market  value of  client  accounts,  offset by an
increase in assets under  management  resulting from net new client  accounts of
Jacobs & Co.

Operating  expenses for fiscal 2003 were  $1,047,773 as compared with $1,512,567
for fiscal 2002. The majority of this decrease is  attributable  to nonrecurring
expenses  including the $116,661 write down of the Company's  leasehold interest
in a mineral  water  spring (see Item 2 above) and the direct  costs of $183,458
incurred in the litigation that has now ended (see Item 3 above). The balance of
the  decrease in general and  administrative  costs can be  associated  with the
overall decrease in general office and other administrative expense.

Interest  expense for fiscal 2003 was  $125,443  as  compared  with  $85,503 for
fiscal  2002.  The   substantial   increase  in  interest   expense  is  largely
attributable  to the  Company's  continued  debt  financing  of  operations  and
substantial deficit in working capital.



                                       7
<PAGE>

Contractual Obligations
-----------------------

The following table lists our significant liabilities at May 31, 2003:
<TABLE>
<CAPTION>

                                                                 Payments Due by Period
<S>                                        <C>             <C>              <C>           <C>       <C>
                                           Less than                                      After
Contractual Obligations:                     1 Year        2-3 Years        4-5 Years    5 Years       Total
Long-term debt                              $ 48,929       $ 550,000         $     0      $   0     $  598,929
Long-term debt to Related Parties
                                             642,354         398,719               0          0      1,041,073
Operating leases                              17,749          23,792           3,995          0         45,536
                                            --------        --------         -------       -----     ---------
Total contractual cash obligations
                                            $709,032       $ 972,511         $ 3,995      $   0     $1,685,538
                                            ========        ========         =======       =====     =========
</TABLE>

NELX has no  outstanding  guarantees  or other  commitments  to be  disclosed as
contractual  obligations.  The terms of the  contractual  obligations  discussed
above have been included in the financial information at Item 7.

Critical Accounting Policies and Estimates
------------------------------------------

Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated  financial statements,  which have been prepared
in accordance with accounting principles generally accepted in the United States
of America.  The preparation of these financial  statements  requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues  and  expenses,   and  related  disclosure  of  contingent  assets  and
liabilities.  On an on-going basis,  we evaluate our estimates,  including those
related to allowance for uncollectible receivables, impairment and income taxes.
We base our estimates on historical experience, current and anticipated business
conditions,   the  condition  of  the  financial  markets,   and  various  other
assumptions that are believed to be reasonable under existing conditions. Actual
results may differ from these estimates.

We believe  that the  following  critical  accounting  policies  affect our more
significant  judgments and estimates used in the preparation of our consolidated
financial statements:

Allowance for  Uncollectible  Receivables.  The majority of our fee revenues are
generated  by  services  provided to  companies  throughout  the Eastern  United
States.  We evaluate the need for a reserve for the amount of these  receivables
that may be uncollectible,  based upon historical  collection  activity adjusted
for current  conditions.  Based on this  evaluation,  management  believes  that
substantially  all accounts  receivable are  collectible,  and therefore has not
established an allowance for estimated uncollectible accounts.

Impairment.  We evaluate  long-lived assets,  including our undeveloped  mineral
spring  lease,  for  impairment  annually,  or  whenever  events or  changes  in
circumstances indicate that the assets may not be recoverable. The impairment is
measured  by  calculating  the  estimated  future  cash  flows  expected  to  be
generated,  and comparing this amount to the carrying  value of the asset.  Cash
flows are calculated utilizing forecasts and projections for the estimated lives
of the assets being analyzed. Should actual results differ from those forecasted
and  projected,  we are subject to future  impairment  charges  related to these
facilities.

                                       8
<PAGE>

Income Taxes.  We currently have net operating loss ("NOL")  carryforwards  that
can be utilized  to offset  future  income for  federal and state tax  purposes.
These NOLs generate a significant deferred tax asset.  However, we have recorded
a valuation allowance against this deferred tax asset as we have determined that
it is more likely  than not that we will not be able to fully  utilize the NOLs.
Should our assumptions  regarding the  utilization of these NOLs change,  we may
reduce  some or all of this  valuation  allowance,  which  would  result  in the
recording of an income tax benefit.

Future Direction of Company
---------------------------

The  Company  intends  to focus its  efforts  on the  expansion  of the  ongoing
business  activities of Jacobs & Co. and FSI, namely  investment  management and
advisory services and insurance (surety).

Recent  conditions  in  the  financial  markets  have  resulted  in a  focus  by
individuals and  institutions on safety and  preservation of capital,  which are
the  cornerstone of the investment  strategies  employed by Jacobs & Co. for its
clients.  The  investment  strategies  of  Jacobs  have  generally  outperformed
relevant  market  indices.  For example,  the performance of the J&C Fund (which
mirrors the investment  strategies of Jacobs' private client accounts) was 2.86%
better than the Lipper  Balanced  Fund Index for the 12 months ended January 31,
2003.  Effectively marketing the services of Jacobs & Co. and increasing avenues
for the  distribution of the J&C Fund will be a principal focus of management in
the coming year.  Acquisitions of complementary  investment  advisory businesses
will also be considered.

Surety  bonds  have  become  unavailable  to all but the most  financially  able
companies.  The  collateralized  bonding  programs  developed by FSI remain very
promising  if an  insurance  company  will  emerge  to fill  this  vacuum in the
marketplace.   FSI  is  reviewing  possible  acquisitions  of,  and  /or  agency
relationships  with,  an  insurance  company  that would enable it to expand the
distribution of its surety programs to fill this market niche. In addition,  FSI
will attempt to take  advantage of  opportunities  for the  generation of income
from consulting services in relation to its surety business as they arise.

In order to secure, and provide a continuing incentive to, the employment of key
employees of the Company,  on July 17, 2003, the Board of Directors  adopted the
NELX, Inc. Stock Incentive Plan (the "Plan"). The Plan authorizes issuance of up
to 25 million common shares for awards to employees, non-employee directors, and
other service  providers.  The Compensation  Committee of the Board of Directors
will administer the Plan and may issue awards in the form of options, restricted
stock, stock appreciation rights or other equity derivatives. On or about August
1, 2003, awards of options to acquire up to 21 million common shares at a strike
price of $.04 per share were issued to  employees  of the  Company.  The options
have a term of five years, and, of the total number issued,  four million may be
exercised  immediately,  with the  remainder  becoming  exerciseable  over time,
conditioned upon continued employment with the Company by the holder.

