Edgar Filing: CONNECTIV CORP

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE YEAR ENDED DECEMBER 31, 2001 COMMISSION FILE NO. 333-70663
_________________________
CONNECTIVCORP
(FORMERLY KNOWS AS SPINROCKET.COM, INC.)
(Exact name of small business issuer as specified in its charter)

DELAWARE 06-1529524
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

750 LEXINGTON AVENUE, 24TH FLOOR (212) 750-5858 10022
NEW YORK, NEW YORK
(Address of Issuer's (Issuer's telephone number, (Zip Code)
principal executive offices) including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE EXCHANGE ACT:

Common Stock, $.001 par value
-----------------------------
(Title of Class)

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 __
---

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. __

The issuer's revenues for the year ended December 31, 2001 were $0.

The aggregate market value of the registrant's voting common equity (i.e.,
the Common Stock) held by non-affiliates as of March 31, 2002 was $237,478,
using the closing sale price of $0.11per share on such date, as reported by the
Nasdaq OTC Bulletin Board.

The number of outstanding shares of the registrant's Common Stock as of
March 30, 2002 was 2,180,716 after the effect of a reverse one for ten stock
split effected March 12, 2002.

Transitional Small Business Disclosure Format.
Yes __ No X
---
DOCUMENTS INCORPORATED BY REFERENCE
None.

A list of Exhibits to this Annual Report on Form 10-KSB begins on Page 18.

TABLE OF CONTENTS
PART I PAGE
-----
Item 1. Description of Business 1
Item 2. Description of Property 3
Item 3. Legal Proceedings 3
Item 4. Submission of Matters to a Vote of Security Holders 3

PART II
Item 5. Market for Common Equity and Related Stockholder Matters 4
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations 5
Item 7. Financial Statements 8
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure 8

PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons 9
Item 10. Executive Compensation 12
Item 11. Security Ownership of Certain Beneficial Owners and Management 15
Item 12. Certain Relationships and Related Transactions 17
Item 13. Exhibits and Reports on Form 8-K 18

___________

The Company's principal executive offices are located at 750 Lexington
Avenue, 24th Floor, New York, New York 10022, and the telephone number is (212)
750-5858.
___________

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-KSB includes forward-looking statements,
including statements regarding, among other things, the Company's:

- anticipated growth strategies, and
- its intention to introduce new products.

The Company has based these forward-looking statements largely on its
expectations. Forward-looking statements are subject to a number of risks and
uncertainties, certain of which are beyond its control. Actual results could
differ materially from those anticipated as a result of numerous factors,
including among other things: (1) the enactment of new laws and regulations, and
the amendment of existing laws and regulations which could affect the Company's
business; (2) changes in the Company's business strategy or development plan;
(3) the Company's ability to obtain financing on acceptable terms when needed;
and (4) the Company's ability to identify appropriate acquisition candidates,
complete such acquisitions and successfully integrate acquired businesses.

The Company does not undertake any obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise. Because of the risks and uncertainties, the forward-looking
events and circumstances discussed in this Annual Report on Form 10-KSB might
not occur.
-i-

PART I

ITEM 1. DESCRIPTION OF BUSINESS

INTRODUCTION AND HISTORY

ConnectivCorp (the "Company"), is a medical communications network with
publishing, Internet and marketing services divisions that connect targeted
consumers and professionals with pharmaceutical and consumer product companies.
SexHealth.com is the Company's comprehensive web site covering sexual health
information and topics.

ConnectivCorp was organized in the State of Delaware on May 8, 1998 as SMD
Group, Inc. In January 1999, the name was changed to CDBeat.com, Inc. Following
the Company's business combination with Cakewalk LLC in November 1999, the name
was again changed to "Spinrocket.com, Inc." On September 11, 2000, in order to
better reflect and describe the Company's then strategic direction, the name was
changed to "ConnectivCorp."

ConnectivCorp is a reporting company under the Securities Exchange Act of
1934, as amended, and its stock is traded on the OTC Bulletin Board under the
symbol "CTTV." ConnectivCorp's principal executive offices are located at 750
Lexington Avenue, 24th Floor, New York, New York 10022, and its telephone number
is (212) 750-5858.

HISTORY

The Company was incorporated in Delaware on May 8, 1998 under the name "SMD
Group, Inc." which was subsequently changed in January 1999, to "CDbeat.com,
Inc." In April 2000, the Company changed its name to "Spinrocket.com, Inc." On
September 11, 2000 Spinrocket.com, Inc. changed its name to "ConnectivCorp"
because that new name better described the Company's then strategic direction.

In November 1999, 32 Records acquired substantially all of the assets and
liabilities relating to the business of Cakewalk LLC ("Cakewalk") in exchange
for 8,307,785 shares of the Common Stock of the Company, which number of shares
equaled approximately 46% of the then issued and outstanding Common Stock of the
Company (the "Cakewalk Transaction"). As a result of the Cakewalk Transaction,
the business formerly operated by Cakewalk was being operated by 32 Records.

Cakewalk BRE LLC ("Cakewalk") was a wholly owned subsidiary of 32 Records
LLC (the entity known as 32 Records was, at one time, known as Cakewalk LLC,
d/b/a 32 Records LLC). Cakewalk defaulted under an Indenture dated June 29,
1999 (the "Indenture") and entered into negotiations with Entertainment Finance
International, Inc. ("EFI") in order to consensually turn over assets to EFI.
EFI was the secured holder of $5,500,000 principal indebtedness issued by
Cakewalk and maintained a security interest in all of Cakewalk's assets (the
"Collateral") pursuant to the Indenture. Cakewalk consented to entry of a
judgment of foreclosure ("Judgment") upon the Collateral in connection with the
action filed by EFI against Cakewalk in the Supreme Court of the State of New
York, County of New York, Index No. 604708/00 on or about October 30, 2000. On
February 2, 2001, judgment was entered by the Court approving the foreclosure,
thereby transferring all of Cakewalk's assets to EFI. On October 18, 2000, the
Company and EFI entered into a consulting agreement under which the Company
agreed to help EFI in the marketing and sale of Cakewalk and/or its assets in
return for which the Company would be entitled to a cash payment upon sale under
certain circumstances.

In addition to the Cakewalk Transaction described above, a certain Stock
Purchase Warrant held by Atlantis Equities, Inc. ("Atlantis"), dated as of
September 23, 1999 (the "Atlantis Warrant"), was amended pursuant to a certain
Warrant Amendment Agreement, dated as of November 16, 1999, among the Company,
Atlantis and Dylan LLC, an affiliate of Atlantis ("Dylan") (the "Warrant
Amendment Agreement"). The Atlantis Warrant gave Atlantis the right to purchase
eighty (80%) percent of the issued and outstanding Common Stock of the Company
and options to purchase 762,064 shares of the Company's Common Stock. Pursuant
to the Warrant Amendment Agreement, the Atlantis Warrant was split into two
warrants, one of which was assigned to Dylan (the "Dylan Warrant"), and the
other of which was retained by Atlantis (the "Revised Atlantis Warrant").
Concurrently with the closing of the Cakewalk Transaction, (i) Dylan exercised
the Dylan Warrant and paid the Company $900,000 for 7,037,183 shares of Common
Stock issuable upon exercise of such warrant (the "Dylan Stock"), and (ii)
Atlantis exercised the Revised Atlantis Warrant and paid the Company $100,000
for 781,909 shares of Company Stock issuable upon exercise of the Revised
Atlantis Warrant (the "Atlantis Stock") and received 762,064 options from the
Company which were exercisable at $2.50 each until December 31, 2000 (the
"Options")(collectively, the "Atlantis Transaction"). Together, the Dylan Stock
and the Atlantis Stock equaled approximately 43% of the then issued and
outstanding Common Stock of the Company (after giving effect to the Cakewalk
Transaction and the Atlantis Transaction). In light of the transfer of
approximately 89% of the issued and outstanding Common Stock of the Company,
collectively, to Cakewalk, Dylan and Atlantis pursuant to the Cakewalk
Transaction and the Atlantis Transaction, a change in control in the Company
occurred. On November 27, 2000, Dylan made a pro rata distribution to all of its
members of all shares of the Dylan Stock it received in connection with the
transactions described above.

OVERVIEW

2001 was a year of accomplishment and fiscal prudence for ConnectivCorp,
but it ended as a year of financial strain.

Despite extensive efforts on the part of senior management and several key
employees, who continued to work without pay for a considerable period of time,
there has not been an appreciable change in the prospects of the Company
successfully implementing its medical services business plan in the near term.
Therefore, the prospects for generating meaningful revenues in the near term are
remote and the Company's financial ability to sustain its activities is in
question.

Accordingly, the Company made a decision to restructure. It will seek to
reduce existing trade payables by the issuance of restricted common stock.
Additionally, management is seeking appropriate merger or acquisition partners
in the medical information or other unrelated fields. Management has agreed to
provide or arrange for short term financing of $250,000 in connection with this
effort and effected a one for ten reverse split of the Company's common stock on
March 12, 2002.

The Company's historical loss per share for the years ended December 31,
2001 and 2000, would be as follows:

Pro forma loss per basic and diluted common share:
2001 2000
---------- --------
Loss from continuing operations $ (2.66) $ (2.41)
Loss from discontinued operations - (0.69)
---------- --------
Net loss $ (2.66) $ (3.10)
========== ========
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INTELLECTUAL PROPERTY RIGHTS

The Company currently does not have any patents issued to it. In December
1999, the Company filed a Provisional Patent Application with the United States
Patent office, seeking protection for certain software developed by the Company.
In December 2000, the Company filed a formal patent application with the patent
office to the same effect. The Company cannot be certain that the current or
any future patent applications will be granted, that any future patent will not
be challenged, invalidated or circumvented, or that the rights granted under any
patent that may be issued will provide competitive advantages to it.

REGULATION

The Company is currently not subject to direct regulation by any
governmental agency, other than laws and regulations generally applicable to
businesses.

EMPLOYEES

As of March 31, 2002, the Company had two employees, both of whom are
engaged in executive management.

ITEM 2. DESCRIPTION OF PROPERTY

On October 31, 2001, the Company terminated the lease for its office space
at 29 West 57th Street, New York, New York. Operations were relocated to the
offices of the Company's current Chairman. Due to the limited operations of the
Company, no rent expense has been incurred.

On January 1, 2002, the Company entered into a sublease for office space
located at 750 Lexington Avenue, New York, New York. The lease term is for the
period from January 1, 2002 through December 31, 2002, with a monthly rent of
$2,500. The office space is being leased from an entity in which the father of
Robert Ellin, Chairman of the Company, is a partner.

