<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]    Annual Report under Section 13 or 15 (d) of the Securities Exchange Act
       of 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

[ ]    Transition Report under Section 13 or 15 (d) of the Securities Exchange
       Act of 1934

       For the transition period from  _______________  to _________________

                         Commission file number 1-13381

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

            NEW YORK                                          11-3096379
---------------------------------                        -------------------
 State or other jurisdiction of                             (IRS Employer
  incorporation or organization                          Identification No.)

201 ALHAMBRA CIRCLE, CORAL GABLES, FL                               33134
----------------------------------------                          ----------
(Address of principal executive offices)                          (Zip Code)


        Registrant's telephone number, including area code 305-774-3200

        Securities registered under Section 12 (b) of the Exchange Act:
                     COMMON STOCK, PAR VALUE $.01 PER SHARE

                      Name of Exchange on which registered:
                             AMERICAN STOCK EXCHANGE

         Securities registered under Section 12 (g) of the Exchange Act:
                                      NONE

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

                                 [ ] YES [X] NO

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

         The aggregate market value of the Common Stock, $.01 par value per
share (the "Common Stock"), held by non-affiliates of the Registrant as of June
18, 2001 (based upon the last sale price for the Common Stock on the American
Stock Exchange) was approximately $4,924,727.

         The number of shares of Common Stock outstanding as of June 18, 2001
was 15,112,867.


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                SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER
                  THE SECURITIES LITIGATION REFORM ACT OF 1995

         Except for historical information contained herein, this Annual Report
on Form 10-K contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 which involve certain risks and
uncertainties. The Company's actual results or outcomes may differ materially
from those anticipated. Important factors that the Company believes might cause
such differences are discussed in the cautionary statements accompanying the
forward-looking statements in this Annual Report on Form 10-K. In assessing
forward-looking statements contained herein, readers are urged to carefully read
those statements. When used in the Annual Report on Form 10-K, the words
"estimate," "anticipate," "expect," "believe," and similar expressions are
intended to identify forward-looking statements. Such statements, including
without limitation, those relating to our future business, prospects, revenues,
working capital, liquidity, capital needs, interest costs and income, wherever
they may appear in this document or in other statements attributable to us,
involve estimates, assumptions and uncertainties which could cause actual
results to differ materially from those expressed in the forward-looking
statements. Such uncertainties include, among others, the following factors:

GOING CONCERN

         The Company's consolidated financial statements have been presented on
the basis that it is a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
liquidity of the Company was severely affected in 1999 and 2000 by significant
losses from continuing operations and discontinued operations, which has
resulted in a significant deterioration of the stockholders' equity of the
Company from $58.4 million at December 31, 1998 to $0.5 million at December 31,
1999 to a capital deficit of $1.8 million at December 31, 2000. In addition, the
Company has a working capital deficiency and significant litigation. These
circumstances raise substantial doubt about the Company's ability to continue as
a going concern. Although management has taken measures intended to positively
impact profit and cash flow, there can be no assurance that the measures taken
will allow the Company to achieve profitability or maintain positive cash flows.

RISKS OF FINANCIAL LEVERAGE

         Our long-term debt, including current portion, was approximately $18.0
million as of December 31, 2000, which is significant in relation to our total
capitalization. While we believe that we will be able to service our debt, there
can be no assurance to that effect. The degree to which we are leveraged could
affect our ability to service our indebtedness, make capital expenditures,
respond to market conditions and extraordinary capital needs, take advantage of
certain business opportunities or obtain additional financing. Unexpected
declines in our future business, or the inability to obtain additional financing
on terms acceptable to us, if required, could impair our ability to meet our
debt service obligations or fund acquisitions and therefore, could have material
adverse effect on our business and future prospects.

LIMITATIONS ON CAPITAL RAISING FUNCTIONS;STOCK LIQUIDITY ISSUES

         The Company has been notified that it has fallen below the continued
listing requirements of the American Stock Exchange ("AMEX"). Also, on April 20,
2001, the AMEX halted trading of the Company's common stock because the Company
had failed to file its Form 10-K for the period ended December 31, 2000.

         Until the trading halt on the Company's common stock is lifted, there
is no public liquidity in the Company's common stock. As a result of falling
below the listing requirements, the AMEX may move to delist the common stock and
if the common stock is delisted, the Company's ability to raise capital and its
liquidity would be adversely affected. If the Company's common stock is
delisted, the Company will likely apply to have its stock traded
over-the-counter, more commonly known as the OTC market. OTC transactions
involve risks in addition to those associated with transactions in securities
traded on an exchange. Many OTC stocks trade less frequently and in smaller
volume than exchange-listed stocks and the values of these stocks may be more
volatile than exchange-listed stocks. If the Company's stock is traded in the
OTC market and a market maker sponsors the Company, the Company may have the
price of its stock electronically displayed on the OTC Bulletin Board, or OTCBB.


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However, if the Company lacks sufficient market maker support for display on the
OTCBB, it must have its price published by the National Quotations Bureau LLP in
a paper publication known as the "Pink Sheets". The marketability of the
Company's stock will be even more limited if its price must be published on the
"Pink Sheets".

         In addition, the financial statements included in this Form 10-K do not
meet all of the requirements under the rules and regulations of the Securities
and Exchange Act of 1934, as amended, because our predecessor auditor has
declined to accept the engagement to reissue their opinion on our 1998 and 1999
financial statements included in this Form 10-K. As a result, we are currently
restricted from filing registration statements with the Securities and Exchange
Commission, which adversely affects our liquidity and our ability to raise
capital.

SUPPLIER RELATIONSHIPS

         The Company's purchasing arrangements with suppliers of
hospitality-related products are by purchase order and terminable at will by
either party. There can be no assurance that any of the Company's supplier
relationships will not be terminated in the future. While the Company has been
able to obtain products on a timely basis in the past, the Company is subject to
the risk that it will be unable to purchase sufficient products to meet its
clients' requirements. Any shortages or delays in obtaining these products could
have a material adverse effect on the Company.

RISKS RELATED TO INTANGIBLE ASSETS

         As of December 31, 2000, intangible assets totaled approximately 16% of
our total assets. For the year ended December 31, 1999, the Company recorded an
asset impairment charge of approximately $9.3 million. At December 31, 2000, we
did not consider any of the unamortized balance of intangible assets to be
impaired. Any future determination, based on reevaluation of the underlying
facts and circumstances, that a significant impairment has occurred would
require the write-off of the impaired portion of un-amortized intangible assets,
which could have a material effect on our business and results of operations.

RISK ASSOCIATED WITH COLLECTION OF ACCOUNTS RECEIVABLE

         The Company carries accounts receivable at the amount it deems to be
collectible. Accordingly, the Company provides allowances for accounts it deems
to be uncollectible based on management's best estimates. Recoveries are
recognized in the period they are received. The ultimate amount of accounts
receivable that becomes uncollectible could differ from those estimated, which
could have a material adverse effect on the Company.

STOCKHOLDER RIGHTS PLAN

         The Company's Board of Directors adopted a Stockholder Rights Plan.
These rights may have the effect of discouraging a third party from making an
acquisition proposal for the Company and may thereby inhibit a change in
control. For example, such provisions may deter tender offers for shares of
common stock, which be attractive to shareholders, or deter purchases of large
blocks of common stock, thereby limiting the opportunity for shareholders to
receive a premium for their shares of common stock or exchangeable shares over
the then-prevailing market prices.

POSSIBLE ANTI-TAKEOVER EFFECTS OF PREFERRED STOCK; POTENTIAL DILUTION OF
COMMON STOCK

         The Company's Certificate of Incorporation authorizes the Board of
Directors to issue up to 3,000,000 shares of preferred stock, par value $ .01
per share (the "Preferred Stock"). The Preferred Stock may be issued in one or
more series, the terms of which may be determined at the time of issuances by
the Board of Directors, without further action by shareholders. As of the date
of this Form 10-K, 1.0 million shares of 8% convertible preferred stock (the
"HSBC Preferred") are outstanding, which shares were issued in connection with
the restructuring of a loan with HSBC Bank. Although the Company currently has
no plans for the issuance of additional shares of Preferred Stock, there can be
no assurance that the Company will not do so in the future. The ability of the
Board of Directors to issue Preferred Stock could have the effect of delaying,
deferring or preventing a change of control of the Company or the removal of
existing management and, as a result, could prevent the shareholders of the
Company from being paid a premium over the market value for their shares of
Common Stock.



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         The risk factors described above could cause actual results or outcomes
to differ materially from those expressed in any forward-looking statements made
by or on behalf of us. Any forward-looking statement speaks only as of the date
on which such statement is made, and we undertake no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrences of
unanticipated events. New factors emerge from time to time and it is not
possible for us to predict all of such factors. Further, we cannot assess the
impact of each such factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

         Hotelworks.com, Inc. (the "Company"), formerly known as Hospitality
Worldwide Services, Inc., has historically been organized into the following six
lines of business: purchasing, reorder, logistics, renovation, real estate
investment and asset management, and hotel development. In September 1999, the
Company announced a strategic initiative to reposition the core purchasing,
reorder and logistics businesses and to divest itself of its renovation business
and real estate investment and asset management business. In December 1998, the
Company decided to discontinue its hotel development business. Given the change
in strategic direction, the operating results of the purchasing, reorder and
logistics businesses are presented as continuing operations and the operating
results associated with the renovation, real estate investment and asset
management, and hotel development businesses, as well as the estimated losses on
disposal, are presented as discontinued operations on the consolidated
statements of operations for all years presented.

         The Company's consolidated financial statements have been presented on
the basis that it is a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
liquidity of the Company was severely affected in 1999 and 2000 by significant
losses from continuing operations and discontinued operations, which have
resulted in a significant deterioration of the stockholders' equity of the
Company from $58.4 million at December 31, 1998 to $0.5 million at December 31,
1999 to a capital deficit of $1.8 million at December 31, 2000. In addition,
during 2000, the Company (a) incurred a net loss of $3.7 million (b) has a
working capital deficit of $7.7 million and (c) has substantial unresolved
litigation. These circumstances have raised substantial doubt about the
Company's ability to continue as a going concern. Reference is made to Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" for further discussion of the
Company's current financial condition and management's action plans to address
these matters. Accordingly, there are no assurances that the Company will have
sufficient funds available to satisfy all of its obligations during 2001.

         After the resignations of a number of directors and officers of the
Company in the fall of 1999, the Company retained counsel to assist in
conducting an investigation into various matters. In the course of the
investigation, the Company discovered, among other things, that approximately
$2.1 million of fraudulent charges had been submitted to and paid by the Company
during 1998 and 1999. Those funds have been returned to the Company by a former
officer of the Company, but the Company has not yet recovered any interest or
related investigation costs. Management believes that it has identified the
financial extent of the fraudulent activities. The financial results for the
fourth quarter of 1999 reflect the recovery. The Company has not restated any
prior period financial statements as management has determined that the impact
was not material in any period. The Company believes that other former
directors, officers and employees may have been involved in the fraudulent
activities, that there may have been breaches of fiduciary duties and other
inappropriate actions, and that the Company may be able to recover damages from
those individuals. The Company intends to pursue all available and appropriate
remedies and to make any appropriate referrals to law enforcement and
administrative agencies. In May 2001, the Company reached an Agreement to settle
its litigation against one of the former officers of the Company. The Agreement
provided for a cash payment by the former officer to the Company of $650,000
within 60 days and the former officer's continued cooperation with the Company's
investigation. In exchange, the Company agreed to a limited release to the
former officer and to dismiss its outstanding litigation upon receipt of the
payment called for under the Agreement.



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CONTINUING OPERATIONS

         In January 1997, the Company completed the acquisition of the Leonard
Parker Company, ("LPC") and its subsidiary, Parker Reorder Online ("Parker
Reorder"). LPC, founded in 1969, is a leading purchasing company for the
hospitality industry which acts as an agent or principal for the purchase of
goods and services for its customers which include major hotel and management
companies worldwide. LPC purchases furniture, fixtures and equipment, kitchen
supplies, linens and uniforms, guestroom amenities, and other supplies to meet
its customers' requirements for new hotel openings and major renovations. LPC
purchases annually, as a principal and as an agent, approximately $300 million
of goods and services for its customers. Parker Reorder has developed a
proprietary software product, Providis(TM), which allows clients to reorder
operating supplies and equipment ("OS&E") and other products on an internet
web-based system and provides such clients with access to, budgeting and product
evaluation capabilities. Parker Reorder offers hotel properties the ability to
order, on an as needed basis, any and all OS&E products used by such properties.
For Parker Reorder (reorder business), Wyndham International, a major lodging
company, accounted for approximately 53% of its revenues in 2000. The purchase
price of LPC and Parker Reorder, including acquisition costs and after final
adjustments, was approximately $12,140,000 which consisted primarily of
1,250,000 newly issued shares of Common Stock and $5 million stated value of
200,000 newly issued shares of 6% convertible preferred stock of the Company
(the "LPC Preferred").

         In conjunction with the development of the Providis(TM) reorder system,
certain components of the Company's previous server-based reorder system, Parker
FIRST, were phased out in 2000. In connection with the migration of the
Company's customer base to the Providis(TM) system, the Company determined that
the goodwill associated with the acquisition of Parker Reorder in January, 1997
was closely related to the Parker FIRST system. As such, the Company recorded an
asset impairment charge of $9,252,000 in 1999 reflecting the remaining net book
value of the capitalized computer software costs associated with the Parker
FIRST system and the goodwill.

         In January 1998, the Company acquired Bekins Distribution Services,
Inc. ("Bekins"), a provider of transportation, warehousing and installation
services to a variety of customers worldwide. Founded in 1969, Bekins is a
logistical services company that serves clients who are opening, renovating or
relocating facilities by assuring that materials, fixtures, furniture and
merchandise are moved from multiple vendor locations to their ultimate
destinations in a controlled orderly sequence so that each item can be installed
on schedule. The purchase price of Bekins, including acquisition costs, of
approximately $11,400,000 consisted of 514,117 shares of Common Stock and the
assumption of certain Bekins' debt. Additionally, under the terms of the
purchase agreement, the Company was required to issue an additional 639,512
shares of Common Stock in January 1999 as a post closing adjustment based on the
market price of the Company's Common Stock on the one year anniversary of the
date of acquisition. The acquisition has been accounted for as a purchase with
the results of Bekins included in the consolidated financial statements of the
Company from the acquisition date. The issuance of additional shares pursuant to
the make-whole provision was accounted for as an equity transaction with no
adjustment to the purchase price or reported net income.

         To a significant number of LPC customers, the Company offers bundled
services of purchasing from LPC and logistics services from Bekins. In these
instances, Bekins will either act as a subcontractor to LPC and bill LPC
directly or bill the customer separately. LPC and its customers account for
approximately 35% of the revenues of Bekins, and as such, the loss of such
business for Bekins would have a material adverse effect on the operations of
Bekins. Conversely, the operations of Parker Reorder are not materially
dependent on the customers of LPC nor are the operations of Parker Reorder and
Bekins linked in any material way. See Footnote 18 to the Consolidated Financial
Statements for financial information on the operating segments of the Company.

DISCONTINUED OPERATIONS

         In August 1995, the Company acquired substantially all of the assets
and assumed certain liabilities of AGF Interior Services Co., a Florida
Corporation ("AGF"), that through its wholly-owned subsidiary, Hospitality
Restoration & Builders, Inc., a New York Corporation ("HRB"), provided
renovation services to the hospitality industry. Until January 1997, the
Company's only line of business was to provide, through HRB, a complete package
of renovation services to the hotel industry ranging from pre-planning and
budget preparation of a project to performing the renovation requirements and
delivering furnished rooms. In September 1999, as part of the Company's
strategic initiative discussed above, the Company decided to divest itself of
the renovation business.



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         In December 2000, as part of an Amended and Restated Loan Agreement
with HSBC Bank USA ("HSBC"), HRB assigned a portion of its contract right in a
disputed receivable with a former customer to HSBC in the form of a five-year
$4,585,000 promissory note, bearing interest at the bank's prime rate. This HRB
note is secured solely by its interest in the receivable and any collections are
to be divided between HRB and HSBC according to a prescribed formula. At
maturity, HRB has the option of extending the term for an additional twelve
months, at which time, if the disputed receivable has not been resolved, title
in full of the contract right along with the related debt passes to HSBC.

         In May 1997, the Company entered into a joint venture ("Apollo Joint
Venture") with Apollo Real Estate Advisors II, L.P. ("Apollo") and Watermark
Investments Limited, LLC ("Watermark"), of which Watermark is affiliated with
Robert Berman, the former Chairman and Chief Executive Officer of the Company,
to identify, acquire, renovate, refurbish and sell hotel properties. The Company
performed the renovation and procurement services for the properties purchased
by the Apollo Joint Venture. In addition, the Company acquired a non-controlling
equity interest in each of the entities formed to purchase such properties. In
September 1997, the Apollo Joint Venture acquired the Warwick Hotel in
Philadelphia, Pennsylvania. The Company made cumulative capital contributions of
approximately $791,000 to the joint venture operating entity that was formed to
purchase the property. In March 1998, the Apollo Joint Venture acquired the
Historic Inn in Richmond, Virginia. The Company made cumulative capital
contributions of approximately $311,000 to the joint venture operating entity
that was formed in connection with the purchase of the property. In September
1999, as part of the Company's strategic initiative discussed above, the Company
decided to divest itself of its real estate investment and asset management
business. In October 2000, the Company entered into an agreement to restructure
its involvement in the Apollo Joint Venture. As a result of the restructuring,
the Company exchanged mutual releases with Apollo, which released the Company
from future obligations to the joint venture. In conjunction with this
agreement, the Company surrendered its equity ownership interest, the Company
issued 100,000 unregistered shares of its Common Stock to Apollo, warrants
formerly issued to Apollo were returned to the Company and cancelled, and the
Company received payment on its remaining receivables with the properties. The
Company wrote off its investment in the Apollo Joint Venture in 1999, and as
such, this agreement did not have a material impact on the 2000 consolidated
financial statements. As a result of the agreement, the Company reversed an
accrued liability recorded in 1999 related to the Apollo Joint Venture and
recorded a gain on disposal of $204,671 in the 2000 consolidated statement of
operations.

         In November 1997, the Company formed a wholly owned subsidiary,
Hospitality Construction Corporation ("HCC"), to specialize in new hotel
construction projects and major hotel upgrades. In addition, HCC was to manage
the renovation projects under the Apollo Joint Venture and any other similar
ventures. HCC's operations commenced in 1998 and related solely to hotel upgrade
and renovation projects, and did not include any new hotel construction
projects. In an effort to consolidate operations, the Company transferred the
HCC operations to HRB in 1998. As discussed above, the renovation business was
discontinued in 1999.

         In December 1997, the Company formed a wholly owned subsidiary,
Hospitality Development Services Corporation ("HDS"). HDS was to provide hotel
development services involving managing and overseeing the development process
related to new hotel construction, to earn a developers fee. HDS commenced
operations in 1998. On January 6, 1998, the Company reached an agreement in
principle to enter into a master development agreement with Prime Hospitality
Corp. ("Prime") to develop up to 20 hotel properties over a two-year period
under the AmeriSuites brand name. In June 1998, the Company and Prime executed
the master development agreement. In late 1998, the Company was informed by
Prime that Prime was no longer going to pursue new development opportunities and
that Prime was abandoning their responsibilities under the master development
agreement, even though the Company had incurred significant costs up to such
time. As a result, in December 1998, management decided to discontinue its hotel
development business. The Company ceased its hotel development operations in
April 1999. In December 1999, the Company and Prime reached an agreement to
terminate the master development agreement whereby the Company received a
settlement payment of $300,000 and both parties agreed to a full release of
obligations and claims.

         In February 1998, the Company formed a wholly owned subsidiary, HWS
Real Estate Advisory Group, Inc. ("HWS REAG") to purchase the assets of
Watermark's real estate advisory business, consisting primarily of contracts to
perform future asset management and advisory services as well as certain equity
interests in the Apollo Joint Venture. The purchase price for such business was
$1,500,000 of cash. The acquisition was accounted for as a purchase with the
results of HWS REAG included in the consolidated financial statements of the
Company from the acquisition date. On September 30, 1999, the Company and
Watermark entered into a Termination Agreement whereby all agreements between
the parties were terminated, and amongst other things, includes a payment by
Watermark to the Company of $885,000, that was made in December 1999.



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         In March 1998, the Company entered into a joint venture with ING Realty
Partners ("ING Joint Venture"), to acquire the Radisson O'Hare (formerly Clarion
Quality) Hotel in Chicago, Illinois, whereby the Company acquired a
non-controlling equity interest in the ING Joint Venture. The Company also
performed the renovation and procurement services for the property. The Company
made cumulative capital contributions of approximately $3.2 million to the ING
Joint Venture. In September 1999, as part of the Company's strategic initiative
discussed above, the Company decided to divest itself of its real estate
investment and asset management business. In May 2000, the Company entered into
an agreement to restructure its involvement in the ING Joint Venture. As a
result of the restructuring, the Company exchanged mutual releases with its
joint venture partner, which released the Company from future obligations to the
joint venture, in exchange for its equity ownership interest. The Company wrote
off its investment in the ING Joint Venture in 1999, and as such, this agreement
did not have a material impact on the current year consolidated financial
statements.

         Financial information about the Company's discontinued operations
appears in Footnote 4 to the Consolidated Financial Statements in Part II, Item
8 of this report.

SALES AND MARKETING

         The Company's sales and marketing strategy is to obtain and maintain
strategic alliances with hotel chains and franchises with a global presence and
to focus on upscale full service hotels.

         The Company's sales and marketing efforts are coordinated by senior
executives of the Company, together with salespersons who contact and maintain
relationships with appropriate hotel personnel. Because of the Company's
commitment to service and customer relationships, the majority of the Company's
business comes from referrals and repeat customers.

COMPETITION

         Servicing the hospitality industry (including, but not limited to
hotels, resorts and time shares) is a highly competitive business, with
competition based largely on price and quality of service. In its purchasing and
reorder businesses, the Company competes with other independent procurement
companies, hotel purchasing companies and food service distribution companies.
With respect to its internet web-based reorder business, the Company receives
competition from a number of hotel management companies, hotel companies,
franchise operators and other entities who are pursuing the development of
software systems to provide on-line procurement services. In its logistics
business, the Company competes with national, regional and local trucking and
installation companies. There is no single competitor or small number of
competitors that are dominant in the Company's business areas. However, some of
the Company's competitors and potential competitors possess substantially
greater financial, personnel, marketing and other resources than the Company.

REGULATION

         The Company's logistics business is subject to various federal, state
and local laws and regulations, pursuant to which it is required to, among other
things, obtain licenses and general liability insurance and workers compensation
insurance. The Company believes that it is currently in compliance in all
material respects with these laws and regulations in those states in which it
currently operates. There are a number of states in which the Company operates
where a license is not required. The Company's purchasing and reorder businesses
are subject to regulation by various state laws and regulations and
international customs, duties, taxing and other authorities that regulate the
import and distribution of goods. Domestically, the freight carrier provides
bills of lading and other documentation that record the pick-up, shipping and
delivery of merchandise purchased by the Company for its clients.
Internationally, the Company must comply with the individual country's
requirements as they relate to commercial documentation. The Company believes
that it is currently in compliance in all material respects with the laws and
regulations in those states and countries in which it currently operates.

DEPENDENCE ON CUSTOMERS

         Most of the Company's customers are in the hospitality industry with
none of them accounting for over 10% of the Company's 2000 revenues. If the
Company continues to grow and expand its businesses, the Company believes its
dependence on significant customers will decrease. There are no assurances that
either continued growth or decreased dependence on significant customers will
occur.



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EMPLOYEES

         As of December 31, 2000, the Company and its subsidiaries employed 263
employees. Other than approximately ten Bekins employees at the Las Vegas,
Nevada warehouse, none of the Company's employees are represented by labor
unions and the Company believes that its relationship with its employees is
good. The union contract expires June 30, 2004.

ITEM 2.  DESCRIPTION OF PROPERTIES

         The Company leases office space in Coral Gables, Florida which houses
its executive offices, as well as offices for LPC and Parker Reorder. The lease
has a ten-year term expiring in April 2009, covering approximately 42,800 square
feet at December 31, 2000, with an annual rental of $1,075,000 increasing to
$1,185,000 in 2002. LPC also maintains satellite offices, in Los Angeles,
California and Amsterdam, The Netherlands, which do not lease significant office
space.

         Bekins maintains its offices in St. Louis, Missouri under a lease which
expires in December 2006 at an annual fixed rental of approximately $230,000 for
13,900 square feet. Bekins has entered into a lease on 50,000 square feet of
warehouse space in Orlando, Florida, at an annual fixed rental of $190,000
increasing to $202,000 in March 2002, expiring in February 2003. Bekins also
leases warehouse space in Las Vegas, Nevada, where it occupies 22,000 square
feet under a lease which expires in October 2001 at an annual fixed rental of
$102,000.

