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

                                   FORM 10-KSB

[X] Annual Report under  Section  13 or 15(d) of  the Securities Exchange Act of
    1934 for the fiscal year ended December 31, 2000.


[ ] Transition  Report  under  Section13  or 15 (d) of the  Securities  Exchange
    Act of  1934  for  the  transition  period  from _____________to____________

                           Commission File No. 0-23806

                                   I/NET, Inc.
                 (Name of Small Business Issuer in its Charter)

       Delaware                                                87-0046720
--------------------------------------------------------------------------------
   (State or Other Jurisdiction of                      (IRS Employer I.D. No.)
    Incorporation or Organization)

                            643 W. Crosstown Parkway
                            Kalamazoo, Michigan 49008
                    (Address of Principal Executive Officers)

                    Issuer's Telephone Number: (616) 344-3017

         Securities Registered under Section 12(b) of the Exchange Act:

    Title of Each Class            Name of Each Exchange on Which Registered

           None                                     None

         Securities Registered under Section 12(g) of the Exchange Act:

                      $0.001 par value common voting stock
                                (Title of Class)


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

            (1) Yes  X  No____              (2)   Yes   X     No____
                  ------                              ----

Check if there is no  disclosure of delinquent  files in response to item 405 of
Regulation  S-B  is  not  contained  in  this  form, and  no  disclosure will be
contained, to  the  best  of  Registrant's  knowledge, in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.  [X]
<PAGE>

                                        1

State Issuer's revenues for its most recent fiscal year:  $1,542,685

State the aggregate market value of the voting and non-voting common equity held
by  non-affiliates  computed  by  reference  to the price at which the stock was
sold, or the average bid and asked prices of such stock,  as of a specified date
within the past 60 days:  $3,241,673.  This  valuation is based upon the average
bid  price  for  shares  of  common  voting  stock  of  the  Registrant  on  the
"Over-the-Counter  Bulletin  Board" of the National  Association  of  Securities
Dealers, Inc. ("NASD") on February 15, 2001. There are approximately  18,009,292
shares of common voting stock of the Registrant held by non-affiliates.



State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date:

                                   31,182,652

                             as of December 31, 2000



     Transitional Small Business Disclosure Format (check one): Yes __ NO __X_







                      -THIS SPACE INTENTIONALLY LEFT BLANK-
<PAGE>






                                TABLE OF CONTENTS



Item 1.  Description of Business ..............................................4

Item 2.  Description of Property...............................................7

Item 3.  Legal Proceedings.................................................... 7

Item 4.  Submission of Matters to a Vote of Security Holders...................7

Item 5.  Market for Common Equity and Related Stockholder Matters..............8

Item 6.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations...................................8

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

Item 8.  Changes in and Disagreement with Accountants on
         Accounting and Financial Disclosure..................................10

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

Item 10. Executive Compensation...............................................12

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

Item 12. Certain Relationships and Related Transactions.......................14

Item 13. Exhibits and  Reports on Form 8-K....................................14

Signatures....................................................................15

<PAGE>
                                     PART 1

Item 1.  Description of Business
         -----------------------
I/NET, Inc. (the "Company" or "I/NET") was organized under the laws of the state
of Delaware  in 1986 under the name of a  predecessor  corporation.  The Company
registered  its  initial  public  offering  with  the  Securities  and  Exchange
Commission in 1987. The Company currently provides  professional services in the
areas  of  software  development  and  Internet-related   consulting  for  small
businesses,  Fortune  500  corporations  and  government  entities.  I/NET  also
develops  and markets  computer  software  for  mid-range  computers,  including
International  Business  Machine's (IBM) AS/400 model,  and the Company,  or its
affiliates,  holds  minority  equity  interests  in three other  privately  held
companies.

The  Company  has  one  wholly  owned   subsidiary,   I/NET,  Inc.  (a  Michigan
corporation)  and  its  wholly  owned   subsidiary,   Stek,  Ltd.  (a  Caymanian
corporation).  Stek was formed to receive  and hold  shares of SEGOES,  Ltd.  (a
privately held Caymanian corporation).  The shares of SEGOES were earned for the
successful  completion,  installation  and operation of the SEGOES  website,  an
Internet-based offshore asset management and trading system.

Business
--------
I/NET was formed as a contract  research and  development  firm  specializing in
software development for digital imaging and voice recognition.  Systems created
by I/NET are  currently  in service  in real  estate,  pharmaceutical  research,
government, newspapers, and information management.

I/NET, in prior years,  was engaged in the business of providing a wide range of
contract research systems planning,  development, and implementation services on
a fee basis to public and private sector clients.  It was founded in response to
demand for high-quality  information systems services on the part of government,
commercial, and not-for-profit organizations,  requiring digital imaging as part
of their  overall  solution.  Since  its  formation,  I/NET  has  delivered  and
installed   microcomputer-based   decision  support  systems  for  systems  sold
worldwide,  supporting  hundreds of users and employing  distributed  databases,
sophisticated  telecommunications  networks,  and  state-of-the-art  development
tools.   Past  projects   which  the  Company  has   undertaken  in  multi-media
applications have incorporated digital imaging and voice recognition.

The Company has  performed  development  work under  contract  with IBM for many
years,  including  developing  multi-media  software  running  on the IBM system
AS/400, a mid-range computer system with nearly 500,000 installations worldwide.

During 1995,  I/NET brought to the marketplace  its own Web  Server/400TM as the
first  commercially  available  product  which can connect the AS/400  computers
worldwide to the Internet.

I/NET's  Commerce  Server/400TM  was  introduced  in August  1996.  This product
provides  AS/400 users with the ability to conduct secured  encrypted  financial
and other  transactions  over the Internet.  In February 1997, IBM bestowed upon
I/NET the  prestigious  Partner in  Development  "Product of the Year Award" for
Commerce  Server/400.TM  During  1998,  the Company  was  licensed by the United
States  Department  of Commerce to export its strong  encrypted  version of this
product to various end users throughout the world.

Another  I/NET  product,  Merchant/400,  allows  Commerce  Server/400  users the
opportunity to easily sell goods and services over the Web. This product ensures
security and complete credit card authorization.

Recently  developed  products include  Webulator/400  which provides instant Web
access to existing AS/400  applications  without code changes and I/NET's newest
product,  NetPrint/400  which  allows for  seamless  ad-hoc  printing  of AS/400
reports without requiring complex host or client setup.

The Company  currently  has a contract that calls for it to provide IBM with web
site consulting services.  This contract,  while extendable for a longer period,
currently runs through September 2001.