ITEM 3. LEGAL PROCEEDINGS

Cakewalk BRE LLC ("Cakewalk") is wholly owned by 32 Records LLC ("32 LLC"),
and owns all the assets of 32 LLC. In 2000, Cakewalk defaulted under an
Indenture dated June 29, 1999 (the "Indenture") with Entertainment Finance
International, Inc. ("EFI"), and entered into negotiations with EFI regarding
the same. EFI was the secured holder of $5,500,000 principal indebtedness issued
by Cakewalk and maintained a security interest in all of Cakewalk's assets (the
"Collateral") pursuant to the Indenture. Cakewalk consented to entry of a
judgment of foreclosure ("Judgment") upon the Collateral in connection with the
action filed by EFI against Cakewalk in the Supreme Court of the State of New
York, County of New York, Index No. 604708/00 on or about October 30, 2000. On
February 2, 2001, judgment was entered by the Court approving the foreclosure,
thereby transferring all of Cakewalk's assets to EFI. On October 18, 2000, the
Company and EFI entered into a consulting agreement under which the Company
agreed to help EFI in the marketing and sale of Cakewalk and/or its assets in
return for which the Company would be entitled to a cash payment upon sale under
certain circumstances.

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

During the fourth quarter of the year ended December 31, 2001, no matters
were submitted by the Company to a vote of its stockholders.
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Stockholders representing approximately 53.2% of the total issued and
outstanding shares of the Company's common stock as of March 12, 2001 took
action by written consent to (i) authorize the Company to effect a reverse split
of the Company's issued and outstanding common stock on up to a one-for-ten
basis, and (ii) approve the adoption of a stock option plan for up to 5 million
shares of common stock (which shall be reduced pro rata if the reverse split is
effectuated). No information statement has yet been mailed to shareholders.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information. The Company's common stock is currently listed on the
OTC Bulletin Board under the trading symbol "CTTV." The Company first listed
its common stock on the OTC Bulletin Board in August 1999. The following table
sets forth the high and low bid prices of the Company's Common Stock as reported
on the OTC Bulletin Board for each calendar quarter commencing in January 2000
through March 28, 2002.
COMMON STOCK
------------
2001 2000
------------------------------
HIGH LOW HIGH LOW
BID BID BID BID
----- ----- ----- -----

First Quarter 1.125 0.375 4.375 2.438

Second Quarter 0.38 0.06 3.5 1.031

Third Quarter 0.47 0.17 2.313 1.125

Fourth Quarter 0.18 0.07 2.313 0.875

As of March 28, 2002, the closing sale price of the Company's common stock
on the OTC Bulletin Board was $0.11 per share after giving effect to the reverse
one for ten stock split that occurred on March 12, 2002.

HOLDERS

As of March 31, 2002, there were approximately 320 holders of record of the
Company's common stock as determined by the Company's transfer agent. Such list
does not include beneficial owners of securities whose shares are held in the
names of various dealers and clearing agencies.

DIVIDENDS

The Company has never declared nor paid any cash dividends on its common
stock and does not anticipate paying dividends in respect of its common stock in
the foreseeable future. Any payment of cash dividends in the future will be at
the discretion of the Company's Board of Directors and will depend upon, among
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other things, its earnings (if any), financial condition, cash flows, capital
requirements and other relevant considerations, including applicable contractual
restrictions and governmental regulations with respect to the payment of
dividends.

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

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
THE COMPANY'S FINANCIAL STATEMENTS AND THE NOTES THERETO APPEARING ELSEWHERE IN
THIS REPORT AS ITEM 7. THIS REPORT CONTAINS STATEMENTS WHICH CONSTITUTE
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. THE COMPANY CAUTIONS THAT FORWARD-LOOKING
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND
UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS.

The Company was incorporated in Delaware on May 8, 1998 under the name "SMD
Group, Inc." In January 1999, the Company changed its name to "CDbeat.com, Inc."
On April 19, 2000, the Company's name was changed to "Spinrocket.com, Inc." On
September 11, 2000, the Company changed its name from Spinrocket.com, Inc. to
"ConnectivCorp" because this new name better described the Company's then
strategic direction. The Company's business model was to facilitate the online
connection between targeted, profiled consumers and marketers desiring to reach
those consumers. As its initial focus, the Company formed a new wholly-owned
subsidiary, ConnectivHealth, in order to facilitate its connectivity model in
the healthcare field.

UNCERTAINTY

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has a limited
operating history, and since its inception in 1998 has incurred substantial
losses. The Company's accumulated deficit as of December 31, 2001 is
approximately $19 million. To date, the Company has not generated any revenue
from its proposed business model, which contemplated selling pharmaceutical and
other healthcare companies access to the Company's aggregated users. The
Company incurred a net loss of approximately $5.8 million and $6.4 million for
the years ended December 31, 2001 and 2000, respectively, while cash and cash
equivalents at December 31, 2001 totaled approximately $90,000. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. The Company's continued existence is dependent upon several factors
including the Company's ability to raise additional equity or execute its
business strategy.

The Company has made a decision to restructure its operations. Management
has stated that restricted common stock may be issued to satisfy existing trade
payables and that the Company is seeking appropriate merger or acquisition
partners in the medical information or other unrelated fields. Management has
agreed to provide or arrange for short term financing of $250,000 in connection
with this effort and has effected a one for ten reverse stock split of the
Company's common stock as of March 12, 2002.

given that it will do so in the future. There can be no assurance that the
Company will generate sufficient revenues to ever achieve profitability or
otherwise sustain its profitability in the future. While the Company is
exploring appropriate merger or acquisition partners in the medical information
or other unrelated fields, there can be no assurance that a transaction will be
consummated.

LETTER OF INTENT

On March 21, 2002, the Company executed a letter of intent to acquire Aqua
Development Corp., a California corporation ("Aqua"). The Company intends to
acquire Aqua in exchange for 78% of the issued and outstanding common stock in
the Company, as defined. The acquisition is contingent upon numerous factors,
including the raising of additional financing by the parties. Immediately upon
the acquisition, the Company will authorize its name to be changed to "d/b/a
Aqua Development Corp.

Capital of $2 million shall be necessary in connection with the transaction
financing, of which $1 million shall be raised by Aqua and $1 million by the
Company. Through April 15, 2002, the Company has raised approximately $350,000
of additional financing. At the signing of the Purchase Agreement, the Company
shall advance $250,000 to Aqua in the form of a secured bridge loan to be
evidenced by a note bearing interest at 12% per annum. In the event the
transaction closes, the $250,000 shall be credited to the Company as part of its
$1 million capital contribution discussed above. The Company shall be obligated
to make another $100,000 available to Aqua prior to closing on the same terms.
In the event the transaction is not consummated, the loan shall mature 90 days
after the closing date, as defined. The parties anticipate the closing shall
occur on or before the date that is 120 days after March 21, 2002.

RESULTS OF OPERATIONS

2001 compared to 2000

The Company reported the following results of operations for the years ended
December 31, 2001 and 2000:

2001 2000
--------------------------------- ---------------------------------

Loss from continuing operations. . . . . $ (5,756,777) $ (4,967,021)
Loss from discontinued operations. . . . - (1,412,700)
--------------------------------- ---------------------------------

Net loss . . . . . . . . . . . . . . . . (5,756,777) (6,379,721)
================================= =================================

Basic and diluted loss per common share:
Loss from continuing operations. . . . . $ (0.27) $ (0.24)
Loss from discontinued operations. . . . - (0.07)
--------------------------------- ---------------------------------
Net loss per common share. . . . . . . . (0.27) (0.31)
================================= =================================

The Company reported a loss of approximately $5.8 million from continuing
operations in 2001 versus a loss from continuing operations of approximately $5
million in 2000. The Company's other income for the year ended December 31,
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2001 consisted of interest income that was earned on invested funds was
approximately $41,000 in 2001 versus approximately $103,000 of interest income
and $80,000 of consulting revenue in 2000. The decrease of approximately
$62,000 in interest income resulted from the decrease in cash and cash
equivalents available to be invested, while the Company did not obtain any
consulting engagements in 2001. General and administrative expenses totaled
approximately $5.8 million in 2001 versus $5.3 million in 2000. Included in
general and administrative was approximately $202,000 of deferred compensation
expense related to options granted to consultants and employees salaries of
approximately $337,000; approximately $917,000 for professional and consulting
fees and software development; amortization expense of approximately $999,000 of
acquired software and goodwill and approximately $2.9 million of expenses
recognized in the fourth quarter of 2001 for the impairment of acquired
software, goodwill, equipment and costs of publications acquired.

Deferred compensation expense related to options granted to consultants and
employees was approximately $202,000 in 2001 versus approximately $1.8 million
in 2000. The decrease is a result of the lower number of options granted in
2001. Salaries totaled $337,000 in 2001 verses $727,000 in 2000. The decrease
was a result in lower salaries taken by management and a reduction of employees
in 2001. Approximately $917,000 of expense was recognized for professional and
consulting fees and software development in 2001 verses $1.3 million in 2000.
The decrease of $383,000 resulted from management's program to reduce costs.
Amortization expense of acquired software and goodwill was approximately
$999,000 in 2001 versus $992,000 in 2000. During the fourth quarter of 2001
approximately $2.9 million of expense was recognized for the impairment of
acquired software, goodwill, equipment and costs of publications acquired.

2000 compared to 1999

The Company reported the following results of operations for the years ended
December 31, 2000 and 1999:

2000 1999
------------ ------------

Loss from continuing operations $(4,967,021) $(1,588,577)
Loss from discontinued operations (1,412,700) (1,475,301)
------------ ------------
Net loss $(6,411,212) $(3,063,878)
============ ============

Basic and diluted loss per share:
Loss from continuing operations $ (0.24) $ (0.28)
Loss from discontinued operations (0.07) (0.26)
------------ ------------
Net loss per common share - basic and diluted $ (0.31) $ (0.54)
============ ============

The Company reported a loss of approximately $5 million from continuing
operations. The Company's operating income for the year ended December 31, 2000
consisted of consulting fee revenue of $80,000, and other income consisted of
interest income of approximately $103,000 that was earned on invested funds.
General and administrative expenses totaled approximately $5.3 million in 2000
versus $3.7 million in 1999. Included in general and administrative was
approximately $1.8 million of deferred compensation expense related to options
granted to consultants and employees; salaries of approximately $727,000;
approximately $1.3 million for professional and consulting fees, and software
development and amortization expense of approximately $992,000 on acquired
software and goodwill.
-7-

ACCOUNTING POLICIES

The following accounting policies are important to an understanding of the
operating results and financial condition of the Company and should be
considered as an integral part of the financial review. For additional
accounting policies, see note 1 to the consolidated financial statements,
"Significant Accounting Policies."

