Recommendation: Neutral

Basis for Recommendation

Currently, our rating on Circle Group Internet, Inc. (Circle Group, CGI) is neutral. The rating is based on the following:

• Circle Group's core business, based on its patent pending e-Mentor Capital(TM) program, which raises capital for small developmental corporations, has had little income for the past 18 months. The principle reason being the current capital markets environment is not favorable for raising capital for Circle Group's targeted companies.
  
  
• Circle Group's main source of revenues and cash flow currently comes from its wholly owned e-tailor subsidiary, On-Line Bedding Corp. Revenues from this source were approximately $1.0 million in the year 2000, $489,000 in the year 2001. We estimate that these revenues could total approximately $750,000 in the year 2002.
  
  
• With its current rate of cash burn, Circle Group needs to raise capital. Cash and equivalents at March 31, 2002, at $353,046, were down from $629,508 at the year ended 12/31/01.
  
  The common stock of Circle Group is lightly traded and somewhat volatile reflecting the fact that the stock is on the Bulletin Board and has only been trading since June 6, 2002. After the initial trade of $2.00 on June 6, 2002, the stock steadily declined to its present level of $0.20 on average daily volume of less than 20,000 shares. Initially, there were only two market makers on the stock, however, as of July 8, 2002, there were nine market makers on the stock.



• The auditor's statement for the year 2001 was qualified with regard to "the Company's ability to continue as a going concern." Investors are directed to the SEC filing 10KSB for the fiscal year ended December 31, 2001, for a description of Circle Group's management corrective strategy.

It is apparent that in response to the current state of the capital markets, Circle Group's basic business plan has been modified with the emphasis now going toward the Company's wholly owned security-training subsidiary, The Brave Way Training Systems. Since the tragedy of "9/11" there is a demonstrated need for quality security training. Brave Way offers cost effective self-defense courses that focus on: Personal safety, Police Officer Safety Training, and Airline Personnel Instruction. Brave Way's marketing efforts focus on the airline, healthcare, and personnel safety industries. Recently, Brave Way formed a partnership with R.O.S. Security and Training Consultants, Inc. R.O.S. is a full service security and training solutions company whose programs include: Executive & Personnel Protection, System Evaluation & Asset Protection, Use of Force & Defensive Tactics. R.O.S. will be focusing on the Corporate and Law Enforcement markets. With the recent certification of Brave Way's Law Enforcement Safety and Liability Reduction Course in the State of Illinois, Circle Group believes it can quickly address the opportunities that have arisen since "9/11" and generate income.

We acknowledge that Circle Group has the infrastructure and management in place to support the core business of assisting small and developing companies to raise capital. However, we believe that the Company and its management need to demonstrate to investors that it can weather the current weak capital market environment and build up revenues, earnings, and cash flow from through its wholly owned subsidiaries. Further, the trading in Circle Group stock needs seasoning.

The Company

Circle Group is an innovative venture capital company that utilizes the Internet for its e-finance, business consulting, e-tailer, and software development divisions. Evidence of the Company's innovative nature is the fact that in the fourth quarter of 1999, the Company raised $2.5 million of capital through a unique, first of its kind, direct stock offering. This direct stock offering was accomplished, from beginning-to-end, over the Internet. The offering was exempt from registration by Regulation A under the Securities Act and was fully subscribed in three weeks. With this kind of background experience, Circle Group developed its core business strategy, known as e-Mentor Capital(TM) (patent pending), which is designed to be a single provider system of e-solutions (through CGI Total Media, Inc.) and business consulting services (through Consulting CGI) coupled with investment banking and financial services (through CGI Capital, Inc.).

Circle Group believes that the e-Mentor Capital(TM) business model is the next evolution in growing and developing emerging businesses. Its product, e-Mentor, consists of developing a company's technological presence, assisting with business consulting and raising capital.

As stated on its initial SEC Form 10KSB for the year ended December 31, 2001, Circle Group Internet, Inc., based in Mundelein, IL, is "an Internet company with e-finance, business consulting, e-tailor, and software development divisions." However, after conducting a due diligence process on Circle Group, we believe that the Company is much more than an "Internet" company. To define the Company as an "Internet" company does the organization a disservice, since it limits the investor's perception of this unique investment banking, venture capital organization, which utilizes the Internet as a means to accomplish its business plan.