The Company also provides  programming  services to Internet Financial Services,
Ltd. (IFS), a privately held Internet and software  services  company,  based in
the Cayman Islands,  which specializes in web site design, hosting and servicing
of financial transactions for offshore clients. IFS had contracted with I/NET in
prior years to design and develop the  first-ever  Internet based offshore asset
management  and  trading  system for a client of IFS,  SEGOES,  Ltd. a Caymanian
corporation.  SEGOES is the first and only  Internet  based  securities  trading
system designed exclusively for the offshore world. SEGOES is operational and is
conducting  brokerage  transactions  in the U.S.  market today.  Much like other
trading systems,  SEGOES offers U.S. stocks,  options, and mutual funds over the
Internet.  But SEGOES also offers its users fixed income  products,  IPO access,
secondary  offerings and private  placement  securities over the same interface.
SEGOES is also  currently  preparing  to offer these same  products to exchanges
around  the  world  such as  Canada,  London,  Frankfurt,  Tokyo,  Hong Kong and
Singapore.The  past few years  have seen a  significant  increase  in the use of
Internet  securities trading and the Company expects this trend to continue even
in the offshore financial  services industry,  which has been traditionally slow
to adopt innovative change.

Recent Events
-------------
In January 2001, the Company  established a Chicago,  Illinois  office to pursue
the development of conversational  interfaces - systems that use everyday spoken
language to control  computers and other  electronic  devices and systems.  This
office is being staffed by some of the world's leading authorities in the field,
including Dr. R. James Firby,  who brings years of experience with such agencies
as the  Jet  Propulsion  Laboratory  and  the  National  Aeronautics  and  Space
Administration (NASA).

In  February  2001,  the  Company  entered  into a  contract  with  NASA for the
development  of Complex Event  Recognition  Architecture  (CERA)  software.  The
two-year  contract is valued at $600,000  calls for I/NET to provide NASA with a
flexible, generally applicable software system for describing complex events and
recognizing  event  occurrences.  It can be  applied  to any  area of  automated
control,  including  life  support  systems,  terrestrial  and  extraterrestrial
planetary exploration, and home and factory control.

Distribution Methods of Products and Services
---------------------------------------------
The Company  currently is operating under worldwide  marketing and  distribution
agreements  with various  organizations  for the  distribution  of its Webserver
products.  Appsmall.com is currently  performing under an informal  agreement to
distribute the Company's  products in the United  States,  Canada,  Europe,  the
Middle East and Africa. The Company is currently  negotiating with Appsmall.com,
as well as other distributors, for the 2001 rights to distribute these products.
General  Business  Services  Co.  Ltd  (GBS) of Tokyo,  Japan has the  exclusive
territory of Japan through March 2001. The Company is currently negotiating with
GBS for a renewal of this contract.

Competitive Business Conditions
-------------------------------
The Company's contract work performed for IBM has been  competitively  acquired,
and usually the final selection is between I/NET and departments within IBM. The
business  conditions for all Webserver  products is intensely  competitive  with
many  large  organizations,  including  IBM,  Advanced  Business  Links  and ROI
Connect, offering similar products, sometimes at lower cost. These organizations
have significantly greater financial,  technical, sales and marketing, and other
resources than the Company.


<PAGE>
Sources and Availability of Raw Materials and Principal Suppliers
------------------------------------------------------------------
Developing  software  requires few tangible raw  materials.  The most  important
element in this  process is the  personnel  who plan,  design,  and  develop the
software  code.  I/NET has  consistently  hired the best  talent  available.  It
recruits  top-of-the-class  talent from two Kalamazoo-based  colleges as well as
candidates  from the East  Coast  of the  United  States.  I/NET's  business  is
dependent on attracting  and retaining  talented  personnel.  Today's market for
technology  experts is highly  competitive  and there can be no assurances  that
I/NET will continue to be able to attract and retain qualified personnel.

Dependence on Major Customers
-----------------------------
The Company provided Internet products, web site consulting services and support
services to three major customers (IBM $933,000, Appsmall.com,  $206,000 and GBS
$182,000) totaling  $1,321,000 for the year ended December 31, 2000. It provided
the same services to three major customers (IBM $942,000,  Appsmall.com $524,000
and  Career/NET  $259,000)  totaling  $1,734,000 for the year ended December 31,
1999.  These three  customers in the aggregate  accounted for 86% and 97% of the
Company's revenues in 2000 and 1999, respectively.

Patents,  Trademarks,  Franchises,  Concessions,  Royalty  Agreements  or  Labor
Contracts, Including Duration
--------------------------------------------------------------------------------
I/NET has various  trademarks  for its  products,  including  Webserver/400  and
Commerce Server/400.

Need for Any Government Approval of Principal Products or Services
------------------------------------------------------------------
The  performance  of services  and the supply of products by the Company are not
subject  to  governmental  approval  except as they  relate to strong  encrypted
software products, which are under government regulation.

Effect of Existing or Probable Governmental Regulations on the Business
-----------------------------------------------------------------------
No present  governmental  regulations have any adverse significant impact on the
present or contemplated business operations of the Company, and no such probable
governmental  regulations are  anticipated to have any adverse effect.  However,
there are  numerous  proposals  pending to regulate  the  Internet.  The Company
cannot predict the impact that the adoption of any of these proposals could have
on the Company's business.

Research and Development Activities
-----------------------------------
There were minimal research and development costs incurred by the Company during
the calendar years ended  December 31, 2000 and 1999.  The Company  completed in
1999 the development of the Webulator/400 and NetPrint/400  products with little
additional costs.  With the announced  opening of a Chicago,  Illinois office to
pursue the development of conversational  interfaces - systems that use everyday
spoken language to control  computers and other electronic  devices and systems.
The Company  estimates  that  research and  development  expense  will  increase
significantly in 2001.

Cost and Effects of Compliance with Environmental Laws
------------------------------------------------------
There  are  no  foreseeable   adverse  effects  on  the  Company's   present  or
contemplated  business  operations  resulting from environmental laws, rules, or
regulations.

Employees
---------
As of December 31, 2000, the Company had 14 full time employees.
<PAGE>
Item 2...Description of Property
--------------------------------
The Company's principal executive and administrative  offices are located at 643
West Crosstown Parkway, Kalamazoo, Michigan, which is comprised of approximately
5,600  square  feet.  This  facility is leased and rental  payments on the space
amounted to $79,000 for 2000.

In February 2001, the Company opened a leased office in Chicago,  Illinois which
will cost approximately $19,000 annually.

Management  considers  its  offices  to be well  maintained,  in good  operating
condition and suitable and adequate for their intended purposes.

Item 3...Legal Proceedings
--------------------------
The Company is not a party to any pending material legal proceeding.