Estimates and Assumptions
---------------------------

In preparing the financial information, the Company used some estimates and
assumptions that may affect reported amounts and disclosures. Estimates are
used when accounting for depreciation, amortization, impairment of assets and
asset valuation allowances. We are also subject to risks and uncertainties that
may cause actual results to differ from estimated results, such as legislation,
regulation and the ability to obtain financing. Certain of these risks and
uncertainties are discussed under the heading entitled "Forward-Looking
Statements."

CHANGE IN MANAGEMENT, LOAN DEFAULT AND DISPOSITION OF SUBSIDIARY

Cakewalk BRE LLC ("Cakewalk") was wholly owned by 32 Records LLC ("32
LLC"), and owned all the assets of 32 LLC. In 2000, Cakewalk defaulted under an
Indenture dated June 29, 1999 (the "Indenture") with its lender, Entertainment
Finance International, Inc. ("EFI"), and entered into negotiations with EFI
regarding the same. EFI was the secured holder of $5,500,000 principal
indebtedness issued by Cakewalk and maintained a security interest in all of
Cakewalk's assets (the "Collateral") pursuant to the Indenture. Cakewalk
consented to entry of a judgment of foreclosure ("Judgment") upon the Collateral
in connection with the action filed by EFI against Cakewalk in the Supreme Court
of the State of New York, County of New York, Index No. 604708/00 on or about
October 30, 2000. On February 2, 2001, judgment was entered by the Court
approving the foreclosure, thereby transferring all of Cakewalk's assets to EFI.
On October 18, 2000, the Company and EFI entered into a consulting agreement
under which the Company agreed to help EFI in the marketing and sale of Cakewalk
and/or its assets in return for which the Company would be entitled to a cash
payment upon sale under certain circumstances.

ITEM 7. FINANCIAL STATEMENTS

The Company's consolidated financial statements for the years ended
December 31, 2001 (unaudited) and 2000 (audited), respectively, are set forth at
the end of this Annual Report on Form 10-KSB and begin on page F-1.

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

None.
-8-

PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information, as of March 28, 2002,
concerning the Company's directors and executive officers:

The following table and subsequent discussion sets forth information
concerning the Company's directors and executive officers:

Name Age Position
---------------------------------------------------------------------------

Elliot Goldman 66 President, Chief Executive Officer, Director
Robert Ellin 37 Chairman
Ivan Berkowitz 56 Director
David Goddard 46 Director
Jeffrey Kuhr 43 Director
Thomas Cyrana 53 Observer

The business experience of each of the persons listed above for at least
the last five years is as follows:

Elliot Goldman (President, Chief Executive Officer and Director). Mr.
Goldman's executive and operational career spans three decades in the
entertainment industry including his role as President and Chief Executive
Officer of BMG Music and senior executive posts at Warner Communications Inc.
(now AOL Time Warner), CBS Records (now Sony Music) and Arista Records. In all
of these instances he had primary responsibility for managing content companies
and maximizing the net income generated. Most recently he has been President of
his own consulting firm specializing in operational and deal assistance to major
and independent music companies. At BMG Music, Mr. Goldman was President and
CEO of worldwide music operations encompassing RCA Records, Arista Record, RCA
Red Seal and the RCA Record Club. Before that, he was a Senior Vice President
of Warner Communications (now AOL Time Warner), with responsibility for the
Warner Music Group's worldwide recorded music and music publishing activities.
Before joining AOL Time Warner, Mr. Goldman was Executive Vice President and
General Manager of Arista Records, from its founding, with direct responsibility
for all areas of its business operations. Mr. Goldman began his career at CBS
Records (now Sony Music) as Director of Business Affairs and rose to
Administrative Vice President of that company.

Robert Ellin (Chairman). Mr. Ellin is a principal of Atlantis Equities,
Inc. ("Atlantis"), Dylan LLC and Trinad Partners ("Trinad"). Atlantis is a
private merchant banking and advisory firm specializing in equity and debt
finance, primarily assisting emerging growth companies under $100 million in
sales. Through Atlantis, Mr. Ellin has spearheaded merger and acquisition and
business development projects for private and public companies such as THQ, Inc.
(OTC:THQI), Grand Toys (OTC: GRIN), and Forward Industries, Inc. (OTC: FORD).
Trinad is a leveraged buyout firm that bought, and recently sold, S&S
Industries, Inc., the largest manufacturer of apparel-related underwire. Dylan
LLC was originally a stockholder of the Company.

Ivan Berkowitz (Director). Since 1989, Mr. Berkowitz has been the President
of Great Court Holdings Corporation and, since 1993, he has served as the

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Managing General Partner of Steib & Company. From 1995 to 1997, Mr. Berkowitz
served as the Chief Executive Officer of PolyVision Corporation, where he
continues to serve as a board member. Mr. Berkowitz is also a member of the
Board of Directors of the following public companies: Migdalei Shekel (Tel
Aviv), Propierre (Paris), HMG WorldWide and IAT Resources. Mr. Berkowitz is also
the Chairman of the Advisory Board of THCG Inc.

David Goddard (Director). Mr. Goddard is a Senior Managing Director in the
Equity Capital Markets Department of Bear Stearns & Co., Inc., an international
investment banking firm. Mr. Goddard has been with Bear Stearns since November
1998. From 1996 to 1998, Mr. Goddard served as a Managing Director - Associate
Director Private Capital Group at BancBoston Robertson Stephens, Inc. Prior to
that, Mr. Goddard was Managing Director - Private Placement Group at Chase
Securities, Inc. from 1994-1996. Mr. Goddard has extensive corporate finance and
capital markets experience specializing in the placement of debt and equity
securities in the private capital markets.

Jeffrey Kuhr (Director). Mr. Kuhr is the managing partner of West End
Capital Partners LLC ("WECP"), a merchant banking firm based in New York City.
Prior to forming WECP, he was a founder and managing director of Peter J.
Solomon Company ("PJSC"), a leading independent investment banking firm. During
his tenure at PJSC from 1989 to 1999, Mr. Kuhr advised public and private
companies on mergers and acquisitions, financing and restructuring transactions.
While a managing director at PJSC, Mr. Kuhr founded RS1W, Inc. with Russell
Simmons (Def Jam Records, Phat Farm apparel) and a group of investors to be a
leading online entertainment destination. RS1W was sold to BET.com in October
2000. From 1987 to 1989, Mr. Kuhr financed leveraged buyouts at GE Capital Inc.,
providing economic and strategic consulting services to Fortune 100 companies.
Mr. Kuhr received his Masters in Business Administration from Wharton School and
his Bachelor of Arts from Oberlin College. On April 11, 2002, Mr. Kuhr was
appointed to the Board of Directors of Forward Industries, Inc.

Thomas Cyrana (Observer). Mr. Cyrana is a Managing Director of
Rascoff/Zysblat Organization ("RZO"), a division of American Express Tax and
Business Services. Mr. Cyrana has been with RZO since 1995. Mr. Cyrana also
serves as a principal of the managing member of EFI, a venture with The
Structured Finance High Yield Fund, LLC, which is managed by Prudential
Investments.

All directors of the Company serve until the next annual meeting of
stockholders or until their successors are duly elected and qualified. All
officers of the Company serve at the discretion of the Board of Directors,
subject to rights, if any, under contracts of employment with the Company. See
"Executive Compensation - Employment Agreements." There are no family
relationships among the directors and executive officers.

MANAGEMENT CHANGES

In January 2001, Peter Crawford resigned as Chief Technology Officer of the
Company. As of January 24, 2002, Robert Miller resigned as Co-Chairman and
Director of the Company, and Robert Ellin became sole chairman.

CERTAIN CORPORATE ACTIONS

Stockholders representing approximately 53.2% of the total issued and
outstanding shares of the Company's common stock as of March 12, 2001 took
action by written consent to (i) authorize the Company to effect a reverse split
of the Company's issued and outstanding common stock on not more than a
one-for-ten basis, and (ii) approve the adoption of a stock option plan for up
to 5 million shares of common stock (reduced pro rata upon the reverse split).
-10-

REVERSE SPLIT

General

On March 12, 2001, stockholders representing 53.2% of the issued and
outstanding shares of the Common Stock of the Company approved an amendment to
the Company's Amended and Restated Certificate of Incorporation to authorize the
Company, for a period of up to one year, to effect a reverse split (the "Reverse
Split") that will cause all issued and outstanding Common Stock to be split, on
a reverse basis, up to one-for-ten. On March 12, 2002, the one-for-ten Reverse
Split was effected. The Reverse Split does not affect the number of authorized
shares of the Company's Common Stock. The Reverse Split effectively increases
the number of available authorized shares of Common Stock. As described below,
the primary objective of the Board of Directors is to increase the per share
market price of the Common Stock.

The Company's historical loss per share for the years ended December 31,
2001 and 2000, would be as follows (unaudited):

Pro forma loss per basic and diluted common share:

2001 2000
----------- -----------
Loss from continuing operations $ (2.66) $ (2.41)
Loss from discontinued operations - (0.69)
----------- -----------
Net loss per common share $ (2.66) $ (3.10)
=========== ===========

Effects of Reverse Split

Effect on Market for Common Stock. The Board of Directors believes that
------------------------------------
the Reverse Split should, although there can be no assurance, enhance the
acceptability of the Company's Common Stock by the financial community and
investing public. The reduction in the number of issued and outstanding shares
of Common Stock caused by the Reverse Split is anticipated initially to increase
proportionately the per share market value of the Company's Common Stock. The
Board of Directors also believes that the Reverse Split may result in a broader
market for the Company's Common Stock than that which currently exists. The
expected increase price level may encourage interest and trading in the Common
Stock and possibly promote greater liquidity for the Company's stockholders,
although such liquidity could be adversely affected by the reduced number of
shares of Common Stock outstanding after the effectiveness of the Reverse Split.

Effects on Number of Shares Available for Issuance. The Reverse Split
-------------------------------------------------------
decreased the number of outstanding shares of Common Stock. Therefore, the
21,588,870 shares of Common Stock issued and outstanding as of the effective
date of the Reverse Split, together with 10,289,552 shares of Common Stock,
assuming the exercise of, all outstanding warrants and options, were converted
into approximately 3,187,842 shares of Common Stock. Because the number of
shares of Common Stock authorized for issuance by the Certificate of
Incorporation, as amended, following the Reverse Split remains at 40,000,000
shares, the Reverse Split results in approximately 36,812,158 additional (or
post-split) shares of Common Stock available for issuance by the Company. In
-11-

lieu of issuing any fractional shares as a result of the Reverse Split, the
Company rounded the number of shares each stockholder is entitled to receive as
a result of the Reverse Split to the nearest whole number of shares.