Therefore, our description of the Company is as follows:

Circle Group Internet, Inc. is a corporation dedicated to providing the necessary financial services to entrepreneurs and small, fledgling businesses to raise capital. That Circle Group uses the Internet as the media vehicle to generate these services, is forward-looking but is secondary to accomplishing its business plan. Circle Group provides these services by mentoring the client company through the processes necessary to develop the technology and infrastructure required to accomplish financing tasks. By utilizing the Internet, Circle Group is able to perform these functions in a timely and efficient manner.

History and Organization

Gregory J. Halpern founded Circle Group in May 1994, as an Illinois Corporation under the name Circle Group Entertainment Ltd. In 1997, the name was changed to Circle Group Internet, Inc. Since the Company's inception, Mr. Halpern has served as chairman, president, and chief executive officer, and in our opinion is the driving force behind the Company.

As of March 22, 2002, Circle Group employed 30 persons, 29 full time and 1 part time. The company believes that this staffing will be sufficient to manage the company and carry on its current business.

Circle Group's operations from May 1994 to January 1997 consisted of research and development activities focused on technological developments that could give businesses the ability to enhance revenue-generating opportunities through a presence on the Internet. This research led to the development of various software products, which were marketed principally to businesses with web sites. Their first business ventures were related to the development and marketing of software products that strategically placed web sites in search engines.

After raising initial capital through the unique Internet offering, Circle Group raised additional capital, including two private placements of Common Stock. Between March 1, 1999, and March 15, 1999, Circle Group sold an aggregate of 129,800 shares of Common Stock, at $2.50 per share. The gross proceeds from these private placements were $324,500 and were used to launch the e-finance division. Between April 1, 1999, and July 22, 1999, Circle Group sold an aggregate of 1,319,200 shares of Common Stock at $10.00 per share, raising gross proceeds of $13,192,000. The proceeds from this offering were reserved for future growth and expansion, as well as general working capital. Currently, there are approximately 20 million shares of common stock outstanding.

In the year 2000, Circle Group developed its patent pending business model, e-Mentor Capital(TM), a single source provider of e-solutions through its subsidiaries: CGI Capital, Inc. a fully licensed broker-dealer and NASD member for the investment banking and financial services, CGI Total Media, Inc. for web design and multimedia development, Consulting CGI for business consulting.

Operating Segments

Circle Group is organized into four reportable business units: e-finance (CGI Capital), business consulting, (Consulting CGI), e-retailer (On-Line Bedding Corp.), and software development (Veridisc Corporation). The e-finance segment is a broker-dealer that offers and sells securities in private placements. The business consulting segment develops distinctive websites and provides other business services. The e-retailer segment is a distributor of pillows, blankets, and other bedding products. Finally, the software development segment produces and markets a patent pending digital rights management system that guides consumers to register and authorize access to multimedia content and commercial software via the Internet, when utilizing the material on their computers. The two subsidiaries, CGI Worldwide, Inc., and CGI Total Media, Inc. did not have revenues sufficient to meet the quantitative thresholds of a reportable segment.

Operations of the E-Mentor Capital(TM) Program

e-Finance
CGI Capital (CGI), a Florida corporation, is a fully licensed broker-dealer and NASD member and is the operating company for eFinance. One of the features distinguishing CGI Capital from many of its competitors (investment bankers that focus on only one or two options for fundraising), is that CGI Capital provides entrepreneurs three different ways to raise capital for their companies: direct investment, private placements, and e-Mentor Capital(TM). These methods may be used individually or in combination to accomplish financing for the participating company. Currently, plans are being formulated to tie the broker-dealer in with the e-consulting business, to assist small corporations in raising capital.

• Direct Investments: CGI Capital's investment strategy is to search for businesses that operate in the non-traditional Internet arena. CGI Capital did not make any direct investments or assist with any capital financing in 2001, nor thus far in 2002. CGI Capital did, however, make direct investments in five client companies from 1999-2000.
  