Item 4...Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
No matter  was  submitted  to a vote of the  Company's  stockholders  during the
fourth quarter of 2000.
<PAGE>
                                     PART II

Item 5...Market for Common Equity and Related Stockholder Matters
-----------------------------------------------------------------
Market Information
------------------
The  Company's  common stock is listed on the Nasdaq  Over-the  Counter-Bulletin
Board under the symbol "INNI". The high and low bid prices for 1999 and 2000 are
summarized by quarter below:
             1999     1999    1999     1999      2000     2000    2000     2000
           1st qtr  2nd qtr  3rd qtr  4th qtr  1st qtr  2nd qtr 3rd qtr  4th qtr
--------------------------------------------------------------------------------
HIGH       $1.91     $1.03   $0.66     $0.79    $0.98    $0.56   $0.34   $0.27
LOW        $0.74     $0.50   $0.31     $0.29    $0.55    $0.26   $0.20   $0.04

These bid prices are  quotations  of  broker-dealers  that reflect  inter-dealer
prices,  without  retail  mark-up,  markdown or commission and may not represent
actual transactions.

Holders
-------

The number of record  holders of the  Company's  common stock as of December 31,
2000,  was 285. There were  approximately  3,000  beneficial  holders as of that
date.

Dividends
---------
There are currently present material  restrictions that limit the ability of the
Company  to pay  dividends  on its  common  stock  as it  has a  deficit  in its
stockholders' equity. The Company has not paid any dividends with respect to its
common stock nor does it intend to do so in the foreseeable future.

Item 6.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations
--------------------------------------------------------------------------------
Calendar Years Ended December 31, 2000 and 1999
-----------------------------------------------
Results of Operations
---------------------
Revenues for the year ended  December 31, 2000,  were  $1,542,685 as compared to
$1,792,881  for the year ended  December  31,  1999.  When  analyzed  by product
category, revenues of web site consulting services to IBM were $933,000 in 2000,
as compared  to  $941,000 in 1999.  Internet  software  products  accounted  for
revenues of $388,000 in 2000 and  $534,000 in 1999.  This  decrease is primarily
due to severe  competition for webserver  product sales in the United States and
Europe.  Licensing fees from the Career/NET  product  decreased by $253,000 from
1999 due to Career/NET's desire to be relieved of its original support agreement
with I/NET.  In exchange  for this  relief,  Career/NET  issued I/NET a $209,000
interest bearing demand note, which was recorded as revenue in 1999.

Cost of  revenues  increased  by  $112,000  to $ 910,000 in 2000 as  compared to
$798,000 in 1999.  The primary  cause for this  increase was the use of contract
labor for the IBM  contract  and adding  staff for other  development  projects.
Gross profit as a percent of sales decreased from 56% in 1999 to 41% in 2000. In
addition,  the recognition of the revenue associated with the Career/NET support
services  agreement  in 1999  increased  margins,  as there were  minimal  costs
associated with this transaction.

General and administrative  expenses decreased by $44,000 to $544,000 in 2000 as
compared to $588,000 in 1999.  The cause for this  decrease  was a reduction  in
various  general  expenses  from the  prior  year.  General  and  administrative
expenses as a percentage of sales increased from 33% in 1999 to 35% in 2000.
<PAGE>
During  August  2000,  the  Company  discharged  a  customer  from  $209,000  of
indebtedness  and also  assigned  that  customer  certain  proprietary  computer
technology,  software and  trademark  for products  known as  Career/NET  and HR
Department. In exchange for this discharge and assignment,  the Company received
2,000,000  shares (18%  interest) each in common stock or units in two privately
held entities.  These entities provide  web-based resume tracking  solutions and
career  boards  and were  working  towards  raising  additional  capital to fund
expansion  and  growth.  During  the  third  quarter  of 2000,  the  raising  of
additional capital was suspended due to deteriorating market conditions for such
fund raising.  The Company determined that it was appropriate to writedown these
investments to their net realizable value at that time.

During   January   2000,  Stek,  Ltd.,  the  Company's  wholly  owned  Caymanian
subsidiary,  sold  approximately 20,000  shares (1.33%) of SEGOES, Ltd. with net
proceeds to the Company of approximately $28,000.

During April, 2000, the Company reached an agreement with a noteholder,  whereby
the Company  exchanged  25,000 of its common shares of stock for the forgiveness
of $74,000 of indebtedness. This forgiveness of indebtedness, less an income tax
benefit of $25,000,  has been  treated as an  extraordinary  item for  financial
statement purposes.

Interest  expense  decreased  by  $10,000  due to  the  continued  repayment  of
borrowings during 2000.

Financial Condition and Liquidity
---------------------------------
The  Company's  primary need for capital will be to invest in computer  software
development.  As of December 31, 2000, the Company's working capital deficit was
$773,000,  compared to a deficit of $639,000 at December 31, 1999. The resulting
increase  in  working  capital  deficit is  primarily  due to the  writedown  of
investments of $209,000.

The Company  believes that the additional  sales provided by the above mentioned
agreements  and the continued  development  of new products  should  provide the
Company with  sufficient  working  capital to fund its needs for 2000.  However,
there can be no  assurance  these  activities  will be  successful.  The Company
continues to explore alternative  options to reduce its debt obligations,  which
could also increase the Company's financial stability.

The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of  liabilities  in the normal  course of  business.  The Company  has  suffered
recurring  losses from  operations  in prior years,  has a  significant  working
capital  deficit,  and  requires  additional  capital to  continue  its  product
development.  Accordingly,  the Company's  independent  public  accountants have
included a modification  in their report on the Company's  financial  statements
for the years ended December 31, 2000 and 1999 discussing the Company's  ability
to continue as a going concern. Management believes the Company will continue as
a going concern and is actively  marketing its products to enable the Company to
meet its current  obligations  and provide  additional  funds for  continued new
product development.  In addition,  management is currently  negotiating several
additional contracts for its services and products. Management is also embarking
on other strategic initiatives to expand its business  opportunities (see Recent
Events). However, there can be no assurance these activities will be successful.

New Accounting Pronouncements
-----------------------------
Statement on Financial  Accounting  Standards  (SFAS) 133  regarding  derivative
instruments   became   effective  during  the  year  ended  December  31,  2000.
Historically,  the Company has not entered into derivative  contracts  either to
hedge existing risks or for speculative purposes.  Accordingly,  the adoption of
the standard did not affect the Company's financial statements.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101,  Revenue  Recognition in Financial  Statements  (SAB 101). SAB
101, as amended, summarizes and clarifies certain existing accounting principals
for the recognition and classification of revenues in the financial  statements.
The  adoption  of SAB 101 did not have any  impact  on the  Company's  financial
statements.

In  March  2000,   the  Financial   Accounting   Standards   Board  issued  FASB
Interpretation No. 44 (FIN 44),  Accounting for Certain  Transactions  Involving
Stock  Compensation - an  Interpretation  of Accounting  Principals  Board (APB)
Opinion No. 25. FIN 44 clarifies the  following:  the  definition of an employee
for  purposes of  applying  APB Opinion  No. 25; the  criteria  for  determining
whether a plan qualifies as a noncompensatory  plan; the accounting  consequence
of various  modifications  to the terms of the previous  fixed stock  options or
awards;  and the  accounting for an exchange of stock  compensation  awards in a
business combination. FIN 44 was effective July 1, 2000, but certain conclusions
in FIN 44 cover specific events that occurred after December 15, 1998 or January
12, 2000.  The  application  of FIN 44 did not have any impact on the  Company's
financial statements.