The Board of Directors believes that the Reverse Split may provide
flexibility for the Company in meeting its possible needs by enabling the Board
to raise additional capital through the issuance of Common Stock or securities
convertible into or exercisable for Common Stock, to make additional stock
awards under the Company's employee benefit plans and/or to employ Common Stock
as a form of consideration for acquisitions.

Effect on the Company's Derivative and Convertible Securities. The total number
-------------------------------------------------------------
of shares of Common Stock issuable upon the exercise of options and warrants to
acquire such shares, and the exercise price thereof shall be proportionally
adjusted to reflect any Reverse Split.

Changes in Stockholders' Equity. As an additional result of a Reverse
---------------------------------- Split, the Company's stated capital,
which consists of the par value per share of the Common Stock and Preferred
Stock multiplied, respectively, by the number of shares outstanding, was
reduced. Although the par value of the Common Stock remains at $.001 per share
following a Reverse Split, stated capital decreased because the number of shares
outstanding was reduced. Correspondingly, the Company's additional paid-in
capital, which consists of the difference between the Company's stated capital
and the aggregate amount paid to the Company upon the issuance by the Company of
all then outstanding shares of Common Stock and Preferred Stock, was increased.

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

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and persons who own more than ten
percent of a registered class of the Company's equity securities to file certain
reports regarding ownership of, and transactions in, the Company's securities
with the Securities and Exchange Commission (SEC). These officers, directors
and stockholders are also required by SEC rules to furnish the Company with
copies of all Section 16(a) reports that are filed with the SEC. Based solely
on a review of copies of such forms received by the Company, and written
representations received by the Company from certain reporting persons, the
Company believes that for the year ended December 31, 2001 all Section 16(a)
reports required to be filed by the Company's executive officers, directors and
10% stockholders were filed on a timely basis.

ITEM 10. EXECUTIVE COMPENSATION

The following summary compensation table sets forth the aggregate
compensation paid to, or earned by, the Chief Executive Officer and the other
most highly compensated executive officer for the years ended December 31, 2001
and 2000 whose total annual salary and bonus exceeded $100,000 for 2001 and 2000
(collectively the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION LONG TERM
----------------------------------------------
COMPENSATION
---------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS/SARS(#)
---------------------------- ---- ----------- --------- ---------------- ---------------

Robert Miller (1) 2001 $ 61,058 __ __ __
Co-Chairman 2000 $ 200,000 __ __ __

Robert Ellin (2) 2001 $ 5,200 __ __ __
Co-Chairman 2000 __ __ __ __

-12-

Elliot Goldman (3) 2001 $ 86,059 __ __ __
President and 2000 $ 146,154 __ __ __
Chief Executive Officer

Alan L. Schaffer (4) 2001 __ __ __ __
Chief Financial Officer 2000 $ 134,154 __ __ __

______________

(1) Mr. Miller, who was President and Chief Executive Officer, was appointed
Co-Chairman in January 2001 and resigned that position in January 2002. He
was being paid an annual salary of $200,000, subject to such increases or
bonuses, as the Board of Directors shall authorize. Mr. Miller voluntarily
reduced his annual cash compensation to $100,000 as of March 1, 2001 and to
$75,000 as of May 1, 2001. As of July 1, 2001, Mr. Miller voluntarily
waived receipt of any further cash compensation. See "Executive
Compensation - Employment Agreements."

(2) Mr. Ellin, who was Chairman in 2000, was appointed Co-Chairman in January
2001 and on January 24, 2002, Mr. Ellin again became sole Chairman. He was
being paid an annual salary of $10,400, subject to such increases or
bonuses, as the Board of Directors shall authorize. As of July 1, 2001, Mr.
Ellin voluntarily waived receipt of any further cash compensation.

(3) In January 2001 Mr. Goldman was promoted and appointed President and Chief
Executive Officer. From January through February 2001, Mr. Goldman's salary
was increased to $250,000. As of March 1, 2001, Mr. Goldman agreed to
reduce his salary to $150,000, and to $125,000 as of May 1, 2001. As of
July 1, 2001, Mr. Goldman voluntarily waived receipt of any further cash
compensation. During 2000 Mr. Goldman served as Chief Operating Officer,
for which he was paid an annual salary of $200,000, subject to such
increases or bonuses, as the Board of Director shall authorize. See
"Executive Compensation - Employment Agreements."

(4) Mr. Schaffer was appointed Chief Financial Officer of the Company in
November 1999, and resigned in November 2000. He was being paid an annual
salary of $135,000 plus a minimum annual bonus of $10,000.

OPTION GRANTS IN 2001

The following table sets forth certain information concerning the grant of
stock options in 2001 to each of the Named Executive Officers.

Number of Percentage to Total
Securities Underlying Options Granted to Exercise Price
Name Options Granted Employees in 2001 ($/Share) Expiration Date
---- --------------- ----------------- --------- ---------------

Elliot Goldman 500,000 100.00% (1) (1)

__________________________
(1) Upon his appointment as President and Chief Executive Officer, the
Company granted Mr. Goldman an additional option to purchase all or any part of
an aggregate of 500,000 shares of the Company's Common Stock at an exercise
price of $1.50, of which 250,000 were immediately exercisable and 250,000 shares
were exercisable when and if the Company achieved certain revenue levels.
-13-

2001 AGGREGATE OPTION EXERCISES AND YEAR-END OPTION VALUES

The following table sets forth certain information concerning the Named
Executive Officers with respect to the number of shares covered by exercisable
and unexercisable stock options at December 31, 2001 and the aggregate value of
exercisable and unexercisable "in-the-money" options at December 31, 2001. No
options were exercised by the Named Executive Officers in 2000.

Number Of Securities Value Of Unexercised
Underlying Unexercised In-The Money Options
Name Options At Fiscal Year-End At Fiscal Year-End(1)
---- -------------------------- ---------------------
Exercisable/Unexercisable Exercisable/ Unexercisable
------------------------- --------------------------

Robert Miller 1,955,750/0 $-0-/$-0-
Elliot Goldman 500,000/500,000 $-0-/$-0-
___________

(1) The value of unexercised "in-the-money" options is equal to the
difference between the closing bid price of the common stock on the OTC Bulletin
Board as of December 31, 2001 ($0.11) and the option exercise price per share,
multiplied by the number of shares subject to options.

DIRECTOR COMPENSATION

The Company's directors do not receive compensation for their services as
directors, but are reimbursed for all reasonable out-of-pocket expenses incurred
in connection with each Board of Directors meeting attended.

EMPLOYMENT AGREEMENTS

The Company entered into an employment contract, on April 11, 2000, with
Elliot Goldman for an initial term of three years. The Agreement was amended by
the Board of Directors in January 2001. The initial term shall automatically be
extended by one additional year at the end of the Initial Term and each
subsequent anniversary thereafter, unless, at least one hundred twenty (120)
days prior to any such renewal date either Mr. Goldman or the Company shall
deliver written notice to the other that the term will not be further extended.
Pursuant to the Employment Agreement, as amended, Mr. Goldman serves as
President, Chief Executive Officer and as a Director of the Company at an
initial annual salary of $250,000, subject to such increases or bonuses as the
Board of Directors of the Company shall authorize. The Company also entered into
an option agreement with Mr. Goldman pursuant to which Mr. Goldman was granted
an option to purchase all or any part of an aggregate of 500,000 shares of the
Common Stock of the Company at an exercise price of $1.28 per share. One half of
such option shares are currently vested, and an additional one quarter of such
option shares vest on each anniversary of the agreement until all of such option
shares are fully vested. All unvested shares shall vest automatically under
certain circumstances. Unless terminated earlier in accordance with the terms
and conditions of the option agreement, the option shall terminate on April 10,
2006. Upon his appointment as President and Chief Executive Officer in January
2001, the Company granted Mr. Goldman an additional option to purchase all or
any part of an aggregate of 500,000 shares of the Company's Common Stock at an
exercise price of $1.50, of which 250,000 were immediately exercisable and
250,000 shares were exercisable when and if the Company achieved certain revenue
levels.

automatically be extended by one additional year at the end of the initial term
and each subsequent anniversary thereafter, unless, at least one hundred twenty
(120) days prior to any such renewal date either Mr. Miller or the Company shall
deliver written notice to the other that the term will not be further extended.
Pursuant to the employment agreement, as amended, Mr. Miller served as a
Director and Co-Chairman of the Company at an initial annual salary of $200,000,
subject to such increases or bonuses as the Board of Directors of the Company
shall authorize. The Company also entered into an option agreement with Mr.
Miller pursuant to which the Company granted to Mr. Miller an option to purchase
all or any part of an aggregate of 1,955,750 shares of the Common Stock of the
Company, at the following exercise prices: 50% of the Option Shares at $1.30 per
share, 25% at $1.50 per share; and 25% at $1.70 per share. Two-thirds, or
1,303,899, Option Shares have vested, and the remaining one-third of the option
shares vest on November 16, 2001. All unvested shares shall vest automatically
under certain circumstances. Unless terminated earlier in accordance with the
terms and conditions of the option agreement, the Option shall terminate upon
the later to occur of (a) the expiration of the term of Mr. Miller's employment
agreement with the Company, or (b) five years from the original date of grant of
the Option. Mr. Miller resigned his as Co-Chairman and Director of the Company
on January 24, 2002.

Messrs. Goldman and Miller have voluntarily reduced their annual cash
compensation to $150,000 and $100,000, respectively, as of March 1, 2001, and to
$125,000 and $75,000, respectively, as of May 1, 2001. As of July 1, 2001,
Messrs. Goldman and Miller have voluntarily waived receipt of any further cash
compensation.

The Company entered into an employment contract, on March 18, 2002 with
Elliot Goldman for an initial term of one year. Mr. Goldman serves as President,
Chief Executive Officer and as a Director of the Company at an annual salary of
$150,000. However, the compensation shall accrue and no more than $200 per week
shall be paid to Mr. Goldman until such time as the Company has received at
least $1 million in proceeds from new debt and/or equity investment subsequent
to the date of the agreement.

The Company entered into an employment contract, on March 18, 2002 with
Robert Ellin for an initial term of one year. Mr. Ellin serves as Chairman of
the Company at an annual salary of $150,000. However, the compensation shall
accrue and no more than $200 per week shall be paid to Mr. Ellin until such time
as the Company has received at least $1 million proceeds from new debt and/or
equity investment subsequent the date of the agreement.

