Edgar Filing: FINX GROUP INC

UNITED STATES SECURITIES AND EXCHANGE

COMMISSION
Washington, D.C. 20549

SCHEDULE 14C/A

Amendment No. 1

Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934

Check appropriate box:

[X] Preliminary information statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14c-5(d)(2)).
[ ] Definitive information statement

The Finx Group, Inc.
--------------------

(Name of Registrant as specified in Its Charter)

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THE FINX GROUP, INC.
249 N. Saw Mill River Road
Elmsford, NY 10523

INFORMATION STATEMENT

August 21, 2002

To the Shareholders of The Finx Group, Inc.

This Information Statement is being furnished to the shareholders of
The Finx Group, Inc. , a Delaware corporation, (the "Company") in connection
with an amendment to the Company's articles of incorporation increasing the
authorized number of shares of its Common Stock, par value $0.01 per share, from
50,000,000 shares to 750,000,000 shares, which has been authorized by the
written consent (the "Written Consent") of the holders of a majority of the
voting power of the outstanding shares of the Common Stock, par value $.01 per
share of the Company (the "Common Stock"), the outstanding shares of the Series
A 4% Preferred Stock, par value $.01 per share of the Company (the "Series A
Preferred Stock"), and the outstanding shares of the Series B $8 Voting
Redeemable Convertible Preferred Stock, par value $.01 per share of the Company
(the "Series B Preferred Stock") voting together as one class of stock, in
accordance with the applicable provisions of Delaware General Corporation Law.

On July 1, 2002, the Board of Directors of the Company resolved to
amend the Company's articles of incorporation to increase the authorized number
of shares of its Common Stock, par value $0.01 per share from 50,000,000 shares
to 750,000,000 shares, subject to shareholder approval.

The approximate date on which this Information Statement is first being
sent or given to shareholders of the Company is August 31, 2002. The Company
will bear the costs of the preparation and mailing of this Information
Statement.

The Company will bear the costs of the preparation and mailing of this
Information Statement which is estimated to approximate $15,000.

WE ARE NOT ASKING YOU FOR A PROXY OR TO SIGN A WRITTEN CONSENT
AND YOU ARE REQUESTED NOT TO SEND US A PROXY OR CONSENT

EQUITY OWNERSHIP OF CONTROLLING SHAREHOLDERS AND
RELATED ANTI-TAKEOVER CONSEQUENCES

Predecessor Company

Fingermatrix, Inc. (the predecessor company) was formed on May 12, 1976
under the laws of the State of New York. For the period from its inception
through December 1998, Fingermatrix, Inc. was in a development stage and,
accordingly, Fingermatrix Inc.'s efforts and resources were directed to product
and prototype development and production and planning of electronic fingerprint
identification systems. Only nominal revenues were generated during this period.
In 1994, Fingermatrix, Inc. filed for reorganization under Chapter 11 of the
U.S. Bankruptcy Code and Fingermatrix, Inc. operated as a debtor in possession
until a Trustee was appointed in September 1995. On March 31, 1996, the
Bankruptcy Court approved a Plan of Reorganization, Fingermatrix, Inc. ceased
operating under the protection of the court and management of Fingermatrix Inc.
was transferred from the Trustee to a Board of Directors. Due to a working
capital shortage and a lack of any meaningful revenues, operations were
suspended on October 15, 1997. From that time until April 1999, Fingermatrix,
Inc. did not conduct any business operations other than to seek investment
capital, debt financing, an entity to acquire Fingermatrix, Inc.'s business or a
merger or joint venture partner.

1999 SES Merger

On April 28, 1999, Fingermatrix consummated an Agreement and Plan of
Reorganization (the "1999 SES Merger ") with The Trinity Group -I, Inc. The
Trinity Group-I, Inc. is owned by Lewis S. Schiller, the Company's Chairman and
Chief Executive Officer. Pursuant to the 1999 SES Merger agreement,
Fingermatrix, Inc. acquired from The Trinity Group-I, Inc. all of the issued and
outstanding shares of capital stock of SES Acquisition Corp. (a then wholly
owned subsidiary of The Trinity Group-I, Inc.) in exchange for 85% of
Fingermatrix, Inc.'s equity and voting power consisting of 10,571,607 shares of
Fingermatrix, Inc.'s Common Stock and 93,654 shares of Fingermatrix, Inc.'s
Series A 2% Voting Convertible Preferred Stock (convertible into 69,566,934
shares of Fingermatrix, Inc.'s Common Stock). Upon the conclusion of the 1999
SES Merger, by virtue of SES Acquisition Corp.'s ownership of all of the issued
and outstanding shares of capital stock of Sequential Electronic Systems, Inc.
and S-Tech, Inc. and 39.1% of the issued and outstanding shares of capital stock
of FMX Corp., Fingermatrix, Inc. succeeded to the ownership of these entities
which became second tier subsidiaries of Fingermatrix, Inc. The former
stockholders of Fingermatrix, Inc. retained a 10% ownership interest in
Fingermatrix, Inc. consisting of 9,428,393 shares of Common Stock and former
creditors of Fingermatrix, Inc. received a 5% equity ownership interest
consisting of 6,346 Shares of Series A 2% Voting Convertible Preferred Stock
(convertible into 4,713,809 shares of Fingermatrix, Inc. Common Stock in
satisfaction of $986,000 of indebtedness held by them on April 28, 1999. In
September 1999, Fingermatrix, Inc. issued 1,000 shares of its Series B 4%
Preferred Stock to The Trinity Group-I, Inc. The Series B 4% Preferred Stock
gave The Trinity Group-I, Inc. the right to elect a majority of the
Fingermatrix, Inc. Board of Directors and was issued to provide The Trinity
Group-I, Inc. with, among other things, the power to resist any third-party
takeover transaction.

2000 Finx Group Merger

The Board of Directors of Fingermatrix, Inc. determined that it would
be in the best interests of Fingermatrix, Inc. to reincorporate Fingermatrix,
Inc. in Delaware and that such reincorporation would be accomplished through the
merger of Fingermatrix, Inc. with and into its wholly-owned subsidiary, The Finx
Group, Inc., a Delaware Corporation formed on June 6, 2000 (the "2000 Finx Group
Merger"). On June 23, 2000, the Fingermatrix, Inc. Board of Directors approved a
merger agreement between Fingermatrix, Inc. and The Finx Group, Inc., which
became effective as of July 14, 2000 upon the written consent of a majority of
the Fingermatrix, Inc. shareholders consisting of The Trinity Group-I, Inc. and
five other shareholders. The Board of Directors fixed the close of business on
June 30, 2000 as the record date for purposes of consummating the 2000 Finx
Group Merger. Fingermatrix, Inc. reported the 2000 Finx Group Merger in an
Information Statement under Section 14 of the Securities and Exchange Act of
1934 and on or about July 14, 2000, such Information Statement was sent to the
shareholders of record as of June 30, 2000. On June 30, 2000, Fingermatrix, Inc.
had 20,000,000 shares of Common Stock, 114,403 shares of Series A 2% Voting
Convertible Preferred Stock (convertible into 84,978,548 shares of Common stock)
and 1,000 shares of Series B 4% Preferred Stock issued and outstanding. On June
30, 2000, The Finx Group, Inc. had authorized capital stock consisting of
50,000,000 shares of Common Stock, par value $.01 per share, of which no shares
were issued or outstanding and

1,000,000 shares of Series A Preferred Stock, par value $.01 per share, of which
1,000 shares were issued and outstanding and were owned by The Trinity Group-I,
Inc.