Item 7.  Financial Statements
-----------------------------
Section                                                             Page Number

Report of Independent Certified Public Accountants.......................18

Consolidated Balance Sheets as of December 31, 2000 and 1999............19-20

Consolidated Statements of Operations for the years ended
   December 31, 2000 and 1999............................................21

Consolidated Statements of Capital Deficit for the years
   ended December 31, 2000and 1999.......................................22

Consolidated Statements of Cash Flows for the years ended
   December 31, 2000 and l999....................23

Summary of Accounting Policies..........................................24-25

Notes to Consolidated Financial Statements..............................26-31


Item 8. Changes in and Disagreement with Accountants on Accounting and Financial
Disclosure
--------------------------------------------------------------------------------
None
<PAGE>
                                    PART III

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

Identification of Directors and Executive Officers

The  following  table sets forth the names and offices held by all directors and
executive  officers of the Company for the year ended  December 31, 2000, and to
the date  hereof,  and the year since  which  each such  director  or  executive
officer has served in their respective positions.

     Name                      Position Held               Date of Election or
                                                               Designation
---------------            -----------------------       -----------------------
James C. Knapp             Chairman of the Board
                               of Directors                       1986

Stephen J. Markee          President and Chief
                            Executive Officer,
                              Director, and
                           Chief Financial Officer                1985

Paul A. Bertoldi           Vice President Systems
                              Development                         1989

Dr. William A. Fitzgerald  Chief Technology Officer         September 1, 2000


Term of Office
--------------
The  terms of office of the  current  directors  and  executive  officers  shall
continue until their replacements are duly qualified and elected.

Business Experience
-------------------
James C, Knapp,  Chairman:  Mr. Knapp,  one of I/NET's initial  founders,  is 52
-------------------------
years of age, and received a BBA Degree from the University of Maryland in 1972.
He began his computer  education at the age of 15 in a special program sponsored
by IBM,  and served in the  United  States  Air Force as a teacher  for  missile
computer  guidance  systems.  He has been  listed  in the ACR  Directory  of Top
Computer  Executives  since 1981,  and was  inducted  into the "Who's Who in the
Computer Industry" in 1990. His efforts in digital imaging and voice recognition
have been recognized  internationally.  Mr. Knapp has been a featured speaker at
the Massachusetts Institute of Technology and the Harvard Business School. He is
also an international speaker on Internet security.

Stephen J. Markee,  President,  CEO and CFO:  Mr.  Markee is 55 years of age. He
-------------------------------------------
received  a BS  Degree  from  Ferris  State  University  in 1970 and an MBA from
Western Michigan  University  ("WMU") in 1971. He is a licensed certified public
accountant in the state of Michigan. Mr. Markee served in the United States Army
during the Viet Nam conflict,  and was decorated and medically  retired in 1968.
After completing his education,  he served as assistant  Auditor General for the
State of Michigan  before joining WMU as Director of Internal  Auditing in 1976.
While at WMU,  he also taught  accounting  classes in the MBA  program.  He then
changed directions, from public to private sector, as Vice President of Planning
and Control for a division of Standex  International  Corporation,  where he was
responsible for information systems,  accounting, and human resources. He joined
I/NET in 1985 as President  and CEO. He has guided I/NET to a successful  equity
partnership with IBM, and engineered the sale of intellectual property rights to
IBM. Mr.  Markee has served on the Board of Directors  of the  Kalamazoo  County
Chamber of Commerce,  Chairman of the Kalamazoo  County  Convention and Visitors
Bureau,  Past  President of the local  chapter of the  Institute  of  Management
Accountants, and President of the Parchment Schools Foundation. He is a frequent
speaker to civic and business  groups,  and has appeared on the  Financial  News
Network ("FNN").
<PAGE>
Paul A. Bertoldi, Vice President,  Systems Development: Mr. Bertoldi is 38 years
------------------------------------------------------
of age. He has received  BBA and MBA degrees  from WMU. He  graduated  magna cum
laude and was named a Presidential  Scholar as one of the top  undergraduates of
WMU.  Since  becoming one of I/NET's first  employees,  Mr.  Bertoldi has helped
design  the  architecture  of  state-of-the-art  imaging  and voice  recognition
systems in the field of real estate,  medical imaging, and document imaging. Mr.
Bertoldi is currently  involved in the  development  of web site  consulting and
Internet  computer  software  products.  He  is  an  active  member  in  various
professional organizations.

Dr. William A. Fitzgerald,  Chief Technology Officer: Dr. Fitzgerald is 44 years
----------------------------------------------------
of  age.  He  received  his  Ph.D.  in  computer   sciences  from   Northwestern
University's  Institute for Learning  Sciences.  Dr.  Fitzgerald joined I/NET in
September 2000 from Neodesic,  a Chicago-based  company which developed a system
to support the rapid growth of online communities and hubs. As vice-president of
research and development at that company,  he also directed  projects in natural
language  understanding,  intelligent  control  and smart web  sites.  He worked
extensively on research for the National  Aeronautics  and Space  Administration
(NASA),  specializing in the areas of complex event  recognition and intelligent
information workbenches. He has published extensively in the above areas.

Family Relationships
--------------------
With the  exception  that Mr.  Bertoldi  is married to the sister of Mr.  Knapp,
there are no family relationships between any directors or executive officers of
the Company.

Indemnification of Directors and Executive Officers
---------------------------------------------------
Under the Delaware Corporation Law, a corporation has the power to indemnify any
person  who  is  made  a  party  to  any  civil,  criminal,   administrative  or
investigative proceeding,  other than action by or any right of the corporation,
by reason of the fact that such  person was a  director,  officer,  employee  or
agent of the corporation,  against  expenses,  including  reasonable  attorney's
fees,  judgments,  fines and amounts  paid in  settlement  of any such  actions;
provided however, in any criminal proceeding,  the indemnified person shall have
had no reason to believe the conduct committed was unlawful.  However, it is the
position of the Securities and Exchange Commission that indemnification  against
liabilities for violation of the federal  securities law, rules, and regulations
is against public policy.

Item 10.    Executive Compensation
----------------------------------
Cash Compensation
-----------------
The following  table sets forth the aggregate  compensation  paid by the Company
for services rendered during the periods indicated.