1998 EMPLOYEE STOCK OPTION PLAN

The Company's 1998 stock incentive plan (the "Stock Incentive Plan") was
--------------------
originally adopted by the Board of Directors and approved by the stockholders on
October 15, 1998. The Stock Incentive Plan provides for the grant of stock
options for up to a total of 1,000,000 shares of the Company's Common Stock to
the Company's employees, officers, directors, consultants and advisors.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of March 31, 2002,
regarding the beneficial ownership of the Company's common stock (assuming the
sale of the maximum number of Shares that are being offered hereby) by: (i) each
person known by the Company to own beneficially more than 5% of the Company's
common stock; (ii) each of the Company's directors; (iii) the Company's Chief
Executive Officer and the other executive officers of the Company whose salary
and bonus for the fiscal year ended December 31, 2001 exceeded $100,000, and
(iv) all officers and directors of the Company as a group.

NAME AND ADDRESS OF BENEFICIAL
OWNER(1) NUMBER OF SHARES(2) PERCENTAGE OF CLASS
------------------------------------------------------------- ------------------ --------------------

Robert Ellin(3) 3,476,787 32.23%
750 Lexington Avenue
New York, NY 10022

Elliot Goldman(4) 1,000,000 9.27%
c/o ConnectivCorp.
750 Lexington Avenue
New York, NY 10022

-15-

David Goddard(5) 40,000 *
c/o ConnectivCorp.
750 Lexington Avenue
New York, NY 10022

Ivan Berkowitz(6) 290,000 2.69%
c/o ConnectivCorp.
750 Lexington Avenue
New York, NY 10022

Jeffrey Kuhr(7) 800,000 7.42%
c/o ConnectivCorp.
750 Lexington Avenue
New York, NY 10022

All directors and executive officers as a group (4 persons)(3) 5,606,787 51.61%

*less than 2%
___________________________________

1 Except as indicated in these notes and subject to community property laws
where applicable, the persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them.

2 Calculated pursuant to Rule 13d-3(d) of the Exchange Act. As used in this
table, a beneficial owner of a security includes any person who, directly
or indirectly, through contract, arrangement, understanding, relationship
or otherwise has or shares (i) the power to vote, or direct the voting of,
such security or (ii) investing power which includes the power to dispose,
or to direct the disposition of, such security. In addition, a person is
deemed to be the beneficial owner of a security if that person has the
right to acquire beneficial ownership of such security within 60 days of
the date shown above.

3 Includes 2.5 million common shares issued in cancellation of any and all
existing unexercised options and cancellation of any and all indebtedness
and/or obligations between Mr. Ellin and ConnectivCorp; and 500,000 common
shares purchased in March 2002.

4 Includes 500,000 common shares issued in cancellation of any and all
existing unexercised options and cancellation of any and all indebtedness
and/or obligations between Mr. Goldman and ConnectivCorp; and 500,000
common shares purchased in March 2002.
-16-

5 Includes 40,000 common shares issued in cancellation of any and all
existing unexercised options and cancellation of any and all indebtedness
and/or obligations between Mr. Goddard and ConnectivCorp.

6 Includes 40,000 common shares issued in cancellation of any and all
existing unexercised options and cancellation of any and all indebtedness
and/or obligations between Mr. Berkowitz and ConnectivCorp; and 250,000
common shares purchased in March 2002.

7 Includes 760,000 common shares issued to West End Capital Partners, LLC of
which Mr. Kuhr is the managing partner.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company retained the services of Atlantis Equities, Inc. ("Atlantis"),
--------
a private merchant banking and advisory firm that primarily assists emerging
growth companies, to act as its financial advisor pursuant to an Engagement
Letter dated October 29, 1999, as amended on January 1, 2001, (the "Engagement
----------
Letter"). Robert Ellin, the Chairman of the Company, is a principal of
Atlantis. In consideration for the services to be provided by Atlantis under
the Engagement Letter, Atlantis was paid a monthly fee of $12,500 (plus
reimbursement of reasonable and actual out-of-pocket expenses). The term of the
Engagement Letter is three years, and shall automatically renew for successive
one year terms (subject to the right of any party to terminate the engagement
upon 90 days' written notice before the end of any such term). The Company has
also granted Atlantis an option to acquire up to 762,064 shares of the Company's
Common Stock at an exercise price of $2.50 per share which expires on December
31, 2002, which was cancelled in March 2002. This agreement was also amended
by the Board of Directors in January 2001 and Atlantis' monthly fee was
increased to $16,666.

Atlantis has voluntarily agreed to reduce its monthly cash compensation to
$8,333 as of March 1, 2001 and to $6,250 as of May 1, 2001 and as of July 1,
2001, Atlantis has voluntarily waived receipt of any further cash compensation.

The Company retained the services of Atlantis Equities, Inc. ("Atlantis"),
a private merchant banking and advisory firm that primarily assists emerging
growth companies, to act as its financial advisor pursuant to an Engagement
letter dated March 21, 2002 for a term of one year from March 18, 2002 and
ending on March 18, 2003. Robert Ellin, the current Chairman of the Company, is
a principal in Atlantis. In consideration for the services to be provided by
Atlantis, upon the consummation of the transactions contemplated by the letter
of intent, dated as of March 21, 2002, by and between the Company and Aqua
Development Corporation, the Company will issue shares of its common stock so
that Atlantis will own that number of shares which constitutes up to 4.0% of the
common stock then outstanding. In addition, Atlantis is to receive cash
compensation of 250,000.

The Company is also a party to certain employment arrangements with its
executive officers. See "Executive Compensation."
-17-

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Unless otherwise indicated, the following is a list of Exhibits
filed as a part of this Annual Report on Form 10-KSB:

Exhibit
Number Description of Document
------- ------------------------

2.1 Contribution Agreement, dated as of October 29, 1999 between CDbeat.com, Inc. and Cakewalk LLC (C)

2.2 Amendment Agreement, dated as of November 16, 1999 by and among Atlantis Equities, Inc., Dylan
LLC, CDbeat.com, Inc., Cakewalk LLC and 32 Records LLC (C)

3.1 Articles of Incorporation and By-laws (A)

10.1 Warrant Agreement, dated September 23, 1999 between the Company and Atlantis Equities, Inc. (B)

10.2 Employment Agreement, dated as of November 16, 1999 between CDBeat.com, Inc. and Robert Miller (C)

10.3 Stock Option Plan (A)

10.4 Engagement Letter, dated October 29, 1999 between Atlantis Equities, Inc. and the Company (F)

10.5 Warrant Amendment Agreement, dated as of November 16, 1999 by and among Atlantis Equities,
Inc. Dylan LLC and the Company (F)

10.6 Employment Agreement, dated as of April 11, 2000 between CDbeat.com, Inc. and Elliot Goldman (F)

10.7 Stock Option Agreement, dated as of April 11, 2000 between CDbeat.com, Inc. and Elliot Goldman

10.8 Indenture, dated as of June 29, 1999 by and among Cakewalk BRE LLC, Entertainment Finance
International, LLC and RZ0 Corporate Administration, Inc. (F)

10.9 Servicing Agreement, dated as of June 29, 1999 by and among Cakewalk BRE, Entertainment
Finance International, LLC and RZ0 Corporate Administration, Inc. (F)

10.1 Management Agreement, dated as of June 29, 1999 by and among Cakewalk LLC, Cakewalk BRE
LLC and Entertainment Finance International, LLC (F)

10.11 Capital Contribution Agreement, dated as of June 29, 1999 between Cakewalk LLC and Cakewalk
BRE LLC (F)

10.12 Consulting Agreement, dated as of October 18, 2000 by and between ConnectivCorp and
Entertainment Finance International LLC (G)

10.13 Asset Purchase Agreement, dated as of October 19, 2000, by and among ConnectivCorp, Neil p.
Phillips, Esq., as Conservator of the Person and Estate of Michael Reitano re: Herpes Advice Center (G)

10.14 Asset Purchase Agreement, dated as of October 19, 2000, by and among ConnectivCorp, Neil p.
Phillips, Esq., as Conservator of the Person and Estate of Michael Reitano re: Sexual Health
Magazine, Inc. (G)

10.15 Consulting Agreement, dated as of October 1, 2000, by and between ConnectivHealth Corp. and
Sexual Health Solutions, Inc. (G)

-18-

10.16 Stock Option Agreement, dated as of October 1, 2000, by and between ConnectivCorp and Sexual
Health Solutions, Inc. (G)

10.17 [Agreement with American Media Inc.] (G)

10.18 [Agreement with iWon] (G)

21.1 Subsidiaries of the Company (G)

(A) Incorporated by reference to the Company's Registration Statement on Form SB-2 (File No. 333-70663)

(B) Incorporated by reference to the Company's Report on Form 8-K filed with the Commission on October 8, 1999

(D) Incorporated by reference to the Company's Report on Form 8-K filed with the Commission on January 31, 2000

(E) Incorporated by reference to the Company's Report on Form 8-K/A filed with the Commission on January 31, 2000

(F) Incorporated by reference to the Company's Annual Report on Form 10-K/SB filed with the Commission on
April 14, 2000.

(G) Incorporated by reference to the Company's Annual Report on Form 10-K/SB filed with the Commission on
April 16, 2001.

(b) The Company did not file any reports on Form 8-K during the fourth quarter of 2001. On March 18, 2002,
the Company filed a Form 8-K.

SIGNATURES

In accordance with 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, on April 16, 2002.

CONNECTIVCORP.

By: /s/ Elliot Goldman
--------------------
Elliot Goldman
President and Chief Executive Officer

In accordance with 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 indicated.

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

/s/ Elliot Goldman President, Director and Chief Executive Officer May 31, 2002
------------------ (Principal Executive Officer)
Elliot Goldman

/s/ Robert Ellin
------------------
Robert Ellin Chairman May 31, 2002

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
-------- -----------------------------
21.1 Subsidiaries of the Company

-21-

INDEX TO FINANCIAL STATEMENTS

PAGE
----

Report of Independent Certified Public Accountants / Successor F-2
Report of Independent Certified Public Accountants / Predecessor F-3
Consolidated Balance Sheet F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Stockholders' Equity (Deficit) F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-9

F-1

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

BOARD OF DIRECTORS AND STOCKHOLDERS
CONNECTIVCORP

We have audited the accompanying consolidated balance sheet of
ConnectivCorp and subsidiaries as of December 31, 2001, and the related
consolidated statements of operations, changes in stockholders' equity (deficit)
and cash flows for the year ended December 31, 2001. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 financial
statement presentation. 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 consolidated financial position of
ConnectivCorp and subsidiaries as of December 31, 2001, and the consolidated
results of its operations and its cash flows for the year ended December 31,
2001 in conformity with accounting principles generally accepted in the United
States.