  
• Private Placements: In the past, CGI Capital offered private placements through non-traditional investment banking methods and had planned to use the Internet to offer and sell securities directly to individual accredited investors and institutional funding sources, in accordance with the rules and regulations of the SEC. Currently, CGI Capital has no plans for additional direct investments. The Company has not conducted an Internet private placement since the first quarter of 2000.
  

Consulting
Consulting CGI was developed because of Circle Group's own growth experience. Circle Group believes that most entrepreneurs are highly knowledgeable in specific areas of their own business, but may require various consulting services in order to grow their companies. These services include:

Consulting to assist the client in managing their employees, refining their infrastructure, developing an online identity, and supporting overall business efficiency. The goal of Consulting CGI is to reproduce and implement Circle Group's infrastructure model to strengthen the operations and infrastructure of its client companies.

The scope of the business provided by Consulting CGI is focused on operational consulting services and does not include raising capital. The duties of this division may range from assisting a company in writing an employee handbook to developing a marketing campaign targeting a specific audience. The goal is to offer the full spectrum of consulting services, allowing the client companies to focus their resources and energies on growing their business. These services include:

· Corporate Communications and Internet Marketing Strategy Technology Support and Strategic Networking;
· Strategy and Planning Consulting;
· Business Plan Development;
· Sales Training;
· Operations Consulting.

Consulting CGI has provided operational consulting services for its client companies at varying levels. Consulting CGI accounted for revenues of approximately $480,000, or 31% of total revenues of $1,538,932, in the year 2000. However, revenues fell to $20,911, or 4.0% of the total revenues of $510,112, in the year 2001. We estimate that Consulting services could increase to approximately $83,000, or 10.5% of the total revenues of approximately $815,000, in the year 2002. In view of current capital markets status, Circle Group is concentrating on its consulting activities through Consulting CGI.

e-Solution
Circle Group also offers services for media development with "E-Solutions By CGI Total Media, Inc." The program provides web site design assistance, for clients.

Competition

Circle Group believes that their e-Mentor Capital(TM) patent-pending business model, which combines all services necessary for raising capital, can provide the best, most comprehensive guidance for emerging companies. Circle Group believes that this factor distinguishes them from other Internet-related firms providing e-solutions, consulting, and financial services.

Marketing

Circle group's fundamental marketing strategy has been to focus on two core target markets - entrepreneurs and investors. They compete within the capital raising and business development industry by providing value-added services in addition to funding for emerging technology companies. They believe that this approach has allowed them to develop a market presence within the institutional-investing community by offering entrepreneurs a unique funding and assistance program, while qualified investors receive potentially better opportunities.

On average, CGI Capital receives eight to twelve business investment plans per week, even in this market. However, the current offerings are not of the quality that would allow CGI Capital to go forward with any financing initiatives. While they continuously review business proposals, they remain selective in respect to client selection. On a historical average, CGI Capital has accepted less than 1% of all reviewed companies into their program. They do not anticipate that this acceptance rate will vary significantly over time.

Circle Group has a pro-active public relations campaign for some of their portfolio companies and their own stock. These efforts involve news alerts and press releases, and have resulted in Circle Group receiving significant media attention. After their Regulation A Internet offering, Circle Group was featured on the CNN/FN Network. They were also covered in the Wall Street Reporter, in Business Week, Capital Growth Interactive, Chicago Tribune, Daily Herald, and LocalBusiness.com. Recently, Circle Group has retained Martin E. Janis & Company to execute a national publicity and financial investor relations program focusing on institutional investors.

Circle Group Management

President and chief executive officer, Gregory J. Halpern - Mr. Halpern founded Circle Group in 1994, and served as its chairman and chief executive officer from March 1994 until March 1999. From March 1999 to the present, Mr. Halpern has served as Circle Group's president and chief executive officer. He has over 20 years of experience in computer programming and pioneering emerging technologies.

Arthur Tanner has served as chief financial officer since March 1999. From November 1998, until he joined Circle Group in March 1999, Mr. Tanner was vice president and controller for UBM, Inc., a construction company with $50 million in annual revenues. From October 1997 to September 1998, he was a financial consultant with Merrill Lynch, Pierce, Fenner & Smith Incorporated. From February 1997 until September 1997, he was a tax principal with R. Yeager & Co., certified public accountants, where his responsibilities included public accounting, tax, and audit work. Mr. Tanner received a B.A. from Walsh College in 1987 and a J.D. from The Ohio State University in 1995.