         The Company currently leases approximately 22,000 square feet of office
space in New York, Coral Gables and Los Angeles that it does not occupy, but has
leased to unrelated third parties under sub-lease agreements that expire
coterminous with the original lease. The sub-lease payments to be received by
the Company approximate the payments to be made by the Company under its leases
with landlords.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is a defendant in various litigation incident to its
business, and in certain instances the amounts sought include substantial claims
and counterclaims.

         In June, 1998, an action (the "State Action") was brought against the
Company by West Atlantic Corp. ("West Atlantic") in the Supreme Court of the
State of New York. The State Action alleged that the Company retained West
Atlantic pursuant to an agreement to perform certain marketing and selling
services for the Company. The State Action further alleged that fees were
allegedly earned and not paid under the Agreement and sought damages relating to
an alleged breach of contract, damages with respect to alleged "significant
benefits to the Company" and damages relating to breach of the duties of good
faith and fair dealing. In November 2000, the Company and West Atlantic executed
a settlement agreement. In connection therewith, the parties executed mutual
releases, the Company agreed to pay to West Atlantic a total of $115,000 over
six years and West Atlantic dismissed the State Action with prejudice. In
connection with the State Action, the Company brought claims in federal and
state court against Tova Schwartz, the former President and Chief Executive
Officer of the Company's predecessor, seeking indemnification against the West
Atlantic claims in the State Action, as well as compensatory damages and
punitive damages for fraud, among other things. The state and federal actions
claim that, among other things, Ms. Schwartz failed to disclose to the Company
the existence of the Agreement and West Atlantic's claims thereunder, when the
Company purchased from Ms. Schwartz certain shares of Common Stock of the
Company which she then held, sold its lighting business to her and provided her
with other severance benefits. Ms. Schwartz asserted counterclaims against the
Company in the State Action, and she also joined Howard Anders and Robert
Berman, former employees of the Company, as fourth-party defendants in the State
Action. Ms. Schwartz asserted counterclaims against the Company in the federal
action, and joined Mr. Anders, Mr. Berman and Alan Friedberg, a former employee
of the Company, as additional counterclaim defendants in the federal action. The
Company has concluded that, pursuant to the Company's By-Laws, Messrs. Anders
and Berman are entitled to indemnification from the Company with respect to the
state and federal actions. The Company has concluded that, pursuant to the
Company's By-Laws, Messrs. Anders and Berman are entitled to indemnification
from the Company with respect to the state and federal actions. In September
2000, the Company and Messrs. Anders and Berman entered into a stipulation with
Ms. Schwartz pursuant to which they dismissed without prejudice all claims and
counterclaims between them in the federal action. That stipulation was
so-ordered by the court on November 2, 2000. As part of this disposition, the
parties executed a separate side-agreement (not filed with the court) pursuant
to which the Company agreed that Ms. Schwartz will not be precluded from raising
a statute of limitations defense in the event the Company re-files against her


                                       8
<PAGE>   9


the claims that were the subject of the federal action. In or about May 2001,
the parties executed a stipulation of discontinue with respect to the third-and
fourth-party actions under the stipulation, all claims and defenses in the
third-and fourth-party actions are dismissed without prejudice pending the
outcome of Ms. Schwartz's legal malpractice action against the Company's former
counsel, Olshan Grundman Frome & Rosenzweig, and Robert Friedman, Esq.
(collectively "Olshan"), arising out of Olshan's advice to the Company in
connection with the Company's August 1995 transaction with AGF Interior Services
(the "Olshan Action"). As part of the disposition of the third-and fourth-party
actions, the parties agreed to toll the statute of limitations as to all claims
in those actions until one year from the date that the Olshan Action is finally
concluded. In the event that the Olshan Action is resolved in Olshan's favor,
the parties to the third-and fourth-party actions will each dismiss with
prejudice their claims against the other parties to those actions. The
stipulation was submitted to the court for its review and signature on June 7,
2001. The Company admitted no wrongdoing in connection with the dismissals of
state and federal actions.

         After the resignations of a number of former directors and officers of
the Company in the fall of 1999, the Company retained counsel to assist in
conducting an investigation into various matters. In the course of the
investigation, the Company discovered, among other things, that approximately
$2.1 million of fraudulent charges had been submitted to and paid by the Company
during 1998 and 1999. Those funds have been returned to the Company by a former
officer of the Company, but the Company has not yet recovered any interest or
related costs. Management believes that it has identified the financial extent
of the fraudulent activities. The financial results for the fourth quarter of
1999 reflect the recovery. The Company has not restated any prior period
financial statements as management has determined that the impact was not
material in any period. The Company believes that other former directors,
officers and employees may have been involved in the fraudulent activities, that
there may have been breaches of fiduciary duties and other inappropriate
actions, and that the Company may be able to recover damages from those
individuals. The Company intends to pursue all available and appropriate
remedies and to make any appropriate referrals to law enforcement and
administrative agencies. In May 2001, the Company reached an Agreement to settle
its litigation against one of the former officers of the Company. The Agreement
provided for a cash payment by the former officer to the Company of $650,000
within 60 days and the former officer's continued cooperation with the Company's
investigation. In exchange, the Company agreed to a limited release to the
former officer and to dismiss its outstanding litigation upon receipt of the
payment called for under the Agreement.

         In June 1999, Hospitality Restoration & Builders, Inc., a wholly owned
subsidiary of the Company ("HRB"), filed a lawsuit in the Supreme Court, New
York County against Servico, Inc. ("Servico"), six (6) Servico hotel subsidiary
corporations, Servico's successor, Lodgian, Inc., and Impac Hotel Group. In
general, the lawsuit alleged that Servico breached its obligations to HRB under
agreements pursuant to which HRB was to renovate certain hotel properties
located in New York, Texas and Illinois. It was also claimed that Servico
fraudulently induced HRB to perform work. HRB has asserted in the action that it
suspended its work at these hotels due to Servico's failure to pay for certain
completed work. Following HRB's suspension of work, Servico terminated HRB as
the contractor at all the hotels. HRB is seeking damages in excess of $14.5
million. As a result of motions made by Servico, the actions related to the
Texas and Illinois properties were dismissed for lack of jurisdiction and the
claims based on fraud were also dismissed. HRB has subsequently filed actions
against Servico in Texas and Illinois. With respect to the New York properties,
Servico has counterclaimed against HRB to recover damages in excess of $19.0
million. The Company believes that it has meritorious defenses against Servico's
counterclaims and that the outcome of this matter will not have a material
adverse effect on the Company, however, because of the uncertainties inherent in
the litigation process it is unable to predict the outcome and an adverse
outcome in this action could have a material adverse effect on the Company. In
the event the Company is successful in its counterclaim, it has agreed to assign
a substantial portion of the proceeds received from the counterclaim to HSBC
pursuant to the refinancing of its debt with HSBC. See "Management's Discussion
and Analysis - Liquidity and Resources".

         On February 3, 2000, Servico Rolling Meadows, Inc. ("Servico RM"),
filed a lawsuit in the United States District Court for the Northern District of
Illinois against HRB. In general, the lawsuit alleges that HRB furnished
defective work and failed to complete work required under an agreement to
renovate a hotel located in Rolling Meadows, Illinois. Servico RM is seeking
damages in excess of $2.1 million. In response to this action, on March 10,
2000, HRB filed an answer in which it denied Servico RM's claims and asserted
counterclaims against Servico RM for breach of contract and fraud, among other
claims. HRB is seeking damages in an amount in excess of $2.8 million against
Servico RM in connection with this counterclaim. To date, Servico RM has not
answered or otherwise responded to HRB's claims and formal discovery has not yet
been initiated. The Company believes that it has meritorious defenses against
Servico's counterclaims and that the outcome of this matter will not have a
material adverse effect on the Company, however, because of the uncertainties
inherent in the litigation process it is unable to predict the outcome and an
adverse outcome in this action could have a material adverse effect on the
Company.



                                       9
<PAGE>   10

         On or about February 23, 2000, HRB filed a lawsuit in the District
Court of Harris County, Texas against Servico Houston, Inc. ("Servico Houston").
In general, the lawsuit alleges that Servico Houston breached its obligations to
HRB under an agreement pursuant to which HRB was to renovate a hotel located in
Houston, Texas and also fraudulently induced HRB to perform work at this hotel.
HRB claims in this lawsuit that it suspended work at this hotel because it was
not paid for completed work. Following its suspension, HRB was terminated as the
contractor. HRB is seeking damages in an amount equal to the sum of at least
$2,568,480 plus statutory interest. Servico Houston has answered, denied
responsibility for any damages and counterclaimed to recover damages in the
total amount of $2,822,856. The Company believes that it has meritorious
defenses against Servico's counterclaims and that the outcome of this matter
will not have a material adverse effect on the Company, however, because of the
uncertainties inherent in the litigation process it is unable to predict the
outcome and an adverse outcome in this action could have a material adverse
effect on the Company.

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

         On December 12, 2000, the Company held its 2000 Annual Meeting of
Shareholders (the "Meeting"), whereby the shareholders (1) elected three members
to the Company's Board of Directors and (2) ratified the appointment of BDO
Seidman LLP as the Company's independent auditors for the fiscal year ended
December 31, 2000. The vote on such matters was as follows:
                                                             NUMBER OF SHARES
                                     NUMBER OF SHARES OF     OF COMMON STOCK
1.        ELECTION OF DIRECTORS       COMMON STOCK FOR     - WITHHELD AUTHORITY
          ---------------------       ----------------     --------------------
          Louis K. Adler                  12,858,727              478,588
          George Asch                     12,858,727              479,188
          Richard Bartlett                13,254,909               82,406


2.       Ratification of the appointment of BDO Seidman LLP as the Company's
         independent auditors for the fiscal year ending December 31, 2000:

              FOR                         AGAINST                 ABSTAINING
              ---                         -------                 ----------
          13,305,779                      28,122                    3,414

                                     PART II

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

         (a)      MARKET INFORMATION. The Common Stock is traded on the American
                  Stock Exchange under the symbol "HWS". The following table
                  sets forth, for the periods indicated, the range of high and
                  low bid prices of the Common Stock.


                                              HIGH               LOW
                                              ----               ---

              1999

              First Quarter                    $ 6-5/8             $2-7/16
              Second Quarter                     3-7/8              2-9/16
              Third Quarter                      3-7/8             1-15/16
              Fourth Quarter                         5               1-1/2

              2000

              First Quarter                   $ 4-9/16             $ 1-3/4
              Second Quarter                         2                .281
              Third Quarter                      1.313                .188
              Fourth Quarter                      .750                .313



                                       10
<PAGE>   11


         On April 19, 2001, the last reported sales price of the Common Stock on
         the American Stock Exchange was $0.35 per share. As a result of the
         Company's failure to timely file its Form 10-K for the year ended
         December 31, 2000, the Company was no longer in compliance with the
         American Stock Exchange filing requirements. As such, the Exchange
         instituted a trading halt in the Company's common stock, effective
         April 20, 2001.

         (b) HOLDERS. As of June 11, 2001, there were approximately 98 record
         holders of the Common Stock.

         (c) DIVIDENDS. The Company has not paid or declared any dividends upon
         its Common Stock since its inception and does not intend to pay any
         dividends on its Common Stock in the foreseeable future. The payment by
         the Company of dividends, if any, in the future rests within the
         discretion of its Board of Directors and will depend, among other
         things, upon the Company's earnings, its capital requirements and its
         financial condition, as well as, other relevant factors. Under a debt
         agreement with Bank of America, N.A., Bekins is prohibited from paying
         any dividends to the Parent Company except for the reimbursement of
         certain allocated overhead and administrative expenses.

         On December 15, 2000, the Company issued 1,000,000 shares of Class B
         convertible preferred stock to HSBC in connection with the Amended and
         Restated Loan Agreement with HSBC. The issuance of the preferred stock
         was made in reliance of Section 4(2) promulgated under the Securities
         Act of 1933, as amended.

ITEM 6.  SELECTED FINANCIAL DATA (a)

         In September 1999, Hotelworks.com, Inc. announced a strategic
initiative to reposition the core purchasing, reorder and logistics businesses
into a business-to-business e-commerce company and to divest itself of its
renovation business and real estate investment and asset management business. In
December 1998, the Company decided to discontinue its hotel development
business. Given the change in strategic direction, the operating results of the
purchasing, reorder and logistics businesses are presented as continuing
operations and the operating results associated with the renovation, real estate
investment and asset management, and hotel development businesses, as well as
the estimated losses on disposal, are presented as discontinued operations in
the consolidated statements of operations for all years presented.

         The following table presents selected financial data for the Company
for each of the five years in the period ended December 31, 2000. The
information in the table has been restated to reflect such amounts related
solely to the continuing operations of the Company, comprising the purchasing
and reorder businesses acquired in January 1997 and the logistics business
acquired in January 1998. All amounts are in thousands except per share amounts.

<TABLE>
<CAPTION>

                                           2000         1999         1998         1997         1996
                                        ---------    ---------    ---------    ---------    ---------
<S>                                     <C>          <C>          <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues (b)                  $ 216,356    $ 223,425     $176,745(d)  $ 66,577(c)  $     --
Loss from continuing operations            (3,876)     (18,245)(e)   (2,069)      (1,802)        (183)

Basic loss from continuing operations       (0.26)       (1.35)        (.19)        (.24)        (.03)
per common share
Diluted loss from continuing                (0.26)       (1.35)        (.19)        (.24)        (.03)
operations per common share

BALANCE SHEET DATA:
Total assets                               66,503       61,781      122,355       79,594        9,523
Long-term debt                             10,256           68        2,965           --           --
</TABLE>


(a)   No cash dividends were declared during the five-year period presented
      above.

(b)   Certain amounts have been reclassified for the effects of Emerging Issues
      Task Force Issue 00-10, "Accounting for Shipping and Handling Fees and
      Costs".



                                       11
<PAGE>   12

(c)   Includes revenues of LPC and Parker Reorder from the date of acquisition,
      January, 1997.

(d)   Includes revenues of Bekins from the date of acquisition, January, 1998.

(e)   See ITEM 7, RESULTS OF OPERATIONS: 1999 COMPARED TO 1998 for further
      description of this amount.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

OVERVIEW

         In September 1999, the Company announced a strategic initiative to
reposition the core supply and distribution businesses, and to divest itself of
its renovation business and real estate investment and asset management
business. In December 1998, the Company decided to discontinue its hotel
development business. As a result, the Company has reflected the operating
results associated with the renovation, real estate investment and asset
management, and hotel development businesses, as well as the estimated losses on
disposal, as discontinued operations in the consolidated statements of
operations for all periods presented. Accordingly, the continuing operations of
the Company are comprised of the purchasing, reorder and logistics businesses.

RESULTS OF OPERATIONS:  2000 COMPARED TO 1999

         Revenues for the year ended December 31, 2000 were $216,355,887,
compared to $223,424,822 for the year ended December 31, 1999. Sales in the
purchasing business (LPC) increased nominally, from $177.2 million in 1999 to
$180.7 million in 2000 or approximately 2.0%. Sales in the reorder business
(Parker Reorder) declined $6.3 million in 2000 due almost entirely to a
significant customer who terminated their sales contract in May 2000. Revenue
dropped $4.2 million in 2000 in the logistics business (Bekins) due to primarily
to a large one-time installation contract with a major consumer products company
in 1999. For all segments, the variance in revenues is primarily due to volume
changes.

         Cost of revenues for 2000 decreased to $202,509,785 compared to
$211,952,584 for 1999 primarily due to the lower revenue at the reorder and
logistics businesses. The cost of revenues at the purchasing business was
relatively unchanged.

         Gross profit for 2000 was $13,846,102 or 6.4% of revenues, compared to
$11,472,238 or 5.1% of revenues for 1999. The increase in gross profit dollars
was primarily attributable to the purchasing and logistics businesses where in
1999 volume discounts declined by $1.4 million and provisions for uncollected
sales taxes at Bekins of $500,000, respectively, were recorded in costs of
revenue. The absence of such items in 2000 were the primary causes of the
increase in gross profit percent in 2000, as well.

         Selling, general and administrative ("S,G&A") expenses for 2000 totaled
$16,391,932 or 7.6% of revenues, as compared to $22,697,922 or 10.2% of revenues
for 1999. In 2000, the Company implemented a cost reduction program with a goal
of eliminating non-essential S,G&A expenditures in order to align costs more
closely with revenues. In connection with this program and as a result of the
action steps taken by management, professional fees decreased by $756,000 and
bad debt provisions decreased by $951,000. S,G&A expenses for 1999 included
amounts related to employee terminations and other costs related to the
corporate office closing in New York and expenses relating to office relocations
in Florida and St. Louis in the amount of $1,831,000. These costs were not
incurred in 2000.

         An asset impairment charge of $9,252,000 was recorded in 1999, as the
Company made a determination that the Parker Reorder proprietary software
product, Parker FIRST, would not provide future long-term benefits to the
Company based on the repositioning of the Company's core businesses. The Parker
FIRST system, which is a client server-based system, was phased out in 2000, as
the Company migrated the reorder business to the Providis(TM) internet web-based
system. Additionally, the Company determined that the goodwill associated with
the acquisition of Parker Reorder in 1997 was closely related to the Parker
FIRST system and should be considered impaired as well. Accordingly, the net
book value of such assets was written-off in 1999.

         The loss from operations for 2000 totaled $2,545,830, as compared to a
loss of $20,477,684 for the previous year, which includes the above stated asset
impairment charge. Operating results improved in the current year due to the
factors cited above.



                                       12
<PAGE>   13

         Interest expense increased slightly from $1,774,111 in 1999 to
$1,795,859 in 2000. Interest income decreased in 2000 to $543,010 from $902,753
in 1999 in line with the decrease in funds available for investment from 1999 to
2000.

         For 2000, the provision for income taxes was $77,000, compared to a
benefit of $3,103,829 in 1999, which primarily represented a current benefit for
a carryback claim for federal, state and local income taxes based on taxable
losses in 1999 offset by a valuation allowance against previously recorded
deferred tax assets. Based upon the fact that the Company has not recorded
income from continuing operations before taxes in the last three years and is
not assured of income in the coming years, the realization of net deferred tax
assets resulting from net operating loss carryforwards is not considered more
likely than not and accordingly, a valuation allowance has been recorded for the
full amount of such assets.

         Based on the factors discussed above, the loss from continuing
operations decreased to $3,875,679 in 2000, from an $18,245,213 loss in 1999.
Basic loss per share from continuing operations decreased from a $1.35 loss in
1999 to a loss of $0.26 in 2000.

         The operating results associated with the discontinued operations were
a loss of $22,589,150 for 1999 compared to $0 for 2000. The loss for 1999
included provisions for uncollectible contract receivables relating to the
renovation business of approximately $17.0 million for substantially complete
renovation projects which were in dispute with customers, and the write-off of
certain real estate investments and receivables of approximately $500,000
relating to the real estate investment and asset management business.

         The gain on disposal of discontinued operations of $204,671 for 2000
related to the reversal of an accrued liability recorded as a loss on disposal
in 1999 on the Apollo Joint Venture as a result of a settlement agreement in
October 2000. The loss on disposal of discontinued operations for 1999 was
$17,169,880. The loss included the write-off of goodwill of approximately $5.0
million and anticipated and actual operating losses during the phase-out period
of $565,000 relating to the renovation business; the write-off of goodwill of
$450,000 and write-downs and reserves in connection with the anticipated
disposal of the real estate investments of approximately $5.1 million relating
to the real estate investment and asset management business; and additional
write-downs of approximately $1.3 million on certain real estate development
projects relating to the hotel development business.

RESULTS OF OPERATIONS:  1999 COMPARED TO 1998

         Revenues for the year ended December 31, 1999 were $223,424,822,
compared to $176,744,593 for the year ended December 31, 1998. Revenue in the
purchasing business increased from $148.5 million in 1998 to $177.2 million in
1999 due primarily to an increase in project scopes whereby contracts called for
larger volume purchasing than previous years. In the reorder business, sales
increased from $5.8 million in 1998 to $17.0 million in 1999 due to the full
year addition of two large customers. For the logistics business, sales
increased from $22.4 million in 1998 to $29.1 million in 1999 primarily due to a
large one-time installation contract with a major consumer products company in
the first half of 1999. For all segments, the increase in revenues is primarily
due to volume changes.

         Cost of revenues for 1999 increased to $211,952,584 as compared to
$163,142,439 for 1998 due primarily to the higher revenue at each business
segment. Additionally, in 1999, the purchasing business recorded additional
reserves on volume discounts of $1.4 million and the logistics business recorded
an additional reserve of $500,000 on sales tax payables.

         Gross profit for 1999 was $11,472,238 or 5.1% of revenues, compared to
$13,602,154 or 7.7% of revenues for 1998. The decrease in gross profit dollars
and percent was due primarily to the aforementioned increase in project scope in
the purchasing business where larger dollar volume purchasing contracts did not
yield correspondingly larger fees, as the complexity of the jobs did not
necessarily increase along with the size of the contract. For the reorder
business, the increased sales volume led to a $510,000 increase in gross profit
and an increase from a gross profit rate of (2.8%) in 1998 to 2.0% in 1999. In
the logistics business, the increase in sales volume led to a relatively minor
increase of $282,000 in gross profit dollars due significantly to the sales tax
reserve of $500,000 recorded in 1999. Accordingly, the gross profit rate in the
logistics business declined from 24.6% in 1998 to 19.8% in 1999.



                                       13
<PAGE>   14


         Selling, general and administrative ("SG&A") expenses for 1999 totaled
$22,697,922 or 10.2% of revenues, as compared to $16,659,136 or 9.4% of revenues
for 1998. The increase in SG&A expenses in 1999 was due to an expansion of the
administrative staff to support the higher sales levels, expenses for employee
terminations and other costs associated with the corporate office closing in New
York, and expenses relating to office relocations in Florida and St. Louis.
Additionally, the Company increased their reserves against certain receivables.
SG&A expenses also include $570,520 and $626,057 of amortization of goodwill and
other intangible assets for 1999 and 1998, respectively.

         An asset impairment charge of $9,252,000 was recorded in 1999, as the
Company made a determination that the Parker Reorder proprietary software
product, Parker FIRST, will not provide future long-term benefits to the Company
based on the repositioning of the Company's core businesses. The Parker FIRST
system, which is a client server-based system, will be phased out completely in
2000, as the Company migrates the reorder business to an internet web-based
system. Additionally, the Company has determined that the goodwill and other
intangibles associated with the acquisition of Parker Reorder in 1997 is closely
related to the Parker FIRST system and is considered an impaired asset as well.
Accordingly, the net book value of such assets was written-off in 1999.

         The loss from operations for 1999 totaled $20,477,684, which includes
the above stated $9,252,000 asset impairment charge, as compared to a loss of
$3,056,982 for the previous year. Operating results decreased in the current
year due to the factors cited above.

         Interest expense increased from $756,100 in 1998 to $1,774,111 in 1999.
The rise in interest expense was the result of increased borrowings under the
Company's lines of credit and an increase in interest rates given that the lines
of credit carry variable interest rates. Interest income decreased in 1999 to
$902,753 from $1,297,245 in 1998 in tandem with the decrease in funds available
for investment from 1998 to 1999.

         The benefit for income taxes in 1999 was $3,103,829 primarily
representing a current benefit for a carryback claim for federal, state and
local income taxes based on taxable losses in 1999, offset by a valuation
allowance against previously recorded deferred tax assets. For 1998, the benefit
for income taxes was $447,263.

         Based on factors discussed above, the loss from continuing operations
increased from a $2,068,574 loss in 1998 to a $18,245,213 loss in 1999. Basic
loss per share from continuing operations increased from a $0.19 loss in 1998 to
a loss of $1.35 in 1999.

         The operating results associated with the discontinued operations were
a loss of $22,589,150 for 1999 compared to income of $2,192,812 for 1998. The
loss for the current year includes additional provisions on contract receivables
relating to the renovation business of approximately $17.0 million for
substantially complete renovation projects which were in dispute with customers,
and the write-off of certain real estate investments and receivables of
approximately $500,000 relating to the real estate investment and asset
management business.

         The loss on disposal of discontinued operations for 1999 was
$17,169,880. The loss includes the write-off of goodwill of approximately $5.0
million and anticipated and actual operating losses during the phase-out period
of $565,000 relating to the renovation business; the write-off of goodwill of
$450,000 and write-downs and reserves in connection with the anticipated
disposal of the real estate investments of approximately $5.1 million relating
to the real estate investment and asset management business; and additional
write-downs of approximately $1.3 million on certain real estate development
projects relating to the hotel development business. Management anticipates
disposing of the assets associated with these businesses and ceasing the
associated operations during 2000. However, the resolution date as to certain
disputed matters is uncertain.