Analysis of Financial Condition
-------------------------------

Management is optimistic with respect to the growth of the Company's business as
described  above,  but the rate of such growth is  difficult  to predict and may
depend  in part  upon the  availability  of  financing.  As of May 31,  2003,  a
deficiency in working capital exists as the Company's current liabilities exceed
its current  assets by  approximately  $1,277,845.  Additionally,  the Company's
current monthly expenses exceed its revenues by an estimated  $25,000 per month.

                                       9
<PAGE>

Recognizing  the potential  cash flow  shortages  that the Company may be facing
within  the next six to twelve  months as its  business  continues  to  develop,
management will seek to raise  additional  funds through  private  placements of
stock at prices  that will not be  dilutive  to current  shareholders.  Based on
preliminary  discussions  with  potential  investors,  management  believes that
opportunities for such private placements exist,  although the Company cannot be
certain that it will be able to obtain such funds.

ITEM 7. FINANCIAL STATEMENTS

The following financial statements are included herein in response to Item 7:

                                                                        Page

         Table of Contents                                              F-1

         Report of Independent Public Accountants                       F-2

         Financial Statements

         Consolidated Balance Sheet                                     F-3
         Consolidated Statement of Operations                           F-4
         Consolidated Statement of Cash Flows                           F-5
         Consolidated Statement of Changes in Stockholders' Equity      F-6
         Notes to Consolidated Financial Statements                     F-7


















                                       10
<PAGE>
NELX, INC.
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS'                                 F-2

CONSOLIDATED FINANCIAL STATEMENTS -

   Balance Sheet                                                          F-3

   Statement of Operations                                                F-4

   Statement of Cash Flows                                                F-5

   Statement of Changes in Stockholders' Equity (Deficit)                 F-6

   Notes to Consolidated Financial Statements                             F-7




















                                      F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS






To the Board of Directors
NELX, INC.
Charleston, West Virginia


We have audited the accompanying  consolidated balance sheet of NELX, INC. as of
May 31, 2003, and the related consolidated statements of operations,  cash flows
and changes in  stockholders'  equity (deficit) for the years ended May 31, 2003
and 2002.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

In our opinion, the accompanying  consolidated  financial statements referred to
above present fairly, in all material respects,  the financial position of NELX,
INC. at May 31, 2003,  and the results of its  operations and its cash flows for
the years ended May 31, 2003 and 2002, in conformity with accounting  principles
generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note A to the
financial   statements,   the  Company's   significant  operating  losses  raise
substantial  doubt  about  its  ability  to  continue  as a going  concern.  The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.



/s/Gordon, Hughes & Banks, LLP
------------------------------
Gordon, Hughes & Banks, LLP
Greenwood Village, Colorado
July 17, 2003


                                      F-2

<PAGE>
NELX, INC.
CONSOLIDATED BALANCE SHEET
MAY 31, 2003


ASSETS

CURRENT ASSETS
    Cash and cash equivalents                                       $      824
    Receivables                                                          44,123
    Prepaid and other                                                    11,262
                                                                    -----------
      TOTAL CURRENT ASSETS                                               56,209

FURNITURE AND EQUIPMENT,
    net of accumulated depreciation of $82,269                           16,942
                                                                    -----------

      TOTAL ASSETS                                                  $    73,151
                                                                    ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
    Current maturities of notes payable                             $    48,929
    Current maturities of notes payable - related parties               642,354
    Accounts payable                                                    211,258
    Accrued interest payable                                             53,427
    Accrued expenses                                                    378,086
                                                                    -----------
      TOTAL CURRENT LIABILITIES                                       1,334,054

LONG-TERM LIABILITIES
    Notes payable, less current maturities                              550,000
    Notes payable, less current maturities - related parties            398,719
                                                                    -----------
      Total long-term liabilities                                       948,719

STOCKHOLDERS' EQUITY (DEFICIT)
    Common stock, $.0001 par value par value; 500 million shares
      authorized: 120,709,510 shares issued and outstanding              12,071
    Additional paid-in capital                                        1,040,730
    Accumulated deficit                                              (3,262,423)
                                                                    -----------
      TOTAL STOCKHOLDERS' EQUITY (DEFICIT)                           (2,209,622)
                                                                    -----------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)          $    73,151
                                                                    ===========


                            See accompanying notes.
                                      F-3

<PAGE>
NELX, INC.
CONSOLIDATED STATEMENT OF OPERATIONS


                                                         Year Ended May 31,
                                                    ----------------------------
                                                         2003           2002
                                                    --------------- ------------

REVENUE                                                 $  344,621  $   370,812
                                                        ----------    ----------
EXPENSES
    General and administrative                             742,864      909,009
    Mutual fund costs                                      173,974      163,149
    Interest                                               125,443       85,503
    Depreciation and amortization                            5,492        6,787
    Costs attributable to unconsummated acquisition              -      183,458
    Impairment of undeveloped mineral spring lease               -      116,661
    Acquisition related expenses                                 -       48,000
                                                        ----------    ----------

      Total expenses                                     1,047,773    1,512,567
                                                        ----------    ----------

NET (LOSS)                                              $ (703,152) $(1,141,755)
                                                        =========== ============


BASIC AND DILUTIVE NET (LOSS) PER SHARE:

    NET (LOSS) PER SHARE                                $    (0.01)     $ (0.01)
                                                        =========== ============

    WEIGHTED AVERAGE SHARES OUTSTANDING                120,601,931  120,577,744
                                                        =========== ============