Michael Theriault has served as chief operating officer since June 1999. His professional experience includes progressive operations, programming, design, support, consulting, project management, and department management experience in manufacturing, insurance, medical, consulting, and mortgage banking industries on both mainframe and personal computer equipment. From September 1989 until June 1997, Mr. Theriault was with Recon Optical, Inc., where he served as Supervisor of Business Systems from June 1997 until May 1999. Subsequently he was the Senior Systems and Programming Specialist and then Senior Project Leader of Manufacturing from September 1989 until June 1997. He received his BS in Computer Science and Business Management from Northeastern Illinois University in 1978 and an MBA from Lake Forest Graduate School of Management in 1987.

Description of Wholly Owned Subsidiaries

Brave Way Training Systems
In recent months, Circle Group has emphasized the business of its wholly owned subsidiary, The Brave Way Training Systems, a security training company. The tragedy of "9/11" pointed out the need for security and the market for quality security training is growing. Brave Way marketing efforts target some airlines and corporate security organizations. The Brave Way Training Systems offers cost effective self-defense courses with a uniquely focused curriculum:

• Personal Safety including rape prevention,
  
• Police Officer Safety Training and
  
• Airline Personnel Instruction.
  

Brave Way instructors have advanced multiple martial arts backgrounds (over 100 years of combined experience), security, law enforcement, corrections, and military training.

In late June, Brave Way formed a partnership with R.O.S. Security & Training Consultants, Inc. to jointly market their training systems. R.O.S. is a full service security and training solutions company with a focus on:

• Executive & Personnel Protection,
• System Evaluation & Asset Protection,
• Use of Force & Defensive Tactics,
• Sexual Harassment Prevention and CPR & AED Certification.

R.O.S. is a conglomerate of former and current law enforcement officers from various Illinois state law organizations. Paul Pankiewicz and Michael Ryan head Brave Way together, with over 50 combined years of law enforcement experience between them.

On July 2, 2002, Circle Group announced it had received Illinois state certification for the Law Enforcement Safety & Liability Reduction Course. The certification came from the Illinois Law Enforcement Training and Standards Board and was submitted by the College of Lake County, Criminal Justice Institute. All private sector law enforcement training classes must be presented through a municipal training unit or institute of higher learning; this certification allows The Brave Way class to be listed in the Illinois Training Schedule of Board Certified Courses and will be made available as well to law enforcement agencies statewide.

On-Line Bedding Corp.
On-line Bedding is an Illinois corporation founded in 1981. In January 1999, Circle Group acquired 100% of the issued and outstanding stock of On-line Bedding Corp., Inc. from Edward L. Halpern and wife (one of Circle Group's directors) in exchange for 800,000 shares of common stock, valued at $1,000,000. The shares issued represent 4.03% of On-line Bedding Corp's outstanding shares. On-line Bedding is a distributor of pillows, blankets and other bedding products to airlines, hospitals and other commercial/institutional customers, with reported annual revenues of approximately $1.5 million in the year 2000 and approximately $500,000 in the year 2001. On-Line Bedding subcontracts the production of pillows, blankets and other bedding products to manufacturers. This subsidiary has accounted for 73% of revenues for the period beginning January 1, 1999, through December 31, 2001. After the events of September 11, On-Line Bedding's domestic and international airline accounts, as well as its domestic rail account experienced a dramatic decrease in orders from these accounts.

On-Line Bedding's customers include hospitals, nursing homes, hotels and motels, and transportation-based companies like airlines, railroads, and motor coach companies. On-Line Bedding purchases its raw materials from various suppliers, and contracts production of its airline pillows and blankets with third party manufacturers. It warehouses a limited inventory, and drop ships its products from manufacturers or wholesale suppliers in multiple locations throughout the United States to reduce freight costs for its customers.