NEW ACCOUNTING PRONOUNCEMENTS

         During 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities", which
provides that all derivative instruments should be recognized as either assets
or liabilities depending on the rights and obligations under the contract and
that all derivative instruments be measured at fair value. This pronouncement is
required to be adopted by January 1, 2001. The Company did not engage in
derivative instruments or hedging activities in any periods presented in the
consolidated financial statements. Management has determined that the adoption
of this pronouncement will not have a material impact on the Company's
consolidated financial statements.



                                       14
<PAGE>   15

         Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial
Statements", provides guidance on the recognition, presentation and disclosure
of revenues in financial statements and requires adoption no later than the
fourth fiscal quarter of fiscal years beginning after December 31, 1999. The
Company implemented SAB during 2000, and its adoption did not have a material
impact on the Company's consolidated earnings or financial position. In
September 2000, The Emerging Issues Task Force ("EITF") issued EITF Issue No.
00-10, "Accounting for Shipping and Handling Fees and Costs" which requires
companies to record shipping and handling fees charged to customers as revenues
and the related costs as expenses. The Company implemented EITF 00-10 on
September 1, 2000. Amounts relating to prior periods presented have been
reclassified to conform to the new issue.

         Statement of Financial Accounting Standards (SPAS) No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities", provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. SPAS 140
replaces SPAS 125 and is effective for transfers and servicing of financial
assets and extinguishments occurring after March 31, 2001. SPAS 140 is effective
for recognition and reclassification of collateral and for disclosures relating
to securitization transactions and collateral for fiscal years ending after
December 15, 2000. The adoption of SFAS 140 did not have a material impact the
Company's consolidated earnings or financial statements.

         In March, 2000, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 44, Accounting for Certain Transactions Involving
Stock Compensation. Interpretation No. 44 provides criteria for the recognition
of compensation expense in certain stock-based compensation arrangements that
are accounted for under Accounting Principles Board Opinion No. 25, Accounting
for Stock Based Compensation. Interpretation No. 44 became effective July 1,
2000, with certain provisions that are effective retroactively to December 15,
1998 and January 12, 2000. The adoption of Interpretation No. 44 did not have a
material impact on the Company's consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's consolidated financial statements have been presented on
the basis that the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business. The liquidity of the Company was severely affected in 1999
and 2000 by significant losses from continuing operations and discontinued
operations, which has resulted in a significant deterioration of the
stockholders' equity of the Company from $58.4 million at December 31, 1998 to
$0.5 million at December 31, 1999 to a capital deficit of $1.8 million at
December 31, 2000. Our auditors' reports on these financial statements contained
explanatory language expressing substantial doubt about the Company's ability to
continue as a going concern.

         The losses from continuing operations in 1999 emanated from a reduction
in the gross margins realized within the purchasing business as compared to
prior years; an increase in selling, general and administrative expenses due to
an expansion of the administrative staff of the on-going businesses and expenses
related to employee terminations and other costs associated with the closing of
the Company's corporate office in New York; and an asset impairment charge of
$9.3 million related to the Parker FIRST software product. Management has taken
the following steps in 2000 and 2001 to improve its operations and reduce its
losses from continuing operations. Management has (a) undertaken a comprehensive
review of its on-going businesses, (b) implemented steps to improve the gross
margin on its contracts and by reducing overhead and labor costs, (c) reduced
its selling, general and administrative expenses from $22.7 million in 1999 to
$16.4 million in 2000 to a budgeted amount of $14.3 million in 2001, (d)
successfully renegotiated defaulted credit lines and (e) sold its Orlando
warehouse in March 2001, the proceeds of which were used to payoff substantially
all of the mortgage note and term loan with Bank of America.

         As further discussed In Note 4, the losses from discontinued operations
in prior years relate to the Company's decision to divest itself of its
renovation, real estate investment and asset management, and hotel development
businesses. Management has been diligently attempting to resolve any remaining
open matters relating to these businesses to avoid any further financial
deterioration to the Company. Management believes that the reserves established
in 1999 will be sufficient to cover any future obligations related to these
discontinued operations and to bring all open matters to closure.



                                       15
<PAGE>   16

      In September 2000, the Company's wholly-owned subsidiary, Bekins, executed
an Amended and Restated Loan Agreement with Bank of America, N.A. whereby the
proceeds were primarily used to pay-off the Company's defaulted unsecured line
of credit. The new facility consists of a revolving note and an overadvance term
loan in the principal amount of $1,500,000 and $5,300,000, respectively.
Interest is charged at the bank's prime rate and is payable monthly. As part of
this Agreement, Bekins also restructured its term loan and mortgage note payable
with Bank of America, N.A. to eliminate their default status. Both new
facilities are secured by the assets and stock of Bekins. Under the Agreement,
Bekins is prohibited from paying any dividends on its stock to the Company
except for reimbursement of certain allocated overhead and administrative
expenses. In conjunction with this Agreement, Bank of America, N.A. dismissed
its legal action against the Company. In March 2001, Bekins sold for $2,265,500
its warehouse facility in Orlando, Florida, the net proceeds of which were used
to repay the mortgage in full and reduce the remaining balance on the term loan
to $107,000. In accordance with the Agreement, the remaining balance of the term
loan was transferred to the overadvance term loan and the term loan was retired.

         In December 2000, the Company executed an Amended and Restated Loan
Agreement with HSBC Bank USA ("HSBC"). This Agreement consists of two debt
instruments and $1 million of 8% convertible preferred stock, which were used to
pay off the Company's defaulted unsecured line of credit in the amount of
$9,885,000 with HSBC. The Company signed a three-year promissory note with HSBC
in the principal amount of $4,300,000 with a $300,000 principal payment paid at
signing and ongoing monthly principal payments of $50,000. Interest on the note
accrues at the bank's prime rate and is due at maturity along with the remaining
principal balance. The note is secured by the assets ofthe Parent Company and
the capital stock of the Leonard Parker Company, Parker Reorder Online and
Hospitality Restoration and Builders. The Company's discontinued subsidiary,
HRB, assigned a portion of its contract right in a disputed receivable with a
former customer to HSBC in the form of a five-year $4,585,000 promissory note,
bearing interest at the bank's prime rate (see Footnote 13 c). This HRB note is
secured solely by its interest in the receivable and any collections are to be
divided between HRB and HSBC according to a prescribed formula. At maturity of
the HRB note, the Company has the option of extending the term for an additional
twelve months, at which time, if the disputed receivable has not been resolved,
title in full of the contract right along with the related debt passes to HSBC.
The preferred stock issued to HSBC under this Agreement was valued at $1 million
on the date of issuance based on the then outstanding debt balance and is
convertible into a total of 1 million shares of the Company's common stock. The
$4.3 million note with HSBC Bank contains a covenant to submit audited financial
statements to the Bank within 105 days of year-end. Due to the late filing of
this Form 10-K, the Company is not in compliance with this covenant. The Company
will cure this default upon the filing of this Form 10-K.

         For 2001, the Company projects a net cash flow deficit from operations
and cash requirements related to the development of its internet web-based
reorder system of approximately $200,000. The net cash flow deficit from
operations for 2001 primarily relates to corporate expenses. Management believes
that its review of the on-going businesses' gross margins and related expenses,
the receipt of settlement payments from former officers and customers, the
proceeds from the sale of Bekins' Orlando warehouse, and its ability to defer
certain capital expenditures and other current payment obligations, if
necessary, will provide sufficient funds to cover cash flow deficits in 2001.

         Net cash provided by operating activities of continuing operations was
$1,580,351 for the year ended December 31, 2000, compared to net cash used of
$8,407,793 for 1999. During the year ended December 31, 2000, cash was primarily
generated by two factors, the first being the purchasing business where the
increases in accounts payable and customer deposits exceeded the uses of cash
via increases in accounts receivable and vendor advances. The second factor was
the collection of approximately $3.4 million in federal, state and local income
tax refunds. In the purchasing business, accounts receivable increased due to
several large jobs at year-end 2000 where customers' funding sources delayed
payments to the customer who thereby stretched payments to the Company of
outstanding bills. These accounts receivable were collected by the Company in
the first quarter of 2001. As a result, the Company arranged extended payment
terms with its vendors thereby leading to increased accounts payable. In
response, vendors requested additional deposits from the Company who in turn
required additional deposits from customers, leading to the increase in vendor
advances and customer deposits.

         Net cash used in operating activities of discontinued operations was
$469,958 for 2000 as compared to net cash used of $4,710,429 in 1999. This
improvement relates to the Company's change in focus from its discontinued
operations in 1999 to its continuing operations in 2000.


                                       16
<PAGE>   17


         Net cash used in investing activities of continuing operations for the
year ended December 31, 2000 was $1,072,313 compared to net cash provided of
$6,794,521 for the prior year. The primary use of investing cash in 2000 was the
purchases of equipment notably Web site hardware and software and computer
system enhancements at Bekins. The primary source of investing cash for 1999 was
the sale of marketable securities.

         Net cash provided by investing activities of discontinued operations
was $0 in 2000 and net cash provided by investing activities of discontinued
operations was $4,599,657 for 1999. The 1999 amount relates to the Company's
real estate investment and asset management business, which were discontinued in
1999.

         Net cash provided by financing activities for the year ended December
31, 2000 was $378,945 compared to net cash provided of $4,105,126 for the year
ended December 31, 1999. The primary financing source for 1999 were borrowings
under the Company's lines of credit, whereas in 2000, the Company restructured
its debt facilities.

         The Company has been notified that it has fallen below the continued
listing requirements of the AMEX. Also, on April 20, 2001, the AMEX halted
trading of the Company's common stock because the Company had failed to file its
Form 10-K for the period ended December 31, 2000. Until the trading halt on the
Company's common stock is lifted, there is no public liquidity in the Company's
common stock. As a result of falling below the listing requirements, the AMEX
may move to delist the common stock and if the common stock is delisted, the
Company's ability to raise capital and its liquidity would be adversely
affected.

         In addition, this Form 10-K does not include all of the financial
statements required under the rules and regulations of the Securities and
Exchange Act of 1934, as amended, because our predecessor auditor has declined
to accept the engagement to reissue their opinion on our 1998 and 1999 financial
statements included in this Form 10-K. As a result, we are currently restricted
from filing registration statements with the Securities and Exchange Commission,
which adversely affects our liquidity and our ability to raise capital.

INFLATION

         Inflation and changing prices during the current year did not
significantly affect the major markets in which the Company conducts its
business. In view of the moderate rate of inflation, its impact on the Company's
business has not been significant.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Although the Company does maintain small offices outside the United
States and does conduct immaterial transactions in foreign currencies, the
Company does not believe that it has material exposure to risks associated with
foreign currency fluctuations related to its operations given the terms of its
contracts with customers. The Company does not use derivative financial
instruments in its operations.

         The Company does have exposure to market risks associated with changes
in interest rates given that the Company does maintain long-term debt facilities
which have variable interest rates. As a result, the Company's earnings are
affected by changes in short-term interest rates. If short-term interest rates
averaged 1% more in 2000, the Company's interest expense and loss from
continuing operations before income taxes would have increased by approximately
$185,000. However, in the event of a large increase in interest rates,
management would likely consider taking actions to mitigate its exposure to the
change.

ITEM 8.  FINANCIAL STATEMENTS

         See Index to Financial Statements.





                                       17
<PAGE>   18






ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         On April 21, 2000, Arthur Andersen LLP ("Andersen") resigned as the
Company's independent accountants. Andersen's accountants' report on the
consolidated financial statements of the Company for the year ended December 31,
1999 did not contain an adverse opinion or a disclaimer of opinion but did
contain a modification expressing substantial doubt about the Company's ability
to continue as a going concern. There were no other reportable events or
disagreements with Andersen in response to Item 304 of Regulation S-K. The
Company is involved in an ongoing fee and service dispute with Andersen. In
light of this dispute, Andersen has declined to accept the engagement to reissue
their opinion on the 1998 and 1999 financial statements included in this Form
10-K.

         On June 26, 2000, BDO Seidman LLP was engaged as the independent
accountants to the Company.



                                       18
<PAGE>   19


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The directors and executive officers of the Company are as follows:

         NAME          AGE                     POSITION
         ----          ---                     --------
Leonard F. Parker       71     Chairman of the Board, Secretary and Director
Douglas A. Parker       43     Chief Executive Officer, President and Director
John F. Wilkens         42     Vice President - Treasurer
                               (Principal Financial Officer,
                               Principal Accounting Officer)
Louis K. Adler          65     Director
George Asch             63     Director
Richard A. Bartlett     43     Director

         LEONARD F. PARKER joined the Company in March 1997 as Chairman of the
Board and a Director. In November 1997, he became Chairman Emeritus of the Board
of Directors. In November 1999, he became Chairman of the Board of Directors and
Secretary of the Company. Leonard Parker founded The Leonard Parker Company
("LPC") in 1969. Mr. Parker is a graduate of Tulane University and served in the
United States Air Force. Prior to founding LPC, Mr. Parker was employed from
1950 by Maxwell Company, an interior design and furnishing company. Mr. Parker
is a member of the board of directors of Douglas Gardens Home for the Aged.
Leonard Parker is the father of Douglas A. Parker, a director and Chief
Executive Officer of the Company.

         DOUGLAS A. PARKER joined the Company in March 1997 as
President-Purchasing Division and a Director. He became the Company's President
in November 1997 and the Chief Executive Officer in September 1999. Mr. Parker
is also President of LPC. Mr. Parker, a graduate of Tulane University, has been
with LPC for 17 years. He is responsible for the development of the overseas
offices in Amsterdam, the Netherlands and Dubai, coordinating the international
operations and sales, as well as vendor and client relationships. Douglas Parker
is the son of Leonard Parker.

         JOHN F. WILKENS has been Vice President and Treasurer of the Company
since October 1997. In November 1999 he also became the Company's Principal
Financial Officer and Principal Accounting Officer. Prior to joining the
Company, Mr. Wilkens was Vice President and Chief Financial Officer of Metro
Creative Graphics, Inc. from January 1992 to October 1997. Mr. Wilkens received
his Bachelors and Masters degrees from Hofstra University and is a certified
public accountant licensed in the State of New York.

         LOUIS K. ADLER has been a director of the Company since September 1996.
Mr. Adler has been a private investor for over five years in Houston, Texas. He
has been Chairman of the Board and President of Bancshares, Inc. (Houston, TX)
since 1973; Vice Chairman of the Board since 1992 and was a director of Luther's
Bar-B-Q, Inc., a group of twenty restaurants in Texas, Louisiana and Colorado,
from 1988 to 1998; was a director, Secretary and Treasurer of Warwick
Communications, Inc. from 1993 to 1998; and was a director and member of the
compensation committee of Executone Information Systems, Inc. from 1997 to 1999.

         GEORGE ASCH has been a director of the Company since September 1996.
Since September 1994, Mr. Asch has been a Vice President of Gray, Seifert and
Co., Inc., an investment management company which is a wholly-owned independent
subsidiary of Legg Mason, Inc. For 25 years prior to joining Gray Seifert and
Co., Inc. in August 1990, Mr. Asch served as President of a manufacturing
company.

         RICHARD A. BARTLETT has been a director of the Company since September
1996. He is a Managing Director of Resource Holdings Limited, a private merchant
banking firm in New York City ("Resource Limited"). Mr. Bartlett specializes in
legal aspects of mergers, acquisitions and other corporate restructurings. In
that capacity, he serves and has served on the board of various companies in
which Resource Limited and its principals have made investments. From 1987 to
1993, he was a member of the Council of Foreign Relations and is a member of the
New York State Bar. Mr. Bartlett received a law degree from Yale Law School and
received his B.A. from Princeton University.


                                       19
<PAGE>   20


ELECTION OF EXECUTIVE OFFICERS

The Company's officers are elected annually by the Board of Directors and serve
at the discretion of the Board of Directors.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent
(10%) of the Company's outstanding Common Stock, to file with the Securities and
Exchange Commission (the "SEC"), initial reports of ownership and reports of
changes in ownership of Common Stock. Such persons are required by SEC
regulation to furnish the Company with copies of all such reports.

         To the Company's knowledge, based solely on a review of the copies of
filings furnished to the Company and written or oral representations that no
other reports were required, the Company believes that all of its directors and
executive officers complied during 2000 with the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934.

ADDITIONAL INFORMATION CONCERNING DIRECTORS

Each non-employee director of the Company is eligible to receive a directors fee
of $750 per Board meeting, however no fees were paid in 2000. All directors are
reimbursed for reasonable out-of-pocket expenses associated with travel to
meetings of the Company's Board of Directors or committees thereof. Directors
who are also employees of the Company do not receive additional compensation for
their services as directors. Non-employee directors are eligible to receive
options under the Company's 1999 Plan. The 1999 Plan provides for an automatic
grant of an option to purchase 15,000 shares of Common Stock upon a person's
election as a non-employee director of the Company. Thereafter, the directors
are granted options to purchase an additional 10,000 shares of Common Stock in
April of each year.

ITEM 11. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

         The following table sets forth, for the years ended December 31, 2000,
1999 and 1998, the aggregate compensation awarded to, earned by or paid to (i)
Douglas A. Parker the Company's Chief Executive Officer, (ii) Leonard F. Parker,
the Company's Chairman of the Board and Secretary, and (iii) John F. Wilkens,
the Company's Vice President and Treasurer (collectively the "Named Executive
Officers") during each of such years. No other executive officer of the Company
received compensation in excess of $100,000 in the fiscal years ended December
31, 2000, 1999 and 1998.



                                       20
<PAGE>   21
                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                              ANNUAL COMPENSATION               LONG-TERM COMPENSATION
                                       ----------------------------------- --------------------------------
                                                                                   AWARDS           PAYOUTS
                                                                           ----------------------  ---------
                                                                           RESTRICTED
                                                                             STOCK      SECURITIES
                                                  BONUS    OTHER ANNUAL      AWARDS     UNDERLYING     LTIP        ALL OTHER
NAME AND PRINCIPAL POSITION   YEAR    SALARY($)    ($)   COMPENSATION($)(1)   ($)       OPTIONS(#)    PAYOUTS   COMPENSATION($)
---------------------------   ----   ----------    ---   ------------------ --------    ----------    -------   ---------------
<S>                           <C>     <C>          <C>         <C>             <C>       <C>    <C>       <C>        <C>
Douglas A. Parker (2)         2000    $255,000     --          --              --        50,000 (7)       --         --
                              1999    $255,000     --          --              --            --           --         --
                              1998    $250,000     --          --              --            --           --         --

Leonard F. Parker (3)         2000    $250,000(4)  --          --              --        50,000 (7)       --         --
                              1999    $250,000     --          --              --            --           --         --
                              1998    $250,000     --          --              --            --           --         --

John F. Wilkens (5)           2000    $184,713     --          --              --        10,000 (7)       --         --
                              1999    $176,012     --          --              --            --           --         --
                              1998    $125,000     --          --              --         7,500 (6)       --         --
</TABLE>


(1)   Perquisites and other personal benefits, securities or property to each
      executive officer did not exceed the lesser of $50,000 or 10% of such
      executive's salary and bonus.

(2)   Mr. Douglas Parker is the Company's Chief Executive Officer.

(3)   Mr. Leonard Parker is the Company's Chairman of the Board of Directors and
      Secretary.

(4)   This amount represents a prepayment made to Mr. Leonard Parker in 1997
      for services rendered in 2000 pursuant to the terms of his employment
      agreement.

(5)   Mr. Wilkens is a Vice President, and the Treasurer, Principal Financial
      Officer and Principal Accounting Officer of the Company.

(6)   Represents options granted under the Company's 1996 Stock Option Plan
      which have an exercise price of $8.94.

(7)   Represents options granted under the Company's 1999 Stock Option Plan
      which have an exercise price of $3.00.

COMPENSATION AGREEMENTS

         The Company entered into a four-year employment agreement with Leonard
Parker on January 9, 1997, with a base compensation of $250,000 per annum.
Although Mr. Parker's employment agreement expired December 31, 2000, Mr. Parker
continued to provide employment services to the Company through June 30, 2001 at
the same compensation rate. Effective July 1, 2001, Mr. Leonard Parker entered
into an agreement with the Company to provide general consulting services to the
Company for a one-year period for an aggregate compensation amount of $250,000.
The $250,000 compensation amount under the agreement has been pre-paid to Mr.
Parker.

         The Company entered into a three-year employment agreement with John F.
Wilkens as of September 1, 1999. The employment agreement provides for base
compensation at the rate of $184,000 per annum plus a one-time payment of
$25,000 to compensate Mr. Wilkens for the cost of relocating to Florida. In the
event of a Change of Control (as defined in the employment agreement) which
results in either (i) a termination of the employment agreement for any reason
other than just cause; (ii) the placement of Mr. Wilkens in a position of lesser
stature than that of executive and financial officer of the Company; (iii) an
assignment of duties to Mr. Wilkens that are inconsistent with that of an
executive and financial officer or that would result in a significant change in
the nature or scope of his powers; (iv) treatment of Mr. Wilkens in derogation
of his status as an executive and financial officer; (v) a breach by the Company
of certain provisions of the employment agreement; or (vi) a requirement that
Mr. Wilkens perform his duties outside of South Florida, Mr. Wilkens may
terminate the employment agreement and, upon such termination, the Company must
pay Mr. Wilkens, as liquidated damages, a lump sum cash payment equal to two
times his base compensation.

STOCK OPTION AND BONUS PLANS

         The Company's 1999 Plan was approved by the Company's Board of
Directors and shareholders in November 1999. The purpose of the 1999 Plan is to
attract new employees, directors, advisors and consultants whose services are
considered valuable; retain directors, consultants and advisors to the Company;
encourage a sense of proprietorship and to stimulate the active interest of such
persons in the development and financial success of the Company and its
subsidiaries. In addition, recent changes in management of the Company have
required certain members of the Board of Directors to participate more actively
in, and devote substantially greater time to, the business affairs of the
Company. The Company desires to achieve greater flexibility in its ability to
compensate members of its Board of Directors.

         Each option granted pursuant to the 1999 Plan is designated at the time
of grant as either an "incentive stock option" or as a "non-statutory stock
option." In addition, any director of the Company who is neither a present nor
past employee of the Company, will receive automatic option grants under Section
6 of the 1999 Plan.

                                       21
<PAGE>   22


         The 1999 Plan is administered by a committee consisting of two or more
directors who are Non- Employee Directors and "Outside Directors" (as such term
is defined in Section 162(m) of the Code) (the "Committee"). The Committee
determines, with the exception of options automatically granted to non-employee
directors pursuant to Section 6 of the Plan, to whom among those eligible
options will be granted to, at what time options will be granted, the number of
shares to be subject to options, the duration of options, any conditions to the
exercise of options, and the manner in and price at which options may be
exercised. In making such determinations, the Committee may take into account
the nature and period of service of eligible persons, their level of
compensation, their past, present and potential contributions to the Company and
such other factors as the Committee in its discretion deems relevant.

         The Committee is authorized to amend, suspend or terminate the 1999
Plan, except that it is not authorized without shareholder approval (except with
regard to adjustments resulting from changes in capitalization) to (i)
materially increase the number of shares that may be issued under the 1999 Plan,
except as is provided in Section 8 of the 1999 Plan; (ii) materially increase
the benefits accruing to the option holders under the 1999 Plan; (iii)
materially modify the requirements as to eligibility for participation in the
1999 Plan; (iv) decrease the exercise price of an Incentive Option to less than
100% of the Fair Market Value per share of Common Stock on the date of grant
thereof, decrease the exercise price of a Nonqualified Option to less than 75%
of the Fair Market Value per share of Common Stock on the date of grant thereof;
or decrease the exercise price of an option granted to a Non-Employee director
under Section 6 of the 1999 Plan; or (v) extend the term of any option beyond
that provided for in Section 5(b) of the 1999 Plan. Unless the 1999 Plan is
terminated earlier by the Committee, it will terminate on November 4, 2009.

         The 1999 Plan provides that options may be granted with respect to a
total of 2,500,000 shares of Common Stock. Under certain circumstances involving
a change in the number of shares of Common Stock, such as a stock split, stock
consolidation or payment of a stock dividend, the class and aggregate number of
shares of Common Stock in respect of which options may be granted under the 1999
Plan, the class and number of shares subject to each outstanding option and the
option price per share will be proportionately adjusted. In addition, if the
Company is involved in a merger, consolidation, dissolution, liquidation or upon
a transfer of substantially all of the assets or more than 80% of the
outstanding Common Stock, the options granted under the 1999 Plan will be
adjusted or, under certain conditions, will terminate, subject to the right of
the option holder to exercise such option holder's option or a comparable option
substituted at the discretion of the Company prior to such event. If any option
expires or terminates for any reason, without having been exercised in full, the
unpurchased shares subject to such option will be available again for the
purposes of the 1999 Plan.