Pursuant to the 2000 Finx Group Merger, each outstanding ten shares of
Fingermatrix, Inc. Common Stock was automatically converted into the right to
receive one share of The Finx Group, Inc.'s Common Stock. Each outstanding share
of Fingermatrix, Inc. Series A 2% Voting Convertible Preferred Stock was
automatically converted into 742.8 shares of Fingermatrix, Inc. Common Stock and
then each outstanding ten shares of such Fingermatrix, Inc. Common Stock was
automatically converted into the right to receive one share of The Finx Group,
Inc.'s Common Stock. Each outstanding share of Fingermatrix, Inc. Series B 4%
Preferred Stock automatically converted into the right to receive one share of
The Finx Group, Inc.'s Series A Preferred Stock. The Finx Group, Inc. Series A
Preferred Stock, which is not convertible into shares of Common Stock, gave The
Trinity Group-I, Inc. the right to elect a majority of The Finx Group, Inc.
Board of Directors and was issued to provide The Trinity Group-I, Inc. with,
among other things, the power to resist any third-party takeover transaction.
The By-Laws of Fingermatrix, Inc. continued in force as the By-Laws of The Finx
Group, Inc. and the directors and officers of The Finx Group, Inc. were the same
as those of Fingermatrix, Inc.

The Trinity Group-I, Inc. Debt Conversion

From April 28, 1999, the date on which The Trinity Group-I, Inc.
acquired its initial controlling interest in the Company through May 7, 2001,
The Trinity Group-I, Inc. has been the Company's only significant source of
funding. As of May 7, 2001, The Trinity Group-I, Inc. had advanced to the
Company and its subsidiaries approximately $3,700,000 in order to fund its
operations and accrued and unpaid interest on such advances, calculated at an
annual rate of 9%, approximated $400,000. On May 7, 2001, The Trinity Group-I,
Inc. converted $1.5 million of such related party debt into 7,500,000 shares of
Common Stock, representing $0.20 per share, the fair market value of the Common
Stock on May 7, 2001 and converted an additional $2,000,000 of such related
party debt into 20,000 shares of Series B Preferred Stock. The Series B
Preferred Stock is convertible into shares of Common Stock as calculated by
dividing $2,000,000 by the lowest price that the Company's shares of Common
Stock have traded during the period that the Series B Preferred Stock has been
outstanding. As of July 1, 2002, the Series B preferred stock can be converted
into 66,666,667 million shares of Common Stock and the holders of the Series B
Preferred stock are entitled to vote alongside of Common Stockholders on an if
converted basis. The Company has been informed by The Trinity Group-I, Inc. of
its intention to convert all of its shares of Series B Preferred Stock upon the
increase in the authorized shares of Common Stock. The Trinity Group-I, Inc. is
the Company's controlling shareholder and is wholly owned by Lewis S. Schiller,
the Company's Chief Executive Officer and Chairman of the Board, and the
transaction whereby The Trinity Group-I, Inc. converted its debt into equity
securities of the Company was not consummated at arms-length.

Options and Warrants Issued to Executives

Since April 28, 1999 Lewis S. Schiller has been the Company's Chief
Executive Officer and Grazyna B. Wnuk has been the Company's Vice-President. For
the entire term of their employments with the Company, Lewis S. Schiller and
Grazyna B. Wnuk have voluntarily deferred payment of their salaries. As of July
1, 2002, Lewis S. Schiller's and Grazyna B. Wnuk's unpaid salaries approximated
$1,125,000 and $462,500, respectively. In order to provide Lewis S. Schiller
with additional compensation, the Company has issued to him options to purchase
an aggregate of 750,000 shares of Common Stock which were exercised at $0.15 per
share, an option to purchase 1,500,000 shares of Common Stock which were
exercised at $0.04 per share and warrants to purchase an aggregate of 20,000,000
shares of Common Stock for $0.043 per share. In addition, upon the increase in
the authorized shares of Common Stock, the Company intends to grant to Lewis S.
Schiller options to purchase 33,000,000 shares of Common Stock for $0.04 per
share and 16,000,000 shares of Common Stock for $0.15 per share. In order to
provide Grazyna B. Wnuk with additional compensation, the Company has issued to
her options to purchase an aggregate of 375,000 shares of Common Stock which
were exercised at $0.15 per share, and a warrant to purchase an aggregate of
10,000,000 shares of Common Stock for $0.043 per share. In addition, upon the
increase in the authorized shares of Common Stock, the Company intends to grant
to Grazyna B. Wnuk options to purchase 3,300,000 shares of Common Stock for
$0.04 per share and 1,200,000 shares of Common Stock for $0.15 per share. Lewis
S. Schiller and Grazyna B. Wnuk are the Company's only executive officers and
the only members of the Company's Board of Directors and the terms pursuant to
which they received their warrants and options to purchase Common Stock shares
were not based on arms length negotiations.

Change of Control Provisions in Executive Employment Agreement

The employment agreements between the Company and Lewis S. Schiller and
the Company and Grazyna B. Wnuk, provide said executives with "Change of
Control" benefits whereby the executives may terminate their respective
employment agreements upon 90 days notice to the Company in the event of a
"Change of Control" and continue to receive payment of their salaries for a
period of 120 months from the date of termination. Within the employment
agreements "Change of Control" is defined as the date on which the Company sells
all or substantially all of its assets, sells more than 50% of the outstanding
capital stock of any one or more subsidiaries, the aggregate gross revenues of
which constitute 33-1/3% or more of the gross revenues of the Company on a
consolidated basis, merges with or into or consolidates with any entity, issues
to an independent, non-affiliated third party such number of shares of its
outstanding capital stock (or equity or debt securities convertible into or
exchangeable for shares of the Company's capital stock) as shall equal thirty
three percent (33%) or more of its total issued and outstanding shares of
capital stock unless waived in writing by the executives, or executive is
removed from the Board, without cause, provided, however, that a Change of
Control shall not be deemed to occur as a result of or in connection with any
recapitalization or public offering of the Company's securities or the
occurrence of any of the foregoing transactions which is approved by the
executives. As of July 1, 2002, the change of control benefits payable to the
executives would be an aggregate of $62,500 per month.

Anti-Takeover Consequences

As a result of the aforementioned transactions, Lewis S. Schiller and
The Trinity Group-I, Inc. own a controlling interest in the Company's equity.
Shares of the Company's Common Stock that will be issued to The Trinity Group-I,
Inc. and Lewis S. Schiller upon the date that the corporate actions described
herein can be effected, will ensure that Lewis S. Schiller an1`d The Trinity
Group-I, Inc. continue to own a controlling interest in the Company's equity and
such control may be used by them to resist or frustrate a third-party
transaction providing an above-market premium that is favored by a majority of
the independent shareholders. All of the shares of The Trinity Group-I, Inc.
owned by Lewis S. Schiller are pledged to an entity controlled by Carol
Schiller, the wife of Lewis S. Schiller. In addition, Carol Schiller, Douglas
Schiller, Linda Schiller and Blake Schiller, the adult children of Lewis S. and
Carol Schiller, own interests in the Company's outstanding Common Stock. This
concentration of ownership and voting rights and the change of control benefits
provided in the executive employment agreements could be used to delay or
prevent a change of control. In addition, Lewis S. Schiller could elect to sell
all, or a substantial portion, of his equity interest in The Trinity Group-I,
Inc. to a third party. In the event of such a sale by Mr. Lewis S. Schiller,
such third party may be able to control the Company's affairs in the same manner
that Lewis S. Schiller is able to do so by virtue of his ownership of The
Trinity Group-I, Inc.