                            See accompanying notes.
                                      F-4

<PAGE>
NELX, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>


                                                                     Year Ended May 31,
                                                               -------------------------------
                                                                    2003            2002
                                                               --------------- ---------------
<S>                                                                <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net (loss)                                                     $ (703,152)    $(1,141,755)
    Adjustments to reconcile net (loss) to
      net cash provided by operating activities
         Depreciation                                                   5,492           6,787
         Stock issued to settle account payable                         6,588               -
         Impairment of undeveloped mineral spring lease                     -         116,661
         Changes in operating assets and liabilities:
           Receivables                                                 (4,811)          3,545
           Prepaid and other current assets                              (574)         17,178
           Accounts payable and bank overdraft                          3,444          26,442
           Accrued expenses                                            62,493         256,537
                                                                   ----------     -----------
               Net cash flows provided (to) operating activities     (630,520)       (714,605)
                                                                   ----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase furniture and equipment                                   (2,356)        (14,120)
                                                                   ----------     -----------
               Net cash flows provided from (to) investing activities  (2,356)        (14,120)
                                                                   ----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from related party debt                                  946,042       1,027,878
    Repayment of related party debt                                  (769,960)     (1,137,350)
    Proceeds from debt obligations                                    460,000         150,000
    Repayment of debt obligations                                     (11,071)        (75,000)
                                                                   ----------     -----------
               Net cash flows provided from (to) financing activities 625,011         (34,472)
                                                                   ----------     -----------

NET INCREASE (DECREASE) IN CASH                                        (7,865)       (763,197)

CASH AND EQUIVALENTS, BEGINNING OF PERIOD                               8,689         771,886
                                                                   ----------     -----------

CASH AND EQUIVALENTS, END OF PERIOD                                $      824     $     8,689
                                                                   ==========     ===========


SUPPLEMENTAL DISCLOSURES
    Interest paid                                                  $  105,465     $   124,480
    Income taxes paid                                                       -               -
    Non-cash investing and financing transactions:
      Warrants issued (rescinded) with related party debt              (3,000)          3,000

</TABLE>

                            See accompanying notes.
                                      F-5

<PAGE>
NELX, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>



                                                                                     Additional
                                                             Common Stock             Paid- In        Accumulated
                                                       -------------------------                 ---------------------
                                                        Shares           Amount       Capital           Deficit           Total
                                                       ------------------------- ---------------------------------------------------

<S>                                                     <C>            <C>          <C>               <C>               <C>
Balance, May 31, 2001                                   120,577,745    $ 12,058     $ 1,034,155       $(1,417,516)      $ (371,303)

    Detachable warrants issued with debt instrument               -           -           3,000                 -            3,000

    Net (loss), year ended May 31, 2002                           -           -               -        (1,141,755)      (1,141,755)
                                                        -----------    ---------    ------------      ------------      -----------

Balance, May 31, 2002                                   120,577,745      12,058       1,037,155        (2,559,271)      (1,510,058)

    Issuance of stock to settle account payable             131,765          13           6,575                 -            6,588

    Rescission of warrants issued in 2002                         -           -          (3,000)                -           (3,000)

    Net (loss), year ended May 31, 2003                           -           -               -          (703,152)        (703,152)
                                                        -----------    ---------    ------------      ------------      -----------

Balance, May 31, 2003                                   120,709,510    $ 12,071     $ 1,040,730       $(3,262,423)     $(2,209,622)
                                                        ===========    =========    ============      ============      ===========
</TABLE>


                            See accompanying notes.
                                      F-6
<PAGE>
NELX, INC.
Notes to Consolidated Financial Statements

Note A - Organization and Business

Organization and Nature of Business
-----------------------------------
NELX,  INC. (the  "Company" or "NELX") was  incorporated  in Kansas on March 25,
1983. On May 29, 2001, the Company acquired two affiliated  companies located in
Charleston, West Virginia: Jacobs & Company ("Jacobs") and FS Investments,  Inc.
("FSI")  (see  below).  Jacobs is a  registered  investment  advisory  firm that
derives  its  revenue  from   asset-based   fees.   Jacobs  serves   clients  in
approximately  twenty  states,  primarily  in the eastern  United  States.  FSI,
through its wholly-owned  subsidiary Triangle Surety Agency, Inc.  ("Triangle"),
is engaged in the business of placing surety bonds with insurance  companies for
clients engaged in regulated industries, such as the extraction of coal, oil and
gas. FSI  receives  commission  income from the  placement of these bonds and is
licensed in ten states  primarily in the eastern United States.  The Company and
its  subsidiaries  are subject to the business risks inherent with the financial
services industry.

Liquidity and Going Concern
---------------------------
These  financial  statements  are  presented  on the basis that the Company is a
going  concern.  Going concern  contemplates  the  realization of assets and the
satisfaction  of  liabilities in the normal course of business over a reasonable
length of time. The Company incurred operating losses of approximately  $703,000
and $1,142,000 for the years ended May 31, 2003 and 2002, and as of May 31, 2003
had a $1,277,845 working capital deficit and a $2,209,622 stockholders' deficit.
Management  intends to  continue  with  steps it has taken to improve  cash flow
through operations and pursuit of viable joint venture opportunities. Management
may seek to raise  additional funds through private  placements of stock,  other
long-term or permanent financing, or short-term borrowings. However, the Company
cannot be certain  that it will be able to obtain such funds,  nor is it able to
currently  determine  whether it will be able to maintain  its status as a going
concern.

Note B - Summary of Significant Accounting Policies

Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of NELX, Inc. and its
majority owned subsidiaries, after the elimination of intercompany transactions.

                                      F-7
<PAGE>
NELX, INC.
Notes to Consolidated Financial Statements


Use of Estimates
----------------
Preparation of financial  statements in conformity  with  accounting  principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that affect the amounts  reported in the  financial
statements  and  accompanying  notes.  Significant  areas  requiring  the use of
management  estimates are  valuation of deferred tax benefits and  impairment of
its investment in an undeveloped mineral spring lease. Actual results inevitably
will differ from those  estimates,  and such  differences may be material to the
financial statements.

Recent Accounting Pronouncements
--------------------------------
In October 2002,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement  of  Financial  Accounting  Standards  No. 146,  Accounting  for Costs
Associated  with Exit or Disposal  Activities,  ("SFAS No.  146").  SFAS No. 146
addresses  financial  accounting and reporting for costs associated with exit or
disposal  activities  and nullifies  Emerging  Issues Task Force Issue No. 94-3,
Liability  Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an  Activity.  SFAS No. 146  establishes  revised  accounting  rules for
recording a liability  for costs  associated  with an exit or disposal  activity
when such liability has occurred rather than when a company has committed itself
to the exit or disposal activity. SFAS No. 146 is effective for exit or disposal
activities  initiated  after  December  31, 2002 and are not expected to have an
effect on the Company's  financial  position or results of operations  given the
Company's current operating activities.