  -----------------------------------------------------------------------------
  SUMMARY COMPENSATION TABLE
  -----------------------------------------------------------------------------
  ------------------- ------------ -------------- ------------- ---------------
  Name and            Year Ended     Salary          Bonus        All Other
  Principal Position  Dec. 31                                    Compensation
  ------------------- ------------ -------------- ------------- ---------------
  ------------------- ------------ -------------- ------------- ---------------
  James C. Knapp         2000      $72,800                         $4,830*
       Chairman          1999      $125,092           -$0-         $5,130*
                         1998      $125,674                        $4,410
  ------------------- ------------ -------------- ------------- ---------------
  ------------------- ------------ -------------- ------------- ---------------
  Stephen J. Markee      2000      $125,530
   President, CEO,       1999      $125,680           -$0-              $0
   CFO and Director      1998      $125,674
  ------------------- ------------ -------------- ------------- ---------------
  -----------------------------------------------------------------------------

       *Approximate value of life insurance premiums paid by the Company

  -----------------------------------------------------------------------------
<PAGE>
Compensation Pursuant to Plans
------------------------------
The Company  maintains  an  incentive  stock  option plan that  provides for the
granting of options to officers and other key employees at an exercise price not
less than 100% of the fair market value on the date of the grant. Twenty percent
of the  options  become  exercisable  each  year  following  the date  they were
granted, and can remain outstanding for five years following the day they become
fully vested. No options were issued to named executives during the year or held
by named executives at December 31, 2000.

In  January  2001,  the Board of  Directors  amended  the Plan to  increase  the
available grants to 5,000,000 shares authorized under this Plan.

Pension Plan
------------
The Company has a profit sharing and defined  contribution pension plan covering
substantially  all  employees.  Under the plan,  employees may make tax deferred
voluntary  contributions  which,  at the  discretion of the  Company's  Board of
Directors, may be matched within certain limits by the Company. In addition, the
Company may make additional  discretionary  contributions  to the plan as profit
sharing  contributions.  All contributions to the plan are limited by applicable
Internal Revenue Code regulations.  There were no Company  contributions charged
against operations in 2000 or 1999.

Compensation of Directors
-------------------------
See Cash Compensation of this Item.

Employment Contracts
--------------------
There are no  employment  contracts for any employees or officers as of December
31, 2000.

Termination of Employment and Changes of Control Arrangement
------------------------------------------------------------
There  are no  compensatory  plans or  arrangements,  including  payments  to be
received  from the  Company,  with  respect to any person  named in the  Summary
Compensation  Table set out above  which  would in any way result in payments to
any  such  person  because  of his  or  her  resignation,  retirement  or  other
termination of such person's employment with the Company or its subsidiaries, or
any change in control of the Company.

Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------
Based  solely on its review of Forms 3, 4 and 5  furnished  to it,  the  Company
believes that each director,  officer and beneficial owner of 10% or more of the
Company's  stock made all required  filings  under Section 16(a) of the Exchange
Act during 2000.
<PAGE>

Item 11.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------
The following table sets forth the share holdings of the Company's directors and
executive  officers  and those  persons or entities  who own more than 5% of the
Company's outstanding common stock as of December 31, 2000.


                                          Amount and Nature of
      Name                 Address        Beneficial Ownership  Percent of Class


James C. Knapp          Grand Cayman Islands      5,417,719           17.37%

Stephen J. Markee       Richland, MI              6,196,743           19.87%

Paul A. Bertoldi        Kalamazoo, MI               410,699            1.32%

William A. Fitzgerald   Kalamazoo, MI                 6,500            0.02%
                                                  ----------          -------

All directors and officers as a group             12,031,661          38.58%
                                                  ==========          =======

Changes in Control
------------------
To the knowledge of management,  there are no present arrangements or pledges of
securities  of the  Company  which  may  result in a change  in  control  of the
Company.

Item 12. Certain Relationships and Related Transactions
-------------------------------------------------------
James C. Knapp,  Chairman  of the Board of  Directors,  and  Stephen J.  Markee,
President, CEO and CFO, have loaned the Company funds for working capital. These
funds are  provided  at an  interest  rate of 8%.  The  balance  outstanding  at
December 31, 2000 was $368,948.  At December 31, 2000, the Company owed $108,698
to Mr. Knapp and $260,250 to Mr.  Markee.  These loans are secured by all of the
Company's assets. With the exception of this transaction, there were no material
transactions to which the Company or any of its  subsidiaries  was or is to be a
party, in which the amount involved  exceeded $60,000 and in which any promoter,
founder,  director or executive officer,  or any security holder who is known to
the  Company to own or record of  beneficially  more than 5% of any class of the
Company's  common  stock,  or any member of the  immediate  family of any of the
foregoing  persons,  had an interest  during the last two  calendar  years ended
December 31, 2000 and 1999.

"Safe Harbor" Provisions Under the Private Securities Litigation Act of 1995
----------------------------------------------------------------------------
Statements  in this filing  that are not  historical  facts are  forward-looking
statements,  which  involve  risks  and  uncertainties  that  could  affect  the
Company's  results of  operations,  financial  position  and cash flows.  Actual
results  may differ  materially  from  those  projected  in the  forward-looking
statements, due to a variety of factors, some of which may be beyond the control
of the  Company.  Readers are  cautioned  not to place  undue  reliance on these
forward-looking statements, which speak only as of the date of this report.

Item 13. Reports on Form 8-K and Exhibits
-----------------------------------------
Reports on Form 8-K:
--------------------
None

Exhibits:
---------
None
<PAGE>
Signatures

In accordance with the requirements of the Exchange Act of 1934, as amended, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto being duly authorized.


                                                        I/NET, Inc.


Date:  March 19, 2001                      By:    /s/   Stephen J. Markee
                                               ---------------------------------
                                                   Stephen J. Markee, Director
                                                     President, CEO, and CFO


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this  Report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated:


Date:  March 19, 2001                       By:   /s/   Stephen J. Markee
                                                --------------------------------
                                                   Stephen J. Markee, Director
                                                      President, CEO and CFO


Date:  March 19, 2001                       By:   /s/   James C. Knapp
                                                --------------------------------
                                                    James C. Knapp, Chairman
                                                   of the Board of Directors
<PAGE>



                                   I/NET, Inc.

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

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


                        Consolidated Financial Statements
                     Years ended December 31, 2000 and 1999


<PAGE>



                                                                     I/NET, Inc.


                                    Contents

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

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


       Report of Independent Certified Public Accountants               18


       Financial Statements:

           Consolidated Balance Sheets                                19 - 20

           Consolidated Statements of Operations                        21

           Consolidated Statements of Capital Deficit                   22

           Consolidated Statements of Cash Flows                        23

       Summary of Accounting Policies                                 24 - 25


       Notes to Consolidated Financial Statements                     26 - 31


<PAGE>
Report of Independent Certified Public Accountants


Board of Directors
I/NET, Inc.
Kalamazoo, Michigan

         We have audited the accompanying  consolidated balance sheets of I/NET,
Inc. as of December 31, 2000 and 1999, and the related  consolidated  statements
of operations,  capital  deficit and cash flows for the years then ended.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects,  the financial position of I/NET, Inc.
at December 31, 2000,  and 1999,  and the results of its operations and its cash
flows  for the  years  then  ended  in  conformity  with  accounting  principles
generally accepted in the United States of America.