VOTING SECURITIES AND PRINCIPAL HOLDERS
---------------------------------------

The Board of Directors fixed the close of business on July 1, 2002 as
the record date for mailing this Information Statement for the matters set forth
herein, at which time 49,808,899 shares of Common Stock, 1,000 shares of Series
A Preferred Stock, 20,000 shares of Series B Preferred Stock, convertible into
66,666,667 shares of Common Stock, 60,000 shares of its Series C 2% Convertible
Preferred Stock, convertible into 6,000,000 shares of Common Stock (the "Series
C Preferred Stock"), and 40,000 shares of its Series D 2% Convertible Preferred
Stock, convertible into 4,000,000 shares of Common Stock (the "Series D
Preferred Stock") were issued and outstanding. Each share of Common Stock is
entitled to one vote on each matter submitted to the Company's shareholders.
Each share of Series A Preferred Stock votes with the Common Stock and is
entitled to one vote per share. Each share of Series B Preferred Stock votes
with the Common Stock and is entitled to one vote per share of Common Stock into
which it is convertible. The Series C Preferred Stock and the Series D Preferred
Stock are not entitled to vote with Common Stock. The Trinity Group-I, Inc.,
Lewis S. Schiller and Grazyna B. Wnuk have advised the Company that they have
provided a Written Consent as to all of the shares of Common Stock, Series A
Preferred Stock and Series B Preferred Stock owned by them in favor of the
corporate action described. The Trinity Group-I, Inc. is wholly owned by Lewis
S. Schiller and accordingly, Mr. Schiller is the natural person considered to be
the beneficial owner of The Trinity Group-I, Inc.

Set forth below is a schedule of each class of voting securities of the
Company entitled to vote on the matter set forth herein, the number of
outstanding shares of each such class and number of votes to which each class is
entitled.

Number of votes to
Number of shares which Class is
Class of Security outstanding Entitled
----------------------------------------------------------------------
Common Stock 49,808,889 49,808,889
Series A Preferred Stock(1) 1,000 1,000
Series B Preferred Stock(2) 20,000 66,666,667
All Classes Voting Together 49,929,889 116,576,556

Set forth below is information as of July 1, 2002, based on information
provided to the Company by the individuals and entities named below, as to each
person or entity owning of record or known by the Company to own beneficially,
more than 5% of any class of the Company's voting securities.

Amount and Nature of Percent of
Title of Class Name and address of Beneficial Owner Beneficial Ownership(3) Class(4)
----------------------------------------------------------------------------------------------------------------------

Common Stock(5) Lewis S. Schiller 90,869,297 67%
Series A Preferred Stock 21634 Club Villa Terrace 1,000 100%
Series B Preferred Stock Boca Raton, FL 33433 20,000 100%

Common Stock(6) The Trinity Group-I, Inc. 69,489,297 60%
Series A Preferred Stock 21634 Club Villa Terrace 1,000 100%
Series B Preferred Stock Boca Raton, FL 33433 20,000 100%

Common Stock(7) Grazyna B. Wnuk 11,811,081 20%
21634 Club Villa Terrace
Boca Raton, FL 33433

Common Stock(8) Alan Risi 15,049,874 25%
150-38 12th Avenue
Whitestone, NY 11357

Set forth below is information as of July 1, 2002, based on information
provided to the Company by the individuals and entities named below, as to each
class of equity securities of the Company beneficially owned by all directors of
the Company, the Company's Chief Executive Officer and the four most highly
compensated executive officers, and the Company's directors and officers as a
group.

Common Stock(5) Lewis S. Schiller 90,869,297 67%
Series A Preferred Stock 21634 Club Villa Terrace 1,000 100%
Series B Preferred Stock Boca Raton, FL 33433 20,000 100%

Common Stock(6) Grazyna B. Wnuk 11,811,081 20%
21634 Club Villa Terrace
Boca Raton, FL 33433

Common Stock Officer and directors as a group 102,705,378 70%
Series A Preferred Stock (2 persons) 1,000 100%
Series B Preferred Stock 20,000 100%

-----------
(1) Pursuant to the Amended and Restated Certificate of Incorporation of the
Company, the Series A Preferred Stock votes with the Common Stock and is
entitled to one vote per share.

(2) Pursuant to the Amended and Restated Certificate of Incorporation of the
Company, the Series B Preferred Stock votes with the Common Stock and is
entitled to one vote per share of Common Stock into which it is
convertible, as calculated by dividing $2,000,000 by the lowest price that
the Common Stock has traded during the period that the Series B preferred
stock has been outstanding which as of July 1, 2002 was $0.03 [$2,000,000 /
$0.03 = 66,666,667].

(3) Unless otherwise indicated, to the Company's knowledge, all persons and
entities listed above have sole voting and investment power with respect to
their voting shares, except to the extent applicable law gives spouses
shared authority.

(4) The "Percent of Class" is based on shares of voting stock that a person,
entity or group has the right to acquire within sixty (60) days after July
1, 2002 pursuant to the exercise of outstanding warrants or options are
deemed to be outstanding for the purpose of computing the percentage
ownership of such person, entity or group, but are not deemed outstanding
for the purpose of calculating the percentage owned by any other person,
entity or group.

(5) Includes 1,380,000 shares directly owned by Lewis S. Schiller, 20,000,000
shares underlying warrants to purchase shares and 69,489,297 shares
beneficially owned by The Trinity Group-I, Inc. The Trinity Group-I, Inc.
is wholly owned by Lewis S. Schiller and accordingly, Mr. Schiller is the
natural person considered to be the beneficial owner of The Trinity
Group-I, Inc. As a result, Mr. Schiller's beneficial ownership includes
1,000 shares of Series A Preferred Stock, 20,000 shares of Series B.
Preferred Stock and 69,489,297 shares of Common Stock owned by The Trinity
Group-I, Inc. which are the same shares presented in the table as
beneficially owned by The Trinity Group-I, Inc. None of the shares of
Series A Preferred Stock, Series B Preferred Stock or Common Stock are held
jointly by The Trinity Group-I, Inc and Mr. Schiller.

(6) Includes 2,822,630 shares directly owned by The Trinity Group-I, Inc. and
66,666,667 shares from the assumed conversion of the Series B preferred
stock. The Trinity Group-I, Inc. exchanged $2,000,000 of debt for 20,000
shares of Series B preferred stock. The Series B preferred stock is
convertible into such shares as calculated by dividing $2,000,000 by the
lowest price that the Common Stock trades during the period that the Series
B preferred stock is outstanding which was $0.03 as of June 30, 2002
[$2,000,000 / $0.03 = 66,666,667]. Excludes 875,000 shares that were
transferred by The Trinity Group-I, Inc. to be used as collateral by Orion
Telecom Operating Corporation, an unrelated company. The Trinity Group-I,
Inc. is wholly owned by Lewis S. Schiller and accordingly, Mr. Schiller is
the natural person considered to be the beneficial owner of The Trinity
Group-I, Inc.

As a result, all of the shares of Series A Preferred Stock, Series B
Preferred Stock and Common Stock presented in the table as beneficially
owned by The Trinity Group-I, Inc. are also included in the table as shares
beneficially owned by Mr. Schiller. None of the shares of Series A
Preferred Stock, Series B Preferred Stock or Common Stock are held jointly
by The Trinity Group-I, Inc and Mr. Schiller.

(7) Includes 1,811,081 shares directly owned by Grazyna B. Wnuk and 10,000,000
shares underlying a warrant to purchase shares.