SFAS No. 147,  Acquisitions  of Certain  Financial  Institutions,  was issued in
December 2002 and is not expected to apply to the  Company's  current or planned
activities.

In December 2002, the FASB approved Statement of Financial  Accounting Standards
No. 148,  Accounting for Stock-Based  Compensation - Transition and Disclosure -
an  amendment  of FASB  Statement  No. 123 (SFAS No.  148).  SFAS No. 148 amends
Statement of Financial  Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123) to provide  alternative  methods of transition for a

                                      F-8
<PAGE>
NELX, INC.
Notes to Consolidated Financial Statements

voluntary  change to the fair value based method of accounting  for  stock-based
employee  compensation.   In  addition,  SFAS  No.  148  amends  the  disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim  financial  statements  about the method of accounting  for  stock-based
employee  compensation  and the effect of the method used on  reported  results.
SFAS No. 148 is effective for financial statements for fiscal years ending after
December  15,  2002.  The  Company  has  not  issued  any  stock-based  employee
compensation  in fiscal 2003,  and does not anticipate  that this  pronouncement
will result in any impact on these financial statements.

In April 2003,  the FASB  approved  SFAS No. 149,  Amendment of Statement 133 on
Derivative  Instruments and Hedging Activities.  SFAS No. 149 is not expected to
apply to the Company's current or planned activities.

In June 2003, the FASB approved SFAS No. 150,  Accounting for Certain  Financial
Instruments with  Characteristics of both Liabilities and Equity (SFAS No. 150).
SFAS No. 150  establishes  standards for how an issuer  classifies  and measures
certain  financial  instruments  with  characteristics  of both  liabilities and
equity.  This Statement is effective for financial  instruments  entered into or
modified  after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. SFAS No. 150 is not expected
to have an effect on the Company's financial position.

Revenue Recognition
-------------------
Fees for investment  advisory  services are based on an agreed percentage of the
value of client  assets  under  management  and are accrued  based on the market
value of client assets on the accrual date. Commissions for surety bond services
are based on a percentage  of premiums  charged for bonds placed with  insurance
companies,  and are recorded upon the issuance or effective  renewal date of the
bonds.  The Company is not responsible for any significant  continuing  services
subsequent to the issuance or renewal of bonds.

Allowance for Doubtful Accounts
-------------------------------
Management  believes that substantially all accounts receivable are collectible,
and therefore  has not  established  an allowance  for  estimated  uncollectible
accounts.

                                      F-9
<PAGE>
NELX, INC.
Notes to Consolidated Financial Statements

Long-Lived Assets
-----------------
When facts and circumstances  indicate that the cost of long-lived assets may be
impaired,  an  evaluation  of the  recoverability  is performed by comparing the
carrying value of the assets to the projected future cash flows. Upon indication
that the  carrying  value of such  assets may not be  recoverable,  the  Company
recognizes an impairment  loss by a charge against current  operations  based on
discounted projected future cash flows.

Investment in Undeveloped Mineral Spring Lease
----------------------------------------------
During  2002,  the  Company  explored   opportunities  for  development  of  its
investment  in an  Arkansas  mineral  spring  lease  but  determined  none  were
currently feasible.  Accordingly,  the Company recorded an impairment expense of
$116,661 to write down its investment.

The Company is  obligated  under the lease  agreement  for  monthly  payments of
approximately  $150 through  October 2006,  with options to extend the lease for
two  additional  ten-year  terms.  The Company has the right to cancel the lease
upon sixty days written notice.

Furniture and Equipment
-----------------------
Furniture and equipment is recorded at cost. Maintenance and repairs are charged
to operations  when  incurred.  When property and equipment are sold or disposed
of, the asset account and related accumulated depreciation account are relieved,
and any  gain or loss is  included  in  operations.  The  cost of  property  and
equipment is depreciated  over the estimated useful lives of the related assets,
ranging from three to seven years,  using the  double-declining  balance method,
which approximates estimated economic depreciation. Depreciation expense charged
to operations was $5,492 and $6,787 in 2003 and 2002.

Income Taxes
------------
The  Company  uses the asset and  liability  approach of  accounting  for income
taxes. The asset and liability approach requires the recognition of deferred tax
assets  and  liabilities  for the  expected  future  consequences  of  temporary
differences  between the financial  reporting  basis and tax basis of assets and
liabilities (see Note E).


                                      F-10
<PAGE>
NELX, INC.
Notes to Consolidated Financial Statements

Statement of Cash Flows
-----------------------
Cash and cash equivalents include cash and short-term  investments with original
maturities of three months or less (including money market investment funds with
immediate availability).

Earnings (Loss) Per Share
-------------------------
Basic earnings  (loss) per share of common stock are computed using the weighted
average number of shares  outstanding  during each period.  Diluted earnings per
share  are  computed  on the  basis  of the  average  number  of  common  shares
outstanding  plus the dilutive  effect of  convertible  debt,  stock options and
warrants.  In periods of net loss, there are no diluted earnings per share since
the result would be anti-dilutive.

Note C - Notes Payable

Notes payable consist of the following as of May 31, 2003:

 Note payable dated February 12, 2002, 10% interest,  secured by personal
 guarantee of an officer, payable on demand.                            $ 38,929

 Note  payable  dated May 30,  2003,  10%  interest,  secured
 by personal  guarantee of an officer, payable on demand.                 10,000

 Notes payable  to an individual,  dated in fiscal 2003, 10% interest,
 secured by personal  guarantee  of an officer,  convertible  into
 common  stock at $.10/per share before the earlier of i) October 15,
 2004 maturity,  or ii) a financing of debt  or  equity  for  net
 proceeds  of  at  least  $5  million  (a  "Qualified Financing").       200,000

 Notes payable to an  individual,  dated in fiscal 2003, 10% interest,
 secured by personal guarantee of an officer,  convertible into common
 stock at $.10/per share before the earlier of i) October 15, 2004, or
 ii) a Qualified Financing.                                              350,000
                                                               -----------------

                Total                                                    598,929

                Current maturities                                        48,929
                                                               -----------------

                Long-term maturities                                   $ 550,000
                                                               =================

         Future maturities of notes payable as of May 31, 2003 are as follows:

                                                              2003     $  48,929
                                                              2004       550,000
                                                               -----------------
                                                                       $ 598,929
                                                               =================