         Any employee, officer, director, consultant or advisor to the Company
or any of its subsidiaries shall be eligible to receive stock options under the
1999 Plan. Only employees of the Company or its subsidiaries shall be eligible
to receive incentive stock options. Only Non-Employee Directors shall be
eligible to receive automatic option grants under Section 6 of the 1999 Plan.

         With the exception of options granted to Non-Employee Directors under
Section 6 of the 1999 Plan, the exercise price of each option is determined by
the Committee, but may not be less than 100% of the Fair Market Value (as
defined in the 1999 Plan) of the shares of Common Stock covered by the option on
the date the option is granted in the case of an incentive stock option, nor
less than 75% of the Fair Market Value of the shares of Common Stock covered by
the option on the date the option is granted in the case of a non-statutory
stock option. If an incentive stock option is to be granted to an employee who
owns over 10% of the total combined voting power of all classes of the Company's
capital stock, then the exercise price may not be less than 110% of the Fair
Market Value of the Common Stock covered by the option on the date the option is
granted.

         With the exception of options granted to Non-Employee Directors under
Section 6 of the 1999 Plan, the Committee shall, in its discretion, fix the term
of each option, provided that the maximum term of each option shall be 10 years.
Incentive stock options granted to an employee who owns over 10% of the total
combined voting power of all classes of stock of the Company shall expire not
more than five years after the date of grant. The 1999 Plan provides for early
expiration of options of a participant in the event of certain terminations of
employment or engagement. In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, or other change in corporate
structure affecting the Common Stock of the Company, the Compensation Committee
shall make an appropriate and equitable adjustment in the number and kind of
shares reserved for issuance under the 1999 Plan and in the number and option



                                       22
<PAGE>   23

price of shares subject to outstanding options granted under the 1999 Plan, to
the end that after such event each option holder's proportionate interest shall
be maintained as immediately before the occurrence of such event.

         Pursuant to Section 6 of the 1999 Plan, each Non-Employee Director who
becomes a director after December 15, 1999 shall receive a grant of an option to
purchase 15,000 shares of Common Stock on the date such Non-Employee Director
becomes a director of the Company. To the extent that shares of Common Stock
remain available for the grant of options under the 1999 Plan, on April 1 of
each year, commencing on April 1, 2000, each Non-Employee Director shall be
granted an option to purchase 10,000 shares of Common Stock.

         Options automatically granted under Section 6 of the 1999 Plan shall be
exercisable in three equal installments commencing on the first anniversary of
the date of such grant; provided that in the case of a Non-Employee Director's
death or permanent disability, such options held thereby will become immediately
exercisable for a one-year period (but in no case after the stated term of such
option has expired); further provided that no such option shall be exercisable
until more than six months have elapsed from the grant date.

         The term of each of the options granted under Section 6 of the 1999
Plan shall be five years from the date of grant, subject to early termination by
the Committee. The 1999 Plan also provides for an early termination of such
options in the event a Non-Employee Director's membership on the Board of
Directors terminates.

         If a Non-Employee Director's membership on the Board of Directors
terminates for any reason other than cause or the death or disability of such
Non-Employee Director, options granted under Section 6 of the 1999 Plan which
are held on the date of termination may be exercised in whole or in part at any
time within ninety days after the date of such termination (but in no event
after the term of such option expires) and shall thereafter terminate. If a
Non-Employee Director's membership on the Board of Directors is terminated for
cause, which determination shall be made by the Board of Directors, all options
granted under Section 6 of the 1999 Plan then held by such Non-Employee Director
shall terminate concurrently with termination of membership.

         Generally, an option may not be transferred or assigned other than by
will or the laws of descent and distribution or pursuant to a qualified domestic
relations order and, during the lifetime of the option holder, may be exercised
solely by him. The aggregate Fair Market Value (determined at the time the
incentive stock option is granted) of the shares as to which an employee may
first exercise incentive stock options in any one calendar year under all
incentive stock option plans of the Company and its subsidiaries may not exceed
$100,000. The Committee may impose any other conditions to exercise as it deems
appropriate.


                                       23
<PAGE>   24


STOCK OPTION INFORMATION

         The following table sets forth, with respect to our Chief Executive
    Officer and our two other highest paid current executive officers named in
    the Summary Compensation Table, certain information concerning the grant of
    stock options in 2000.

                        OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>

                                                                                                   POTENTIAL REALIZABLE
                                                                                                     VALUE AT ASSUMED
                                                                                                     ANNUAL RATES OF
                                                                                                       STOCK PRICE
                                                                                                     APPRECIATION FOR
                                       INDIVIDUAL GRANTS                                             OPTION TERM (2)
-------------------------------------------------------------------------------------------------    ---------------
                                        NUMBER OF      % OF TOTAL
                                        SECURITIES      OPTIONS
                                       UNDERLYING      GRANTED TO     EXERCISE
                          DATE OF        OPTIONS      EMPLOYEES IN      PRICE       EXPIRATION
        NAME               GRANT       GRANTED (1)    FISCAL YEAR     ($/SHARE)        DATE          5% ($)      10% ($)
--------------------- ---------------- ------------- --------------- ------------ --------------- ---------- ------------
<S>                         <C>              <C>               <C>         <C>           <C>        <C>         <C>
Douglas A. Parker     March 7, 2000          50,000            6.9%        $3.00   March 7, 2010    $94,500     $239,000

Leonard F. Parker     March 7, 2000          50,000            6.9%        $3.00   March 7, 2010    $94,500     $239,000

John F. Wilkens       March 7, 2000          10,000            1.4%        $3.00   March 7, 2010    $18,900      $47,800

</TABLE>

(1)   All such options were granted under the 1999 Stock Option Plan and become
      exercisable in installments over three years. Under our 1999 Stock Option
      Plan, these options will become immediately exercisable in the event of
      certain change of control transactions.

(2)   Potential realizable value assumes that the stock price increases from the
      date of grant until the end of the option term (10 years) at the annual
      rate specified (5% and 10%). The 5% and 10% assumed annual rates of
      appreciation are mandated by SEC rules and do not represent our estimate
      or projection of the future price of our common stock. We do not believe
      that this method accurately illustrates the potential value of a stock
      option.

AGGREGATED FISCAL YEAR-END OPTION VALUES

         The following table sets forth certain information regarding
unexercised stock options held by the Named Executive Officers as of December
31, 2000. No stock options were exercised by the Named Executive Officers during
2000. No stock appreciation rights have been granted or are outstanding.

                     NUMBER OF SECURITIES          VALUE OF UNEXERCISED
                    UNDERLYING UNEXERCISED         IN-THE-MONEY OPTIONS/
                  OPTIONS AT FISCAL YEAR-END        AT FISCAL YEAR-END
NAME               EXERCISABLE/UNEXERCISABLE   EXERCISABLE/UNEXERCISABLE($)(1)
----               -------------------------   -------------------------------


Douglas A. Parker      102,666 / 47,334                    (2)

Leonard F. Parker       16,666 / 33,334                    (2)

John F. Wilkens          9,333 / 13,167                    (2)

(1)   On December 29, 2000, the last trading day of the fiscal year, the last
      reported sales price of the Common Stock on the American Stock Exchange
      was $0.375 per share.

(2)   The option exercise prices exceed $0.375 and accordingly, such options are
      not in the money.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         None.


                                       24
<PAGE>   25


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The voting securities of the Company outstanding on June 11, 2001
consisted of 15,112,867 shares of Common Stock. The following table sets forth
information concerning ownership of the Common Stock, as of such date by (i)
each director, (ii) the Named Executive Officers (as defined in "Executive
Compensation"), (iii) all directors, and executive officers as a group, and (iv)
each person who, to the knowledge of management, owned beneficially more than 5%
of the Common Stock. Unless otherwise indicated, the address of each person
listed below is 201 Alhambra Circle, Coral Gables, Florida 33134.
<TABLE>
<CAPTION>

                                                                       COMMON STOCK       PERCENT OF
BENEFICIAL OWNER (1)                                                 BENEFICIALLY OWNED   CLASS(2)
--------------------                                                 ------------------   ----------
<S>                                                                        <C>             <C>
Leonard F. Parker (3) ..........................................           304,769         2.0%

Douglas A. Parker (4) ..........................................           631,951         4.1%

Richard A. Bartlett (5) ........................................           146,499           *
c/o Resource Holdings Associates, L.P.
520 Madison Avenue, 40th Floor
New York, New York 10022

Louis K. Adler (6) .............................................           113,333           *
910 Travis Street, Suite 1950
Houston, Texas 77002-5809

George Asch (7) ................................................           113,333           *
c/o Gray Seifert & Company, Inc.
380 Madison Avenue
New York, New York 10022

John F. Wilkens (8) ............................................            12,666           *

Hathaway & Associates, Ltd. (9) ................................           800,000         5.3%
119 Rowayton Avenue
Rowayton, Connecticut 06853

All Executive Officers and Directors as a group (6 persons) (10)         1,322,551         8.6%
</TABLE>

*     Less than 1%

(1)   Except as outlined herein, the persons named in the table, to the
      Company's knowledge, have sole voting and dispositive power with respect
      to all shares shown as beneficially owned by them, subject to community
      property laws where applicable and the information contained in the
      footnotes hereunder.

(2)   Calculations assume that all options and warrants which are presently
      exercisable or exercisable within 60 days have been exercised.

(3)   Consists of (a) 271,435 shares of Common Stock held individually by Mr.
      Leonard Parker, and (b) 33,334 shares of Common Stock issuable upon
      exercise of presently exercisable options to purchase Common Stock at an
      exercise price of $3.00 per share currently held by Mr. Leonard Parker.

(4)   Consists of (a) 512,617 shares of Common Stock held individually by Mr.
      Douglas Parker, (b) 65,000 shares of Common Stock issuable upon exercise
      of presently exercisable options to purchase Common Stock at an exercise
      price of $6.75 per share, (c) 21,000 shares of Common Stock issuable upon
      exercise of presently exercisable options to purchase Common Stock at an
      exercise price of $12 per share, and (d) 33,334 shares of Common Stock
      issuable upon exercise of presently exercisable options to purchase Common
      Stock at an exercise price of $3.00 per share currently held by Mr.
      Douglas Parker.

(5)   Consists of (a) 108,166 shares of Common Stock owned individually by Mr.
      Bartlett, (b) 15,000 shares of Common Stock issuable upon exercise of
      presently exercisable options to purchase shares of Common Stock at an
      exercise price of $2.75 per share, (c) 10,000 shares of Common Stock
      issuable upon exercise of presently exercisable options to purchase shares
      of Common Stock at an exercise price of $6.125 per share, (d) 10,000
      shares of Common Stock issuable upon exercise of presently exercisable
      options to purchase shares of Common Stock at an exercise price of $9.50
      per share, and (e) 3,333 shares of Common Stock issuable upon exercise of
      presently exercisable options to purchase shares of Common Stock at an
      exercise price of $1.94 per share currently held by Mr. Bartlett.

(6)   Consists of (a) 75,000 shares of Common Stock held individually by Mr.
      Adler, (b) 15,000 shares of Common Stock issuable upon exercise of
      presently exercisable options to purchase shares of Common Stock at an
      exercise price of $2.75 per share, (c) 10,000 shares of Common Stock
      issuable upon exercise of presently exercisable options to purchase shares
      of Common Stock at an exercise price of $6.125 per share, and (d) 10,000


                                       25
<PAGE>   26


      shares of Common Stock issuable upon exercise of presently exercisable
      options to purchase shares of Common Stock at an exercise price of $9.50
      per share, and (f) 3,333 shares of Common Stock issuable upon exercise of
      presently exercisable options to purchase shares of Common Stock at an
      exercise price of $1.94 per share held by Mr. Adler.

(7)   Consists of (a) 75,000 shares of Common Stock held individually by Mr.
      Asch, (b) 10,000 shares of Common Stock issuable upon exercise of
      presently exercisable options to purchase shares of Common Stock at an
      exercise price of $6.50 per share, (c) 10,000 shares of Common Stock
      issuable upon exercise of presently exercisable options to purchase shares
      of Common Stock at an exercise price of $9.50 per share and (d) 6,667
      shares of Common Stock issuable upon exercise of presently exercisable
      options to purchase shares of Common Stock at an exercise price of $9.50
      per share, and (f) 3,333 shares of Common Stock issuable upon exercise of
      presently exercisable options to purchase shares of Common Stock at an
      exercise price of $1.94 per share held by Mr. Asch.

(8)   Consists of (a) 3,000 shares of Common Stock issuable upon exercise of
      presently exercisable options to purchase shares of Common Stock at an
      exercise price of $10.25 per share, (b) 3,000 shares of Common Stock
      issuable upon exercise of presently exercisable options to purchase shares
      of Common Stock at an exercise price of $8.94 per share, and (c) 6,666
      shares of Common Stock issuable upon exercise of presently exercisable
      options to purchase shares of Common Stock at an exercise price of $3.00
      per share held by Mr. Wilkens.

(9)   Included in reliance on information contained in a Schedule 13G, dated
      December 21, 2000, and filed with the Securities and Exchange Commission
      on January 5, 2001 by Hathaway & Associates, Ltd., reporting sole voting
      power of 800,000 and sole dispositive power of 800,000 shares.

(10)  See notes (3) - (8) above.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.


                                       26
<PAGE>   27


                                     PART IV

ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K.

(a)      Index of Financial Statements of Hotelwork.com Inc.

         (1)      Financial Statements included under Item 8:
                  Consolidated Balance Sheets as of December 31, 2000 and 1999
                  Consolidated Statements of Operations for years ended
                    December 31, 2000, 1999 and 1998
                  Consolidated Statements of Stockholders' Equity for the years
                    ended December 31, 2000, 1999 and 1998
                  Consolidated Statements of Cash Flows for the years ended
                    December 31, 2000, 1999 and 1998
                  Notes to Consolidated Financial Statements

         (2)      Financial Statements Schedules:
                  Schedule I  - Condensed Financial Information of Registrant
                  Schedule II - Valuation and Qualifying Accounts

         (3)      Report of Independent Certified Public Accountants


                                       27
<PAGE>   28
(b)      Exhibits

EXHIBIT
 NUMBER                                 EXHIBITS
--------                                --------

3.1            Certificate of Incorporation, as amended, of the Company.

3.2            Amended and Restated By-laws of the Company.

4.1            Specimen Common Stock Certificate (Incorporated by reference to
               Exhibit 4.1 to the Company's Registration Statement on Form SB-2,
               No. 33-7094-NY).

4.2            Rights Agreement dated as of November 24, 1997, by and between
               the Company and Continental Stock Transfer & Trust Company, as
               rights agent (the "Rights Agreement") (Incorporated by reference
               to the Company's Registration Statement on Form 8-A filed with
               the Commission on December 2, 1997).

4.3            Amendment to Rights Agreement dated January 7, 1998 (Incorporated
               by reference to Exhibit 4.3 of the Company's Form 10-K for the
               year ended December 31, 1997).

10.1           Asset Purchase Agreement dated as of April 1, 1995, by and among
               AGF Interior Services Co., Watermark Investments Limited
               (Bahamas), Watermark Investments Limited (Delaware), HRB, the
               Company and Tova Schwartz (Incorporated by reference to the
               Company's Current Report on Form 8-K dated August 22, 1995).

10.2           Divestiture, Settlement and Reorganization Agreement dated as of
               February 26, 1996, by and among the Company, HRB, Watermark
               Investments Limited (Bahamas), Watermark Investments Limited
               (Delaware), AGF Interior Services Co., Tova Schwartz, Alan G.
               Friedberg and Guillermo Montero (Incorporated by reference to
               Exhibit 10.2 of the Company's Form 10-KSB for the year ended
               December 31, 1995).

10.3           Memorandum Agreement dated April 12, 1996, by and between the
               Company and Watermark (Incorporated by reference to Exhibit 10.3
               of the Company's Form 10-KSB for the year ended December 31,
               1995).

10.4           Bill of Sale and Assumption Agreement dated February 26, 1996, by
               and between the Company and Tova Schwartz (Incorporated by
               reference to Exhibit 10.4 of the Company's Form 10-KSB for the
               year ended December 31, 1995).

10.5           Consulting Agreement dated February 28, 1996, by and between to
               Company and Resource Holdings Associates (Incorporated by
               reference to Exhibit 10.6 of the Company's Form 10-KSB for the
               year ended December 31, 1995).

10.6           Employment Agreement, dated January 1, 1998, by and between the
               Company and Robert A. Berman (Incorporated by reference to
               Exhibit 10.6 to the Amendment No. 1 to the Company's Form 10-K,
               filed on April 29, 1998, for the year ended December 31, 1997).

10.7           Employment Agreement, dated January 1, 1998, by and between the
               Company and Howard G. Anders (Incorporated by reference to
               Exhibit 10.7 to the Company's Form 10-K filed on April 29, 1998,
               for the year ended December 31, 1997).

10.8           1996 Stock Option Plan (Incorporated by reference to Exhibit 4(a)
               to the Company's Registration Statement on Form S-8 filed on
               February 12, 1997, File No. 333-21689).

10.9           Form of Option Agreement for the 1996 Plan (Incorporated by
               reference to Exhibit 4(b) to the Company's Registration Statement
               on Form S-8 filed on February 12, 1997, File No. 333-21689).

10.10          Form of Stock Agreement for the Outside Directors' Plan
               (Incorporated by reference to Exhibit 4(c) to the Company's
               Registration Statement on Form S-8 filed on February 12, 1997,
               File No. 333-21689).

10.11          Form of Option Granted to Officers (Incorporated by reference to
               Exhibit 4(d) to the Company's Registration Statement on Form S-8
               filed on February 12, 1997, File No. 333-21689).

10.12          Agreement and plan of Merger dated as of January 9, 1997, by and
               among Leonard Parker Company, LPC Acquisition Corp., and the
               Company (incorporated by reference to Exhibit 2.1 of the
               Company's Current Report on Form 8-K filed January 24, 1997).

10.13          Employment Agreement, dated as of January 9, 1997, by and among
               The Leonard Parker Company, the Company and Leonard Parker
               (Incorporated by reference to Exhibit 10.13 to the Company's
               Registration Statement on Form SB-2 filed July 22, 1997, No.
               333-31765).

10.14          Employment Agreement, dated January 1, 1998, by and between the
               Company and Douglas Parker (Incorporated by reference to Exhibit
               10.14 to the Amendment No. 1 to the Company's Form 10-K, filed on
               April 29, 1998, for the year ended December 31, 1997).

                                       28
<PAGE>   29

EXHIBIT
 NUMBER                                 EXHIBITS
--------                                --------


 10.15         Registration Rights Agreement, date as of January 9, 1997, by and
               among the Company, Leonard Parker, Douglas Parker, Bradley
               Parker, Philip Parker, Gregg Parker and Mitchell Parker
               (Incorporated by reference to Exhibit 10.18 to the Company's
               Registration Statement on Form SB-2 filed July 22, 1997, No.
               333-31765).

 10.16         Agreement to Joint Venture, dated as of May 12, 1997, by and
               among Apollo Real Estate Advisors II, L.P., the Registrant and
               Watermark Investments Limited, LLC. (Incorporated by reference to
               Exhibit 10.19 to the Company's Registration Statement on Form
               SB-2 filed July 22, 1997, No. 333-31765).

 10.17         Warrant dated May 12, 1997 issued to Apollo Real Estate Advisors
               II, L.P. (Incorporated by reference to Exhibit 10.20 to the
               Company's Registration Statement on Form SB-2 filed July 22,
               1997, No. 333-31765).

 10.18         Agreement and Plan of Merger, dated as of January 1, 1998, by and
               among the Company, HWS Acquisition Corp., a Delaware corporation,
               Bekins Distribution Services Co., Inc. and the Sellers named
               therein (Incorporated by reference to Exhibit 2.1 the Company's
               Current Report on Form 8-K dated January 9, 1998).

 10.19         Registration Rights Agreement dated as of January 1, 1998, by and
               among the Company and the Shareholders named therein
               (Incorporated by reference to Exhibit 10.1 to the Company's
               Amended Current Report on 8-K, dated September 16, 1998).

 10.20         Financial Advisory Agreement dated April 10, 1997, by and between
               the Company and Resource Holdings Associates (Incorporated by
               reference to the Company's Registration Statement on Form SB-2,
               No. 333-31765).

 10.21         Master Development Agreement, dated June 5, 1998, by and between
               the Company and Prime Hospitality Corp. (Incorporated by
               reference to Exhibit 10 to the Company's Form 10-Q for the
               quarter ended June 30, 1998).

 10.22         Stock Purchase Agreement, dated March 31, 1999, by and among the
               Company, Watermark Investments Limited, LLC, Leonard Parker,
               Douglas Parker, Philip Parker, Mitchell Parker, Gregg Parker and
               Bradley Parker.

 10.23         Agreement, by and between the Company and Watermark Investments
               Limited, LLC, as terminated by Termination Agreement, dated
               September 30, 1999 (Incorporated by reference to Exhibit 10.1 to
               the Company's Form 10-Q for the quarter ended Sept 30, 1999).

 10.24         Termination Agreement, dated September 30, 1999, by and between
               the Company and Robert A. Berman (Incorporated by reference to
               Exhibit 10.2 to the Company's Form 10-Q for the quarter ended
               September 30, 1999).

 10.25         Employment Agreement, dated September 1, 1999, by and between the
               Company and John F. Wilkens (Incorporated by reference to Exhibit
               10.3 to the Company's Form 10-Q for the quarter ended September
               30, 1999).

 10.26         Stipulation of Settlement and Mutual Release between Hospitality
               Worldwide Services and Prime Hospitality Corporation dated
               December 14, 1999.

 10.27         Hospitality Worldwide Services, Inc. 1999 Stock Option Plan.

 10.28         Second Amended and Restated Loan Agreement between Bank of
               America, N.A. and Bekins Distribution Services Co., Inc. dated
               September 1, 2000 (Incorporated by reference to Exhibit 10.28 to
               the Company's Form 10-Q for the quarter ended September 30,
               2000).

 10.29         Overadvance Term Note by Bekins Distribution Services Co., Inc.
               in favor of Bank of America, N.A. dated September 1, 2000
               (Incorporated by reference to Exhibit 10.29 to the Company's Form
               10-Q for the quarter ended September 30, 2000).

 10.30         Revolving Note by Bekins Distribution Services Co., Inc. in favor
               of Bank of America, N.A. dated September 1, 2000 (Incorporated by
               reference to Exhibit 10.30 to the Company's Form 10-Q for the
               quarter ended September 30, 2000).

*10.31         Amended and Restated Agreement among the Company, HSBC Bank USA
               and Hospitality Restoration and Builders, Inc. dated December 15,
               2000.

 11            Computation of earnings per share (Incorporated herein by
               reference to Note 16 to the Company's Consolidated Financial
               Statements).

*21            Subsidiaries of the Company.

------------------
*Filed herewith.

(c)      Reports on Form 8-K

         The Company filed a Form 8-K on December 21, 2000 to report that it had
         negotiated and excuted an Amended and Restated Agreement with HSBC Bank
         USA.


                                       29
<PAGE>   30


                                   SIGNATURES

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

                                  HOTELWORKS.COM, INC.


Dated:  June 18, 2001         By: /s/  DOUGLAS A. PARKER
                                  --------------------------------------------
                                  Douglas A. Parker, Chief Executive Officer,
                                  (principal executive officer)
                                  President and Director

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>

                  SIGNATURE                                     TITLE                              DATE
                  ---------                                     -----                              ----

<S>                                            <C>                                             <C>
/s/  LEONARD F. PARKER                         Chairman of the Board, Secretary                June 18, 2001
------------------------------------           And Director
Leonard F. Parker


/s/  DOUGLAS A. PARKER                         Chief Executive Officer, President and          June 18, 2001
------------------------------------           Director
Douglas A. Parker


/s/  JOHN F. WILKENS                           Vice President - Treasurer (principal           June 18, 2001
------------------------------------           financial officer, principal
John F. Wilkens                                accounting officer)


/s/  LOUIS K. ADLER                            Director                                        June 18, 2001
------------------------------------
Louis K. Adler


/s/  GEORGE ASCH                               Director                                        June 18, 2001
------------------------------------
George Asch


/s/  RICHARD A. BARTLETT                       Director                                        June 18, 2001
------------------------------------
Richard A. Bartlett

</TABLE>

                                       30
<PAGE>   31

ITEM 8.  FINANCIAL STATEMENTS

                          INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                                                                                                 PAGE NO.
                                                                                                 --------
<S>                                                                                                <C>
HOTELWORKS.COM, INC. AND SUBSIDIARIES

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

                  BDO Seidman, LLP                                                               F-2

CONSOLIDATED FINANCIAL STATEMENTS:

                  Balance sheets                                                                 F-3
                  Statements of operations                                                       F-4
                  Statements of stockholders' equity                                             F-5
                  Statements of cash flows                                                       F-6, F-7
                  Notes to consolidated financial statements                                     F-8-F-30
                  Schedule I  - Condensed Financial Information of Registrant                    F-31-F-34
                  Schedule II - Valuation and Qualifying Accounts                                F-35
</TABLE>



                                      F-1
<PAGE>   32



REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of
Hotelworks.com, Inc.
Coral Gables, Florida



We have audited the accompanying consolidated balance sheet of Hotelworks.com as
of December 31, 2000 and the related consolidated statements of operations,
(capital deficit) and cash flows for the year then ended. We have also audited
the schedules listed in the accompanying index. These financial statements and
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and the schedules based
on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit 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
presentation of the financial statements and the schedules. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hotelworks.com at
December 31, 2000, and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States of America.