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

/s/ PATRUSKY, MINTZ & SEMEL

New York, New York
May 17, 2002

F-2

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To The Shareholders of ConnectivCorp:

We have audited the accompanying related consolidated statements of
operations, changes in shareholders' equity and cash flows of ConnectivCorp and
Subsidiaries for the year ended December 31, 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

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

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has not generated revenues from its proposed business model that raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

/s/ Arthur Andersen LLP

New York, New York
March 21, 2001

F-3

CONNECTIVCORP
CONSOLIDATED BALANCE SHEET
DECEMBER 31,2001

ASSETS
-------

CURRENT ASSETS:
Cash and cash equivalents $ 89,861
========================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
-------------------------------------------

CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 101,587
------------------------
Total Current Liabilities 101,587
------------------------

COMMITMENTS

STOCKHOLDERS' DEFICIENCY:
Preferred Stock, $.001 par value
10,000,000 shares authorized, Series D -
Common Stock, $.001 per value
40,000,000 shares authorized, 21,807,155 issued and outstanding 21,807
Paid in capital 19,102,936
Deferred compensation (64,504)
Accumulated deficit (19,071,965)
-------------------------
Total Stockholders' Deficiency (11,726)
-------------------------
Total Liabilities and Stockholders' Deficiency $ 89,861
=========================

The accompanying notes are an integral part of these consolidated statements.

F-4

CONNECTIVCORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,

2001 2000
--------------------------------- ---------------------------------

Revenues $ - $ 80,000

General and administrative expenses (5,797,920) (5,265,695)
--------------------------------- ---------------------------------

Operating loss (5,797,920) (5,185,695)

Interest income 41,143 102,674
--------------------------------- ---------------------------------

Loss from continuing operations before income
tax benefit (5,756,777) (5,083,021)
Income tax benefit - 116,000
--------------------------------- ---------------------------------
Loss from continuing operations (5,756,777) (4,967,021)
Loss from discontinued operations,
after income taxes ($0) - (1,412,700)
--------------------------------- ---------------------------------
Net loss (5,756,777) (6,379,721)
================================= ==================================
Net loss per common share- basic and diluted:
Loss from continuing operations $ (0.27) $ (0.24)
Loss from discontinued operations - (0.07)
--------------------------------- ---------------------------------
Net loss per common share- basic and diluted (0.27) (0.31)
================================= =================================
Weighted average shares outstanding:
basic and diluted 21,635,373 20,600,339
================================== ================================

The accompanying notes are an integral part of these consolidated statements

F-5

CONNECTIVCORP
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

Stockholders'
Preferred Common Paid in Deferred Accumulated Equity
Stock Stock Capital Compensation Deficit (Deficiency)
---------------------------------------------------------------------------------------------------------------------------

BALANCE, January 1, 2000 $ - $18,082 $13,572,426 $ (583,539) $ (6,935,467) $ 6,071,502

Adjustment of cost of acquired software - - 290,454 - - 290,454

Issuance of 121,494 shares with respect to
1999 business combination of
ConnectivCorp and Cakewalk LLC as an
adjustment to purchase price - 121 (121) - - -

Placement fee paid with respect to 1999
business combination of ConnectivCorp and
Cakelwalk LLC - - (90,000) - - (90,000)

Issuance of 2,661,352 shares of Series D
Preferred Stock in Private Placement 2,661 - 2,995,076 - - 2,997,737

Issuance of 648,128 shares of Common Stock
in Private Placement - 648 729,400 - - 730,048

Conversion of shares of preferred stock to
common stock (2,661) 2,661 - - - -

Issuance of 19,531 shares and 119,531
warrants in satisfaction of liability to
stockholder - 20 24,980 - - 25,000

Issuance of options for consulting services - - 1,493,261 (1,493,261) - -
Issuance of stock options to an officer - - 580,250 (580,250) - -

Amortization of deferred compensation - - - 1,801,441 - 1,801,441
Net loss - - - - (6,379,721) (6,379,721)
------------------------------------------------------------------------------
BALANCE, December 31, 2000 - 21,532 19,595,726 (855,609) (13,315,188) 5,446,461

Issuance of stock for legal services - 275 95,975 - - 96,250
Issuance of options for consulting services - - 26,382 (26,382) - -
Revaluation of unvested options - - (615,147) 268,743 - (346,404)
Amortization of deferred compensation - - - 548,744 - 548,744
Net loss - - - - (5,756,777) (5,756,777)
-------------------------------------------------------------------------------
BALANCE, December 31, 2001 $ - $21,807 $19,102,936 $ (64,504) $(19,071,965) $ (11,726)
===============================================================================

The accompanying notes are an integral part of these consolidated statements

F-6

CONNECTIVCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,

2001 2000
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $(5,756,777) $(6,379,721)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 1,002,700 995,458
Stock-based compensation 202,340 1,801,440
Shares issued for legal services 96,250 -
Loss on disposal of equipment - 10,740
Loss on writedown of impaired assets 2,896,759
Deferred tax benefit - (116,000)
Loss from discontinued operations - 1,412,700
Changes in assets and liabilities:
Prepaid expenses 42,781 (19,270)
Other assets - (3,610)

Accounts payable and accrued expenses (212,824) 22,364
------------- -------------
Net cash used in operations (1,728,771) (2,275,899)
------------- -------------

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of equipment - (5,054)
Acquisition of publications - (95,000)
------------- -------------
Net cash used in investing activities - (100,054)
------------- -------------
F-7

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from private placement - 3,637,785
------------- -------------
Net cash provided by financing activities - 3,637,785
------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,728,771) 1,261,832
CASH AND CASH EQUIVALENTS, beginning of year 1,818,631 556,799
------------- -------------
CASH AND CASH EQUIVALENTS, end of year $ 89,860 $ 1,818,631
============= ============

NON-CASH INVESTING AND FINANCING ACTIVITIES
Conversion of preferred to common stock $ - $ 2,997,737
============= ============
Satisfaction of accounts payable through issuance of common stock $ 96,250 $ -
============== ============
Fair value of warrants to purchase common stock issued with private placement $ - $ 9,764,458
============== ============
Fair value of warrants issued to placement agency $ - $ 1,146,880
============== ============
Increase in cost of acquired software $ - $ 290,454
============== ============
The accompanying notes are an integral part of these consolidated statements

F-8

CONNECTIVCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION
------------
ConnectivCorp (the "Company") was incorporated on May 8, 1998 under the name SMD
Group, Inc., which was subsequently changed to CDBeat.com, Inc. Following the
Company's business combination with Cakewalk LLC, the name was changed to
Spinrocket.com, Inc. On September 11, 2000, in order to better reflect and
describe the Company's current strategic direction, the name was changed to
ConnectivCorp. On November 16, 1999, the Company, through its wholly-owned
subsidiary, 32 Records LLC ("32 LLC") merged with Cakewalk LLC ("Cakewalk") in a
transaction accounted for by the purchase method wherein Cakewalk LLC was deemed
to be the acquiror and ConnectivCorp the acquiree (the "Merger").

ConnectivCorp's mission is to facilitate the online connection between
aggregated, targeted and profiled consumers, and marketers desiring to reach
those consumers. Operating through its subsidiary, ConnectivHealth Corp.
(ConnectivHealth), the Company functions as a deep content provider and
marketing company that facilitates the online connection between
healthcare-oriented consumers, patients and caregivers, and those health care
companies desiring to serve their healthcare needs.

On March 30, 2000, the Board of Directors voted to exit the business conducted
by 32 LLC within one year, and recharacterized 32 LLC as a discontinued
operation for financial reporting purposes. 32 LLC continued to operate the
business while seeking a buyer. During the second quarter of 2000, the Company
wrote off the net assets of 32 LLC and recorded a loss in its consolidated
financial statements. On February 2, 2001, the assets of 32 LLC were
surrendered to Entertainment Finance International, Inc. ("EFI") under a default
of the loan agreement.

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
-----------------------------------------------------------

The consolidated balance sheet includes the accounts of ConnectivCorp and its
wholly-owned subsidiaries ConnectivHealth and 32 Records LLC. Significant
intercompany transactions have been eliminated in consolidation.
F-9

CONNECTIVCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

UNCERTAINTY
-----------

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has a limited
operating history, and since its inception in 1998, has incurred substantial
losses. The Company's accumulated deficit as of December 31, 2001 is
approximately $19 million. To date, the Company has not generated any revenue
from its proposed business model, which contemplated selling pharmaceutical and
other healthcare companies access to the Company's aggregated users. The
Company incurred a net loss of approximately $5.8 million and $6.4 million for
the years ended December 31, 2001and 2000, respectively, while cash and cash
equivalents at December 31, 2001 totaled approximately $90,000. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. The Company's continued existence is dependent upon several factors
including the Company's ability to raise additional equity or execute its
business strategy.

In 2001, the Company has made a decision to restructure its operations.
Management stated that restricted common stock may be issued to satisfy existing
trade payables and that the Company is seeking appropriate merger or acquisition
partners in the medical information or other unrelated fields. Management
agreed to provide or arrange for short term financing of $250,000 in connection
with this effort and, effected a one-for-ten reverse stock split of the
Company's common stock as of March 12, 2002.

The Company's ability to operate as a going concern is dependent on its ability
to execute its restructuring and/or raise additional equity. There can be no
level of assurance that the Company will be able to achieve or sustain any level
of profitability in the future. Future operating results will depend upon a
number of factors, including the ability to raise additional capital, the
execution of the Management's restructuring plans and prevailing economic
conditions. While the Company has reduced its operating expenses, no assurance
can be given that the Company can sustain these operating levels. Moreover, the
Company has not yet generated any meaningful revenues, and no assurance can be
given that it will do so in the future. There can be no assurance that the
Company will generate sufficient revenues to ever achieve profitability or
otherwise sustain its profitability in the future. While the Company is
exploring appropriate merger or acquisition partners in the medical information
or unrelated fields, there can be no assurance that a transaction will be
consummated.

F-10

CONNECTIVCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 revenue and expense during the reporting period. Actual
results could differ from those estimates.

CASH AND CASH EQUIVALENTS
----------------------------
All highly liquid investments with original maturities of three months or less
are considered to be cash equivalents.

EQUIPMENT AND DEPRECIATION
----------------------------
Equipment is carried at cost, less accumulated depreciation. Depreciation is
recognized using the straight-line method over the estimated useful lives of the
assets, which approximates five years. The Company recorded depreciation
expense of $3,900 and $3,601 during 2001 and 2000, respectively.

SOFTWARE DEVELOPMENT COSTS
--------------------------
Software development costs represents the estimated value of the software owned
by the Company at the time of the business combination with 32 LLC. These costs
are being amortized using the straight-line method over the estimated useful
life of five years. The Company recorded $840,000 and $849,028 for amortization
for the years ended December 31, 2001 and 2000, respectively.