                                      F-11

<PAGE>
NELX, INC.
Notes to Consolidated Financial Statements

Note D - Notes Payable - Related Parties

 Notes payable to related parties consist of the following as of May 31,
 2003:  Notes payable to four  shareholders,  10% interest,  two notes
 totaling  $100,000  secured by a personal  guarantee  of an  officer;
 payable on demand.
                                                                       $ 335,000

 Notes payable to officer dated February 2002,  approximately  14.5%
 interest, unsecured, payable on demand.                                  90,000

 Advances  from  former  director,  non-interest  bearing,  unsecured,
 payable on demand.                                                       39,837

 Notes  payable to  shareholder  dated May 7, 2003,  $5,000  interest,
 secured by personal guarantee of an officer, due on June 10, 2003.       75,000

 Note payable to shareholder dated May 2002, 10% interest,  unsecured,
 due on December 31, 2003.                                                20,000

 Convertible notes payable to four shareholders, dated in fiscal 2003,
 10%   interest,   secured  by  personal   guarantee  of  an  officer,
 convertible into common stock at $.10/per share before the earlier i)
 October  15,  2004,  or ii) a  financing  of debt or  equity  for net
 proceeds of at least $5 million.                                        384,500

 Note  payable  to  officer  dated  June 19,  2001,  with  interest
 approximating  9.34%, unsecured,  average  monthly  interest and
 principal of $16,538 payable monthly in fiscal 2003 and reducing
 thereafter with a final payment due April 29, 2006.                      80,278

 Note payable to  shareholder  dated  October 21, 1999,  10% interest,
 secured by assignment of $25,000 of proceeds of a term life insurance
 policy  insuring the life of an officer,  interest  and  principal of
 $531 payable monthly, with a final payment on May 1, 2006.               16,458
                                                               -----------------

                Total                                                  1,041,073

                Current maturities                                       642,354
                                                               -----------------
                Long-term maturities                                   $ 398,719
                                                               =================


Future  maturities of notes payable to related parties as of May 31, 2003 are as
follows:

                                                   2004             $    642,354
                                                   2005                  381,562
                                                   2006                   17,157
                                                               -----------------
                                                                    $  1,041,073
                                                               =================

Note E - Income Taxes

Deferred  income tax assets and  liabilities  are  recorded  to reflect  the tax
consequences in future years of differences  between the tax basis of assets and
liabilities and their  financial  reporting  amounts at each year-end.  Deferred

                                      F-12
<PAGE>

NELX, INC.
Notes to Consolidated Financial Statements

income tax assets are recorded to reflect the tax  consequences  on future years
of income tax carryforward benefits, reduced by a valuation allowance for future
benefit  amounts not expected to be realized by the  Company.  A tax benefit has
not been reported in the  accompanying  financial  statements  for the operating
loss carried  forward  because the Company is uncertain as to the  likelihood of
utilization.

At May 31, 2003, the Company's net deferred income tax asset is comprised of the
following:


   Net operating loss benefit carryforward                       $ 1,600,000
   Valuation allowance for the deferred tax asset                 (1,600,000)
                                                                 ------------
   Net deferred income tax asset                                 $       -0-
                                                                 =============

In 2003, the valuation allowance increased by approximately $616,000.

As  of  May  31,  2003,  the  Company  had  operating  loss   carryforwards   of
approximately  $7.8  million,  an  increase  in  fiscal  2003  of  approximately
$600,000. The operating loss carryforward expires beginning in 2010. As a result
of the ownership change  resulting from the acquisitions of FSI and Jacobs,  the
utilization of  approximately  $6.4 million of the operating loss  carryforwards
will be substantially limited in future periods.

Note F - Stockholders' Equity

Settlement of Trade Payable for Stock
-------------------------------------
On March 25,  2003,  the Company  settled a $13,176  trade  account  payable for
131,765  shares of common  stock  valued at $6,588,  resulting  in a gain on the
settlement of $6,588.

Warrants
--------
On January 30, 2002, the Company issued  detachable  warrants to acquire 150,000
shares of common stock in connection  with a note payable to a shareholder.  The
estimated fair value of the warrants were separated from the debt instrument and
recorded at a fair value of $3,000.  On May 7, 2003, the warrants were rescinded
and the note was refinanced with a revised maturity of June 10, 2003, with total
interest consideration of $5,000.

                                      F-13
<PAGE>
NELX, INC.
Notes to Consolidated Financial Statements

Note G - Contingencies and Commitments

Insurance Settlement
--------------------
In 2002, the Board of Trustees of Advisors Series Trust ("AST")  determined that
certain  securities  held by the Jacobs & Company  Mutual Fund (the "Fund") were
incorrectly  priced. A demand was made on Jacobs & Company as investment adviser
to the Fund in November  2002,  and Jacobs & Company  agreed to pay the Fund the
amount  required  to avoid a charge to the  accounts  of the Fund  shareholders.
Jacobs & Company  filed claims  against its insurers for its loss arising out of
these  circumstances.  On June  18,  2003,  Jacobs  &  Company  entered  into an
agreement  with one of its  insurers  to  settle  these  claims.  The  agreement
provides that, of the aggregate amount of approximately $352,000 demanded by AST
on behalf of the Fund, the insurer will pay approximately $329,000, and Jacobs &
Company will bear and pay the $23,000 balance.  The insurer also agreed to pay a
portion of Jacobs & Company's legal fees with respect to this matter.  As of May
31, 2003, obligations between the Company and the insurer had substantially been
settled.

Litigation
----------
During 2000, the Company's subsidiary, FS Investments,  Inc. ("FSI"), negotiated
for the  acquisition  of an  insurance  company  located in  Kentucky.  Prior to
closing the transaction, the sellers refused to go forward with the transaction.
FSI  brought a cause of  action  in the  United  States  District  Court for the
Eastern  District  of  Kentucky  for breach of  contract  seeking  damages.  The
defendant  filed a  counterclaim  against  FSI for fraud in the  inducement  and
negligent  misrepresentation.  In March 2002,  the Court  issued its opinion and
order for summary  judgment  in favor of the  defendants.  In  exchange  for the
Company's  agreement not to appeal the decision,  the defendants  agreed to drop
their  counterclaim  in the  matter.  Costs  attributed  to  this  unconsummated
acquisition totaled $183,458 for the year ended May 31, 2002.