Also in our opinion, the schedules present fairly, in all material respects, the
information set forth therein as of and for the year ended December 31, 2000.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
consolidated financial statements, the Company has suffered significant
recurring losses from operations, has a net capital deficiency, a working
capital deficiency and is engaged in significant litigation 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 3. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

                                                                BDO Seidman, LLP

Miami, Florida
June 6, 2001


                                      F-2
<PAGE>   33


                      HOTELWORKS.COM, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                ASSETS (NOTE 10)
<TABLE>
<CAPTION>

                                                                                 2000                  1999
                                                                            ------------          ------------
<S>                                                                         <C>                   <C>
Cash and cash equivalents                                                   $  4,976,963          $  4,559,938
Accounts receivable, net of allowance for doubtful accounts                   33,676,781            28,300,842
      of $2,002,051 and $1,743,364
Costs and estimated earnings in excess of billings (Note 7)                           --               276,000
Deposits with vendors                                                         10,762,510             7,050,701
Income taxes refundable (Note 11)                                                490,302             3,906,804
Prepaids and other current assets                                                446,550             1,187,637
                                                                            ------------          ------------
      Total current assets                                                    50,353,106            45,281,922
Property and equipment, net (Notes 5 and 8)                                    5,315,324             5,195,180
Goodwill, net (Notes 5 and 6)                                                 10,638,579            11,038,178
Other assets                                                                     101,926                85,818
Non-current assets of discontinued operations (Note 4)                            93,835               180,067
                                                                            ------------          ------------
                                                                            $ 66,502,770          $ 61,781,165
                                                                            ------------          ------------

             LIABILITIES AND (CAPITAL DEFICIT) STOCKHOLDERS' EQUITY

Accounts payable                                                            $ 26,988,156          $ 21,247,448
Accrued expenses and other liabilities                                         5,085,245             5,550,258
Billings in excess of costs and estimated earnings (Note 7)                    1,294,373               142,000
Customer deposits                                                             14,136,174            12,017,566
Current portion of long-term debt (Note 10)                                    3,165,880             2,902,000
Loans payable  (Note 9)                                                               --            15,835,000
Net current liabilities of discontinued operations (Note 4)                    7,366,432             3,542,293
                                                                            ------------          ------------
      Total current liabilities                                               58,036,260            61,236,565

Long-term debt (Note 10)                                                      10,255,906                68,294
                                                                            ------------          ------------
      Total liabilities                                                       68,292,166            61,304,859
                                                                            ------------          ------------

Commitments and contingencies (Notes 3 and 13)

(Capital deficit) stockholders' equity:  (Note 15)
8% convertible preferred stock, $.01 par value, $1 stated,                    1,000,000                    --
         value, 5,000,000 shares authorized, 1,000,000 and 0
         shares issued and outstanding
Common stock, $.01 par value, 50,000,000 shares authorized,                      149,125               146,592
         14,912,867 and 14,659,067 issued and outstanding
Additional paid-in capital                                                    60,019,244            59,612,964
(Deficit)                                                                    (62,957,765)          (59,283,250)
                                                                            ------------          ------------
      Total (capital deficit) stockholders' equity                            (1,789,396)              476,306
                                                                            ------------          ------------
                                                                            $ 66,502,770          $ 61,781,165
                                                                            ------------          ------------
</TABLE>


See accompanying report of independent certified public accountants and notes to
consolidated financial statements.


                                      F-3
<PAGE>   34


                      HOTELWORKS.COM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                                     YEAR ENDED DECEMBER 31,
                                                                    -----------------------------------------------------
                                                                        2000                1999                1998
                                                                    -------------       -------------       -------------
<S>                                                                 <C>                 <C>                 <C>
Revenues                                                            $ 216,355,887       $ 223,424,822       $ 176,744,593

Cost of revenues                                                      202,509,785         211,952,584         163,142,439
                                                                    -------------       -------------       -------------
          Gross profit                                                 13,846,102          11,472,238          13,602,154
Selling, general and administrative expenses                           16,391,932          22,697,922          16,659,136

Asset impairment charge (Note 5)                                               --           9,252,000                  --
                                                                    -------------       -------------       -------------
          Loss from operations                                         (2,545,830)        (20,477,684)         (3,056,982)

                                                                    -------------       -------------       -------------
Other income (expense):
     Interest expense                                                  (1,795,859)         (1,774,111)           (756,100)
     Interest income                                                      543,010             902,753           1,297,245
                                                                    -------------       -------------       -------------
     Total other income (expense)                                      (1,252,849)           (871,358)            541,145
                                                                    -------------       -------------       -------------
          Loss from continuing operations before                       (3,798,679)        (21,349,042)         (2,515,837)
          Income tax provision (benefit) (Note 11)                         77,000          (3,103,829)           (447,263)
                                                                    -------------       -------------       -------------
          Loss from continuing operations                              (3,875,679)        (18,245,213)         (2,068,574)
                                                                    -------------       -------------       -------------
Discontinued operations (Notes 4 and 11):

     Income (loss) from operations of discontinued businesses,                 --         (22,589,150)          2,192,812
       net of tax
     Gain (loss) on disposal of discontinued businesses,
       including provision of $2,290,000 in 1999 and
       $104,000 in 1998 for operating losses during
       phase-out period, net of tax                                       204,671         (17,169,880)            (90,900)
                                                                    -------------       -------------       -------------
       Income (loss) from discontinued operations                         204,671         (39,759,030)          2,101,912
                                                                    -------------       -------------       -------------
          Net income (loss)                                         $  (3,671,008)      $ (58,004,243)      $      33,338
                                                                    -------------       -------------       -------------

Basic and diluted loss per common share (Note 16):

        Loss from continuing operations                             $       (0.26)      $       (1.35)      $       (0.19)
                                                                    -------------       -------------       -------------
       Discontinued operations:
          Income (loss) from operations                                        --               (1.65)               0.18
          Gain (loss) on disposal                                            0.01               (1.26)              (0.01)
                                                                    -------------       -------------       -------------
          Income (loss) from discontinued operations                         0.01               (2.91)               0.17
                                                                    -------------       -------------       -------------
          Net loss                                                  $       (0.25)      $       (4.26)      $       (0.02)
                                                                    -------------       -------------       -------------

Weighted average common shares outstanding - basic and diluted         14,815,908          13,665,465          12,092,437
                                                                    -------------       -------------       -------------

</TABLE>


See accompanying report of independent certified public accountants and notes to
consolidated financial statements.



                                      F-4
<PAGE>   35

                      HOTELWORKS.COM, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
<TABLE>
<CAPTION>

                              PREFERRED STOCK               COMMON STOCK                                          TOTAL
                        ---------------------------  -------------------------                                STOCKHOLDERS'
                                                       NUMBER OF                   ADDITIONAL                     EQUITY
                        NUMBER OF         STATED         SHARES                    PAID-IN                        (CAPITAL
                          SHARES           VALUE      OUTSTANDING   PAR VALUE       CAPITAL       (DEFICIT)       DEFICIT)
                        ------------   ------------   ------------  ------------  ------------   ------------   ------------
<S>                          <C>         <C>               <C>             <C>       <C>         <C>            <C>
BALANCE,
December 31, 1997            200,000   $  5,000,000     11,345,572  $    113,456  $ 47,519,725   $   (907,345)  $ 51,725,836
Exercise of stock
  options and
  warrants                        --             --        265,667         2,657       768,024             --        770,681
Issuance of shares
  in connection with
  acquisition                     --             --        514,117         5,141     6,165,859             --      6,171,000
Conversion of
  preferred stock            (80,000)    (2,000,000)       584,800         5,848     1,994,152             --             --
Net income                        --             --             --            --            --         33,338         33,338
Preferred dividends
  accrued                         --             --             --            --            --       (270,000)      (270,000)
                        ------------   ------------   ------------  ------------  ------------   ------------   ------------
BALANCE                      120,000      3,000,000     12,710,156       127,102    56,447,760     (1,144,007)    58,430,855
December 31, 1998
Exercise of stock
  options                         --             --         40,000           400        80,294             --         80,694
Conversion of
  preferred stock           (120,000)    (3,000,000)     1,269,399        12,695     2,987,305             --             --
Issuance of shares
  in connection with
  acquisition                     --             --        639,512         6,395        (6,395)            --             --
Warrants issued for
  services                        --             --             --            --       104,000             --        104,000
Net loss                          --             --             --            --            --    (58,004,243)   (58,004,243)
Preferred dividends
  accrued                         --             --             --            --            --       (135,000)      (135,000)
                        ------------   ------------   ------------  ------------  ------------   ------------   ------------
BALANCE                           --             --     14,659,067       146,592    59,612,964    (59,283,250)       476,306
December 31, 1999
Exercise of stock
  options and warrants            --             --        153,800         1,533       310,920             --        312,453
Stock and options
  issued in                       --             --        100,000         1,000        95,360             --         96,360
  settlements (Note 4)
Issuance of shares
  in connection with
  refinancing              1,000,000      1,000,000             --            --            --             --      1,000,000

Net loss                          --             --             --            --            --     (3,671,008)    (3,671,008)

Preferred dividends
  accrued                         --             --             --            --            --         (3,507)        (3,507)
                        ------------   ------------   ------------  ------------  ------------   ------------   ------------
BALANCE
 December 31, 2000         1,000,000   $  1,000,000     14,912,867  $    149,125  $ 60,019,244   $(62,957,765)  $ (1,789,396)
                        ------------   ------------   ------------  ------------  ------------   ------------   ------------

</TABLE>


See accompanying report of independent certified public accountants and notes to
consolidated financial statements.



                                      F-5
<PAGE>   36

                      HOTELWORKS.COM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                      YEAR ENDED DECEMBER 31,
                                                           --------------------------------------------
                                                                2000            1999            1998
                                                           ------------    ------------    ------------
<S>                                                        <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                          ($ 3,671,008)   ($58,004,243)   $     33,338

Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:

Depreciation and amortization                                 1,351,768       2,208,706       1,667,785
Provision for bad debts                                         764,562       1,632,922         668,922

Loss (gain) from operations of discontinued businesses               --      18,857,810      (2,858,325)
Loss (gain) on disposal of discontinued businesses             (204,671)     16,557,668         150,000
Asset impairment charge                                              --       9,252,000              --
Deferred income tax provision (benefit)                              --       4,535,178      (3,796,090)
(Increase) decrease in current assets:
Accounts receivable                                          (6,140,501)      4,441,236     (14,817,443)

Costs  and estimated earnings in excess of billings             276,000         221,717         (86,878)
Deposits with vendors                                        (3,711,809)      5,708,745      (8,504,265)
Income taxes refundable                                       3,416,502      (3,906,804)             --
Prepaid and other current assets                                741,087        (296,713)        245,399
Other assets                                                    (16,108)        696,903         166,684
Increase (decrease) in current liabilities:
Accounts payable                                              5,740,708      (3,268,623)      8,547,541
Accrued expenses and other liabilities                         (237,160)      1,063,029       2,451,782

Billings in excess of costs and estimated earnings            1,152,373         (85,000)         80,800
Customer deposits                                             2,118,608      (7,846,279)      6,540,274
Income taxes payable                                                 --        (176,045)        168,376
                                                           ------------    ------------    ------------
     Net cash provided by (used in) operating activities
        of continuing Operations                              1,580,351      (8,407,793)     (9,342,100)
                                                           ============    ============    ============
     Net cash (used in) operating activities of
        Discontinued operations                                (469,958)     (4,710,429)     (8,492,603)
                                                           ------------    ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities                                    --              --      (8,500,000)
Sale of marketable securities                                        --       8,500,000      18,915,686
Cash acquired upon acquisition, net of acquisition costs             --              --         (62,000)
Purchases of property and equipment                          (1,072,313)     (1,705,479)     (3,156,883)
                                                           ------------    ------------    ------------
     Net cash provided by (used in) investing activities
        of continuing operations                             (1,072,313)      6,794,521       7,196,803
                                                           ------------    ------------    ------------
     Net cash provided by (used in) investing
          activities of discontinued operations                      --       4,599,657      (9,490,769)
                                                           ------------    ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings on loans payable                            --       4,910,000      26,625,000
Repayment of loans payable                                   (5,950,000)             --     (15,700,000)
Repayment of long term debt                                  (1,045,513)       (615,568)     (1,352,285)
Payment of preferred stock dividends                           (135,000)       (270,000)             --
Borrowings on long-term debt                                  7,197,005              --              --
Proceeds from exercise of stock options and warrants            312,453          80,694         770,681
                                                           ============    ============    ============
     Net cash provided by (used in) financing activities
        of continuing operations                                378,945       4,105,126      10,343,396
                                                           ============    ============    ============
NET INCREASE (DECREASE)  IN CASH AND CASH EQUIVALENTS
                                                                417,025       2,381,082      (9,785,273)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                4,559,938       2,178,856      11,964,129
                                                           ============    ============    ============
CASH AND CASH EQUIVALENTS, END OF  PERIOD                  $  4,976,963    $  4,559,938    $  2,178,856
                                                           ============    ============    ============
</TABLE>

See accompanying report of independent certified public accountants and notes to
consolidated financial statements.


                                      F-6
<PAGE>   37


                      HOTELWORKS.COM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                           YEAR ENDED DECEMBER 31,
                                                    ------------------------------------
                                                       2000         1999         1998
                                                    ----------   ----------   ----------
<S>                                                 <C>          <C>          <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest                                            $1,875,333   $1,550,027   $  794,724
Income taxes                                            65,360      466,081    3,826,546

Cash received during the period for:

Income tax refunds                                   3,416,502           --           --

NON-CASH ACTIVITIES:

Net assets acquired (including goodwill and other           --           --    6,233,000
intangibles)
Stock issued for assets acquired                            --           --    6,171,000
Options and warrants issued for services                    --      104,000           --
Stock and options issued in settlements                 96,360           --           --
Preferred stock cash dividends accrued                      --      135,000      270,000
Preferred stock in-kind dividends accrued                3,507           --           --
Conversion of preferred stock into common stock             --    3,000,000    2,000,000
Refinancing of HSBC debt                             9,885,000           --           --
</TABLE>


See accompanying report of independent certified public accountants and notes to
consolidated financial statements.



                                      F-7
<PAGE>   38


                     HOTELWORKS.COM, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       ORGANIZATION AND BUSINESS

         Hotelworks.com, Inc., formerly known as Hospitality Worldwide Services,
Inc., (the "Company"), was incorporated in the State of New York on October 10,
1991. Through its wholly owned operating subsidiaries, the Company performs
purchasing services of furniture, fixtures and equipment, and operating supplies
and equipment for leading hotels and hospitality customers; performs reorder
services of operating supplies and equipment for leading hotel and hospitality
customers; and performs logistics services, including transportation,
warehousing and installation, to a wide variety of customers. Through September
1999, the Company's core businesses also included providing renovation services
to the hospitality industry as well as being active in the real estate
investment and asset management business.

         In September 1999, the Company announced a strategic initiative to
reposition the core supply and distribution businesses, and to divest itself of
its renovation business and real estate investment and asset management
business. In December 1998, the Company decided to discontinue its hotel
development business. As a result, the Company has reflected the operating
results associated with the renovation, real estate investment and asset
management, and hotel development businesses, as well as the estimated losses on
disposal, as discontinued operations on the consolidated statements of
operations for all years presented. Discontinued operations are further
discussed in Note 4.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany balances
and transactions have been eliminated. Certain prior year balances have been
reclassified in the consolidated financial statements in order to provide a
presentation consistent with the current year.

         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. Management believes that the estimates utilized in preparing
the Company's financial statements are reasonable and prudent, however, actual
results could differ from those estimates.

         The most significant estimates for the Company relates to the
recognition of revenues under the percentage of completion method for its
purchasing and logistics businesses, and the estimation of reserves for asset
realizability and contingent liabilities. To the extent that contracts extend
over more than one reporting period, revisions in estimated earnings and the
estimated efforts during the course of the work are reflected in the year in
which the facts which require the revision become known. Due to the
uncertainties inherent in the estimation process, it is reasonably possible that
such estimates will be revised over the next year. When a loss is forecasted for
a contract, the full amount of the anticipated loss is recognized in the period
in which it is determined that a loss will occur.

         REVENUE RECOGNITION

PURCHASING BUSINESS (LPC)

         The Company recognizes earnings for fixed fee service contracts under
the percentage of completion method. Under this method, the Company recognizes
as earnings that portion of the total earnings anticipated from a contract
measured by which the ratio of efforts expended bears to the estimated efforts
over the life of the contract. Earnings for variable fee service contracts,
where the fee is usually a percentage of the merchandise purchased, are
generally recognized upon completion of the associated service.



                                      F-8
<PAGE>   39

         The Company performs purchasing services either acting as a principal,
for which it functions in a manner similar to a purchaser and reseller of
merchandise, or as an agent. As an agent, revenues include solely the service
fee income and the cost of the contracts includes labor and other direct costs
associated with the contract and those indirect costs related to contract
performance. As a principal, the revenues and cost of the contracts also include
the associated merchandise purchased for the customer, which are recognized when
the merchandise is shipped directly from the vendor to the customer.

         Customer deposits consist of amounts remitted to the Company by
customers as deposits on specific contracts. Deposits with vendors consist of
amounts paid by the Company to vendors on specific contracts.

REORDER BUSINESS (PARKER REORDER)

         The Company recognizes earnings for variable fee service contracts,
where the fee is usually a percentage of the merchandise purchased, upon
completion of the associated service. The Company performs reorder services
either acting as a principal, for which it functions in a manner similar to a
purchaser and reseller of merchandise, or as an agent. As an agent, revenues
include solely the service fee income and the cost of the contracts includes
labor and other direct costs associated with the contract and those indirect
costs related to contract performance. As a principal, the revenues and cost of
the contracts also include the associated merchandise purchased for the
customer, which are recognized when the merchandise is shipped directly from the
vendor to the customer.

LOGISTICS BUSINESS (BEKINS)

         The Company recognizes earnings on logistics and installation services
under the percentage of completion method. Under this method, the Company
recognizes as earnings that portion of the total earnings anticipated from a
contract measured by which the ratio of efforts expended bears to the estimated
efforts over the life of the contract. The cost of the contracts includes labor
and other direct costs associated with the contract, including warehousing and
transportation costs, and those indirect costs related to contract performance.

         DEPRECIATION AND AMORTIZATION

         The Company calculates depreciation on property and equipment on the
straight-line method. Estimated useful lives are as follows: office equipment, 5
years; software, 5 years; furniture and fixtures, 7 years; and building and
improvements, 25 years. Leasehold improvements to property used in the Company's
operations are amortized on a straight-line basis over the lease terms.
Maintenance and repairs are expensed currently, while expenditures for
betterments are capitalized.

         WEB SITE DEVELOPMENT

         The Emerging Issues Task Force ("EITF") recently issued EITF Issue No.
00-2, Accounting for Web Site Development Costs, in which the Task Force
specified the types of costs that should be capitalized and those that should be
expensed relating to web site development costs. The EITF is effective for web
site development costs incurred for fiscal quarters beginning after June 30,
2000, including costs incurred for projects in process as of the beginning of
the quarter in which the new rules are adopted, with earlier application
encouraged. In connection with the adoption of this EITF, the Company
capitalized $221,872 of web site development costs and expensed $17,829 of web
site costs for the year ended December 31, 2000. The capitalized costs are
included in property and equipment, net in the accompanying consolidated balance
sheet. The Company will amortize the web site development costs over 3 years.

         LONG-LIVED ASSETS

         Long-lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If such review indicates that the asset is
impaired, when the carrying amount of an asset exceeds the sum of its expected
future cash flows, on an undiscounted basis, the asset's carrying amount is
written down to fair value. Long-lived assets to be disposed of are reported at
the lower of carrying amount or fair value less cost to sell.



                                      F-9
<PAGE>   40

         GOODWILL

         Goodwill is amortized on a straight-line basis over its estimated
useful life of 30 years. Goodwill represents the costs of an acquisition in
excess of the fair value of net assets acquired at the date of acquisition.
Accumulated amortization was $1,359,391 and $959,792 at December 31, 2000 and
1999, respectively.

         EARNINGS PER COMMON SHARE

         Basic earnings per common share are based on net income less preferred
stock dividends divided by the weighted average number of common shares
outstanding. Diluted earnings per common share are adjusted to reflect the
incremental number of shares issuable under stock-based compensation plans,
contingently issuable shares, the assumed conversion of convertible preferred
stock and the elimination of the preferred stock dividends, if such adjustments
are dilutive.

         INCOME TAXES

         Deferred income tax assets or liabilities are computed based on the
difference between the financial reporting and income tax bases of assets and
liabilities using the enacted marginal tax rate. Deferred income tax expenses or
benefits are based on the changes in the asset or liability from period to
period.

         CASH EQUIVALENTS

         The Company considers all highly liquid investments purchased with
maturities of 90 days or less to be cash equivalents.

         STOCK-BASED COMPENSATION

         The Company accounts for its stock-based employee compensation plans
using the intrinsic value based method, under which compensation cost is
measured as the excess of the stock's market price at the grant date over the
amount an employee must pay to acquire the stock. Expenses related to stock
options and warrants issued to non-employees are accounted for using the fair
value based method, under which the cost is measured as the fair value of the
security at the date of grant based on option-pricing models.

         FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying amounts of financial instruments including cash and cash
equivalents, accounts receivable, accounts payable, accrued and other
liabilities and long-term debt approximate the fair values as of December 31,
2000, due to the short-term maturity of these instruments. The carrying amounts
as of December 31, 2000 of costs and estimated earnings in excess of billings,
deposits with vendors, billings in excess of costs and estimated earnings, and
customer deposits approximate fair value as these amounts are due or payable
within the Company's operating cycle.

         SHIPPING AND HANDLING FEES

         The Company includes shipping and handling fees billed to customers as
revenues and the related costs as cost of revenues. Such fees and costs are
primarily comprised of outbound freight. Included in revenues in the
accompanying consolidated statements of operations for the years ended December
31, 2000, 1999 and 1998 are shipping and handling fees of approximately
$8,900,000, $8,248,000 and $6,990,000, respectively. Amounts for prior periods
presented have been reclassified.

         ADVERTISING COSTS

         The Company expenses advertising costs as incurred. Advertising
expenses included in selling, general and administrative expenses for the years
ended December 31, 2000, 1999 and 1998 were approximately $125,000, $100,000 and
$160,000, respectively.



                                      F-10
<PAGE>   41

         NEW ACCOUNTING PRONOUNCEMENTS

         During 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities", which
provides that all derivative instruments should be recognized as either assets
or liabilities depending on the rights and obligations under the contract and
that all derivative instruments be measured at fair value. This pronouncement is
required to be adopted by January 1, 2001. The Company did not engage in
derivative instruments or hedging activities in any periods presented in the
consolidated financial statements. Management has determined that the adoption
of this pronouncement will not have a material impact on the Company's
consolidated financial statements.

         Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial
Statements", provides guidance on the recognition, presentation and disclosure
of revenues in financial statements and requires adoption no later than the
fourth fiscal quarter of fiscal years beginning after December 31, 1999. The
Company implemented SAB during 2000, and its adoption did not have a material
impact on the Company's consolidated financial statements. In September 2000,
the Emerging Issues Task Force ("EITF") issued EITF Issue No. 00-10, "Accounting
for Shipping and Handling Fees and Costs" which requires companies to record
shipping and handling fees charged to customers as revenues and the related
costs as expenses. The Company implemented EITF 00-10 as of October 1, 2000.
Amounts relating to prior periods presented have been reclassified to conform to
the new issue.