(8) Includes 5,049,874 shares directly owned by Alan Risi, 6,000,000 shares
underlying the Series C Preferred Stock and 4, 000,000 shares underlying
the Series D Preferred Stock.

DILUTION
--------

The following table sets forth information which presents the dilution
of the Common Stock that would occur upon the approval of the increase in
authorization by the shareholders. The information presented assumes (i) the
immediate conversion of the Series B, C and D Preferred Stock; (ii) the
immediate exercise of outstanding warrants to purchase common stock; and (iii)
the immediate grant and exercise of stock options. The information presented
does not include the dilutive effects that would occur upon the conversion and
exercise of the Series E and F Preferred Stock, as such shares are not
immediately issuable upon the shareholder approval of the increased
authorization. Information is as of July 1, 2002 and presents separately, based
on information provided to the Company by the individuals and entities named
below, as to each person or entity owning of record or known by the Company to
own beneficially, more than 5% of the Company's Common Stock and all other
Common Stock holders as a group.

Percent of
Common Common
Common Percent of Stock Stock
Stock Common Stock Ownership Outstanding
Ownership Outstanding Immediately Immediately
Prior to the Prior to the After to the After the
Increased Increased Increased Increased
Beneficial Owner Authorization Authorization Authorization Authorization
-------------------------------------------------------------------------------------------------------------------

Lewis S. Schiller 4,202,630 (1) 10.85% 99,869,297 (2) 54.66%

The Trinity Group-I, Inc. 2,822,630 7.29% 69,489,297 (3) 38.03%

Grazyna B. Wnuk 1,811,081 4.67% 13,311,081 (4) 7.28%

Alan Risi 5,049,874 13.03% 15,049,874 (5) 8.24%

Consultant's Stock Options - - 15,750,000 (6) 8.62%

All other shareholders as a group 38,745,314 71.45% 38,745,314 21.20%

-----------
(1) Includes 1,380,000 shares of Common Stock directly owned by Lewis S.
Schiller, and 2,822,630 shares of Common Stock owned by The Trinity
Group-I, Inc., a company wholly-owned by Lewis S. Schiller.

(2) Includes 1,380,000 shares of Common Stock directly owned by Lewis S.
Schiller, 2,822,630 shares of Common Stock owned by The Trinity
Group-I, Inc., assumes the conversion of the Series B Preferred Stock
owned by The Trinity Group, Inc. into 66,666,667 shares of Common
Stock, assumes the exercise of warrants to purchase 20,000,000 shares
of Common Stock, and assumes the exercise of a stock option to purchase
9,000,000 shares of Common Stock.

(3) Includes 2,822,630 shares of Common Stock directly owned by The Trinity
Group-I, Inc., and assumes the conversion of the Series B Preferred
Stock owned by The Trinity Group, Inc. into 66,666,667 shares of Common
Stock.

(4) Includes 1,811,081 Common Stock shares directly owned by Grazyna B.
Wnuk, assumes the exercise of warrants to purchase 10,000,000 shares of
Common Stock, and assumes the exercise of a stock option to purchase
1,500,000 shares of Common Stock.

(5) Includes 5,049,874 shares of Common Stock directly owned by Alan Risi,
assumes the conversion of the Series C Preferred Stock owned by Alan
Risi into 6,000,000 shares of Common Stock, and assumes the conversion
of the Series D Preferred Stock owned by Alan Risi into 4,000,000
shares of Common Stock.

(6) Assumes the exercise of stock options to purchase 15,750,000 shares of
Common Stock.

INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
---------------------------------------------

The Board of Directors approved, subject to Shareholders approval, an
amendment to the Company's articles of incorporation to increase the authorized
number of shares of its Common Stock, par value $0.01 per share from 50,000,000
shares to 750,000,000. The Board of Directors approved the increase in
authorized Common shares because, in its opinion, the best interests of the
Company will be served. By written consent, holders of shares having in excess
of 50% of the total voting power of all outstanding voting shares consented in
writing to the adoption of the amendment.

Reasons for Increase in Authorized Shares of Common Stock

The Company requires additional shares of its Common Stock in order to
(i) continue efforts to obtain equity financings from the proposed sale of
convertible preferred stock; (ii) to provide compensation in the form of option
grants to its executive employees and key consultants; (iii) to facilitate the
conversion of its existing convertible preferred stock; (iv) to reserve shares
for outstanding warrants to purchase Common Stock; and (v) provide sufficient
shares for other corporate purposes as such needs may arise. Once the increased
authorization is approved, the Board may issue shares without further
shareholder action. The following describes the Company's currently planned uses
for its Common Stock and the funding that may be received if such equity
issuances occur. It is possible that the Company will have to re-evaluate the
uses of its Common Stock in the near term based on negotiations that may occur
with regards to any potential funding source(s) or any of its key consultants.
The Company does not have any firm funding commitments and has no assurance that
any funding, if obtained, will be in the amounts proposed herein. Furthermore,
the Company has no assurance that if the proposed securities that carry exercise
provisions are issued, that the holders of such securities will exercise such
securities, and to the extent that such securities are not exercised, the
Company would not receive the proposed proceeds from any such exercise.

Proposed Equity Funding

The Company has not obtained any firm commitments for any equity or
debt financing and can give no assurance as to when, or if, any such funding
will occur. The Company believes that, when and if it obtains any meaningful
funding from an investor, such potential investor would receive securities
representing a significant ownership in the Company's then outstanding capital
stock.

One such potential investor is Orion Technology Holding, Inc., an
unaffiliated third party. The Company has not obtained any firm commitments for
such funding from Orion Technology Holding, Inc. and can give no assurance as to
when, or if, any such funding will occur. On May 16, 2002, the Company entered
into a memorandum of understanding with Orion Technology Holding, Inc. with
respect to Orion Technology Holding, Inc. making a $10,000,000 capital
investment in the Company and a $5,000,000 loan for the benefit of the Company
in exchange for (i) an equity security(s) representing 33.33% of the Company's
outstanding Common Stock on the date of the investment; (ii) a right to 12% of
the common stock in the subsidiaries of the Company at a price to be determined;
and (iii) the right to appoint two to three members to the Board of Directors.
In order to provide Orion Technology Holding, Inc. with the aforementioned
33.33% equity interest in the Company for the aforementioned $10,000,000 capital
investment, the Company intends, among other things, to (i) designate and sell
to Orion Technology Holding,

Inc. 10,000 shares of Series E Convertible Preferred Stock, convertible into
10,000,000 shares of Common Stock, for $1,000,000; (ii) designate and sell to
Orion Technology Holding, Inc. 90,000 shares of Series F Convertible Preferred
Stock, convertible into 90,000,000 shares of Common Stock, for $9,000,000; and
(iii) issue to Orion Technology Holding, Inc. a senior subordinated debenture in
the amount of $5,000,000. In addition, the Company would (i) give Orion
Technology Holding, Inc. an option to purchase 23,300,000 shares of Common Stock
for $0.04 per share and an option to purchase 15,500,000 shares of Common Stock
for $0.15 per shares. In the event Orion Technology Holding, Inc. exercised all
such options, the aggregate proceeds to the Company would be $3,257,000. Based
on the Company's discussions with Orion Technology Holding, Inc., the earliest
date that any such funding could occur is August 31, 2002, if ever.