Lease Commitments
-----------------
The Company leases certain office  equipment with combined  monthly  payments of
approximately $1,500 and expiration terms varying from three to five years.

The  Company's  lease of office,  parking and storage space expired in July 2002
and  continues  on a  month-to-month  basis at an  approximate  monthly  rate of
$2,400.


                                      F-14
<PAGE>

Rental expense for the above lease commitments totaled approximately $47,000 and
$35,000 during 2003 and 2002.

Minimum  future lease  payments  under  non-cancelable  operating  leases having
remaining terms in excess of one year as of May 31, 2003 are:

                         2004                      $17,749
                         2005                       13,185
                         2006                       10,607
                         2007                        3,995

Note H - Financial Instruments

Fair Value

The carrying amount reported in the balance sheet for cash, receivables, prepaid
expenses,  notes payable,  accounts payable and accrued liabilities approximates
fair value because of the immediate or relatively  short-term  maturity of these
financial instruments.

The  determinations  of fair value  discussed above are subjective in nature and
involve  uncertainties  and  significant  matters of judgment and do not include
income tax  considerations.  Therefore,  the results  cannot be determined  with
precision and cannot be substantiated by comparison to independent market values
and may not be realized in actual sale or settlement of the instruments.

Concentration of Credit Risk
----------------------------
Statement of Financial  Accounting Standards No. 105, "Disclosure of Information
about  Financial   Instruments   with   Off-Balance-Sheet   Risk  and  Financial
Instruments  with  Concentrations  of  Credit  Risk",   requires  disclosure  of
significant concentration of credit risk regardless of the degree of such risk.

The  Company   transacts  the  majority  of  its  business  with  two  financial
institutions,  one for commercial  banking  services and the other for brokerage
and  custodial  services.  Periodically,  the amount on deposit in the financial
institution providing commercial banking services exceeds the $100,000 federally
insured  limit.   Management   believes  that  this  financial   institution  is
financially sound. With respect to the financial institution providing brokerage
and  custodial  services,  amounts on deposit are invested in money market funds
comprised of short-term U.S. government securities.

                                      F-15
<PAGE>
NELX, INC.
Notes to Consolidated Financial Statements

Management  believes  that  substantially  all  trade  account  receivables  are
collectible,  and  therefore  has not  established  an allowance  for  estimated
uncollectible accounts.

Note I - Segment Reporting

The Company has two reportable segments, investment advisory services and surety
bond  brokerage.  The  following  table  presents  revenue  and other  financial
information by industry segment.

                                                       Year Ended
        Industry Segment                May 31, 2003                May 31, 2002
        ----------------                ------------                ------------
        Revenues:
         Investment advisory                305,493                   $ 293,163
         Surety bond brokerage               32,538                      36,918
         Corporate                            6,590                      40,731
                                          ----------                ------------
         Total revenues                   $ 344,621                   $ 370,812
                                          ==========                ============

        Operating (Loss):
         Investment advisory              $(391,545)                  $(756,186)
         Surety bond brokerage             (131,463)                   (426,300)
         Corporate                         (180,144)                      40,731
                                          ----------                ------------
         Total operating income           $(703,152)                $(1,141,755)
                                          ==========                ============

        Identifiable Assets:
         Investment advisory               $ 64,613                    $ 71,293
         Surety bond brokerage                7,714                       5,943
         Corporate                              824                       1,531
                                          ----------                ------------
         Total assets                      $ 73,151                    $ 78,767
                                          ==========                ============
        Capital Acquisitions:
         Investment advisory               $  2,356                    $ 14,120
         Surety bond brokerage                    -                           -
         Corporate                                -                            -
                                          ----------                ------------
         Total assets                       $ 2,356                   $  14,120
                                          ==========                ============

        Depreciation and Valuation Charged
          to Identifiable Assets:
         Investment advisory               $  5,492                    $  6,787
         Surety bond brokerage                    -                           -
         Corporate                                -                     116,661
                                          ----------                ------------

        Total assets                       $  5,493                  $  123,448
                                          ==========                ============

                                      F-16
<PAGE>
NELX, INC.
Notes to Consolidated Financial Statements


Note J - Comprehensive Income

There  are  no  adjustments   necessary  to  net  income  as  presented  in  the
accompanying   statements  of  operations  to  derive  comprehensive  income  in
accordance with SFAS No. 130, "Reporting Comprehensive Income."

Note K - Events Subsequent to May 31, 2003

In June and July  2003,  the  Company  received  a total  of  $130,000  from the
issuance of two  convertible  promissory  notes.  The notes are guaranteed by an
officer with interest at 10%, payable quarterly,  with principal due October 15,
2004. The principal is  convertible,  in whole or in part, into common shares of
NELX,  Inc. on or before the earlier of i) October 15, 2004,  or ii) a financing
of debt or equity for net proceeds of at least $5 million.  Any such  conversion
is at the rate of $.10 per share and upon written  notice of conversion at least
five business days prior to the conversion date.

On July 17, 2003, the Board of Directors  adopted the NELX, Inc. Stock Incentive
Plan (the  "Plan").  The Plan  authorizes  issuance  of up to 25 million  common
shares  for  awards to  employees,  non-employee  directors,  and other  service
providers.  The Compensation Committee of the Board of Directors will administer
the Plan and may issue awards in the form of options,  restricted  stock,  stock
appreciation rights or other equity derivatives.



















                                      F-17
<PAGE>

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

In connection with the audits for the years ended May 31, 2003 and May 31, 2002,
there have been no disagreements  with  independent  accountants with respect to
any  matter  of  accounting   principles  or  practices,   financial   statement
disclosure, or auditing scope or procedure.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; Compliance
With Section 16(a) of the Exchange Act.

The directors and  executive  officers of the Company,  their ages and positions
are as follows:

                                             Company
         Name              Age               Position
----------------------     ---              ------------
John M. Jacobs             49               President &
                                            Director

Frederick E. Ferguson      69               Director

C. David Thomas            50               Director

Robert J. Kenney           56               Vice President


JOHN M. JACOBS

Mr. Jacobs is a SEC registered investment advisor,  Certified Public Accountant,
and is licensed  as a property  and  casualty  insurance  agent in fifteen  (15)
states.  For the past seven  years,  Mr.  Jacobs  has  served as a Director  and
President  of  both  Jacobs  &  Company  and  FS  Investments,   Inc.  Prior  to
establishing  his  investment  advisory  business  in  1988,  Mr.  Jacobs  was a
practicing  public  accountant  for over thirteen  years,  during which he was a
managing  partner of his accounting firm and a business and personal  advisor to
his  clients.  Mr.  Jacobs has served as a director  and  President of NELX Inc.
since May 2001.