Primary accounts include AMTRAK as well as domestic and international airlines. On-Line Bedding uses an electronic invoice system with the United States military for a specialty pillow, regularly purchased by the U.S. armed forces. On-Line Bedding is also an authorized pillow and related product vendor for a hospital purchasing group of 500-plus member hospitals in eight states.

On-Line Bedding has historically direct marketed its products through regular catalog mailings to existing customers, as well as to hospitals, nursing homes, airlines, and university housing directors. Marketing efforts have expanded with the introduction of their e-commerce site, and web-based marketing strategies. These include strategic web site placement, keyword targeting, affiliate linking, and other on-line promotional strategies. Since the purchase of On-Line Bedding, Circle Group has developed an e-commerce site to expand On-Line Bedding's current operations. This web site, www.bedsandbeyond.com/, offers single and multi-pack quantities of pillows, blankets, mattress pads, quilts, mattresses, and other products at factory direct prices. Presently, customers who use the online store can conduct targeted searches through a catalog of over 500 products, browse among featured product lines, participate in promotions, view informational videos, and access customer support representatives by telephone, fax, and e-mail during regular business hours.

On July 11, 2002 On-Line Bedding announced an agreement with World Healthcare Systems, Inc. wherein On-Line Bedding will supply its polypropylene pillow over a four-year period. This contract should increase revenues and earnings for On-Line over the four-year period.

Veridisc(TM)
In July 2000, CGI Capital began an e-Mentor project on its wholly owned subsidiary Veridisc(TM), a patent-pending digital rights management (DRM) system that guides consumers to register and authorize access to multimedia content and commercial software via the Internet, when utilizing the material on their computers. The system is based on the FairPlay(TM) methodology and is offered to entertainment and software companies. FairPlay(TM) is Veridisc's commercial web distribution platform for multimedia files.

The methodology is based on the understanding that online consumers will pay for digital content, if given a fair and reasonable proposition. Circle Group management, after discussions with industry peers and analysts, believes that FairPlay(TM) will be accepted commercially. FairPlay(TM) provides easy, cost-effective solutions to problems created by web sites such as Napster and widespread piracy of commercial software. Veridisc(TM) is currently refining its system and has plans to launch it commercially in 2002. Veridisc(TM) had no revenues in the twelve month period ended December 31, 2001.

Veridisc(TM) is operational, and is currently being implemented in one project involving an online digital marketplace. Veridisc(TM) generates revenue from up-front set-up fees, and back-end transaction fees through content downloaded using the system. As use of Veridisc(TM) expands, management anticipates the back-end transaction fees to be the larger share of revenues. These back-end fees are based on a percentage of the overall sales generated through the Veridisc(TM) system. The Company is in the process of selling, merging, licensing and/or entering into a strategic alliance with respect to Veridisc Corporation.

A brief description of some of Circle Group's client companies:

Startech Environmental Corp.
In September 1999, CGI Capital invested $500,000 in Startech Environmental Corporation through the purchase of shares of convertible preferred stock in a private placement. They were retained, through CGI Total Media, to develop and design a new website for Startech, which has been completed. Startech currently trades on the Nasdaq SmallCap Market (NSC: STHK) and produces waste management equipment, using its proprietary plasma waste conversion technology. This equipment minimizes waste, prevents pollution from hazardous and non-hazardous organic and inorganic waste, and recovers valuable commodity resources. The company is establishing a worldwide presence with the sale of its plasma waste converter in Japan, Poland, Taiwan, South Africa, Egypt and the United States. On February 20, 2001, Circle Group executed the convertible preferred shares into 90,198 common shares of Startech, which were registered for resale in a statement filed under the Securities Act of 1933. The 90,198 shares represent less than 1% ownership in Startech. On March 29, 2002, the stock closed at $2.479 per share.

Paw Island, Inc.
In November 1999, CGI Capital, Inc. raised approximately $933,000 in a best-efforts e-Mentor Capital private placement for Paw Island, Inc. to institutional and individual investors. In addition, Circle Group received 308,000 shares of restricted common stock for business consulting, multimedia development, and web design services provided to this company. The 308,000 shares represent approximately 4.2% ownership in Paw Island. Paw Island focuses on teaching life lessons to children through wholesome entertainment. It has created and delivered non-violent, entertaining, and virtuous children's content through a combination of interactive CD-ROMs and web-based media. Integrated with this media is a line of private label wearable T-shirts, a proprietary web browser and toys. Paw Island expects to release its first home video during 2002, and is currently in production on this project.