In the event that a funding pursuant to the memorandum of understanding
with Orion Technology Holdings, Inc. is consummated, the $5,000,000 loan would
be in the form of a subordinated debenture, would bear annual interest at
Citibank Prime plus 1% and would be interest only for year one, principal and
interest in years two through five and a balloon payment at the end of year
five. The Series E Convertible Preferred Stock and Series F Convertible
Preferred Stock have not been authorized by the Company's Board of Directors and
will not be authorized for the purposes stated herein until such time, if ever,
that the potential funding with Orion Technology Holding, Inc. is consummated.
Pursuant to the memorandum of understanding with Orion Technology Holding, Inc.,
the rights and preferences of the Series E Convertible Preferred Stock would
include the following: (i) voting rights whereby the Series E Convertible
Preferred Stock shareholders would vote with the common shareholders and would
be entitled to cast such number of votes per share of Series E Preferred Stock
as are equal to the number of shares of Common Stock issuable upon conversion of
the Series E Preferred Stock; (ii) liquidation rights equal to $100 per share;
and (iii) conversion features whereby each share of the Series E Preferred Stock
could be converted into 1,000 shares of Common Stock and would be immediately
converted upon availability of underlying common shares. Pursuant to the
memorandum of understanding with Orion Technology Holding, Inc., the rights and
preferences of the Series F Convertible Preferred Stock would include the
following: (i) voting rights if actions are to be taken related to a merger,
acquisition or reincorporation, whereby the Series F Convertible Preferred Stock
shareholders would vote on such matters with the common shareholders and would
be entitled to cast such number of votes per share of Series F Preferred Stock
as are equal to the number of shares of Common Stock issuable upon conversion of
the Series F Preferred Stock; (ii) liquidation rights equal to $100 per share;
(iii) conversion features whereby every 3 months from the date sufficient Common
Stock shares are available, 7,500 shares of Series F Preferred Stock could be
converted into 1,000 shares of Common Stock each; (iv) dividends at an annual
rate of 1% per share; and (v) the right to nominate 2 members to the to the
board of directors if the board consists of five members in total and the right
to nominate 3 members to the board of directors if the board consists of seven
members. Because the Series E Preferred Stock and Series F Preferred Stock
shares are entitled to vote along with Common Stock shares on an "if converted
basis", the voting rights of the existing Common Stock shareholders would be
diluted by 100,000,000 votes in the event that the Series E Preferred Stock and
Series F Preferred Stock shares are issued.

The Company is a holding company and holds controlling investments in
its subsidiaries that currently operate, or intend to operate, in four distinct
business segments which are identified as (i) Electro-Mechanical and
Electro-Optical Products; (ii) Specialized Vending Machines and Avionics
Equipment; (iii) Security Systems; and (iv) Software Development. Substantially
all of the holding Company's assets, consisting of its investments in its
subsidiaries and receivables due from its subsidiaries for funds advanced to
them, are eliminated in its consolidated financial statements. As a result,
substantially all of the Company's assets and operations, as reported in the
Company's financial statements, are the consolidated assets and operations of
its subsidiaries. None of the Companies subsidiaries are publicly traded and the
Company has control in all of its subsidiaries through ownership of a majority
of the subsidiaries' common stock and ownership of all of the subsidiaries'
preferred stock. The preferred stock of the subsidiaries owned by the Company
gives it the right to elect a majority of the directors of all of its
subsidiaries. In the event that the Company is able to consummate the proposed
funding transaction with Orion Technology Holding, Inc., the Company would be
obligated to issue to Orion Technology Holding, Inc. shares of its subsidiaries
common stock representing 12% of the subsidiaries then outstanding common stock.
If the Company transfers 12% of its subsidiaries common equity, the Company
would continue to have control of such subsidiaries and such subsidiaries would
continued to be included in the Company's consolidated results of operations.
However, such transfer of the subsidiaries common equity would increase minority
interest whereby any future income of the Company's subsidiaries would reduce,
by 12%, the amount of income attributable to the Common Stock shareholders of
the Company.

In the event the transaction with Orion Technology Holding, Inc. is
consummated, and no assurance is given that it will be consummated, the proceeds
from such funding would be used to (i) make payments on existing trade payable
obligations of the Company and it is subsidiaries; (ii) provide working capital
for the ongoing operations of the Company and its subsidiaries; and (iii) be
reserved for future acquisitions. Until such time as any such funding is
consummated, if ever, the Company has not identified specific uses for such
funds other than those described in the immediately preceding sentence.

Convertible Preferred Stock Issued in Exchange for Related Party Debt

The Series B Preferred Stock provides for (i) dividends at an annual
rate of $8 per share; (ii) voting rights whereby the holders of the Series B.
Preferred Stock are entitled to vote together with the Common Stock, as if the
Common Stock and the Series B Preferred Stock were a single class; whereby, in
all matters, the holders of the Series B Preferred Stock shall have the right to
cast such number of votes per share of Series B Preferred Stock as are equal to
the number of shares of Common Stock issuable upon conversion of the Series B
Preferred Stock based on the conversion rate per share of Common Stock on the
record date for determining shareholders entitled to vote; (iii) redemption in
whole or in part at the option of the Company's Board of Directors at the rate
of $100 per share of Series B Preferred Stock, plus all accrued dividends
thereon, whereby in the event that the holders of the Series B Preferred Stock
is a board member on any date on which the Company's Board of Directors vote on
whether to redeem such shares, such holder is prohibited to vote on such matter;
(iv) liquidation preferences whereby, in the event of the liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary,
holders of the Series B Preferred Stock shall be entitled to receive $100 per
share, plus all accrued and unpaid dividends, before any payment or distribution
upon dissolution, liquidation or winding up shall be made on any series or class
of capital ranking junior to the Series B Preferred Stock as to such payment or
distribution, and after all such payments or distributions have been made on any
series or class of capital stock ranking senior to the Series B Preferred Stock,
whereby the Series B Preferred Stock is senior to Common Stock and the Series A
Preferred Stock and is junior to the Series C and D Preferred Stock; and (v)
conversion into shares of Common Stock as calculated by dividing $2,000,000 by
the lowest price that the Company's shares of Common Stock have traded during
the period that the Series B Preferred Stock has been outstanding. As of July 1,
2002, the Series B preferred stock can be converted into 66,666,667 million
shares of Common Stock and accrued and unpaid dividends on the Series B
Preferred Stock amounted to $240,000.

The Company has been informed by The Trinity Group-I, Inc. of its
intention to convert all of its shares of Series B Preferred Stock upon the
increase in the authorized shares of Common Stock. The Trinity Group-I, Inc.
will be exchanging the Series B Preferred Stock shares for Common Stock shares
which do not have the aforementioned preferences as to dividends and liquidation
but do have the same voting rights. Because the Series B Preferred Stock shares
are entitled to vote along with Common Stock shares on an "if converted basis",
the voting rights of the existing Common Stock shareholders will not be further
diluted upon such conversion.