         The accompanying  financial statements have been prepared assuming that
the Company  will  continue as a going  concern.  As discussed in Note 13 to the
financial  statements,  the Company has suffered losses from  operations,  has a
significant  working capital deficit and requires additional capital to continue
its product development. These factors raise substantial doubt about its ability
to continue as a going  concern.  Management's  plans in regard to these matters
are also  described  in Note 13. The  financial  statements  do not  include any
adjustments that might result from the outcome of this uncertainty.




Kalamazoo, Michigan                              /s/BDO SEIDMAN, LLP
                                                 -------------------------------
January 15, 2001                                 Certified Public Accountants


<PAGE>


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

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

December 31,                                          2000               1999
--------------------------------------------------------------------------------

Assets (Note 3)

Current:

     Cash and cash equivalents                      $ 88,693           $ 171,681

     Trade Receivables (Note 4)                      156,457             364,253
--------------------------------------------------------------------------------
     Prepaid Expense                                  17,500               _
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Total Current Assets                                 262,650            535,934

Office Furniture and Equipment,
    less accumulated depreciation of $36,524
    and $97,451                                       18,754             16,587

--------------------------------------------------------------------------------
                                                   $ 281,404            $552,521
--------------------------------------------------------------------------------
<PAGE>
                                                                     I/NET, Inc.

Consolidated Balance Sheets
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
December 31,                                            2000             1999
--------------------------------------------------------------------------------
Liabilities and Capital Deficit

Current Liabilities:
    Accounts payable                                  $ 1,922         $ 17,618
    Accruals:
         Commissions (Note 1)                         258,000          258,000
         Interest                                     193,803          171,402
         Other                                           -              33,500
    Advances from stockholders (Note 2)                95,500           95,500
    Current maturities of long-term debt (Note 3)     486,000          599,000
--------------------------------------------------------------------------------

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

Total Current Liabilities                           1,035,225        1,175,020

Long-term Debt, less current maturities (Note 3)      403,304          504,196

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

Total Liabilities                                   1,438,529        1,679,216

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

Commitments and Contingencies (Notes 6, 7,
    11 and 13)

Capital Deficit (Note 8):
    Common stock, $.001 par value - shares
    authorized 50,000,000 issued and outstanding
    31,182,652 in 2000 and 31,037,652 in 1999          31,183           31,038
    Additional paid-in capital                     11,916,554       11,886,674
    Deficit                                       (13,104,862)     (13,044,407)

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

Total Capital Deficit                              (1,157,125)      (1,126,695)
--------------------------------------------------------------------------------

                                                 $    281,404      $   552,521
--------------------------------------------------------------------------------


See  accompanying  summary  of  accounting  policies  and notes to  consolidated
financial statements.
<PAGE>

                                                                     I/NET, Inc.

Consolidated Statements of Operations
--------------------------------------------------------------------------------

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

Year ended December 31,                               2000               1999
--------------------------------------------------------------------------------

Revenues   (Note 4)                               $1,542,685        $ 1,792,881

Cost of Revenues                                     909,961            797,587

--------------------------------------------------------------------------------
    Gross profit                                     632,724            995,294

Selling, General, and Administrative Expenses        544,239            588,474

--------------------------------------------------------------------------------
Loss on writedown of investments (Note 9)           (209,000)              -
--------------------------------------------------------------------------------

    (Loss) Earnings from operations                 (120,515)           406,820

Interest Expense - net of interest income
    $15,789 in 2000
    and $10,764 in 1999                               42,114             52,300

Gain on sale of securities (Note 9)                   28,199               -
--------------------------------------------------------------------------------

    (Loss) Earnings before Extraordinary
    Item and Income Taxes                           (134,430)           354,520

Income Tax Benefit (Note 5)                           25,000               -
--------------------------------------------------------------------------------

    (Loss) Earnings before Extraordinary Item       (109,430)           354,520

Extraordinary Item:
    Gain on extinguishment of debt, net
    of tax (Note 3)                                   48,975              -
--------------------------------------------------------------------------------

Net (Loss) Earnings                                 $(60,455)          $354,520

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

Net (Loss) Earnings per Share- Basic
and Diluted (Note 12)
    Net (Loss) Earnings before extraordinary
    item                                           $     .00         $      .01
    Extraordinary item                             $     .00         $      .00
    Net (Loss) Earnings                            $     .00         $      .01

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

Average Number of Basic Common
Shares Outstanding (Note 12)                       31,106,401        31,037,652

Average Number of Diluted Common
Shares Outstanding (Note 12)                       31,106,401         31,659,027

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

See  accompanying  summary  of  accounting  policies  and notes to  consolidated
financial statements.

<PAGE>
                                                                     I/NET, Inc.

Consolidated Statements of Capital Deficit
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                            Common Stock       Additional
                            ------------         Paid in
--------------------------------------------------------------------------------
                          Shares    Amount    Capital    Deficit      Total
                          ------    ------    -------    -------      -----
Balance,January 1,
1999                    31,037,612 $31,038 $11,886,674 $(13,398,927)$(1,481,215)

    Net earnings
    for the year            -         -        -            354,520     354,520

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

Balance, December 31,
1999                    31,037,652  31,038  11,886,674  (13,044,407) (1,126,695)

    Net loss for the
    year                    -         -        -            (60,455)    (60,455)

    Issuance of stock
    (Note 10)              145,000     145      29,880        -          30,025

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

Balance, December 31,
2000                    31,182,652 $31,183 $11,916,554 $(13,104,862)$(1,157,125)

--------------------------------------------------------------------------------
See  accompanying  summary  of  accounting  policies  and notes to  consolidated
financial statements.


<PAGE>
                                                                     I/NET, Inc.