         Statement of Financial Accounting Standards (SFAS) No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities", provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. SFAS 140
replaces SFAS 125 and is effective for transfers and servicing of financial
assets and extinguishments occurring after March 31, 2001. SFAS 140 is effective
for recognition and reclassification of collateral and for disclosures relating
to securitization transactions and collateral for fiscal years ending after
December 15, 2000. The adoption of SFAS 140 did not have a material impact on
the Company's consolidated earnings or financial statements.

         In March, 2000, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 44, Accounting for Certain Transactions Involving
Stock Compensation. Interpretation No. 44 provides criteria for the recognition
of compensation expense in certain stock-based compensation arrangements that
are accounted for under Accounting Principles Board Opinion No. 25, Accounting
for Stock Based Compensation. Interpretation No. 44 became effective July 1,
2000, with certain provisions that are effective retroactively to December 15,
1998 and January 12, 2000. The adoption of Interpretation No. 44 did not have a
material impact on the Company's consolidated financial statements.

3.       GOING CONCERN

         The Company's consolidated financial statements have been presented on
the basis that the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business. The liquidity of the Company was severely affected in 1999
and 2000 by significant losses from continuing operations and discontinued
operations, which has resulted in a significant deterioration of the
stockholders' equity of the Company from $58.4 million at December 31, 1998 to
$0.5 million at December 31, 1999 to a capital deficit of $1.8 million at
December 31, 2000. In addition, the Company has a working capital deficiency and
is engaged in significant litigation (see Note 13). These circumstances raise
substantial doubt about the Company's ability to continue as a going concern.

         The losses from continuing operations in 1999 emanated from a reduction
in the gross margins realized within the purchasing business as compared to
prior years; an increase in selling, general and administrative expenses due to
an expansion of the administrative staff of the on-going businesses and expenses
related to employee terminations and other costs associated with the closing of
the Company's corporate office in New York; and an asset impairment charge of
$9.3 million related to the Parker FIRST software product. Management has taken
the following steps in 2000 and 2001 to improve its operations and reduce its
losses from continuing operations. Management has (a) undertaken a comprehensive
review of its on-going businesses, (b) implemented steps to improve the gross
margin on its contracts and by reducing overhead and labor costs, (c) reduced
its selling, general and administrative expenses, (d) successfully renegotiated
defaulted credit lines and (e) sold its Orlando warehouse in March 2001, the
proceeds of which were used to pay-off substantially all of the mortgage note
and term loan with Bank of America.



                                      F-11
<PAGE>   42

         As further discussed In Note 4, the losses from discontinued operations
in prior years relate to the Company's decision to divest itself of its
renovation, real estate investment and asset management, and hotel development
businesses. Management has been diligently attempting to resolve any remaining
open matters relating to these businesses to avoid any further financial
deterioration to the Company. Management believes that the reserves established
in 1999 will be sufficient to cover any future obligations related to these
discontinued operations and to bring all open matters to closure.

         In September 2000, the Company's wholly-owned subsidiary, Bekins,
executed an Amended and Restated Loan Agreement with Bank of America, N.A.
whereby the proceeds were primarily used to pay-off the Company's defaulted
unsecured line of credit. As part of this Agreement, Bekins also restructured
its term loan and mortgage note payable with Bank of America, N.A. to eliminate
their default status. In conjunction with this Agreement, Bank of America, N.A.
dismissed its legal action against the Company. In March 2001, Bekins sold for
$2,265,500 its warehouse facility in Orlando, Florida, the net proceeds of which
were used to repay the mortgage in full and reduce the remaining balance on the
term loan to $107,000. In accordance with the Agreement, the remaining balance
of the term loan was transferred to the overadvance term loan and the term loan
was retired. In December 2000, the Company executed an Amended and Restated Loan
Agreement with HSBC Bank USA ("HSBC"). This Agreement consists of two debt
instruments and $1 million of convertible preferred stock, which were used to
pay off the Company's defaulted unsecured line of credit with HSBC.

         For 2001, the Company projects a net cash flow deficit from operations
and cash requirements related to the development of its internet web-based
reorder system of approximately $200,000. The net cash flow deficit from
operations for 2001 primarily relates to continued losses of the Parker Reorder
business and corporate expenses. Management believes that its review of the
on-going businesses' gross margins and related expenses, the receipt of
settlement payments from former officers and customers, the proceeds from the
sale of Bekins' Orlando warehouse, and its ability to defer certain capital
expenditures and other current payment obligations, if necessary, will provide
sufficient funds to cover cash flow deficits in 2001.

         Net cash provided by operating activities of continuing operations was
$1,580,351 for the year ended December 31, 2000, compared to net cash used of
$8,407,793 for 1999. During the year ended December 31, 2000, cash primarily
generated from an increase in accounts payable and customer deposits and by a
decrease in income taxes refundable was partially offset by an increase in
accounts receivable and deposits with vendors.

4.       DISCONTINUED OPERATIONS

         In September 1999, the Company announced a strategic initiative to
reposition the core supply and distribution businesses, and to divest itself of
its renovation business and real estate investment and asset management
business. In December 1998, the Company decided to discontinue its hotel
development business. As a result, the Company has reflected the operating
results associated with the renovation, real estate investment and asset
management, and hotel development businesses, as well as the estimated losses on
disposal, as discontinued operations on the consolidated statements of
operations for all years presented. The loss from operations, net of taxes, for
the discontinued businesses was $22,589,150 in 1999. The income from
discontinued operations, net of taxes, was $2,192,812 for 1998. The loss on
disposal, net of taxes, was $17,169,880 and $90,900 for 1999 and 1998,
respectively. The loss on disposal principally includes reserves and write-offs
of certain investments and receivables to their estimated recoverable amounts,
the write-off of goodwill associated with these businesses, and accruals for
estimated liabilities and operating losses during the phase-out period for the
discontinued businesses. The gain on disposal, net of taxes, was $204,671 for
2000 and was related primarily to the reversal of an accrued liability recorded
as a loss on disposal in 1999 on the Apollo Joint Venture.

HOTEL DEVELOPMENT BUSINESS

         In December 1997, the Company formed a wholly owned subsidiary,
Hospitality Development Services Corporation ("HDS"). HDS was to provide hotel
development services involving managing and overseeing the development process
related to new hotel construction, to earn a developers fee. HDS commenced
operations in 1998. On January 6, 1998, the Company reached an agreement in
principle to enter into a master development agreement with Prime Hospitality
Corp. ("Prime") to develop up to 20 hotel properties over a two-year period
under the AmeriSuites brand name. In June 1998, the Company and Prime executed
the master development agreement. In late 1998, the Company was informed by
Prime that Prime was no longer going to pursue new development opportunities and
that Prime was abandoning their responsibilities under the master development
agreement, even though the Company had incurred significant costs up to such
time. As a result, in December 1998, management decided to discontinue its hotel
development business.



                                      F-12
<PAGE>   43

         The Company ceased its hotel development operations in April 1999. In
December 1999, the Company and Prime reached an agreement to terminate the
master development agreement, whereby the Company received a settlement payment
of $300,000 and both parties agreed to a full release of obligations and claims.
The loss on disposal for the year ended December 31, 1999 includes approximately
$1,670,000 of additional write-offs to record certain real estate development
projects to the amount realized by the Company. The loss on disposal for the
year ended December 31, 1998 included $150,000 of estimated operating losses
during the phase-out period.

RENOVATION BUSINESS

        The Company provided renovation services to the hospitality industry,
through its wholly owned subsidiary, Hospitality Restoration & Builders, Inc.
("HRB"). HRB provided a complete package of renovation services to the hotel
industry, ranging from pre-planning and scope preparation of a project to
performing the renovation requirements and delivering furnished rooms.

        In November 1997, the Company formed a wholly owned subsidiary,
Hospitality Construction Corporation ("HCC"), to specialize in new hotel
construction projects and major hotel upgrades. HCC's operations commenced in
1998 and related solely to hotel upgrade and renovation projects, and did not
include any new hotel construction projects. In an effort to consolidate
operations, the Company transferred the HCC operations to HRB in 1998.

        In September 1999, as part of the Company's strategic initiative
discussed above, the Company decided to divest itself of its renovation
business. The Company transferred certain in-process renovation contracts to a
company owned by the former President of the renovation subsidiary in November
1999. The Company ceased the remaining renovation operations in 2000. However,
the resolution date as to certain disputed receivables with customers related to
specific renovation projects which have been substantially completed is
uncertain. Losses from discontinued operations for 1999 and 1998 include
provisions on contract receivables of approximately $17,090,000 and $8,863,000
related to renovation projects (including approximately $15,400,000 and
$5,500,000, respectively, relating to the Servico litigation, see Note 13 c),
which have been substantially completed but have not yet been closed out with
customers. The loss on disposal in 1999 includes additional provisions on
contract receivables of $2,075,000, a write-off of goodwill of approximately
$5,000,000 and anticipated operating losses during the phase-out period of
$2,066,000.

         In December 2000, as part of an Amended and Restated Loan Agreement
with HSBC Bank USA ("HSBC"), HRB assigned a portion of its contract right in a
disputed receivable with a former customer to HSBC in the form of a five-year
$4,585,000 promissory note, bearing interest at the bank's prime rate. This HRB
note is secured solely by its interest in the receivable and any collections are
to be divided between HRB and HSBC according to a prescribed formula. At
maturity, HRB has the option of extending the term for an additional twelve
months, at which time, if the disputed receivable has not been resolved, title
in full of the contract right along with the related debt passes to HSBC (see
Note 10).

REAL ESTATE INVESTMENT AND ASSET MANAGEMENT BUSINESS

         In May 1997, the Company entered into a joint venture ("Apollo Joint
Venture") with Apollo Real Estate Advisors II, L.P. ("Apollo") and Watermark
Investments Limited, LLC ("Watermark"), which is affiliated with Robert Berman,
the former Chairman and Chief Executive Officer of the Company, to identify,
acquire, renovate, refurbish and sell hotel properties. The Company performed
the renovation and procurement services for the properties purchased by the
Apollo Joint Venture. In addition, the Company acquired a non-controlling equity
interest in each of the entities formed to purchase such properties. In
September 1997, the Apollo Joint Venture acquired the Warwick Hotel in
Philadelphia, Pennsylvania. The Company made cumulative capital contributions of
approximately $791,000 to the joint venture operating entity that was formed to
purchase the property. In March 1998, the Apollo Joint Venture acquired the
Historic Inn in Richmond, Virginia. The Company made cumulative capital
contributions of approximately $311,000 to the joint venture operating entity
that was formed in connection with the purchase of the property. In September
1999, as part of the Company's strategic initiative discussed above, the Company
decided to divest itself of its real estate investment and asset management
business.



                                      F-13
<PAGE>   44

         In October 2000, the Company entered into an agreement to restructure
its involvement in the Apollo Joint Venture. As a result of the restructuring,
the Company exchanged mutual releases with Apollo, which released the Company
from future obligations to the joint venture. In conjunction with this
agreement, the Company surrendered its equity ownership interest, the Company
issued 100,000 unregistered shares of its Common Stock to Apollo, warrants
formerly issued to Apollo were returned to the Company and cancelled, and the
Company received payment on its remaining receivables with the properties. The
Company wrote off its investment in the Apollo Joint Venture in 1999, and as
such, this agreement did not have a material impact on the current year
financial statements. As a result of the agreement, the Company reversed an
accrued liability recorded in 1999 related to the Apollo Joint Venture and
recorded a gain on disposal of $204,671 in the 2000 consolidated statement of
operations.

         In March 1998, the Company entered into a joint venture with ING Realty
Partners ("ING Joint Venture"), to acquire the Radisson O'Hare (formerly Clarion
Quality) Hotel in Chicago, Illinois, whereby the Company acquired a
non-controlling equity interest in the ING Joint Venture. The Company also
performed the renovation and procurement services for the property. The Company
made cumulative capital contributions of approximately $3.2 million to the ING
Joint Venture. In September 1999, as part of the Company's strategic initiative
discussed above, the Company decided to divest itself of its real estate
investment and asset management business.

         In May 2000, the Company entered into an agreement to restructure its
involvement in the ING Joint Venture. As a result of the restructuring, the
Company exchanged mutual releases with its joint venture partner, which released
the Company from future obligations to the joint venture, in exchange for its
equity ownership interest. The Company wrote off its investment in the ING Joint
Venture in 1999, and as such, this agreement did not have a material impact on
the 2000 financial statements.

      In February 1998, the Company formed a wholly owned subsidiary, HWS Real
Estate Advisory Group, Inc. ("HWS REAG") to purchase the assets of Watermark's
real estate advisory business, consisting primarily of contracts to perform
future asset management and advisory services as well as certain equity
interests in the Apollo Joint Venture. The purchase price for such business was
$1,500,000 of cash. The acquisition was accounted for as a purchase with the
results of HWS REAG included in the consolidated financial statements of the
Company from the acquisition date. On September 30, 1999, the Company and
Watermark entered into a Termination Agreement whereby all agreements between
the parties were terminated, and among other things, includes a payment by
Watermark to the Company of $885,000, that was made in December 1999.

      The Company's real estate investment and asset management business was
comprised of the HWS REAG operations and investments in various real estate
ventures, including the Apollo Joint Venture and ING Joint Venture discussed
above. In September 1999, as part of the Company's strategic initiative
discussed above, the Company decided to divest itself of its real estate
investment and asset management business. The Company disposed of its real
estate investments, and ceased the real estate asset management and advisory
operations in 2000. Losses from discontinued operations for 1999 include the
write-off of certain real estate investments and receivables no longer deemed
realizable of approximately $500,000. The loss on disposal for 1999 includes the
write-off of goodwill of $450,000 and write-downs and reserves in connection
with the anticipated disposal of real estate investments of approximately
$4,900,000 to record such investments at their estimated recoverable amounts.

SUMMARY OF FINANCIAL INFORMATION

        The Company has reflected the operating results associated with the
renovation, real estate investment and asset management, and hotel development
businesses, as well as the estimated losses on disposal, as discontinued
operations on the consolidated statements of operations for all years presented.
Results of these operations, as presented in accompanying consolidated
statements of operations, are as follows:
<TABLE>
<CAPTION>

                                                              2000           1999            1998
                                                         ------------   ------------    ------------
<S>                                                      <C>            <C>             <C>
      RENOVATION BUSINESS:
           Revenues                                      $         --   $ 22,053,206    $ 56,014,202
           Income (loss) from operations, net of taxes             --    (21,223,412)      3,141,971
           Loss on disposal, net of taxes                          --     (9,847,414)             --

      REAL ESTATE INVESTMENT AND ASSET MANAGEMENT
      BUSINESS:

           Revenues                                                --             --         961,529
           Loss from operations, net of taxes                      --     (1,365,738)        (82,407)
           Gain (loss) on disposal, net of taxes              204,671     (5,652,262)             --
</TABLE>

                                      F-14
<PAGE>   45

<TABLE>
<CAPTION>
                                                              2000           1999            1998
                                                         ------------   ------------    ------------
<S>                                                      <C>            <C>             <C>
      HOTEL DEVELOPMENT BUSINESS:

           Revenues                                                --             --              --
           Loss from operations, net of taxes                      --             --        (866,752)
           Loss on disposal, net of taxes                          --     (1,670,204)        (90,900)

      TOTAL DISCONTINUED OPERATIONS:
           Revenues                                                --     22,053,206      56,975,731
           Income (loss) from operations, net
           of taxes                                                --    (22,589,150)      2,192,812
           Gain (loss) on disposal, net of taxes              204,671    (17,169,880)        (90,900)
</TABLE>


         The remaining assets and liabilities of the discontinued operations as
of December 31, 2000 and 1999, as presented in the accompanying consolidated
balance sheets, are as follows:
<TABLE>
<CAPTION>

                                                                REAL ESTATE
                                                                INVESTMENT &        HOTEL
                                                RENOVATION    ASSET MANAGEMENT   DEVELOPMENT      TOTAL
                                                ----------    ----------------   -----------      -----
<S>                                            <C>             <C>             <C>             <C>
      DECEMBER 31, 2000:
      Accounts receivable                      $ 19,483,650    $         --    $         --    $ 19,483,650
      Allowance for doubtful accounts           (19,071,638)             --              --     (19,071,638)
      Prepaids and other current assets, net        110,000              --              --         110,000
      Accounts payable                           (1,548,735)             --              --      (1,548,735)
      Accrued and other liabilities                (707,082)     (1,000,000)        (47,627)     (1,754,709)
      Current portion of long-term debt          (4,585,000)             --              --      (4,585,000)
                                               ------------    ------------    ------------    ------------
      Net current liabilities                  $ (6,318,805)   $ (1,000,000)   $    (47,627)   $ (7,366,432)
                                               ------------    ------------    ------------    ------------
      Property and equipment, net                    30,000              --          23,640          53,640
      Other assets                                   18,638              --          21,557          40,195
                                               ------------    ------------    ------------    ------------
      Net non-current assets                   $     48,638    $         --    $     45,197    $     93,835
                                               ------------    ------------    ------------    ------------

      DECEMBER 31, 1999:
      Accounts receivable                      $ 23,535,764    $         --    $         --    $ 23,535,764
      Allowance for doubtful accounts           (20,903,638)             --              --     (20,903,638)
      Prepaids and other current assets, net        753,000              --              --         753,000
      Accounts payable                           (3,428,505)             --              --      (3,428,505)
      Accrued and other liabilities              (2,468,028)     (1,000,000)        (30,886)     (3,498,914)
                                               ------------    ------------    ------------    ------------
      Net current liabilities                  $ (2,511,407)   $ (1,000,000)   $    (30,886)   $ (3,542,293)
                                               ------------    ------------    ------------    ------------
      Property and equipment, net                    74,014              --          34,420         108,434
      Other assets                                   38,296              --          33,337          71,633
                                               ------------    ------------    ------------    ------------
      Net non-current assets                   $    112,310    $         --    $     67,757    $    180,067
                                               ------------    ------------    ------------    ------------
</TABLE>

         Net current liabilities of discontinued operations at December 31, 2000
and 1999, include renovation accounts receivables which include unapproved
change orders and estimated net claims, which involve negotiations with
customers and in some cases has resulted in litigation. The Company believes
that it has established contractual or legal bases for pursuing recovery of
unapproved change orders and claims and it is management's intention to pursue
these matters and litigate, if necessary, until a decision or settlement is
reached. Unapproved change orders and claims involve the use of estimates and it
is reasonably possible that revisions to the estimated recoverable amounts could
be made within the next year. The settlement of these amounts depends on
individual circumstances and negotiations with the counter party, accordingly,
the timing of the collection will vary and may extend beyond one year.


                                      F-15
<PAGE>   46


5.       ASSET IMPAIRMENT CHARGE

         As a result of the Company's strategic initiative to reposition the
core businesses into a business-to-business e-commerce company, the Parker
Reorder proprietary software product, Parker Fully Integrated Reorder Systems
Tracking ("Parker FIRST"), which is a client server-based system used by clients
to reorder operating supplies and equipment, was phased out in 2000 as the
Company migrated the reorder business to an internet web-based system.
Consequently, management determined that the Parker FIRST system will not
provide future long-term benefits to the Company. In addition, management
determined that the goodwill and other intangibles associated with the
acquisition of Parker Reorder in January 1997 is closely related to the Parker
FIRST system, which was under development at the time of the acquisition.
Accordingly, the Company recorded for the year ended December 31, 1999, an asset
impairment charge of $9,252,000, consisting of net capitalized computer software
costs associated with the Parker FIRST system of $3,099,000 and net goodwill and
other intangibles of $6,153,000.

6.       ACQUISITIONS

         In January 1998, the Company acquired Bekins Distribution Services,
Inc. ("Bekins"), a provider of transportation, warehousing and installation
services to a variety of customers worldwide. Founded in 1969, Bekins is a
logistical services company that serves clients who are opening, renovating or
relocating facilities by assuring that materials, fixtures, furniture and
merchandise are moved from multiple vendor locations to their ultimate
destinations in a controlled orderly sequence so that each item can be installed
on schedule. The purchase price of Bekins, including acquisition costs, of
approximately $11,400,000 consisted of 514,117 shares of common stock and the
assumption of certain Bekins' debt. Additionally, under the terms of the
purchase agreement, the Company was required to issue an additional 639,512
shares of common stock in January 1999 as a result of the decrease in the price
of the Company's common stock on the one year anniversary date of the
acquisition, which was accounted for as an equity transaction resulting in no
adjustment to the purchase price or reported net loss. The acquisition resulted
in goodwill of approximately $7,400,000 which is being amortized on a
straight-line basis over its estimated useful life of 30 years. The acquisition
has been accounted for as a purchase with the results of Bekins included in the
consolidated financial statements of the Company from the acquisition date.

7.       COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

         Costs and estimated earnings in excess of billings on uncompleted
contracts represent unbilled receivables. Billings on uncompleted contracts in
excess of costs and estimated earnings represent deferred revenue, and consists
of:
<TABLE>
<CAPTION>

                                                                                   DECEMBER 31,
                                                                           --------------------------------
                                                                               2000                 1999
                                                                           -----------          -----------
<S>                                                                        <C>                  <C>
Costs incurred and earnings on uncompleted contracts                       $ 3,172,815          $ 6,132,097
Billings to date                                                            (4,467,188)          (5,998,097)
                                                                           -----------          -----------
Costs and estimated earnings on uncompleted contracts in excess of
billings                                                                    (1,294,373)             134,000
                                                                           -----------          -----------
Included in the accompanying consolidated balance sheets under
the following captions:
Costs and estimated earnings in excess of billings                                  --              276,000
Billings in excess of costs and estimated earnings                          (1,294,373)            (142,000)
                                                                           -----------          -----------
                                                                           $(1,294,373)         $   134,000
                                                                           -----------          -----------
</TABLE>



                                      F-16
<PAGE>   47






8.    PROPERTY AND EQUIPMENT

      Property and equipment consists of the following:
<TABLE>
<CAPTION>

                                                                   DECEMBER 31,
                                                        --------------------------------
                                                            2000                 1999
                                                        -----------          -----------
<S>                                                     <C>                  <C>
Building and improvements                               $ 2,277,000          $ 2,264,874
Furniture and fixtures                                    1,093,011            1,043,599
Office equipment                                          2,401,489            2,227,554
Leasehold improvements                                      392,431              552,898
Software                                                  1,299,245              877,348
Web Site Development Costs                                  288,885               67,013
                                                        -----------          -----------
                                                          7,752,061            7,033,286
Less: Accumulated depreciation and amortization          (2,436,737)          (1,838,106)
                                                        -----------          -----------
                                                        $ 5,315,324          $ 5,195,180
                                                        -----------          -----------
</TABLE>

9.       LOANS PAYABLE

         In March 1998, the Company obtained an unsecured line of credit with
HSBC Bank USA ("HSBC"). This line expired on September 30, 1999, with
outstanding borrowings of $9,885,000 and was refinanced in December 2000, into a
new three-year term note with the Company, a new five-year note with the
Company's subsidiary, HRB and $1 million of preferred stock. In July 1998, the
Company obtained an unsecured line of credit with Bank of America N.A. (formerly
Nations Bank). This line expired on September 30, 1999, with outstanding
borrowings of $5,950,000 and was refinanced in September, 2000 into two new
three-year notes with the Company's subsidiary, Bekins. Both unsecured lines
charged interest at the bank's prime rate.

         The weighted average interest rates for 2000, 1999 and 1998 on the
loans outstanding during the year were 9.17%, 8.45% and 8.20%, respectively.