Convertible Preferred Stock Issued to Obtain an Exclusive Distribution Agreement

On August 11, 1999, the Company formed Secured Portal Systems, Inc.,
pursuant to which the Company owns a controlling interest in Secured Portal
System's Inc. as represented by its ownership of 89% of Secured Portal System's
Inc. common stock and 100% of its preferred stock, which gives the Company the
right to elect a majority of its board of directors. On September 13, 1999,
Secured Portals entered into an exclusive distribution agreement with GIL
Security Systems, Inc. GIL Security Systems, Inc. is engaged in the manufacture
and sale of security entrance systems for use as a security device by a variety
of customers at airports, federal buildings, court houses, embassies,
correctional facilities, schools, governmental operations, department stores and
other retail outlets. GIL Security Systems, Inc. is a subsidiary of Georal
International, Ltd. and holds all world-wide rights related to the intellectual
property related to the GIL security systems, including trademarks, patents and
technology, as licensed to it by Alan J. Risi, the controlling owner of both GIL
Security Systems, Inc. and Georal International, Ltd. The exclusive distribution
agreement gives Secured Portal Systems, Inc. distribution rights for the sale of
GIL Security System's, Inc. security entrance systems to certain categories of
customers. The products covered by the exclusive distribution agreement includes
all of GIL Security System's, Inc. products that existed on September 13, 1999
and all products developed during the term of the exclusive distribution
agreement, including all models of the GIL-2001 security door. The categories of
customers covered by the exclusive distribution agreement include the United
States Treasury Department, the United States Central Intelligence Agency and
all other United States Government intelligence agencies, the United States
National Security Agency, the United States Defense Intelligence Agency, the
United States Department of the Navy, the United States Air Force, the United
States Army, all United States Federal Courts and all United States Embassies,
all department stores and retail stores located in the United States (including
all retail stores located in foreign countries which are part of a retail store
chain which is based in the United States), the Government of Israel, NCR Corp.
and Sun Microsystems, Inc. The exclusive distribution agreement commenced on
September 1, 1999 and had an initial expiration date of August 31, 2004 which
was later extended to August 31, 2009.

On September 13, 1999, as an inducement to obtain the exclusive
distribution agreement and in exchange for 1,000,000 common stock shares of GIL
Security Systems, Inc., the Company's predecessor, Fingermatrix, Inc., issued to
Alan J. Risi, 14,134 shares of Fingermatrix, Inc.'s Series A preferred stock,
convertible into 10,498,735 shares of Fingermatrix, Inc.'s common stock which on
July 14, 2000 were exchanged for 1,049,874 shares of The Finx Group, Inc.'s
common stock pursuant to the 2000 Finx Group Merger in an Information Statement
under Section 14 of the Securities and Exchange Act of 1934. On the initial date
that the exclusive distribution agreement was entered into, the GIL 2001
security door had not been certified by the U.S. State Department and no sales
channel pipeline had been developed and the underlying costs of the shares
issued were nominally valued.

On February 21, 2002, the exclusive licensing agreement for the Georal
security systems was amended whereby the categories of customers was expanded to
include all financial institutions around the world and whereby Secured Portal
System's Inc. received a right of first refusal to be the exclusive distributor
for sales to any governmental body in the world which is not currently included
in the exclusive licensing agreement as a protected customer. As consideration
for the amendment entered into on February 21, 2002, the Company issued to Alan
Risi 40,000 shares of its Series D 2% Convertible Preferred Stock (the "Series D
Preferred Stock") which are convertible into 4,000,000 shares of the Company's
Common Stock. The Series D Preferred Stock provides for (i) dividends at an
annual rate of 2% per share; (ii) no voting rights except as otherwise required
by law; (iii) no redemption rights; (iv) liquidation preferences whereby, in the
event of the liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, holders of the Series D Preferred Stock shall be
entitled to receive $1 per share, plus all accrued and unpaid dividends, before
any payment or distribution upon dissolution, liquidation or winding up shall be
made on any series or class of capital ranking junior to the Series D Preferred
Stock as to such payment or distribution, and after all such payments or
distributions have been made on any series or class of capital stock ranking
senior to the Series D Preferred Stock, whereby the Series D Preferred Stock is
senior to Common Stock and the Series A and B Preferred Stock and is junior to
the Series C Preferred Stock; and (v) conversion into shares of Common Stock
whereby each share of the Series D Preferred Stock may be converted into 100
shares of Common Stock and are automatically converted at such date as there
becomes available, sufficient shares of Common Stock to execute such conversion.
As of July 1, 2002 accrued and unpaid dividends on the Series D Preferred Stock
amounted to $400. Upon conversion, Alan Risi will be exchanging the Series D
Preferred Stock shares for Common Stock shares which do not have the
aforementioned preferences as to dividends and liquidation. Because the Series D
Preferred Stock shares are not entitled to vote along with Common Stock shares,
the voting rights of the existing Common Stock shareholders will be diluted upon
the conversion of the Series D Preferred Stock by 4,000,000 votes.

On May 16, 2002, the exclusive licensing agreement for the Georal
security systems was further amended whereby the exclusive distribution
agreement was expanded to give Secured Portal System's Inc. exclusive world wide
sales and marketing rights, for the term of the agreement extending to all
casinos, malls, stadiums, office buildings and high rises. As consideration for
the amendment entered into on May 16, 2002, the Company issued to Alan Risi
60,000 shares of its Series C 2% Convertible Preferred Stock (the "Series C
Preferred Stock") which are convertible into 6,000,000 shares of the Company's
Common Stock. The Series C Preferred Stock provides for (i) dividends at an
annual rate of 2% per share; (ii) no voting rights except as otherwise required
by law; (iii) no redemption rights; (iv) liquidation preferences whereby, in the
event of the liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, holders of the Series C Preferred Stock shall be
entitled to receive $1 per share, plus all accrued and unpaid dividends, before
any payment or distribution upon dissolution, liquidation or winding up shall be
made on any series or class of capital ranking junior to the Series C Preferred
Stock as to such payment or distribution, and after all such payments or
distributions have been made on any series or class of capital stock ranking
senior to the Series C Preferred Stock, whereby the Series C Preferred Stock is
senior to Common Stock and the Series A B and C Preferred Stock; and (v)
conversion into shares of Common Stock whereby each share of the Series C
Preferred Stock may be converted into 100 shares of Common Stock and are
automatically converted at such date as there becomes available, sufficient
shares of Common Stock to execute such conversion. As of July 1, 2002 accrued
and unpaid dividends on the Series D Preferred Stock amounted to $300. Upon
conversion, Alan Risi will be exchanging the Series C Preferred Stock shares for
Common Stock shares which do not have the aforementioned preferences as to
dividends and liquidation. Because the Series C Preferred Stock shares are not
entitled to vote along with Common Stock shares, the voting rights of the
existing Common Stock shareholders will be diluted upon the conversion of the
Series C Preferred Stock by 6,000,000 votes.

The terms of the agreements that the Company entered into to obtain the
expansion of the exclusive licensing agreements pursuant to which the Series C
and D Preferred Stock were issued, were the result of arms-length negotiations
between the Company and Alan J. Risi, the controlling owner of both GIL Security
Systems, Inc. and Georal International, Ltd. The expansions to the exclusive
licensing agreements were valued based on the shares of Common stock into which
the Series C and D Preferred Stock are convertible, which using the
Black-Scholes Option Valuation formula amounted to $1.1 million.

Stock Options Issuable Pursuant to a Management and Investment Banking Agreement

On April 2, 2002, the Company entered into a one year Management and
Investment Banking Agreement with vFinance Investments, Inc., and is currently
negotiating an amendment to such agreement. Pursuant to the existing Management
and Investment Banking Agreement, vFinance Investments Inc. is performing
financial advisory and investment banking services to the Company and in
consideration for such services vFinance Investments, Inc. is to receive $7,500
a month for the term of the agreement (of which $15,00 has been paid) and is to
receive a warrant to purchase 2,000,000 shares of Common Stock for $0.01 per
share and a warrant to purchase 1,000,000 shares of Common Stock for $0.35 per
share. In the event that the proposed amendment to the Management and Investment
Banking Agreement is consummated, the Company would not be required to make any
further monthly payments beyond the $15,000 which has already been paid and
vFinance Investments, Inc. will receive an option to purchase 7,500,000 shares
of Common Stock for $0.04 per share instead of a warrant to purchase 2,000,000
shares for $0.01 per share and an option to purchase 5,000,000 shares of Common
Stock for $0.15 per share instead of a warrant to purchase 1,000,000 shares for
$0.35 per share. In the event vFinance Investments, Inc. exercised all such
options, the Company would receive aggregate proceeds of $1,050,000.