FurnitureFind.com
In November 1999, CGI Capital made a direct investment in FurnitureFind.com by providing $2 million in financing through a convertible bridge note. Because of a series of transactions, the company's business has been divided into FF Holdings Corp. (the "clicks and mortar" business) and Bookouts Furniture, Inc. (the "bricks and mortar" business). In February 2000, Circle Group converted the note into 868,247 shares of common stock in FF Holdings Corp., representing a 4.5% ownership position and 868,247 shares of common stock in Bookouts Furniture Inc., representing a 4.5% ownership position. CGI Capital also holds a warrant to purchase shares of common stock of FF Holdings. At the time of the investment, Circle Group believed that FurnitureFind.com was one of the leading furniture sites on the Internet, in terms of on-line sales volume. According to Gomez Advisors and Top9.com, FurnitureFind.com is the number one furniture web site for customer confidence and traffic.

Evantis (Named changed from Mortgage Banking Center.Com as of 5/01/02)
In August 2000, CGI Capital assisted Evantis in their efforts to raise capital by providing a $750,000 direct investment in return for an 8% convertible promissory note. CGI Capital also conducted a $650,000 private placement of preferred convertible promissory notes to individual investors. The company is an early-stage, business-to-business managed service provider, serving the home ownership industry. Using its proprietary web-based platform, Evantis utilizes industry professionals as a point of access to the home ownership industry, providing the end consumer with a comprehensive line of products and services including mortgages, home warranty, and home inspection services. Evantis believes that consumers will benefit from the convenience of the "one-stop-shopping" and from the savings the company's services can provide, while members will enjoy diversified income streams, an e-commerce enabled platform, training, and customer relationship management tools to help grow their businesses. As of December 31, 2001, neither Circle Group nor its subsidiaries had an equity stake in Evantis. Circle Group has warrants to purchase 414,550 shares of their common stock, or approximately 3.7% of the outstanding shares.

On June 18, 2002, Evantis and Furniture Find formed a partnership to leverage each other's customer base through online and offline promotions, which could increase revenues for both entities.

Maxcess, Inc.
CGI Capital worked with Maxcess, Inc. on both a direct investment and a private placement. In May 2000, CGI Capital invested $1 million through the purchase of 333,333 shares of common stock as part of a private placement. In addition, CGI Capital, Inc. assisted Maxcess in raising approximately $3 million during a private placement in June 2000 to both institutional and individual investors. Maxcess offers converged networks, local phone services, long distance, and high-speed Internet access using packet switch technology over existing phone lines. Circle Group owns approximately 3.9% of the outstanding shares of Maxcess.

Financial Highlights

CIRCLE GROUP INTERNET INC.
Income Statement

For the year ended December 31, 2001, Circle Group reported revenues of $510,112 as compared to $1,528,992 for the previous year, and a net loss of $ (4,947,806) or Basic and diluted EPS $(0.25) on 19,850,186 weighted shares outstanding as compared to a net loss of $(4,654,399) or Basic and Diluted EPS of $ (0.24) on 19,788,241 weighted shares outstanding in the year 2000. The loss in 2001 included an impairment loss on investment in associated companies of $(1,308,780) as compared to an impairment loss on investment in associated companies of $(197,096) for the year 2000. Selling, general and administrative expenses were $3.3 million in 2001, down from $4.1 million the previous year.

For the first quarter ended March 31, 2002, Circle Group reported revenues of $133,442 as compared to $137,657 for the first quarter of 2001, and a net loss of $(791,302) or Basic and diluted EPS $(0.04) on 19,999,648 weighted shares outstanding for the first quarter of 2002, as compared to a net loss of $(1,157,038) or Basic and Diluted EPS of $(0.06) on 19,840,014 weighted shares outstanding in the first quarter of 2001. Selling, general and administrative expenses for the first quarter of 2002 were $534,006 down from $1,007,013 the previous year.