10.      LONG-TERM DEBT

         Long-term debt consists of the following:
<TABLE>
<CAPTION>

                                                                                                DECEMBER 31,
                                                                                       ------------------------------
                                                                                            2000               1999
                                                                                       -----------         ----------
<S>                                                                                    <C>                 <C>
Overadvance term loan with Bank of America N.A. issued by Bekins.  Payable in
quarterly installments of $75,000 with the final balance due September, 2003
Interest is payable monthly at the bank's prime lending rate (9.50% at
December 31, 2000)                                                                     $ 5,300,000         $       --

Revolving note with Bank of America N.A. issued by Bekins. Interest only with
balance due September 2003.  Interest is payable monthly at the bank's prime
lending rate (9.50% at December 31, 2000)                                                1,500,000                 --

Promissory note with HSBC Bank issued by the Company.  Payable in monthly
installments of $50,000 with the final balance (remaining principal plus
accrued interest) due December, 2003.  Interest is payable at maturity at the
bank's prime lending rate (9.50% at December 31, 2000)                                   4,015,781                 --

Term loan with Bank of America N.A. issued by Bekins. Payable in quarterly
installments of $117,000 with the final balance due on April 1, 2001. Interest
is payable monthly at the bank's prime lending rate (9.50% at December 31,
2000)                                                                                      918,000          1,386,000

Mortgage note payable with Bank of America N.A. issued by Bekins related to
the building owned. Payable in quarterly installments of $31,000 with the
final balance due on April 1, 2001. Interest is payable monthly at the bank's
prime lending rate (9.50% at December 31, 2000)                                          1,385,000          1,509,000
</TABLE>

                                      F-17
<PAGE>   48




<TABLE>
<CAPTION>

                                                                                                DECEMBER 31,
                                                                                       ------------------------------
                                                                                            2000               1999
                                                                                       -----------         ----------

<S>                                                                                    <C>                 <C>
Settlement agreement with West Atlantic Corp., payable in varying annual
installments of $12,000 to $15,000 through November, 2006.  This obligation is
non-interest bearing                                                                        85,000                 --

Capital lease obligations issued by the Company covering various office
equipment bearing interest at fixed rates of 9.60% to 16.62% with varying
payments through February, 2003                                                            172,072                 --

Capital lease obligations issued by Bekins covering various office furniture
and equipment bearing interest at fixed rates of 6.75% to 10.50% with varying
payments through December 2001                                                               7,000             14,000

Capital lease obligations issued by LPC covering computer and office equipment
bearing interest at fixed rates of 8% to 10%, with payments through October
2004                                                                                        38,933             61,294
                                                                                       -----------         ----------
                                                                                       $13,421,786         $2,970,294
                                                                                       -----------         ----------
</TABLE>


         In September 2000, the Company's wholly-owned subsidiary, Bekins,
executed an Amended and Restated Loan Agreement with Bank of America, N.A.
whereby the proceeds were primarily used to pay-off the Company's defaulted
unsecured line of credit. As part of this Agreement, Bekins also restructured
its term loan and mortgage note payable with Bank of America, N.A. to eliminate
their default status. Both new facilities are secured by the assets and stock of
Bekins. Under the Agreement, Bekins is prohibited from paying any dividends on
its stock to the Parent Company except for reimbursement of certain allocated
overhead and administrative expenses. In conjunction with this Agreement, Bank
of America, N.A. dismissed its legal action against the Company. In March 2001,
Bekins sold for $2,265,500 its warehouse facility in Orlando, Florida, the net
proceeds of which were used to repay the mortgage in full and reduce the
remaining balance on the term loan to $107,000. In accordance with the
Agreement, the remaining balance of the term loan was transferred to the
overadvance term loan and the term loan was retired.

         In December 2000, the Company executed an Amended and Restated Loan
Agreement with HSBC Bank USA ("HSBC"). This Agreement consists of two debt
instruments ("HWS note, HRB note") and $1 million of 8% convertible preferred
stock, which were used to pay off the Company's defaulted unsecured line of
credit with HSBC. The Company signed a three-year promissory note (HWS note)
with HSBC in the principal amount of $4,300,000 with a $300,000 principal
payment paid signing and ongoing monthly principal payments of $50,000. Interest
on the note accrues at the bank's prime rate and is due at maturity along with
the remaining principal balance. The note is secured by the assets of the Parent
Company and the capital stock of the Leonard Parker Company, Parker Reorder
Online and Hospitality Restoration and Builders. The Company's discontinued
subsidiary, HRB, assigned a portion of its contract right in a disputed
receivable with a former customer to HSBC in the form of a five-year $4,585,000
promissory note, bearing interest at the bank's prime rate (see Note 13 c). This
HRB note is secured solely by its interest in the receivable and any collections
are to be divided between HRB and HSBC according to a prescribed formula. At
maturity of the HRB note, the Company has the option of extending the term for
an additional twelve months, at which time, if the disputed receivable has not
been resolved, title in full of the contract right along with the related debt
passes to HSBC. The preferred stock issued to HSBC under this Agreement was
valued at $1 million on the date of issuance based on the then outstanding debt
balance and is convertible into a total of 1 million shares of the Company's
common stock. The note with HSBC Bank contains a covenant to submit audited
financial statements to the Bank within 105 days of year-end. Due to the late
filing of this Form 10-K, the Company is not in compliance with this covenant.
The Company will cure this default upon the filing of this Form 10-K.
Additionally, the Bank has advised the Company that they will not call the note
as a result of this violation.



                                      F-18
<PAGE>   49

         The Company does have exposure to market risks associated with changes
in interest rates given that the Company maintains long term debt facilities
which have variable interest rates.

         The following represents aggregate annual principal payments on
long-term debt, for the years ended December 31:

                2001                              $3,165,880
                2002                                 979,369
                2003                               9,227,807
                2004                                  18,730
                2005 and after                        30,000
                                                -------------
                                                 $13,421,786
                                                -------------

11.      INCOME TAXES

         The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>

                                                      2000             1999                 1998
                                                    -------         -----------          -----------
<S>                                                 <C>             <C>                  <C>
CONTINUING OPERATIONS
Current:
Federal                                             $    --         ($2,721,337)         ($  963,592)
State and Local                                      77,000            (574,118)             608,133
                                                    -------         -----------          -----------
     Total Current                                   77,000          (3,295,455)            (355,459)
                                                    -------         -----------          -----------
Deferred:
Federal                                                  --             151,377              (73,674)
State and Local                                          --              40,249              (18,130)
                                                    -------         -----------          -----------
     Total Deferred                                      --             191,626              (91,804)
                                                    -------         -----------          -----------
     Total                                           77,000          (3,103,829)            (447,263)
                                                    -------         -----------          -----------

OPERATIONS OF DISCONTINUED BUSINESSES
Current:
Federal                                                  --                  --            4,080,714
State and Local                                          --                  --              229,985
                                                    -------         -----------          -----------
     Total Current                                       --                  --            4,310,699
                                                    -------         -----------          -----------
Deferred:
Federal                                                  --           2,947,618           (2,925,453)
State and Local                                          --             783,722             (719,733)
                                                    -------         -----------          -----------
     Total Deferred                                      --           3,731,340           (3,645,186)
                                                    -------         -----------          -----------
     Total                                               --           3,731,340              665,513
                                                    -------         -----------          -----------

LOSS ON DISPOSAL OF DISCONTINUED BUSINESSES
Current:
Federal                                                  --                  --                   --
State and Local                                          --                  --                   --
                                                    -------         -----------          -----------
     Total Current                                       --                  --                   --
                                                    -------         -----------          -----------
Deferred:
Federal                                                  --             483,624              (47,280)
State and Local                                          --             128,588              (11,820)
                                                    -------         -----------          -----------
     Total Deferred                                      --             612,212              (59,100)
                                                    -------         -----------          -----------
     Total                                               --             612,212              (59,100)
                                                    -------         -----------          -----------
     Total Current Provision (Benefit)               77,000          (3,295,455)           3,955,240
     Total Deferred Provision (Benefit)                  --           4,535,178           (3,796,090)
                                                    -------         -----------          -----------
          Total Provision                           $77,000         $ 1,239,723          $   159,150
                                                    -------         -----------          -----------

</TABLE>

                                      F-19
<PAGE>   50



      The current provision for income taxes in 2000 primarily represents state
and local taxes arising in jurisdictions in which a consolidated tax return
cannot be filed. The current benefit for income taxes in 1999 primarily
represents the benefit associated with the Company's ability to carryback 1999
tax losses to prior years for federal, state and local tax purposes. The
deferred provision in 1999 primarily represents the valuation allowance against
the Company's previously recorded deferred tax assets. The Company has also
provided a valuation allowance against deferred tax assets arising in 2000 and
1999, representing future deductible expenses, given the Company's current tax
position.

         The following is a reconciliation of the Company's income tax provision
(benefit) based on the statutory rate and the actual provision for continuing
operations:
<TABLE>
<CAPTION>

                                                                      2000                 1999               1998
                                                                  -----------          -----------          ---------
<S>                                                                <C>                 <C>                  <C>
Statutory federal income tax at 34%                               ($1,317,731)         ($7,258,674)         ($855,385)

Current state and local taxes, net of federal tax benefit              50,820             (588,743)           389,402
Nondeductible goodwill amortization and expenses                       56,995            2,261,036            223,748
Prior year provision adjustment                                            --                   --           (205,028)
Net deferred state and local taxes on deferred tax assets            (164,232)                  --                 --
Increase in valuation allowance on deferred tax assets              1,451,148            2,482,552                 --
                                                                  -----------          -----------          ---------
                                                                  $    77,000          ($3,103,829)         ($447,263)
                                                                  -----------          -----------          ---------
</TABLE>



         At December 31, 2000 and 1999, the Company has approximately
$31,158,000 and $10,689,000, respectively, of federal net operating loss
carryforwards expiring through 2020. Realization of approximately $21,570,000
and $20,119,000 net deferred tax assets at December 31, 2000 and 1999,
respectively, resulting primarily from net operating loss carryforwards and
allowance for doubtful accounts, is not considered more likely than not and
accordingly, a valuation allowance has been recorded for the full amount of such
assets.

      Deferred income taxes result from temporary differences between the
financial reporting carrying amounts and the tax bases of assets and
liabilities. The source of these differences and the tax effect of each at
December 31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>

DEFERRED INCOME TAX LIABILITY (ASSET)                 2000                  1999
                                                 ------------          ------------
<S>                                              <C>                   <C>
Warrant expense                                  $    (17,735)         $   (827,220)
Allowance for doubtful accounts                    (8,322,481)          (11,747,380)
Investment reserves and write-offs                         --            (1,907,379)
Operating losses during phase-out period             (100,815)             (199,038)
Depreciation and amortization expense                  96,184                25,000
Rent expense                                          (34,945)              (42,870)
Net operating loss carryforward                   (12,279,985)           (4,208,897)

Rebate income                                        (236,472)             (236,261)
Legal expenses                                       (413,826)             (586,716)
Other - accrued expenses                             (259,767)             (387,933)
                                                 ------------          ------------
Total                                             (21,569,842)          (20,118,694)

Valuation allowance                                21,569,842            20,118,694
                                                 ------------          ------------
Net                                              $          0          $          0
                                                 ------------          ------------
</TABLE>


                                      F-20
<PAGE>   51





12.      RELATED PARTY TRANSACTIONS

(a)  In connection with the Apollo Joint Venture on April 10, 1997, the Company
     and Resource Holdings, an entity affiliated with a director of the Company,
     entered into a financial advisory agreement pursuant to which Resource
     Holdings agreed to assist the Company in connection with negotiations
     relating to the Apollo Joint Venture and to provide general financial
     advisory, strategic planning and acquisition advice to the Company. In
     consideration for those services, the Company agreed to pay Resource
     Holdings 16 1/2% of certain distributions received by the Company from the
     Apollo Joint Venture (after certain distributions to the joint venture
     parties and returns on capital invested in each project in which the Apollo
     Joint Venture participates) and a monthly retainer of $10,000 per month. No
     distributions were received by the Company from Apollo in 2000, 1999 or
     1998. The financial advisory agreement was terminated in April 1999.

(b)  Officer and Employee Loans. At various times at the direction of certain
     former officers, but without Board of Director approval, the Company
     provided short-term loans to various officers and employees of the Company
     bearing interest at 12%. Loans provided during 2000, 1999, and 1998
     amounted to $0, $39,500 and $3,590,000, respectively. The balance owed to
     the Company was $9,125 and $289,500 at December 31, 2000 and 1999,
     respectively. In 1998, the Company provided a loan of $3,200,000 to
     Watertone Holdings LP, a firm managed by Watermark. This loan was repaid in
     full in 1998 without interest. Watermark is affiliated with Robert Berman,
     the former Chief Executive Officer and Chairman of the Board, and certain
     former employees of the Company.

(c)  In February 1998, the Company, through HWS REAG, purchased the assets of
     Watermark's real estate advisory business for consideration of $1,500,000
     in cash. In September 1999, the Company and Watermark entered into a
     Termination Agreement pursuant to which Watermark paid $885,000 to the
     Company in December 1999.

(d)  During 1999 and 1998, the Company provided renovation and procurement
     services to the Apollo Joint Venture and ING Joint Venture in which the
     Company had an ownership interest. The following revenues and gross profit,
     have been reflected in discontinued operations in the consolidated
     financial statements.

         YEAR ENDED                   DECEMBER 31, 1999     DECEMBER 31, 1998
         ----------                   -----------------     -----------------
         Revenues                       $16,065,121           $22,806,617
         Cost of revenues                14,790,131            21,684,241
                                        -----------           -----------
         Gross profit                   $ 1,274,990           $ 1,122,376
                                        -----------           -----------

Amounts receivable from the joint ventures were $2,100,077 at December 31, 1999.

(e)  The Company entered into an Agreement with the Chairman of the Board of the
     Company effective July 1, 2001 to provide general consulting services to
     the Company for a one-year period for an aggregate compensation amount of
     $250,000. The Company prepaid the $250,000 in 2000 and has reflected this
     amount in accounts receivable, net in the consolidated balance sheet at
     December 31, 2000.

13.      COMMITMENTS AND CONTINGENCIES

(A)   LEASE COMMITMENTS

      The Company leases office space in New York, Los Angeles, St. Louis and
Coral Gables which expire at various dates through 2009. In conjunction with the
acquisition of Bekins in January 1998, the Company assumed a ground lease on a
warehouse in Orlando, Florida which expires in 2085, with a minimum annual
payment of $6,489 and assumed a lease on warehouse space in Las Vegas, Nevada
through October 2001.

      The Orlando, Florida warehouse was sold and the ground lease assigned in
March 2001, for $2,265,500, the net proceeds of which were used to repay the
related mortgage in full and pay off substantially all of the term loan with
Bank of America, N.A. (see Note 10). In anticipation of a sale, Bekins entered
into a lease on warehouse space in Orlando in February 2000.


                                      F-21
<PAGE>   52


The aggregate future minimum lease payments due under operating leases, are as
follows:

DECEMBER 31

2001                                             $1,808,525
2002                                              1,880,594
2003                                              1,675,856
2004                                              1,582,349
2005                                              1,416,192
Thereafter                                        4,179,239
                                                -------------
                                                 12,542,755
                                                -------------

      Rent expense for 2000, 1999 and 1998 was $1,833,164, $2,401,536 and
$2,101,282, respectively.

(B)   EMPLOYMENT AGREEMENTS

      The Company currently has employment agreements with four members of
management personnel that expire from December 2001 to August 2002 at an
aggregate annual compensation of $610,275.

(C)   LITIGATION

      The Company is a defendant in various litigation incident to its business
and in some instances the amounts sought include substantial claims and
counterclaims.

         In June 1999, Hospitality Restoration & Builders, Inc., a wholly owned
subsidiary of the Company ("HRB"), filed a lawsuit in the Supreme Court, New
York County against Servico, Inc. ("Servico"), six (6) Servico hotel subsidiary
corporations, Servico's successor, Lodgian, Inc., and Impac Hotel Group. In
general, the lawsuit alleged that Servico alleged that Servico breached its
obligations to HRB under agreements pursuant to which HRB was to renovate
certain hotel properties located in New York, Texas and Illinois. It was also
claimed that Servico fraudulently induced HRB to perform work. HRB has asserted
in the action that it suspended its work at these hotels due to Servico's
failure to pay for certain completed work. Following HRB's suspension of work,
Servico terminated HRB as the contractor at all the hotels. HRB is seeking
damages in excess of $14.5 million. As a result of motions made by Servico, the
actions related to the Texas and Illinois properties were dismissed for lack of
jurisdiction and the claims based on fraud were also dismissed. HRB has
subsequently filed actions against Servico in Texas and Illinois. With respect
to the New York properties, Servico has counterclaimed against HRB to recover
damages in excess of $19.0 million. The Company believes that it has meritorious
defenses against Servico's counterclaims and that the outcome of this matter
will not have a material adverse effect on the Company, however, because of the
uncertainties inherant in the litigation process it is unable to predict the
outcome and an adverse outcome in this action could have a material adverse
effect on the Company.

         On February 3, 2000, Servico Rolling Meadows, Inc. ("Servico RM"),
filed a lawsuit in the United States District Court for the Northern District of
Illinois against HRB. In general, the lawsuit alleges that HRB furnished
defective work and failed to complete work required under an agreement to
renovate a hotel located in Rolling Meadows, Illinois. Servico RM is seeking
damages in excess of $2.1 million. In response to this action, on March 10,
2000, HRB filed an answer in which it denied Servico RM's claims and asserted
counterclaims against Servico RM for breach of contract and fraud, among other
claims. HRB is seeking damages in an amount in excess of $2.8 million against
Servico RM in connection with this counterclaim. To date, Servico RM has not
answered or otherwise responded to HRB's claims and formal discovery has not yet
been initiated. The Company believes that it has meritorious defenses against
Servico's counterclaims and that the outcome of this matter will not have a
material adverse effect on the Company, however, because of the uncertainties
inherant in the litigation process it is unable to predict the outcome and an
adverse outcome in this action could have a material adverse effect on the
Company.

         On or about February 23, 2000, HRB filed a lawsuit in the District
Court of Harris County, Texas against Servico Houston, Inc. ("Servico Houston").
In general, the lawsuit alleges that Servico breached its obligations to HRB
under an agreement pursuant to which HRB was to renovate a hotel located in
Houston, Texas and also fraudulently induced HRB to perform work at this hotel.
HRB claims in this lawsuit that it suspended work at this hotel because it was
not paid for completed work. Following its suspension, HRB was terminated as the
contractor. HRB is seeking damages in an amount equal to the sum of at least
$2,568,480 plus statutory interest. Servico Houston has answered, denied


                                      F-22
<PAGE>   53


responsibility for any damages and counterclaimed to recover damages in the
total amount of $2,822,856. The Company believes that it has meritorious
defenses against Servico's counterclaims and that the outcome of this matter
will not have a material adverse effect on the Company, however, because of the
uncertainties inherant in the litigation process it is unable to predict the
outcome and an adverse outcome in this action could have a material adverse
effect on the Company.

         In June, 1998, an action (the "State Action") was brought against the
Company by West Atlantic Corp. ("West Atlantic") in the Supreme Court of the
State of New York. The State Action alleged that the Company retained West
Atlantic pursuant to an agreement to perform certain marketing and selling
services for the Company. The State Action further alleged that fees were
allegedly earned and not paid under the Agreement and sought damages relating to
an alleged breach of contract, damages with respect to alleged "significant
benefits to the Company" and damages relating to breach of the duties of good
faith and fair dealing. In November 2000, the Company and West Atlantic executed
a settlement agreement. In connection therewith, the parties executed mutual
releases, the Company agreed to pay to West Atlantic a total of $115,000 over
six years and West Atlantic dismissed the State Action with prejudice. In
connection with the State Action, the Company brought claims in federal and
state court against Tova Schwartz, the former President and Chief Executive
Officer of the Company's predecessor, seeking indemnification against the West
Atlantic claims in the State Action, as well as compensatory damages and
punitive damages for fraud, among other things. The state and federal actions
claim that, among other things, Ms. Schwartz failed to disclose to the Company
the existence of the Agreement and West Atlantic's claims thereunder, when the
Company purchased from Ms. Schwartz certain shares of Common Stock of the
Company which she then held, sold its lighting business to her and provided her
with other severance benefits. Ms. Schwartz asserted counterclaims against the
Company in the State Action, and she also joined Howard Anders and Robert
Berman, former employees of the Company, as fourth-party defendants in the State
Action. Ms. Schwartz asserted counterclaims against the Company in the federal
action, and joined Mr. Anders, Mr. Berman and Alan Friedberg, a former employee
of the Company, as additional counterclaim defendants in the federal action. The
Company has concluded that, pursuant to the Company's By-Laws, Messrs. Anders
and Berman are entitled to indemnification from the Company with respect to the
state and federal actions. The Company has concluded that, pursuant to the
Company's By-Laws, Messrs. Anders and Berman are entitled to indemnification
from the Company with respect to the state and federal actions. In September
2000, the Company and Messrs. Anders and Berman entered into a stipulation with
Ms. Schwartz pursuant to which they dismissed without prejudice all claims and
counterclaims between them in the federal action. That stipulation was
so-ordered by the court on November 2, 2000. As part of this disposition, the
parties executed a separate side-agreement (not filed with the court) pursuant
to which the Company agreed that Ms. Schwartz will not be precluded from raising
a statute of limitations defense in the event the Company re-files against her
the claims that were the subject of the federal action. In or about May 2001,
the parties executed a stipulation of discontinue with respect to the third-and
fourth-party actions under the stipulation, all claims and defenses in the
third-and fourth-party actions are dismissed without prejudice pending the
outcome of Ms. Schwartz's legal malpractice action against the Company's former
counsel, Olshan Grundman Frome & Rosenzweig, and Robert Friedman, Esq.
(collectively "Olshan"), arising out of Olshan's advice to the Company in
connection with the Company's August 1995 transaction with AGF Interior Services
(the "Olshan Action"). As part of the disposition of the third-and fourth-party
actions, the parties agreed to toll the statute of limitations as to all claims
in those actions until one year from the date that the Olshan Action is finally
concluded. In the event that the Olshan Action is resolved in Olshan's favor,
the parties to the third-and fourth-party actions will each dismiss with
prejudice their claims against the other parties to those actions. The
stipulation was submitted to the court for its review and signature on June 7,
2001. The Company admitted no wrongdoing in connection with the dismissals of
state and federal actions.

         After the resignations of a number of former directors and officers of
the Company in the fall of 1999, the Company retained counsel to assist in
conducting an investigation into various matters. In the course of the
investigation, the Company discovered, among other things, that approximately
$2.1 million of fraudulent charges had been submitted to and paid by the Company
during 1998 and 1999. Those funds have been returned to the Company by a former
officer of the Company, but the Company has not yet recovered any interest or
related costs. Management believes that it has identified the financial extent
of the fraudulent activities. The financial results for the fourth quarter of
1999 reflect the recovery. The Company has not restated any prior period
financial statements as management has determined that the impact was not
material in any period. The Company believes that other former directors,
officers and employees may have been involved in the fraudulent activities, that
there may have been breaches of fiduciary duties and other inappropriate
actions, and that the Company may be able to recover damages from those
individuals. The Company intends to pursue all available and appropriate
remedies and to make any appropriate referrals to law enforcement and
administrative agencies. In May 2001, the Company reached an Agreement to settle
its litigation against one of the former officers of the Company. The Agreement
provided for a cash payment by the former officer to the Company of $650,000
within 60 days and the former officer's continued cooperation with the Company's
investigation. In exchange, the Company agreed to a limited release to the
former officer and to dismiss its outstanding litigation upon receipt of the
payment called for under the Agreement.



                                      F-23
<PAGE>   54

14.      MAJOR CUSTOMERS

         During 2000, no customers accounted for over 10% of the Company's
continuing revenues. During 1999, one customer, a high-ranking government
official of the United Arab Emirates, accounted for 13% of the Company's
continuing revenues. The largest customer of the Company for 1998, a major
lodging company, accounted for 14% of the Company's continuing revenues.

15.      (CAPITAL DEFICIT) STOCKHOLDERS' EQUITY

         In January 1997, in connection with the acquisition of the Leonard
Parker Company and Parker Reorder, the Company issued 200,000 shares of 6%
Convertible Preferred Stock ("LPC Preferred"). The holders of LPC Preferred were
entitled to receive cash dividends at the rate of six percent (or $1.50) per
annum per share of LPC Preferred (the "Preferred Dividend"), accruing from the
date of issuance and payable commencing March 31, 1998. The dividends for 1998
were accrued at December 31, 1998 and paid in 1999, and the dividends for 1999
were accrued at December 31, 1999 and paid in 2000. The LPC Preferred was
convertible into the Company's Common Stock based upon a prescribed formula in
the purchase agreement. In October 1998, 80,000 shares of LPC Preferred were
converted into an aggregate of 584,800 shares of Common Stock. The remaining
120,000 shares of LPC Preferred were converted into an aggregate of 1,269,399
shares of Common Stock in September and October 1999.

         In January 1998, in connection with the acquisition of Bekins, the
Company issued 514,117 shares of Common Stock. Further, pursuant to a make-whole
provision in the purchase agreement, 639,512 additional shares of Common Stock
were issued by the Company in January 1999.

         As an inducement to enter into the Joint Venture Agreement with Apollo,
the Company issued to Apollo a seven-year warrant to purchase up to 750,000
shares of Common Stock at $8.115 per share. The warrant was initially
exercisable as to 250,000 shares and became exercisable as to the remaining
500,000 shares in increments of 100,000 shares for every $7,500,000 of
incremental renovation revenue and purchasing fees earned by the Company from
the Apollo Joint Venture. In October 2000, as part of the Company's agreement to
restructure its involvement in the Apollo Joint Venture, the Company issued
100,000 shares of Common Stock to Apollo and all the warrants previously issued
were returned to the Company and cancelled. The cost associated with the
warrants for the 250,000 shares initially exercisable were expensed as warrant
expense in 1997. The costs associated with the warrants for the 100,000 share
increments earned by Apollo were recognized as an additional cost of the related
renovation and procurement contract. In 1999 and 1998, the Company recognized
expenses related to these warrants of $381,525 and $213,555, respectively, all
of which are included in discontinued operations in the accompanying
Consolidated Statement of Operations.