GOODWILL AND AMORTIZATION
---------------------------
Goodwill represents costs in excess of fair values assigned to underlying net
assets acquired and is being amortized over five years. The Company recorded
amortization expense of $139,800 in each of the years ending December 31, 2001
and 2000. As further discussed in Note 2, the net carrying value of goodwill
was considered impaired as of December 31, 2001. Accordingly, $419,000 was
charged to general and administrative expense.

COST OF PUBLICATIONS ACQUIRED
--------------------------------
The Company purchased sexual health publications in 2000. The publications
provide content for the Company's website. The publications are being amortized
using the straight-line method over five years. The Company recorded
amortization expense of $19,000 and $2,375 in the years ended December 31, 2001
and 2000, respectively.

F-11

CONNECTIVCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LONG-LIVED ASSETS
------------------
The Company's policy is to record long-lived assets at cost, amortizing these
costs over the expected useful lives of the related assets. In accordance with
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of," these assets are reviewed on a periodic
basis for impairment whenever events or changes in circumstances indicate the
carrying amounts of the assets may not be realizable. Furthermore, the assets
are evaluated for continuing value and proper useful lives by comparison to
expected future cash flows. Accordingly, certain long-lived assets were
considered impaired during 2001, as further discussed in Note 2.

FAIR VALUE OF FINANCIAL INSTRUMENTS
---------------------------------------
The Company's current financial instruments, including cash and cash equivalents
and accounts payable are carried at cost, which approximates their fair value
due to the short-term maturity of these instruments.

STOCK-BASED COMPENSATION
-------------------------
In October 1995, the FASB issued SFAS No.123, "Accounting for Stock-Based
Compensation." This statement establishes a fair market value based method of
accounting for an employee stock option but allows companies to continue to
measure compensation cost for those plans using the intrinsic value based method
prescribed by APB Opinion No. 25 "Accounting for Stock Issued to Employees."
Companies electing to continue using the accounting under APB Opinion No. 25
must, however, make pro forma disclosure of net income and earnings per share as
if the fair value based method of accounting in SFAS No. 123 had been applied.
The Company has elected to continue to account for its stock-based compensation
awards to employees and directors under the accounting prescribed by APB Opinion
No. 25, and to provide the necessary pro forma disclosures as if the fair value
method had been applied.

REVENUE RECOGNITION
--------------------

The Company recognizes consulting revenues for technology services when the
services are provided.

It is anticipated that future revenues will be recognized as services are
delivered under terms of future contracts.

F-12

CONNECTIVCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS
-------------------------------

In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations ("FAS 141") and
No. 142, Goodwill and Other Intangible Assets ("FAS 142"). FAS 141 requires all
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method. Under FAS 142, goodwill and intangible assets with
indefinite lives are no longer amortized but are reviewed annually (or more
frequently if impairment indicators arise) for impairment. Separable intangible
assets that are not deemed to have indefinite lives will continue to be
amortized over their useful lives (but with no maximum life). The amortization
provisions of FAS 142 apply to goodwill and intangible assets acquired after
June 30, 2001. With respect to goodwill and intangible assets acquired prior to
July 1, 2001, the Company is required to adopt FAS 142 effective January 1,
2002. The Company is currently evaluating the effect that adoption of the
provisions of FAS 142 that are effective January 1, 2002 will have on its
results of operations and financial position.

In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets". This statement
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. SFAS No. 144 will be effective for financial statements of
fiscal years beginning after December 15, 2001. We do not anticipate that it
will have a material impact on the Company's financial results.

NOTE 2 - IMPAIRMENT OF ASSETS

During the fourth quarter of the year ended December 31, 2001, the Company
performed a review to ascertain the realizability of long-lived tangible and
intangible assets. Based upon the uncertainty related to the Company's current
business model, it was determined that the current carrying value of the assets
may not be able to be realized. As a result of the review, equipment with a net
book value of $4,885, software development costs with a net book value of
$2,380,000, the net unamortized carrying value of goodwill of $419,400 and costs
of publications acquired with a net book value of $73,625 were determined to be
impaired. A total of $2,877,910 was charged to general and administrative
expense.
F-13

CONNECTIVCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - DISCONTINUED OPERATIONS

In March 2000, the Label Manager and Creative Director of 32 LLC resigned their
positions. The resignation of the Creative Director constituted a default under
the Management Agreement among 32 Records LLC, Cakewalk BRE LLC ("BRE") and
Entertainment Finance International, Inc. ("EFI"). As a result of these
defaults EFI, as holder of $5,500,000 principal amount of indebtedness issued by
BRE, has accelerated the maturity date of such indebtedness and commenced
foreclosure proceedings. At the time the loan was granted in June 1999, EFI
required the establishment of a new subsidiary, BRE, into which all assets of 32
LLC were transferred as security for EFI. Accordingly, EFI does not have
recourse to the Company's assets not included in the BRE.

On March 30, 2000, the Board of Directors voted to exit the business conducted
by 32 LLC by March 2001, and recharacterized 32 LLC as a discontinued operation
for financial reporting purposes. Since March 30, 2000, 32 LLC has been
operating the business and has sought to sell the business or assets. During
the second quarter of 2000, the Company wrote off the business of 32 LLC in its
consolidated financial statements.

On February 2, 2001, the assets of 32 LLC were surrendered to EFI under a
default of the loan agreement.

NOTE 4 - INCOME TAXES
The significant components of the deferred tax asset as of December 31, 2001,
assuming an effective income tax rate of 40%, are as follows:

Net operating loss $ 4,037,894
Non-cash compensation expense 1,364,920
Other 30,000
--------------
Total deferred tax asset 5,432,814
Liabilities -
--------------
Net 5,432,814
Less valuation allowance (5,432,814)
--------------
Total deferred income tax asset - net $ -
==============

The Company established a valuation allowance to fully offset the deferred
income tax asset as of December 31, 2001 as the realization of the asset did not
meet the required asset recognition standard of SFAS No. 109 "Accounting for
Income Taxes." The increase in the Company's deferred tax valuation allowance
was $1,977,476 during 2001.

F-14

CONNECTIVCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - INCOME TAXES (CONTINUED)

At December 31, 2001, the Company had net operating loss carryforwards of
approximately $10.1 million for federal income tax purposes. The carryforwards
expire through the year 2020 and may be subject to limitations due to the
ownership change, as further discussed in Note 10.
The $116,000 deferred tax benefit in 2000 results from the timing difference on
the revaluation of software costs acquired in 1999. Subsequent to the Merger in
1999, the Company utilized $583,000 of deferred tax asset to offset a
pre-acquisition deferred tax liability.

NOTE 5 - LOSS PER COMMON SHARE

Loss per common share was calculated as follows:

2001 2000
--------------------------------- ---------------------------------

Loss from continuing operations $ (5,756,777) $ (4,967,021)
Loss from discontinued operations - (1,412,700)
--------------------------------- ---------------------------------
Net loss (5,756,777) (6,379,721)
================================= =================================
Basic and diluted loss per common share:
Loss from continuing operations $ (0.27) $ (0.24)
Loss from discontinued operations - (0.07)
--------------------------------- ---------------------------------
Net loss per common share (0.27) (0.31)
================================= ==================================

Stock options and warrants issuable representing equivalents of 10,597,874
shares of common stock during 2001 and 10,284,544 shares of common stock during
2000 had exercise prices greater than the average market price of ConnectivCorp
common stock. These common stock equivalents were outstanding during 2001 and
2000, but were not included in the computation of diluted earnings per share for
those years because their inclusion would have had an antidilutive effect.

F-15

CONNECTIVCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - COMMITMENTS

LEASE COMMITMENTS
------------------

On October 31, 2001, the Company terminated the lease for its office space at 29
West 57th Street, New York, New York. Operations were relocated to the offices
of the Company's current Chairman. Due to the limited operations of the
Company, no rent expense was incurred during the two months ended December 31,
2001.

EMPLOYMENT AGREEMENTS
----------------------

The Company entered into an employment contract, on April 11, 2000, with Elliot
Goldman for an initial term of three years. The Agreement was amended by the
Board of Directors in January 2001. The initial term shall automatically be
extended by one additional year at the end of the Initial Term and each
subsequent anniversary thereafter, unless, at least 120 days prior to any such
renewal date, either Mr. Goldman or the Company shall deliver written notice to
the other that the term will not be further extended. Pursuant to the Employment
Agreement, as amended, Mr. Goldman serves as President, Chief Executive Officer
and as a Director of the Company at an initial annual salary of $250,000,
subject to such increases or bonuses as the Board of Directors of the Company
shall authorize. The Company also entered into an option agreement with Mr.
Goldman pursuant to which Mr. Goldman was granted an option to purchase all or
any part of an aggregate of 500,000 shares of the Common Stock of the Company at
an exercise price of $1.28 per share. One half of such option shares are
currently vested, and an additional one quarter of such option shares vest on
each anniversary of the agreement until all of such option shares are fully
vested. All unvested shares shall vest automatically under certain
circumstances. Unless terminated earlier in accordance with the terms and
conditions of the option agreement, the option shall terminate on April 10,
2006. In January 2001, upon his appointment as President and Chief Executive
Officer, the Company granted Mr. Goldman an additional option to purchase all or
any part of an aggregate of 500,000 shares of the Company's Common Stock at an
exercise price of $1.50, of which 250,000 were immediately exercisable and
250,000 shares were exercisable when and if the Company achieved certain revenue
levels.

The Company entered into an employment contract, on November 16, 1999 with
Robert Miller for an initial term of three years. This agreement was also
amended by the Board of Directors in January 2001. The initial term shall
automatically be extended by one additional year at the end of the initial term
and each subsequent anniversary thereafter, unless, at least 120 days prior to
any such renewal date, either Mr. Miller or the Company shall deliver written
notice to the other that the term will not be further extended. Pursuant to the
employment agreement, as amended, Mr. Miller served as a Director and
Co-Chairman of the Company at an initial annual salary of $200,000, subject to
such increases or bonuses as the Board of Directors of the Company shall
authorize. The Company entered into an option agreement with Mr. Miller pursuant
to which the Company granted to Mr. Miller an option to purchase all or any part
of an aggregate of 1,955,750 shares of the Common Stock of the Company, at the
following exercise prices: 50% of the Option
F-16

CONNECTIVCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - COMMITMENTS (CONTINUED)

Shares at $1.30 per share, 25% at $1.50 per share; and 25% at $1.75 per share.
Two-thirds, or 1,303,899, Option Shares have vested, and the remaining one-third
of the option shares vest on November 16, 2001. All unvested shares shall vest
automatically under certain circumstances. Unless terminated earlier in
accordance with the terms and conditions of the option agreement, the Option
shall terminate upon the later to occur of (a) the expiration of the term of Mr.
Miller's employment agreement with the Company, or (b) five years from the
original date of grant of the Option. Mr. Miller resigned his position as
Co-Chairman and Director of the Company on January 24, 2002

Messrs. Goldman and Miller have voluntarily reduced their annual cash
compensation to $150,000 and $100,000, respectively, as of March 1, 2001 and to
$125,000 and $75,000, respectively, as of May 1, 2001. As of July 1, 2001,
Messrs. Goldman and Miller have voluntarily waived receipt of any further cash
compensation.