The services to be performed by vFinance Investments, Inc. pursuant to
the Management and Investment Banking Agreement would not be modified by the
proposed amendment to such agreement and are as followings:

1. Financial Advisory Services - vFinance Investments, Inc. is providing
the Company with capital market advice and working with the Company's
management in creating market awareness of the Company and its stock,
and in the organization and sponsorship of its investor presentations.
vFinance Investments, Inc. is providing advice to the Company
pertaining to stock buy back plans, stock splits or dividends and other
related plans as they pertain the Company's stock price and liquidity.
At the request of the Company's management, vFinance Investments, Inc.
will attend shareholder and Board of Director meetings to make
presentations.

2. Assessment - vFinance Investments, Inc. has provided the Company with
an assessment of its business, operations, strategies and current
target markets. The assessment highlighted current market conditions
and other contributing factors that would likely influence the
Company's ability to successfully pursue the current course of
business.

3. Fairness Opinion - vFinance Investments, Inc. will provide the Company
with a fairness opinion with respect to potential transactions that the
Company may contemplate.

4. Information Memorandum - vFinance Investments, Inc. is working with the
Company's management to become educated with the Company's intended
business, operations, strategies and current target markets and is
assisting the Company's management in the preparation of an Information
Memorandum that will articulate business opportunities, a business
model and investment opportunities. The Information Memorandum will
reflect the future business of the Company, detail the Company's
strategic position, and define requirements and terms for potential
financings. The Information Memorandum will describe potential
distribution channels, market potential, marketing strategies, a
description of key technologies, organizational structure and financial
projections.

5. Mergers, Acquisitions and Investments - vFinance Investments, Inc. is
researching market opportunities, identifying potential mergers,
acquisitions and investors and will model and structure any potential
financing transactions and will work with the Company's management to
close such transactions.

vFinance Investments, Inc. has exclusive rights to conduct substantive
discussion with any potential investors, acquirers or joint venture partners on
behalf of the Company, whether such discussion is initiated by vFinance
Investments, Inc. or otherwise. In the event that the Company consummates a
financing during the twelve month term of the Management and Investment Banking
Agreement and for a twelve month period after the termination of the agreement,
vFinance Investments, Inc. is entitled to a fee of 10% of the proceeds of any
such transaction and the right to receive a such number of warrants that would
be negotiated prior to the consummation of any such transaction. In the event
that the proposed amendment to the Management and Investment Banking Agreement
is consummated, vFinance Investments, Inc. would not be entitled to 10% of the
proceeds from a financing transaction that was consummated with a funding source
that vFinance Investments, Inc. did not initiate.

Pursuant to the Management and Investment Banking Agreement, in the
event that the Company enters into any transaction resulting in a change of
control of the Company that is initiated by vFinance Investments, Inc. during
the twelve month term of the Management and Investment Banking Agreement and for
a twelve month period after the termination of the agreement, vFinance
Investments, Inc. is entitled to receive a percentage of the total consideration
received on any such transaction equal to 6% of the first $2,000,000 of total
consideration received, plus 5% of the next $2,000,000 of total consideration
received, plus 4% of the next $2,000,000 of total consideration received, plus
3% of the next $2,000,000 of total consideration received, plus 2% of any amount
of total consideration in excess of $8,000,000.

Stock Purchase Warrants Held by the Company's Executive Officers

Since April 28, 1999 Lewis S. Schiller has been the Company's Chief
Executive Officer and Grazyna B. Wnuk has been the Company's Vice-President. For
the entire term of their employments with the Company, Lewis S. Schiller and
Grazyna B. Wnuk have voluntarily deferred payment of their salaries. As of July
1, 2002, Lewis S. Schiller's and Grazyna B. Wnuk's unpaid salaries approximated
$1,125,000 and $462,500, respectively. In order to provide its executives with
additional compensation, on April 16, 2002, the Company issued to Lewis S.
Schiller a warrant to purchase 10,000,000 million shares of common stock at
$0.043 per share, the fair market value at date of issuance, and 10,000,000
million shares of common stock at $0.001, subsequently adjusted to $0.043 per
share, the fair market value at date of issuance and issued to Grazyna B. Wnuk,
Vice-President, a warrant to purchase 10,000,000 shares of common stock at
$0.043 per share, the fair market value at date of issuance. The Company intends
to reserve 30,000,000 shares of its common stock for the future exercise of
these warrants. The warrant issued to Lewis S. Schiller and Grazyna B. Wnuk
contain cashless exercise provisions which may result in compensation expense
equal to the amount by which the fair market value of such underlying shares of
common stock exceeds the exercise price of such warrants and will be calculated
for each future reporting period for which the warrants remain outstanding. In
the

event that all of such warrants were exercised and the cashless exercise
provision was not utilized, the Company would receive an aggregate of $1,290,000
in exercise proceeds upon the issuance of 30,000,000 shares of Common Stock. In
the event that all of such warrants were exercised utilizing the cashless
exercise provision, no cash proceeds would be received by the Company and the
number of Common Stock shares to be issued would be calculated as follows
[(shares exercised x (fair market value on date of exercise - exercise price)) /
fair market value on date of exercise]. Lewis S. Schiller and Grazyna B. Wnuk
are the Company's only executive officers and the only members of the Company's
Board of Directors and the terms pursuant to which they received their warrants
to purchase Common Stock shares were not based on arms length negotiations.

Stock Options to Be Issued to the Company's Executive Officers

Since April 28, 1999 Lewis S. Schiller has been the Company's Chief
Executive Officer and Grazyna B. Wnuk has been the Company's Vice-President. For
the entire term of their employments with the Company, Lewis S. Schiller and
Grazyna B. Wnuk have voluntarily deferred payment of their salaries. As of July
1, 2002, Lewis S. Schiller's and Grazyna B. Wnuk's unpaid salaries approximated
$1,125,000 and $462,500, respectively. In order to provide its Chief Executive
Officer with additional compensation, the Company intends to grant to Lewis S.
Schiller an option to purchase 9,000,000 shares of Common Stock for $0.04 per
share, exercisable upon issuance, an option to purchase 24,000,000 shares of
Common Stock for $0.04 per share and an option to purchase 16,000,000 shares of
Common Stock for $0.15 per share. In the event Lewis S. Schiller exercised all
such options, the Company would receive aggregate proceeds of $3,720,000. In
order to provide its Vice-President with additional compensation, the Company
intends to grant to Grazyna B. Wnuk an option to purchase 1,500,000 shares of
Common Stock for $0.04 per share, exercisable upon issuance, an option to
purchase 1,800,000 shares of Common Stock for $0.04 per share and an option to
purchase 1,200,000 shares of Common Stock for $0.15 per share. In the event
Grazyna B. Wnuk exercised all such options, the Company would receive aggregate
proceeds of $312,000. Lewis S. Schiller and Grazyna B. Wnuk are the Company's
only executive officers and the only members of the Company's Board of Directors
and the terms pursuant to which they may receive options to purchase Common
Stock shares will not be based on arms length negotiations.