Consolidated Statements of Cash Flows
--------------------------------------------------------------------------------

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

Year ended December 31,                                2000               1999

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

Operating Activities
    Net (loss) earnings                           $  (60,455)        $  354,520
    Depreciation and amortization                     26,028             17,238
    Gain on sale of securities (Note 9)              (28,199)              -
    Loss on writedown of investments                 209,000               -
    Extraordinary item:
          Gain on extinguishment of debt (Note 5)    (73,975)              -
    Changes in assets and liabilities:
         Receivables                                  (1,204)          (162,292)
         Accounts payable                            (15,696)          (106,882)
         Accruals                                     (3,730)            41,795

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

Cash Provided by Operating Activities                 51,769            144,379

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

Investing Activities
    Proceeds from sale of securities (Note 9)         28,199               -
    Capital expenditures                             (15,695)            (2,725)

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

Cash Provided by (Used In) Investing Activities       12,504             (2,725)

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

Financing Activities
    Principal payments on long-term debt            (109,067)           (39,613)
    Principal payments on notes to stockholders      (38,194)           (34,207)
--------------------------------------------------------------------------------

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

Cash Used In Financing Activities                   (147,261)           (73,820)

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

Increase (Decrease) in Cash and Cash Equivalents     (82,988)            67,834

Cash and Cash Equivalents, beginning of year         171,681            103,847

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

Cash and Cash Equivalents, end of year              $ 88,693          $ 171,681

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

See  accompanying  summary  of  accounting  policies  and notes to  consolidated
financial statements.

<PAGE>

                                                                     I/NET, Inc.

                                                  Summary of Accounting Policies
--------------------------------------------------------------------------------

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

Basis of Presentation
---------------------
The  consolidated  financial  statements  include the  accounts of the  Company,
I/NET,  Inc. (a Delaware  Corporation),  and its wholly owned subsidiary  I/NET,
Inc. (a Michigan  Corporation),  and its wholly owned subsidiary,  Stek, Ltd. (a
Caymanian  corporation).  I/NET,  Inc. the Delaware  Corporation  is not active,
therefore the consolidated  financial  statements  presented within are those of
I/NET,  Inc.  the  Michigan   corporation  and  Stek,  Ltd.,  its  wholly  owned
subsidiary.  Stek, Ltd. was formed to receive and hold shares of SEGOES, Ltd. (a
privately  held  Caymanian  corporation).  These  shares  were  earned  for  the
successful  completion  of the  development,  installation  and operation of the
SEGOES web site, an Internet-based offshore asset management and trading system.

Description of the Business
---------------------------
The Company  operates  in one segment  consisting  of software  development  and
Internet  consulting  services.  The Company does not operate based upon product
lines but as one business unit. Its major customers are  International  Business
Machines  Corporation (IBM),  Appsmall.com and General Business Services Co. Ltd
(GBS). (See Note 5)

Use of Estimates
----------------
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

Cash and Cash Equivalents
-------------------------
For purposes of the  statement of cash flows,  the Company  considers all highly
liquid  investments  with maturity of three months or less when  purchased to be
cash equivalents.

Office Furniture, Equipment, and Depreciation
---------------------------------------------
Office  furniture  and equipment  are stated at cost.  Depreciation  is computed
principally by the straight-line  method for financial  reporting  purposes over
the  estimated  useful  lives of the assets and by  accelerated  methods for tax
purposes.

Developed Computer Software
---------------------------
Software  development  costs are accounted for in accordance with the provisions
of Statement of Financial  Accounting  Standards (SFAS) No. 86,  "Accounting for
the  Cost of  Computer  Software  To Be Sold,  Leased  or  Otherwise  Marketed."
Software development costs and certain product  enhancements,  when significant,
are capitalized subsequent to the establishment of technological feasibility for
the product and prior to the products general release to customers.

Costs incurred prior to technological feasibility or subsequent to the product's
general release to customers,  as well as selling,  general,  and administrative
costs associated with the products, are expensed as incurred.

          See accompanying notes to consolidated financial statements.

<PAGE>

                                                                    I/NET, Inc.

                                                 Summary of Accounting Policies
--------------------------------------------------------------------------------

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

Fair Value of Financial Instruments
-----------------------------------
The Company's financial instruments consist of cash, receivables, notes payable,
accounts payable and long-term debt. Due to the short-term  nature of the items,
other than  long-term  debt,  and the variable  interest  rates on a substantial
portion of the long-term debt, management estimates that carrying amounts of the
Company's  financial  instruments  approximate their fair values at December 31,
2000.

Revenue Recognition
-------------------
Revenues for the sale of the Company's Internet products are recognized when the
customer has accepted the  product.  The Company  records  revenue from web site
development  contracts  on a monthly  basis as amounts are invoiced for time and
expense incurred.

Earnings (Loss) Per Share
-------------------------
Basic (loss) earnings per share includes no dilution and is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted (loss) earnings per share reflect, in
periods  in which  they have a  dilutive  effect,  the  effect of common  shares
issuable upon exercise of stock options and warrants.

New Accounting Pronouncements
-----------------------------
Statement on Financial  Accounting  Standards  (SFAS) 133  regarding  derivative
instruments  became effective for the Company during the year ended December 31,
2000. Historically, the Company has not entered into derivative contracts either
to hedge existing risks or for speculative purposes.  Accordingly,  the adoption
of the standard did not affect the Company's financial statements.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101,  Revenue  Recognition in Financial  Statements  (SAB 101). SAB
101, as amended, summarizes and clarifies certain existing accounting principals
for the recognition and classification of revenues in the financial  statements.
The  adoption  of SAB 101 did not have any  effect  on the  Company's  financial
statements.

In  March  2000,   the  Financial   Accounting   Standards   Board  issued  FASB
Interpretation  No.44 (FIN 44),  Accounting for Certain  Transactions  Involving
Stock  Compensation-  an  Interpretation  of Accounting  Principals  Board (APB)
Opinion No.25. FIN 44 clarifies the following: the definition of an employee for
purposes of applying APB Opinion No. 25; the criteria for determining  whether a
plan qualifies as a noncompensatory plan; the accounting  consequence of various
modifications  to the terms of the previous  fixed stock options or awards;  and
the  accounting  for an  exchange  of stock  compensation  awards in a  business
combination.  FIN 44 was effective July 1, 2000, but certain  conclusions in FIN
44 cover specific events that occurred after either December 15, 1998 or January
12, 2000.  The  application  of FIN 44 did not have any impact on the  Company's
financial statements.

Investments
-----------
The Company has a minority  interest in three  privately held  companies.  These
investments  are carried at the lower of cost or  estimated  fair market  value.
(Note 9).

          See accompanying notes to consolidated financial statements.

                                                                    I/NET, Inc.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

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

1. Commissions
--------------
During a prior year,  the Company  renegotiated  to be released by a distributor
from its exclusive  contract to distribute  certain I/NET products.  In exchange
for this  release  I/NET is required  to pay  commissions  totaling  $258,000 at
December 31, 2000.

2. Short-term Advances from Stockholders
----------------------------------------
Advances from stockholders consist of:

December 31,                                    2000                1999
-------------------------------------------------------------------------------

Non-interest bearing notes payable to
stockholders, due on demand                $   13,500         $    13,500

Secured stockholder's advances bearing
interest at 8%,  due on demand                 82,000              82,000


                                           $   95,500            $ 95,500

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

3. Long-term Debt
-----------------
Long-term debt consists of:

December 31,                                   2000                 1999
--------------------------------------------------------------------------------

Notes payable to vendors (see below)        $ 615,856           $ 791,554

Notes payable to stockholders,
bearing interest at 8%, due in
December 2002, secured by all
the Company's assets                          273,448             311,642

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

                                              889,304           1,103,196
Less current maturities                       486,000             599,000

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

Total Long-term Debt                        $ 403,304           $ 504,196

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

<PAGE>

                                                                     I/NET, Inc.