         In December 2000, the Company executed an Amended and Restated Loan
Agreement with HSBC Bank. In connection with this Agreement, the Company issued
1 million shares of 8% Convertible Preferred Stock ("HSBC Preferred") valued at
$1.00 per share for a total value of $1 million (the then outstanding debt
balance). The HSBC Preferred are convertible into the Company's Common Stock at
a ratio of 1:1 or into a total of 1 million shares of Common Stock. During the
first two years after the date of this Agreement, the dividend is payable in
additional shares of Convertible Preferred Stock. After two years, the dividend
is payable either in additional shares of Convertible Preferred Stock or cash,
at the option of the Company. Dividends are payable on a semi-annual basis,
commencing June 30, 2001.

16.      STOCK OPTION PLANS

         At December 31, 2000, the Company has three stock option plans. The
Company accounts for its stock option plans under the intrinsic value based
method, such that when the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant, no
compensation cost is recognized.

         In December 1999, the Company's Board of Directors adopted, and the
stockholders approved, the 1999 Stock Option Plan (the "Plan") for the purpose
of providing incentive to the officers and employees of the Company, who are
primarily responsible for the management and growth of the Company, as well as
to secure for the Company and its stockholders the benefits arising from stock
ownership by its outside directors. The Company can issue options for up to
2,500,000 shares under the Plan. With respect thereto, options to purchase a
total of 820,500 shares have been granted. Each option granted pursuant to the
Plan shall be designated at the time of grant as either an "incentive stock
option" or as a "non-qualified stock option". Incentive stock options are
granted at the fair market value of the stock while non-qualified stock options
must be granted at no less than 75% of the fair market value of the stock. The
term and vesting period for each option granted is determined by the Stock


                                      F-24
<PAGE>   55

Option Committee, which is composed of two or more outside members of the Board
of Directors, provided the maximum length of the term of each option granted
will be no more than ten years. Each outside director who becomes an outside
director after December 15, 1999, shall receive the grant of an option to
purchase 15,000 shares of common stock. To the extent that shares of Common
Stock remain available for the grant of options under the Plan on April 1 of
each year, beginning on April 1, 2000, each outside director shall be granted an
option to purchase 10,000 shares of Common Stock. Options granted to outside
directors vest over three years and shall be exercisable in three equal annual
installments beginning on the first anniversary of the date of grant.

         The Company is required to provide pro forma information regarding
income from continuing operations and earnings per share as if compensation cost
for the Company's stock option plans had been determined in accordance with the
fair value-based method, under which compensation cost would be measured at the
grant date based on the fair value of the awards and recognized over the vesting
period. The Company estimates the fair value of each stock option at the grant
date by using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1998: no dividends paid;
expected volatility of 98%; risk-free interest rate of 5.54%; and expected lives
of 5.8 years. No options were granted in 1999. For options granted in 2000, the
following weighted average assumptions were used: no dividends paid; expected
volatility of 70%; risk-free interest rate of 6.55%; and expected lives of 3
years.

         Under the fair value based method, the Company's income from continuing
operations and earnings per share would have been the pro forma amounts
indicated below.
<TABLE>
<CAPTION>

                                                                    2000                 1999               1998
                                                           -------------------- -------------------- ------------------
<S>                                                                   <C>                <C>                 <C>
Loss from continuing operations (in thousands):
As reported                                                           $(3,876)           $ (18,245)          $ (2,069)
Pro forma                                                              (4,680)             (19,846)            (3,443)
Basic loss per share from continuing operations:
As reported                                                             (0.26)               (1.35)             (0.19)
Pro forma                                                               (0.31)               (1.46)             (0.31)
Diluted loss per share from continuing operations:
As reported                                                             (0.26)               (1.35)             (0.19)
Pro forma                                                               (0.31)               (1.46)             (0.31)

</TABLE>

                                      F-25
<PAGE>   56

         The following table contains information on stock options for the three
year period ended December 31, 2000:

                                                               WEIGHTED AVERAGE
                                                    OPTIONS     EXERCISE PRICE
                                                   ---------   ---------------
         Outstanding, December 31, 1997            1,728,000          5.58
         Granted                                     426,000          8.95
         Exercised                                  (250,834)         2.74
         Canceled                                   (179,750)         8.28
                                                  ----------          ----
         Outstanding, December 31, 1998            1,723,416          6.42
         Granted                                          --            --
         Exercised                                   (40,000)         1.28
         Canceled                                   (819,416)         6.46
                                                  ----------          ----
         Outstanding, December 31, 1999              864,000          6.62
         Granted                                     820,500          2.96
         Exercised                                  (153,800)         2.27
         Canceled                                   (220,700)         5.08
                                                  ----------          ----
         Outstanding, December 31, 2000            1,310,000          5.10
                                                  ----------          ----
         Exercisable at December 31, 2000            662,175          5.83
         Exercisable at December 31, 1999            535,996          5.19
         Exercisable at December 31, 1998            864,650          3.67
                                                  ----------          ----


<TABLE>
<CAPTION>

                                                         EXERCISE PRICE LESS    EXERCISE PRICE EQUAL
                                                             THAN MARKET              TO MARKET
                                                       ------------------------ ----------------------
<S>                                                                <C>                 <C>
Weighted-average fair value of:
Options granted in 1998                                            --                  $ 7.14
Options granted in 1999                                            --                      --
Options granted in 2000                                            --                  $ 2.96
</TABLE>

         The following table summarizes information about stock options
outstanding at December 31, 2000:
<TABLE>
<CAPTION>

                                      OPTIONS OUTSTANDING                                OPTIONS EXERCISABLE
     ----------------------------------------------------------------------------- --------------------------------
                                   WEIGHTED
                                   AVERAGE
                                  REMAINING                          WEIGHTED                         WEIGHTED
              AMOUNT             CONTRACTUAL         RANGE OF         AVERAGE          AMOUNT          AVERAGE
            OUTSTANDING          LIFE (YEARS)    EXERCISE PRICE   EXERCISE PRICE    EXERCISABLE    EXERCISE PRICE
     -------------------------- --------------- ----------------- ---------------- --------------- ----------------
<S>                    <C>                <C>         <C>                   <C>           <C>                <C>
                       798,000            8.58        $1.94-3.00            $2.95         285,974            $2.96
                       225,000            1.03        6.125-6.75             6.67         225,000             6.67
                       287,000            6.58        8.94-12.00             9.86         151,201            10.00
     -------------------------- --------------- ----------------- ---------------- --------------- ----------------
                     1,310,000            6.85       $1.94-12.00             5.10         662,175             5.83


</TABLE>

                                      F-26
<PAGE>   57




17.      EARNINGS PER SHARE

         The following table reconciles the components of basic and diluted
earnings per common share for loss from continuing operations for the years
ended December 31, 2000, 1999 and 1998:
<TABLE>
<CAPTION>

                                                           2000                  1999                  1998
                                                      ------------          ------------          ------------
<S>                                                   <C>                   <C>                   <C>
NUMERATOR:

Loss from continuing operations                       $ (3,875,679)         $(18,245,213)         $ (2,068,574)
Preferred stock dividends                                   (3,507)             (135,000)             (270,000)
                                                      ------------          ------------          ------------
Loss available to common stockholders from
continuing operations - Basic                           (3,879,186)          (18,380,213)           (2,338,574)
                                                      ------------          ------------          ------------
Effect of dilutive securities (a):

Preferred stock dividends                                       --                    --                    --
                                                      ------------          ------------          ------------

Loss available to common stockholders from
continuing operations - Diluted                       $ (3,879,186)         $(18,380,213)         $ (2,338,574)
                                                      ------------          ------------          ------------
DENOMINATOR:

Weighted average common shares outstanding -
Basic                                                   14,815,908            13,665,465            12,092,437
                                                      ------------          ------------          ------------
Effect of dilutive securities (a):
Stock-based compensation plans                                  --                    --                    --
Contingently issuable shares                                    --                    --                    --
Convertible preferred stock                                     --                    --                    --
                                                      ------------          ------------          ------------
Weighted average common and common equivalent
shares outstanding - Diluted                            14,815,908            13,665,465            12,092,437
                                                      ------------          ------------          ------------
Basic loss per common share from continuing
operations                                            $      (0.26)         $      (1.35)         $      (0.19)

Diluted loss per common share from continuing
operations                                            $      (0.26)         $      (1.35)         $      (0.19)

</TABLE>



(a)   The common stock equivalent shares for the years ended December 31, 2000,
      1999 and 1998 were as follows: 0 shares, 211,449 shares and 738,984
      shares, respectively, for the stock-based compensation plans; 0 shares,
      14,211 shares and 395,600 shares, respectively, for the contingently
      issuable shares; and 0 shares, 710,324 shares and 1,020,474 shares,
      respectively, for the convertible preferred stock. The common stock
      equivalents for these securities were not included in the calculation of
      diluted loss per common share because the effect would be antidilutive.

18.      OPERATING SEGMENTS

         The Company's operating segments are based on the separate lines of
business acquired over the past several years which provide different services
to the hospitality industry, namely purchasing, reorder and logistics services.
The purchasing business through LPC provides "project-managed" procurement of
furniture, fixtures and equipment for new and refurbished properties. The
reorder business, operating through Parker Reorder, provides reordering of
operating supplies and equipment for daily use in hotels. The logistics business
through Bekins provides warehousing, transportation and installation services to
the hospitality industry and other related fields, including retail
merchandising. Due to the strategic repositioning of the Company's lines of
business, the Company has changed the composition of its reportable segments.
The Company's renovation business and real estate investment and asset
management business have been classified as discontinued operations (Note 4) and
are no longer reported as part of segment reporting. In addition, the previously
reported purchasing segment has been segregated into the purchasing business and
the reorder business. The Company has restated the prior years to conform to the
revised segment reporting.


                                      F-27
<PAGE>   58

<TABLE>
<CAPTION>

                                           2000                   1999                   1998
                                      -------------          -------------          -------------
<S>                                   <C>                    <C>                    <C>
SALES TO CUSTOMERS
Purchasing                            $ 180,652,770          $ 177,233,213          $ 148,520,654
Reorder                                  10,772,132             17,046,504              5,807,316
Logistics                                24,930,985             29,145,105             22,416,623
Corporate                                        --                     --                     --
                                      -------------          -------------          -------------
                                      $ 216,355,887          $ 223,424,822          $ 176,744,593
                                      -------------          -------------          -------------

INTER-SEGMENT SALES
Purchasing                            $         803          $   2,544,306             18,543,669
Reorder                                          --                     --                     --
Logistics                                 5,693,015              4,543,032              3,610,377
Corporate                                        --                     --                     --
                                      -------------          -------------          -------------
                                      $   5,693,818          $   7,087,338          $  22,154,046
                                      -------------          -------------          -------------

INCOME (LOSS) FROM OPERATIONS
Purchasing                            $   1,068,504          ($  1,632,081)         $   3,299,112
Reorder                                  (2,118,422)           (12,278,965)            (3,076,160)
Logistics                                 1,265,000               (846,940)             1,377,000
Corporate                                (2,760,912)            (5,719,698)            (4,656,934)
                                      -------------          -------------          -------------
                                      ($  2,545,830)         ($ 20,477,684)         ($  3,056,982)
                                      -------------          -------------          -------------

DEPRECIATION AND AMORTIZATION
Purchasing                            $     358,244          $     415,376          $     361,781
Reorder                                     162,726                736,196                700,692
Logistics                                   605,000                667,000                537,000
Corporate                                   225,798                390,134                 68,312
                                      -------------          -------------          -------------
                                      $   1,351,768          $   2,208,706          $   1,667,785
                                      -------------          -------------          -------------

INTEREST INCOME
Purchasing                            $     402,085          $     565,304          $     492,554
Reorder                                      98,607                     --                     --
Logistics                                    20,000                  4,000                  1,000
Corporate                                    22,318                333,449                803,691
                                      -------------          -------------          -------------
                                      $     543,010          $     902,753          $   1,297,245
                                      -------------          -------------          -------------

INTEREST EXPENSE
Purchasing                            $      16,059                170,234                 39,779
Reorder                                         270                     --                     --
Logistics                                   486,000                284,000                353,000
Corporate                                 1,293,530              1,319,877                363,321
                                      -------------          -------------          -------------
                                      $   1,795,859          $   1,774,111          $     756,100
                                      -------------          -------------          -------------
</TABLE>

                                      F-28
<PAGE>   59









<TABLE>
<CAPTION>

                                            2000                 1999                 1998
                                       -----------         ------------         ------------
<S>                                    <C>                 <C>                  <C>
TOTAL ASSETS AT YEAR END
Purchasing                             $46,371,038         $ 32,862,748         $ 44,734,461
Reorder                                  2,147,605            5,009,992           12,497,819
Logistics                               16,352,612           16,067,410           17,051,060
Discontinued Operations                     93,835              180,067           31,846,334
                                       -----------         ------------         ------------
     Segment Total                      64,965,090           54,120,217          106,129,674

Unallocated:
     Cash and cash equivalents             131,877            2,456,771            1,283,411
     Marketable securities                      --                   --            8,500,000
     Income taxes refundable               490,302            3,906,804                   --
     Deferred taxes                             --                   --            4,535,178
     Other                                 915,501            1,297,373            1,906,569
                                       -----------         ------------         ------------
                                       $66,502,770         $ 61,781,165         $122,354,832
                                       -----------         ------------         ------------
CAPITAL EXPENDITURES
Purchasing                             $    20,238         $    140,766         $    603,780
Reorder                                    243,316              301,927            1,905,308
Logistics                                  464,000              701,000              454,000
Corporate                                  344,759              561,786              193,795
                                       -----------         ------------         ------------
                                       $ 1,072,313         $  1,705,479         $  3,156,883
                                       -----------         ------------         ------------
</TABLE>


         All transactions between reportable segments are accounted for on an
arms length basis and are eliminated in consolidation. Sales to customers
include sales to related parties.

         The Company's revenue and assets predominately relate to the United
States operations. For the years ended December 31, 2000, 1999 and 1998, the
purchasing business recorded revenues of approximately $13,400,000, $38,993,000
and $4,462,000, respectively on shipments to Dubai, United Arab Emirates.


                                      F-29
<PAGE>   60

19.   QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (a)
<TABLE>
<CAPTION>

2000 QUARTER ENDED                                  MARCH 31          JUNE 30         SEPTEMBER 30         DECEMBER 31
------------------                                  --------          -------         ------------         -----------
<S>                                                <C>               <C>               <C>                  <C>
Revenues                                           $ 41,555          $ 54,265          $ 65,284             $   55,252
Gross profit                                          3,146             3,851             3,829                  3,020 (e)
Loss from continuing operations                        (962)             (669)             (288)                (1,957)(e)
Income  from discontinued operations                     --                --                --                    205
Net loss                                               (962)             (669)             (288)                (1,752)
Basic loss per common share: (b)
  Loss from continuing operations                     (0.07)            (0.05)            (0.02)                 (0.13)
  Net loss                                            (0.07)            (0.05)            (0.02)                 (0.12)
Diluted loss per common share: (b)
  Loss from continuing operations                     (0.07)            (0.05)            (0.02)                 (0.13)
  Net loss                                            (0.07)            (0.05)            (0.02)                 (0.12)



1999 QUARTER ENDED (C)                              MARCH 31          JUNE 30         SEPTEMBER 30         DECEMBER 31
------------------                                  --------          -------         ------------         -----------
Revenues                                           $ 57,687          $ 58,617          $ 53,668             $   53,453
Gross profit                                          4,200             4,693             1,304                  1,275

Loss from continuing operations                        (297)             (661)          (16,252)(d)             (1,035)

Income (loss) from discontinued                         841               100           (31,105)                (9,595)
Net income (loss)                                       545              (560)          (47,357)(d)            (10,632)

Basic earnings (loss) per common share:(b)
  Loss from continuing operations                     (0.02)            (0.05)            (1.22)                 (0.07)
  Net income (loss)                                    0.04             (0.04)            (3.55)                 (0.73)
Diluted earnings (loss) per common
share:(b)
  Loss from continuing operations                     (0.02)            (0.05)            (1.22)                 (0.07)
  Net income (loss)                                    0.04             (0.04)            (3.55)                 (0.73)

</TABLE>


(a)   All amounts except per share data presented in thousands.

(b)   The quarterly per share amounts are computed independently of annual
      amounts.

(c)   1999 quarterly amounts have been restated to reflect discontinued
      operations.

(d)   Includes asset impairment charge of $9,017,000.

(e)   Decrease from previous quarters due primarily to the timing of fee income
      in the purchasing business.





                                      F-30
<PAGE>   61





           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                              HOTELWORKS.COM, INC.
                             CONDENSED BALANCE SHEET


                                                                       2000
                                                                   ------------

                                     ASSETS

Cash and cash equivalents                                          $    114,922
Income taxes refundable                                                 483,802
Prepaids and other current assets                                       104,988
                                                                   ------------
     Total current assets                                               703,712
Property and equipment, net                                             786,770
Investment in subsidiaries                                          (13,825,954)
Receivables from related parties                                     18,461,604
Other assets                                                             52,152
                                                                   ------------
                                                                   $  6,178,284
                                                                   ------------


                        LIABILITIES AND CAPITAL DEFICIT

Accounts payable                                                   $  1,185,066
Accrued and other liabilities                                           450,735
Current portion of long-term debt                                       683,931
Income taxes payable                                                  1,011,399
Net current liabilities of discontinued operations                    1,047,627
                                                                   ------------
    Total current liabilities                                         4,378,758

Long-term debt                                                        3,588,922
                                                                   ------------
     Total liabilities                                                7,967,680

Commitments and Contingencies

     Total capital deficit                                           (1,789,396)
                                                                   ------------
                                                                   $  6,178,284
                                                                   ------------


The "Notes to Consolidated Financial Statements of Hotelworks.com, Inc. and
Subsidiaries" are an integral part of these statements. See accompanying "Notes
to Condensed Financial Information of Registrant".




                                      F-31
<PAGE>   62







                              HOTELWORKS.COM, INC.
                        CONDENSED STATEMENT OF OPERATIONS
                          YEAR ENDED DECEMBER 31, 2000
                                   SCHEDULE I
<TABLE>

<S>                                                                    <C>
Revenues                                                               $        --

Expenses:
     Selling, general and administrative                                 2,760,912
                                                                       -----------

Loss from operations before equity in net income of subsidiaries        (2,760,912)

Equity in net income of subsidiaries                                       233,445
                                                                       -----------

Loss from operations                                                    (2,527,467)

Interest expense, net                                                    1,271,212
                                                                       -----------

Loss from continuing operations before income taxes                     (3,798,679)

Income tax provision                                                        77,000
                                                                       -----------

Loss from continuing operations                                         (3,875,679)

Gain on disposal of discontinued businesses                                204,671
                                                                       -----------

Net loss                                                               $(3,671,008)
                                                                       -----------
</TABLE>


The "Notes to Consolidated Financial Statements of Hotelworks.com, Inc. and
Subsidiaries" are an integral part of these statements. See accompanying "Notes
to Condensed Financial Information of Registrant".





                                      F-32
<PAGE>   63



                              HOTELWORKS.COM, INC.
                        CONDENSED STATEMENT OF CASH FLOWS
                          YEAR ENDED DECEMBER 31, 2000

                                   SCHEDULE I
<TABLE>
<S>                                                                              <C>
OPERATING ACTIVITIES:
     Net loss                                                                    $ (3,671,008)
     Adjustments to reconcile net loss to net cash provided by operating
        activities:
        Depreciation and amortization                                                 204,415
        Equity in net income of subsidiaries                                         (236,445)
        Gain on disposal of discontinued businesses                                  (204,671)

(Increase) decrease in current assets:
     Prepaids and other current assets                                                543,071
     Income tax refundable                                                          3,423,002
     Receivables from related parties                                               5,754,408
     Other assets                                                                      11,780

Increase (decrease) in current liabilities:
     Accounts payable                                                                 (77,664)
     Accrued and other liabilities                                                   (792,966)
                                                                                 ------------
     Net cash provided by operating activities of continuing operations             4,953,922
                                                                                 ------------
     Net cash (used in) operating activities of discontinued operations              (200,588)
                                                                                 ------------

INVESTING ACTIVITIES:
     Dividends from subsidiaries                                                    3,740,604
     Purchases of property and equipment                                             (344,759)
                                                                                 ------------
     Net cash provided by investing activities of continuing operations             3,395,845
                                                                                 ------------

FINANCING ACTIVITIES:
   Repayment of loans payable                                                     (14,835,000)
   Repayment of long-term debt                                                       (411,657)
   Payment of preferred stock dividends                                              (135,000)
   Borrowings on long-term debt                                                     4,684,510
   Proceeds from exercise of stock options and warrants                               312,453
                                                                                 ------------
        Net cash used in financing activities                                     (10,384,694)
                                                                                 ------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                          (2,235,515)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                      2,350,437
                                                                                 ------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                         $    114,922
                                                                                 ------------
</TABLE>

The "Notes to Consolidated Financial Statements of Hotelworks.com, Inc. and
Subsidiaries" are an integral part of these statements. See accompanying "Notes
to Condensed Financial Information of Registrant".




                                      F-33
<PAGE>   64







Notes to Condensed Financial Information of Registrant:

1.       Basis of Presentation

Pursuant to the rules and regulations of the Securities and Exchange Commission,
the Condensed Financial Statements of the Registrant do not include all of the
information and notes normally included with financial statements prepared in
accordance with generally accepted accounting principles. It is, therefore,
suggested that these Condensed Financial Statements be read in conjunction with
the Consolidated Financial Statements and Notes thereto.

         In the parent-company-only financial statements, the Company's
investment in subsidiaries is stated at cost plus/minus equity in undistributed
earnings/losses of subsidiaries since the date of acquisition. The Company's
share of net income/loss of its unconsolidated subsidiaries is included in
consolidated income/loss using the equity method. Since the Company is committed
to providing further financial support to its subsidiaries, the Company has
recognized losses of its subsidiaries in excess of its investment in
subsidiaries amounting to $30,788,000.

2.       Dividends from Subsidiaries

Cash dividends paid to Hotelworks.com from the Company's consolidated
subsidiaries were $3,740,604 in 2000.



                                      F-34
<PAGE>   65

                              HOTELWORKS.COM, INC.
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>

                                                BALANCE AT     CHARGED TO
                                               BEGINNING OF     COSTS AND   CHARGED TO                         BALANCE AT END
     DESCRIPTION                                  PERIOD        EXPENSES   OTHER ACCOUNTS     DEDUCTIONS(1)       OF PERIOD
     -----------                                  ------        --------   --------------     -------------       ---------
<S>                                   <C>     <C>            <C>              <C>           <C>                 <C>
CONTINUING OPERATIONS:
     Allowance for doubtful accounts
                                      1998    $   142,595    $   668,922      $ --          $  (131,528)        $   679,989
                                      1999        679,989      1,632,922        --             (569,547)          1,743,364
                                      2000      1,743,364        764,562        --             (505,875)          2,002,051

Allowance or deferred tax assets
                                      1998             --             --        --                   --                  --
                                      1999             --     20,118,694        --                   --          20,118,694
                                      2000     20,118,694      1,451,148        --                   --          21,569,842

DISCONTINUED OPERATIONS:
     RENOVATION BUSINESS:

     Reserves for loss on disposal,
     including operating losses during
     phase-out period
                                      1998             --             --        --                   --                  --
                                      1999             --      9,236,894        --           (6,330,837)          2,906,057
                                      2000      2,906,057             --        --           (1,731,057)          1,175,000

HOTEL DEVELOPMENT BUSINESS:
     Reserves for loss on disposal,
     including operating losses during
     phase-out period
                                      1998             --        150,000        --                   --             150,000
                                      1999        150,000      1,670,204        --           (1,820,204)                 --
                                      2000             --             --        --                   --                  --

REAL ESTATE INVESTMENT AND ASSET
 MANAGEMENT BUSINESS:

     Reserves for loss on disposal,
     including losses during phase-out
     period
                                      1998             --             --        --                   --                  --
                                      1999             --      5,650,570        --             (713,071)          4,937,499
                                      2000      4,937,499             --        --           (4,937,499)                 --
</TABLE>

(1)   Charges to the accounts are for the purposes for which the reserves were
      created.


                                      F-35