FREDERICK E. FERGUSON

Mr. Ferguson is retired coal operator who has a diverse  experience with respect
to business and the coal industry. Prior to owning his own company, Mr. Ferguson
began the first half of his career as a state and federal mine inspector. During
the later half of his career,  Mr.  Ferguson  owned his own coal company and was
involved in all facets of mining  production.  He has served as a Director of FS
Investments,  Inc.  since its  inception in December  1997,  and has served as a
director of NELX, Inc. since July 2002.

C. DAVID THOMAS

Mr.  Thomas is a licensed  resident  insurance  agent in West Virginia and holds
non-resident agent licenses in several other states. Mr. Thomas began his surety
career in 1976 with United  States  Fidelity and Guaranty  Company and served as
the surety  underwriter in the Charleston,  WV branch office until 1979. At that
time he joined George  Friedlander & Company,  a regional insurance agency based
in  Charleston,  WV, where he presently  serves as Vice President and Manager of
the Surety  Department.  Mr.  Thomas is a  shareholder  and  Director  of George
Friedlander & Company. He has served as a Director of FS Investments, Inc. since
its inception in December 1997, and has served as a director of NELX, Inc. since
July 2002.

                                       11
<PAGE>

ROBERT J. KENNEY

Mr. Kenney joined FSI and Jacobs &Co. in 2000,  and is Senior Vice  President of
Triangle Surety and Vice President and Assistant Portfolio Manager of Jacobs. In
addition,  he is a licensed  resident  insurance agent in West Virginia and also
holds Series 63 and 65 securities licenses. Prior to joining Triangle Surety and
Jacobs, Mr. Kenney had over 20 years experience in the oil and gas industry with
Columbia  Energy Group.  With  Columbia,  Mr.  Kenney held various  positions in
Treasury,  Human Resources, and Law Departments and most recently served as both
Manager of Risk Management and Special Projects Manager.  Mr. Kenney was elected
Vice President of the Company during fiscal 2003.

Mr.  Charles L. Stout was President of NELX from 1997 to May 2001 and a director
of the Company until July 2002,  when his commitment to the Company  ended.  Mr.
Robert L. Neal served as Chief Financial  Officer and Secretary of NELX from May
2001 to May 2002,  when he resigned to pursue other  business  interests.  Denis
Iler,  who served as a director and Secretary of NELX,  resigned as director and
Secretary in May 2001 to pursue other business interests.  Mr. Kenneth L. Curry,
President  and a director  of Square  Roots  Inc.,  and who was  appointed  as a
director  in July 2000,  resigned  this  position  in January  2001 upon  NELX's
decision to terminate its acquisition of Square Roots Inc.

There  are no family  relationships  among any of the  Company's  directors  and
executive officers.

During  the past five  years,  there have been no  filings  of  petitions  under
federal  bankruptcy  laws,  or any state  insolvency  laws,  by or  against  any
business of which any director or executive officer of the Company was a general
partner or executive  officer at the time or within two years before the time of
such filing.

During the past five years, no director or executive  officer of the Company has
been  convicted in a criminal  proceeding or been subject to a pending  criminal
proceeding.

During the past five years, no director or executive  officer of the Company has
been the subject of any order,  judgement, or decree, not subsequently reversed,
suspended  or  vacated  by a court of  competent  jurisdiction,  permanently  or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities.

During the past five years, no director or executive  officer of the Company has
been  found  by a court  of  competent  jurisdiction  (in a civil  action),  the
Commission  or the  Commodity  Futures  Trading  Commission  to have  violated a
federal or state securities or commodities law.

                                       12
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth the  compensation  paid by the Company during the
calendar years ended December 31, 2000,  December 31, 2001 and December 31, 2002
to the Chief Executive  Officer of the Company ("the Named Executive  Officer").
Other than the Chief  Executive  Officer,  no  executive  officer of the Company
received total compensation from the Company in excess of $100,000.

--------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
--------------------------
                               Annual Compensation
                              ---------------------
--------------------------------------------------------------------------------
                                                                    Other
Name and                                                            Annual
Principal Position              Year     Salary ($)   Bonus(s)  Compensation ($)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

John M. Jacobs (1)              2002     $150,000     $     -      $       -
Chief Executive Officer         2001     $ 87,500     $     -      $       -
                                2000     $  5,000     $     -      $ 147,656

Charles L. Stout (2)            2001     $     -      $     -      $       -
Chief Executive Officer         2000     $     -      $     -      $       -
--------------------------------------------------------------------------------

(1)  Mr. Jacobs was appointed  Chief  Executive  Officer of NELX in May 2002 and
     the amounts  reported  represent  compensation  paid to Mr. Jacobs as Chief
     Executive  Officer of Jacobs & Co. and FSI during the calendar  years 2002,
     2001,  and  2000.  Other  annual  compensation  for Mr.  Jacobs  represents
     distributions  made to or on behalf of Mr.  Jacobs by Jacobs & Company as a
     small business  corporation  electing to be taxed under Subchapter S of the
     Internal Revenue Code.

(2) Mr. Stout resigned as Chief Executive Officer of NELX in May 2001.

The  Company  had no long  term  incentive  compensation  plans  in the  form of
restricted stock awards,  stock  appreciation  rights  ("SARs"),  phantom stock,
stock  options,  warrants,  convertible  securities,  performance  units  and/or
performance  shares, or any other such instruments during the 2002, 2001 or 2000
calendar years.

There were no cash payments or other  compensation paid or set aside directly or
indirectly  to or for the  benefit of any  director of the Company for the 2002,
2001 or 2000  calendar  years.  There are no standard or other  arrangements  in
effect for the compensation of directors of the Company.

                                       13
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth the beneficial  ownership of common stock of the
Company as of August 31,  2003 by (i) each  person  known by the  Company to own
more than 5% of the Company's  common stock,  (ii) each of the directors,  (iii)
the Named Executive  Officer and (iv) all directors and executive  officers as a
group.  Unless  otherwise  noted,  such persons have sole voting and  investment
power with respect to such shares.