Balance Sheet

The balance sheet at the end of the first quarter ending March 31, 2002, showed cash and cash equivalents of $352,046, as compared to $629,508 at year-end 2001, with total current assets of $485,324 at the end of the first quarter as compared to $789,568 at year-end 2001, total assets were $1,962, 325 at the end of the first quarter 2002 as compared to $2,257,195 at year-end 2001. Current liabilities were $332,465 for the first quarter 2002, as compared to $283,272 at year-end 2001. Stockholders Equity was $1,629,860 at the end of the first quarter 2002, as compared to $1,973,923 at year-end 2001 and Total Liabilities and Stockholders Equity was $1,982,325 at the end of the first quarter as compared to $2,257,196 at year-end 2001.

Summary and Valuation

Circle Group Internet Inc., is a young developing company that, with the current state of the capital markets, has been forced to undergo a transition away from its original corporate mission of providing services and raising capital for small developing companies. In the current climate, Circle Group is presently dependent upon its wholly owned subsidiary, e-tailer operation - On-Line Bedding Corp., for revenues, and for cash flow. To generate additional revenue and cash flow the company is endeavoring to market the newly licensed Brave Way Training Systems, with its new Partnership with R.O.S. Security & Training Consultants, Inc. The need for additional capital is paramount and this situation will be closely monitored in future quarters.

Income Model Year 2002

At its current price, Circle Group Internet, Inc. is selling at an approximate $5.0 million market capitalization. On a market cap/revenue basis the stock is selling at 10x the year-end 12/31/01 revenues of $510,112. Based on our estimated revenues of $814,442 for year ended 12/31/02, the stock is selling at 6.1x estimated revenue basis. The stock sells at 3.125x price to book value.

With the decreasing revenue situation and considering the need for additional capital, a stronger market environment for its core business of raising capital for targeted companies and the current trading activity of its common stock with its limited liquidity, we have assigned a Neutral rating for Circle Group Internet, Inc. We will monitor the situation in the coming quarters as to the Company's progress in raising capital, increasing revenues, and its trading history, and adjust our rating accordingly.

Analyst:
Richard West, CFA
Richard W. West, CFA, has a range of experience extending over 40 years in securities analysis and investment management. Following three years as a broker with Stein Bros. & Boyce, he moved into investment management and research in the early 1970's with Delaware Management and, from 1974 to 1983, with Brittingham, Inc., where his responsibilities included management of the U.S. portfolio of the Nobel Foundation, one of the premier growth portfolios of its time. Mr. West formed an investment management and research firm in the mid-1980's specializing in small-cap growth stock analysis and investment publishing, following which he served as research director with Gaines Berland, an investment firm specializing primarily in growth stocks and special situations. He has been independently engaged since 1998 in corporate finance and private research activities. Mr. West is a graduate of the Wharton School, University of Pennsylvania (1960), served four years (1954-58) as a Navy pilot, and remains active as a pilot and Master Swimmer. He also maintains an office in New York City.

Contact:
Circle Group Internet, 1011 Campus Drive, Mundelein, IL. 60030. Gregory J. Halpern, President Tel: (847) 549-6002 http://www.cgrp.com/

J.M.Dutton & Associates, LLC. John M. Dutton, President and Supervisory Analyst, 1129 Manning Drive, Suite 310, El Dorado Hills, CA 95762 Phone (916) 941-4985, Fax (978) 418-6422 Email: [email protected] Web site: www.JMDutton.com

Information, opinions or recommendations contained in this research report or research note are submitted solely for advisory and information purposes. The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Such information and the opinions expressed are subject to change without notice. This research report or note is not intended as an offering or a solicitation of an offer to buy or sell the securities mentioned or discussed. Neither the Firm, its principals, nor the assigned analysts own or trade shares of any company covered. The Firm does not accept any equity compensation. Anyone may enroll a company for research coverage, which currently costs US $25,000 prepaid for one-year. Dutton & Associates received $22,000 from the Company for coverage for the year. Reports are performed on behalf of the public, and are not a service to any company. The analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests and insure independence. Please read full disclosure and other reports and notes on the Company at www.JMDutton.com..

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