Stock Options to Be Issued to Consultants

The Company does not currently have the funds to pay consulting fees to
its key non-employee consultants. As an inducement to retain the services of its
key non-employee consultants, the Company intends to issue to them, options to
purchase an aggregate of 15,750,000 shares of Common Stock for $0.04 per share,
exercisable upon issuance. In the event the consultants exercised all such
options, the Company would receive aggregate proceeds of $630,000. The terms of
the proposed options that may be issued to the Company's key non-consultants
were the result of negotiations between the Company's management and the
consultants.

Stock Options to Be Issued to Future Employees

The Company recognizes the need to attract qualified employees to
conduct the business operations of the Company. Currently the Company utilizes
its two executive employees and key consultants to conduct its business
operations. The Company believes that, if it obtains funding sufficient to,
among other things, provide appropriate levels of compensation, appropriate
levels of directors and officers liability insurance and appropriate benefit
packages, it will be in a position to search for qualified individuals for
permanent positions within the Company. In anticipation of the hiring of future
officers and employees, the Company intends to attract such individuals by
issuing to them options to purchase an aggregate of 26,600,000 shares of Common
Stock for $0.04 per share and 17,750,000 shares of Common Stock for $0.15 per
share. In the event the future employees exercised all of such options, the
Company would receive aggregate proceeds of $3,726,500. The terms of the
proposed options that may be issued to future employees of the Company were
determined by the Company's management and are terms that the Company believes
will attract qualified employees.

Summary of Proposed Equity Issuances

The following table presents a pro forma capitalization of the Company
which assumes that all of the previously discussed issuances occur and assumes
that all equity instruments with conversion or exercise provisions have been
converted or exercised.

------------------------------------------------------------------------------------------------

Fully
Diluted
Preferred Common Conversion
Title of Equity Instrument to be Shares Conversion Stock or Exercise
Issued Issued Rate Shares Price
------------------------------------------------------------------------------------------------
Common Stock outstanding 49,808,890
Series B Preferred Stock 20,000 3,333 66,666,667
Series C Preferred Stock 60,000 100 6,000,000
Series D Preferred Stock 40,000 100 4,000,000
Series E Preferred Stock 10,000 1,000 10,000,000 $0.10
Series F Preferred Stock 90,000 1,000 90,000,000 $0.10
Stock Options 109,450,000 $0.04
Stock Options 55,450,000 $0.15
Warrants held by Lewis S. Schiller 20,000,000 $0.043
Warrants held by Grazyna B. Wnuk 10,000,000 $0.043
------------------------------------------------------------------------------------------------
Totals 421,375,557
------------------------------------------------------------------------------------------------

MARKET FOR COMMON EQUITY
------------------------

The Company's Common Stock is traded on the National Association of
Securities Dealers, Inc.'s Over the Counter Bulletin Board ("OTC Bulletin
Board") under the symbol "FXGP". The following table sets forth, for the periods
indicated, the quarterly range of the high and low closing bid prices per share
of our Common Stock as reported by the OTC Bulletin Board Trading and market
services. Such bid quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.

Bid Prices
----------
Current period from High Low
---- ---
July 1, 2002 to
July 19, 2002 $0.12 $0.04

Quarter ended
September 30, 2001 $0.87 $0.26
December 31, 2001 $0.72 $0.38
March 31, 2002 $0.99 $0.08
June 30, 2002 $0.23 $0.03

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
------------------------------------------------------------------

A significant number of the Common Stock shares to be authorized herein
are intended to be reserved for the future conversion of outstanding options and
warrants to purchase Common Stock shares. The following table provides
aggregated information regarding outstanding warrants that existed as of July 1,
2002 and the stock options that are proposed herein.

Equity Compensation Plan Information Table

-------------------------------------------------------------------------------------------------------------------------

Number of securities
remaining available for
Number of securities to be future issuance under
issued upon exercise of Weighted average exercise equity compensation plans
outstanding options, price of outstanding (excluding securities
warrants and rights options, warrants and rights reflected in column (a))
Plan Category (a) (b) (c)
-------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security
holders -- -- --
------------------------------- ----------------------------- ----------------------------- -----------------------------
Equity compensation plans
not approved by security
holders 194,900,000 $0.07 --
------------------------------- ----------------------------- ----------------------------- -----------------------------
Total 194,900,000 $0.07 --
------------------------------- ----------------------------- ----------------------------- -----------------------------

The aggregated information in the preceding Equity Compensation Plan
Information Table includes outstanding warrants to purchase 30,000,000 share of
Common Stock at $0.043 per share, the fair value on the date of issuance. The
warrants were not issued pursuant to a plan and represent individual
compensation arrangements provided by the Company to its two executive officers.
Since April 28, 1999 Lewis S. Schiller has been the Company's Chief Executive
Officer and Grazyna B. Wnuk has been the Company's Vice-President. For the
entire term of their employments with the Company, Lewis S. Schiller and Grazyna
B. Wnuk have voluntarily deferred payment of their salaries. As of July 1, 2002,
Lewis S. Schiller's and Grazyna B. Wnuk's unpaid salaries approximated
$1,125,000 and $462,500, respectively. In order to provide its executives with
additional compensation, on April 16, 2002, the Company issued to Lewis S.
Schiller a warrant to purchase 10,000,000 million shares of common stock at
$0.043 per share, the fair market value at date of issuance, and 10,000,000
million shares of common stock at $0.001, subsequently adjusted to $0.043 per
share, the fair market value at date of issuance and issued to Grazyna B. Wnuk,
Vice-President, a warrant to purchase 10,000,000 shares of common stock at
$0.043 per share, the fair market value at date of issuance. The warrants issued
to Lewis S. Schiller and Grazyna B. Wnuk contain cashless exercise provisions.
In the event that all of such warrants were exercised utilizing the cashless
exercise provision, no cash proceeds would be received by the Company and the
number of Common Stock shares to be issued would be calculated as follows
[(shares exercised x (fair market value on date of exercise - exercise price)) /
fair market value on date of exercise].

The aggregated information in the preceding Equity Compensation Plan
Information Table includes shares of Common Stock underlying the options that
the Company plans to issue pursuant to a proposed stock option plan. The Company
intends to adopt a stock option plan in order to secure long-term relationships
for the Company and its stockholders, from the benefits arising from capital
stock ownership by the Company's Consultants, Advisors, Employees and Directors,
who can help in the company's growth and success and to provide an effective
means of compensation for such persons and entities providing services to the
Company in lieu of cash payments therefor. Pursuant to the proposed option plan,
the Company intends to issue options to purchase an aggregate of 26,250,000
shares of Common Stock for $0.04 per share, which will vest immediately, options
to purchase an aggregate of 83,200,000 shares of Common Stock for $0.04 per
share, some of which may have vesting periods of up to five years, and options
to purchase an aggregate of 55,450,000 shares of Common Stock for $0.15 per
share, some of which may have vesting periods of up to five years.

RIGHTS OF DISSENTING SHAREHOLDERS

Pursuant to Delaware General Corporate Law, any shareholder of the
Company who objects to the amendment of the articles of incorporation will not
have any right to receive from the Company the fair value of his, her or its
shares. Under the Delaware General Corporate Law, any provision of the
certificate of incorporation of The Finx Group may be amended by approval of the
board of directors and the affirmative vote of a majority of the voting power of
the outstanding shares entitled to vote thereon; provided, that any amendment
which affects the rights of the holders of any class or series of capital stock
must be approved by the holders of a majority of the shares of such class or
series.

By Order of the board of directors

Lewis S. Schiller
Chairman of the Board

August 21, 2002