         Name and Address of            Amount and Nature of          Percent of
         Beneficial Ownership           Beneficial Ownership (1)      Class (2)
         --------------------           ------------------------      ----------

         John M. Jacobs
         300 Summers Street, Suite 970
         Charleston, WV  25351             18,207,460 (3)                14.78%

         Charles L. Stout and
         Marilyn Stout
         Route 1, Box 41J
         Bridgeport, WV  26330             13,025,000 (4)                10.79%

         William D. Jones and
         Cynthia B. Jones
         513 Georgia Avenue
         Chattanooga, TN  37403             9,060,000                     7.51%

         Frederick E. Ferguson and
         Sandra B. Ferguson
         Rt. 3, Box 408
         Fayetteville, WV 25840               750,000                     0.63%

         C. David Thomas
         PO Box 5157
         Charleston, WV 25361                 917,295                     0.76%

         Robert J. Kenney
         809 Sherwood Road
         Charleston, WV  25314              1,770,000 (5)                 1.46%

         All Executive Officers
         and Directors as a Group          21,644,755                    17.43%

                                       14
<PAGE>

(1)  Beneficial  ownership is  determined  in  accordance  with the rules of the
     Securities  Exchange Commission and generally includes voting or investment
     power with respect to securities.  Shares of common stock issuable upon the
     exercise of options or  warrants  currently  exercisable  within 60 days of
     September  8, 2003 are deemed  outstanding  for  computing  the  percentage
     ownership of the person holding such options or warrants but are not deemed
     outstanding for computing the percentage ownership of any other person.

(2)  Based on  120,708,509  shares of common stock issued and  outstanding as of
     September 8, 2003.

(3)  Includes  12,233,044  shares of common stock held in the name of FS Limited
     Partnership  ("FSLP") of which Mr. Jacobs is the sole general partner.  Mr.
     Jacobs  has the power to vote and to direct  the voting of and the power to
     dispose  and direct the  disposition  of the shares  beneficially  owned by
     FSLP. Also includes  currently  exerciseable  options to acquire  2,500,000
     shares at a strike price of $.04 per share.

(4)  Includes 25,000 shares held in the name of Applied Mechanics Corporation of
     which Charles L. Stout is President and a director and 500,000  shares held
     in the name of James R. Stout.

(5)  Includes  260,000 shares held in an individual  retirement  account for the
     benefit of Mr.  Kenney,  510,000  shares held in an  individual  retirement
     account  for the  benefit  of Mr.  Kenney's  wife,  Lee  Anne  Kenney,  and
     currently  exerciseable  options  to acquire  1,000,000  shares at a strike
     price of $.04 per share.

There are no outstanding  arrangements that may result in a change in control of
the Company.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As  described  in Item 6.  Management's  Discussion  and  Analysis of  Financial
Condition  and Results of  Operations,  the Company  previously  acquired  for a
nominal  amount  all the  right,  title  and  interest  in  certain  oil and gas
properties  located  in Roane  County,  West  Virginia  from  Applied  Mechanics
Corporation  ("AMC"),  a company  affiliated  with a principal  shareholder  and
former director of the Company  (Charles L. Stout).  In connection with the sale
of the properties in May 2001 to an unrelated third-party,  AMC was appointed as
agent to  represent  the Company and  received a fee of $150,000 for its role in
bringing a  successful  conclusion  to the sale and  transfer of the  properties
which netted the Company proceeds of $1.3 million.

For the calendar year 2000, the five-month period ended May 31, 2001, and fiscal
years 2002 and 2003, the Company's  operating  expenses were partially funded by
advances from its principal  shareholder  and chief executive  officer,  John M.
Jacobs.  The source of funding for these advances  originated  with  obligations
incurred by Mr. Jacobs with third parties.  Interest expense on such obligations
amounted  to  $135,358 in  calendar  year 2000,  and $61,097 for the  five-month
period  ended May 31,  2001,  $58,158  for fiscal year ended May 31,  2002,  and
$34,438 for the fiscal year ended May 31, 2003.

                                       15
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)  The following exhibits are filed as a part of this Annual Report.

Exhibit Number                                                           Page
--------------                                                           ----
2.1    Agreement and Plan of Merger dated as of
       May 18, 2001 by and among NELX, Inc.,
       FSI Acquisition Corp. and FS Investments, Inc. (1)
2.2    Agreement and Plan of Merger dated as of
       May 18, 2001 by and among NELX, Inc.,
       J&C Acquisition Corp. and Jacobs & Company (1)

       Company's plan of acquisition, reorganization, arrangement,
       liquidation or succession


3.1    Company's Articles of Incorporation (2)
3.2    Company's By-laws (2)

31.1   Certification of Chief Executive Officer and Principal Financial
       Officer pursuant to Rule13a-146.1 promulgated under the Securities
       Exchange Act of 1934

32.1   Certification pursuant to 18 U.S.C. Section 1950, as adopted pursuant
       to Section 906 of the Sarbanes-Oxley Act of 2002

21     Subsidiaries of Company                                            E-1

     (1)  Incorporated by reference to the Company's  Current Report on Form 8-K
          dated May 29, 2001.

     (2)  Incorporated by reference to the Company's  Registration  Statement on
          Form 10.

(b)  No  reports  on Form 8-K have been  filed  during  the last  quarter of the
     period covered by this report.




                                       16
<PAGE>
SIGNATURES

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

                                                           NELX, INC.
                                                          (Registrant)

Dated:  September 10, 2003                         By:     /s/  John M. Jacobs
        ------------------------------------       ----------------------------
                                                     John M. Jacobs
                                                     President



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


Dated:   September 10, 2003                        By:     /s/ John M. Jacobs
        ------------------------                   ----------------------------
                                                     John M. Jacobs
                                                     President, Director and
                                                     principal financial officer


Dated:   September 10, 2003                        By: /s/ Frederick E. Ferguson
        ------------------------                   ----------------------------
                                                     Frederick E. Ferguson
                                                     Director


Dated:   September 10, 2003                        By: /s/ C. David Thomas
        ------------------------                   ----------------------------
                                                     C. David Thomas
                                                     Director






                                       17