CONSULTING AGREEMENT
---------------------

The Company retained the services of Atlantis, a private merchant banking
and advisory firm that primarily assists emerging growth companies, to act as
its financial advisor pursuant to an Engagement Letter dated October 29, 1999,
as amended on January 1, 2001, (the "Engagement Letter"). Robert Ellin, the
current Chairman of the Company, is a principal of Atlantis. In consideration
for the services to be provided by Atlantis under the Engagement Letter,
Atlantis is paid a monthly fee of $12,500, (plus certain expenses). The term of
the Engagement Letter is three years, and shall automatically renew for
successive one-year terms. The Company has also granted Atlantis a warrant to
acquire up to 762,064 shares of the Company's common stock at an exercise price
of $2.50 per share which expires on December 31, 2002. This agreement was also
amended by the Board of Directors in January 2001 and Atlantis' monthly fee was
increased to $16,666.

Atlantis voluntarily agreed to reduce its monthly cash compensation to $8,333 as
of March 1, 2001, and to $6,250 as of May 1, 2001. As July 1, 2001, Atlantis
voluntarily waived receipt of any further cash compensation.

NOTE 7 - STOCK OPTIONS

During 2001 and 2000 the Company granted options and warrants to purchase
650,000 and 5,737,435 shares of common stock, which were outstanding as of
December 31, 2001 and 2000, respectively. These options and warrants were
granted to employees, consultants and others at exercise prices ranging from
$.01 to $3.125, per share; and are exercisable through 2010. As of December 31,
2001 and 2000, 9,797,874 and 8,589,297 options and warrants were exercisable at
a weighted average exercise price of $2.55 and $2.67 per share, respectively.
F-17

CONNECTIVCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - STOCK OPTIONS (CONTINUED)

In 2001 and 2000, the Company recorded compensation expense in the amount
Of $258,559 and $1,408,519 under the requirement of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." Had compensation
cost been determined in accordance with SFAS No. 123, "Accounting for
Stock-Based Compensation" the Company would have reported additional losses as
follows:

2001 2000
------------ ------------

Loss from continuing operations As reported $(5,756,777) $(4,998,512)
Proforma (6,721,681) (7,037,497)

Loss from discontinued operations As reported 0 (1,412,700)
Proforma 0 (1,412,700)

Net loss As reported (5,756,777) (6,411,212)
Proforma (6,721,681) (8,450,197)

Basic and diluted loss per common share:
From continuing operations As reported (0.27) (0.24)
Proforma (0.31) (0.34)

From discontinued operations As reported 0.00 (0.07)
Proforma 0.00 (0.07)

Net loss per common share As reported (0.27) (0.31)
Proforma (0.31) (0.41)

Under SFAS No. 123, the fair value of each option is estimated on the date of
grant using Black-Scholes option-pricing model with the following
weighted-average share assumptions used for grants in 2000; (1) expected life of
options 4 years; (2) no dividend yield; (3) expected volatility 148%; (4)
risk-free interest rate 5%, and in 1999: (1) expected life of the option 5
years; (2) no dividend yield; (3) expected volatility 209%; (4) risk free
interest rate 5%.
F-18

CONNECTIVCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - STOCK OPTIONS (CONTINUED)
The following summarizes stock option activity:

Year Ended December 31, 2001 Year Ended December 31, 2000
----------------------------- -----------------------------
Weighted Weighted
Average Average
Shares Exercise Price Shares Exercise Price
----------- ---------------- ---------- -----------------

Outstanding - beginning of year 4,177,289 $ 2.60 2,782,683 1.30
Granted 650,000 1.56 1,858,325 $ 1.30
Exercised - - - -
Forfeited (336,670) (1.90) (463,719)
----------- ---------------- ---------- -----------------

Outstanding - end of year 4,490,619 $ 1.66 4,177,289 $ 2.60
=========== ================ ========== =================
Number of shares exercisable at
December 31, 3,940,620 $ 1.51 2,482,043 $ 1.42
=========== ================ ========== =================
Weighted average fair value of
options granted during period $ 1.56 $ 1.83
================ =================

NOTE 8 - STOCKHOLDERS' EQUITY
On March 31, 2000, the Company raised approximately $3 million (net of Placement
Agent fees) through the private placement of 2,661,352 shares of the Company's
Series D Convertible Preferred Stock (the "Series D Preferred Stock") at a price
of $1.28 per share (the "Private Placement"). On April 19, 2000, the Company
converted the Series D Preferred Stock into shares of common stock at a ratio of
one share of common stock for one share of Series D Preferred Stock and amended
its charter to authorize the issuance of up to 40 million shares of common
stock. At the second closing on April 28, 2000, the Company received
approximately $.7 million (net of placement agent fees) and issued 648,128
shares of common stock. The Company also issued one warrant to purchase one
share of common stock for each share of preferred or common stock issued in the
private placement. The warrants have an exercise price of $5 per share and are
exercisable at any time until April 19, 2002. The warrants were assigned a fair
value of $9.8 million, using the Black Scholes pricing model. The Company also
granted to the Placement Agent warrants to purchase 330,948 shares of the
Company's common stock. The warrants have an exercise price of $1.28 per share
and are exercisable at any time until April 28, 2005. The warrants were
assigned a fair value of $1.1 million, using the Black Scholes pricing model.
F-19

CONNECTIVCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - RELATED PARTY TRANSACTION

During 1999, the Company retained Atlantis Equities, Inc. ("Atlantis"), a
private merchant banking and advisory firm that primarily assists emerging
growth companies, to act as its financial advisor. Robert Ellin, the Chairman of
the Company, is a principal of Atlantis. In consideration for services rendered
during 2001 and 2000, Atlantis was paid $52,566 and $150,000, respectively. The
Company also granted Atlantis options to acquire up to 762,064 shares of the
Company's common stock at an exercise price of $2.50 per share which expire on
December 31, 2002. The warrant was assigned a fair value of $1,522,909, using
the Black Scholes pricing model. The warrant was cancelled in March 2002.

NOTE 10 - SUBSEQUENT EVENTS

REVERSE STOCK SPLIT
---------------------
On March 12, 2002, the Company effected a one-for-ten reverse split of its
common stock.

The Company's historical loss per share for the years ended December 31, 2001
and 2000, would be as follows:

Pro forma loss per basic and diluted common share:

2001 2000
----------------- -----------------

Loss from continuing operations $ (2.66) $ (2.41)
Loss from discontinued operations - (0.69)
----------------- -----------------
Net loss per common share $ (2.66) $ (3.10)
================= =================

LETTER OF INTENT
------------------

Capital of $2 million shall be necessary in connection with the transaction
financing, of which $1 million shall be raised by Aqua and $1 million by the
Company. Subsequent to year end, the Company has raised approximately $350,000
of additional financing. At the signing of the Purchase Agreement, the Company
shall advance $250,000 to Aqua in the form of a secured
F-20

CONNECTIVCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - SUSEQUENT EVENTS (CONTINUED)

bridge loan to be evidenced by a note bearing interest at 12% per annum. In the
event the transaction closes, the $250,000 shall be credited to the Company as
part of its $1 million capital contribution discussed above. The Company shall
be obligated to make another $100,000 available to Aqua prior to closing on the
same terms. In the event the transaction is not consummated, the loan shall
mature 90 days after the closing date, as defined. The parties anticipate the
closing shall occur on or before the date that is 120 days after March 21, 2002.

ISSUANCE OF COMMON SHARES
----------------------------
Subsequent to year end, the Company committed to issue approximately
709,000 shares of common stock to creditors, 228,250 to employees and
consultants and 1,165,000 shares of common stock to officers and directors in
settlement of unpaid liabilities and in exchange for options issued or
authorized.

In March 2002, Atlantis Equities and Messers. Ellin and Goldman received
respectively 2 million and 500,000 and 500,000 shares of the Company's common
stock in exchange for cancellation of unexercised options and obligations and
indebtedness owed to them by the Company.

In March 2002, 40,000 common shares were issued to Jeffrey Kuhr upon his
joining the Board of Directors. Additionally, 760,000 common shares were issued
to West End Capital Partners, LLC in settlement of investment banking services
of approximately $16,000. Mr. Kuhr is the managing partner of West End Capital
Partners, LLC.

Further, subsequent to year end, the Company raised approximately $350,000
through the sale of 3,500,000 shares of common stock at $0.10 per share.

The number of shares and the per share data reflect the reverse split
effect on March 12, 2002.

SUBLEASE
--------
On January 1, 2002, the Company entered into a sublease for office space
located at 750 Lexington Avenue, New York, New York. The lease term is for the
period from January 1, 2002 through December 31, 2002, with a monthly rent of
$2,500. The office space is being leased from an entity in which the father of
Robert Ellin, Chairman of the Company, is a partner.

EMPLOYMENT AGREEMENTS
----------------------
The Company entered into an employment contract, on March 18, 2002 with
Elliot Goldman for an initial term of one year. Mr. Goldman serves as President,
Chief Executive Officer and as a Director of the Company at an annual salary of
$150,000. However, the compensation shall accrue and no more than $200 per week
shall be paid to Mr. Goldman until such time as the Company has received at
least $1 million in proceeds from new debt and/or equity investment subsequent
the date of the agreement.
F-21

CONNECTIVCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - SUSEQUENT EVENTS (CONTINUED)

The Company entered into an employment contract, on March 18, 2002 with Robert
Ellin for an initial term of one year. Mr. Ellin serves as Chairman of the
Company at an annual salary of $150,000. However, the compensation shall accrue
and no more than $200 per week shall be paid to Mr. Ellin until such time as
the Company has received at least $1 million in proceeds from new debt and/or
equity investment subsequent the date of the agreement.

CONSULTING AGREEMENT
---------------------

F-22

EXHIBIT 21.1

Subsidiaries of the Company
------------------------------

Name State of Organization

ConnectivHealth Corp. Delaware
32 Records LLC Delaware
Cakewalk BRE LLC New York

F-23