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

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

Unsecured notes payable to various vendors totaling  $615,856 are due in various
installments and at varying interest rates.

A note in the amount of $374,023 is due on demand.  This note bears  interest at
the prime rate plus 2% (effectively 11.5 % at December 31, 2000).

Another note in the amount of $56,456 is due in monthly installments at the rate
of 5% of the  previous  month's  cash  receipts (as defined) but at a minimum of
$2,000 bi-monthly. The principal balance of this note was due in September 1996.
The  Company is in  default  on  repayment  on this note but  continues  to make
payments as required by the original note. This note bears interest at 8% and is
classified as current.

Another note in the amount of $174,650 is due in monthly  installments  of 5% of
the previous month's cash receipts (as defined) but at a minimum rate of $10,000
bi-monthly and bears interest at the prime rate plus 2%. Final payment, assuming
minimum payments only, is June 2004.

Another vendor note in the amount of $10,727 is due in monthly  installments  of
5% of the previous  month's cash  receipts (as defined) but at a minimum rate of
$3,500  monthly  and bears  interest at 10%.  Final  payment,  assuming  minimum
payments only, is April 2001.

Aggregate  maturities  of  long-term  debt  over the next  five  years  assuming
repayment of stockholders' advances (Note 2) and notes are as follows:

                         2001           $581,000
                         2002           $323,000
                         2003            $54,000
                         2004            $27,000
                         2005               -

During April 2000, the Company  reached an agreement with a noteholder,  whereby
the Company  exchanged  25,000 of its common shares of stock for the forgiveness
of $74,000 of indebtedness. This forgiveness of indebtedness, less an income tax
benefit of $25,000,  has been  treated as an  extraordinary  item for  financial
statement purposes.


<PAGE>

                                                                     I/NET, Inc.

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

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

4.  Major Customers
-------------------
The Company provided Internet products, web site consulting services and support
services to three major customers (IBM $933,000,  Appsmall.com  $206,000 and GBS
$182,000)  totaling  $1,321,000  for the year ended  December  31,  2000 It also
provided the same services to three major  customers (IBM $942,000  Appsmall.com
$524,000  and  Career/NET  $259,000)  totaling  $1,734,000  for the  year  ended
December 31, 1999.  The three  customers in the aggregate  accounted for 86% and
97% of the Company's revenue in 2000 and 1999, respectively.

In a prior year,  the  Company  signed a licensing  agreement  and  supplemental
support services agreement for a previously developed product.  These agreements
allowed the licensee a license to use and sell the product.  In March 1999,  the
licensee desired to be relieved of the supplemental  support services agreement.
In exchange for this relief, it gave to I/NET a $209,000 demand promissory note,
which bears  interest at 7% per annum.  The revenue  from this  transaction  was
recorded in 1999 and the note is included  in trade  receivables  as of December
31, 1999. (See Note 9)

5. Taxes on Income
------------------
Income taxes are calculated using the liability method specified by Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."

Deferred income taxes reflect the net effects of temporary  differences  between
the carrying amounts of assets and liabilities for financial  reporting purposes
and the amounts used for income tax purposes.

Significant components of the Company's deferred tax assets are as follows:

--------------------------------------------------------------------------------
                               December 31,         2000                1999
--------------------------------------------------------------------------------
 Deferred Tax Assets:
 Reserves                                     $    159,000       $     88,000
 Trademark                                           -                 51,000
 Net operating loss carryforward                 3,042,000          3,406,000
 Tax credit carryforwards                            -                 27,000
 Capital loss carryforwards                          -                 24,000
--------------------------------------------------------------------------------
Total Deferred Tax Assets                        3,201,000          3,596,000

Valuation Allowance                             (3,201,000)        (3,596,000)

--------------------------------------------------------------------------------
                                             $       -           $      -
--------------------------------------------------------------------------------

As of December 31, 2000, the Company had a net operating loss  carryforwards  of
approximately  $8,947,000  available  to reduce  future  taxable  income.  These
carryforwards expire from 2001 through 2011.

Income  tax  expense  of  $25,000  for the  year  ended  December  31,  2000 was
recognized in conjunction with the  extraordinary  item. A corresponding  income
tax benefit  from  operations  of $25,000 was  recorded.  The income tax benefit
varied from the statutory rate due to the valuation allowance listed above.

<PAGE>

                                                                     I/NET, Inc.

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

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

6.  Employee Benefit Plan
-------------------------
The Company has a profit sharing and defined  contribution pension plan covering
substantially  all  employees.  Under the plan,  employees may make tax deferred
voluntary  contributions  which,  at the  discretion of the  Company's  Board of
Directors, may be matched within certain limits by the Company. In addition, the
Company may make additional  discretionary  contributions  to the plan as profit
sharing  contributions.  All contributions to the plan are limited by applicable
Internal Revenue Code regulations.  There were no Company  contributions charged
against operations in 2000 or 1999.

7. Operating Lease
------------------
The Company  leases its facilities and certain  equipment  under  non-cancelable
operating  leases.  Management  expects  that in the normal  course of business,
leases will be renewed or replaced with other leases. Rental expense under these
leases was  approximately  $103,000  and  $112,000  for each of the years  ended
December 31, 2000 and 1999.  Future minimum annual lease payments  subsequent to
December 31, 2000 are as follows:

                         2001              $ 76,000
                         2002               $ 8,000
                         2003               $ 6,000

8. Incentive Stock Option Plan
------------------------------
The Company  maintains  an  incentive  stock  option plan that  provides for the
granting of options to officers and other key employees at an exercise price not
less than 100% of the fair market value on the date of the grant. Twenty percent
of the  options  become  exercisable  each  year  following  the date  they were
granted, and can remain outstanding for five years following the day they become
fully vested. Changes in options outstanding are summarized as follows:

                                            Option Price        Weighted Average
                            Shares            Per Share         Price Per Share
--------------------------------------------------------------------------------
January 1, 1999             115,000           $.37-2.50           $  .63

Lapsed October
 1999                      (100,000)            .37                  .37
Granted December
 1999                        50,000             .29                  .29

--------------------------------------------------------------------------------
December 31, 1999            65,000           $.29-2.50          $   .80

Granted September
 2000                       250,000             .24                  .24
--------------------------------------------------------------------------------

December 31, 2000           315,000          $.24-$2.50             $.36

--------------------------------------------------------------------------------
<PAGE>

                                                                     I/NET, Inc.

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

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

At December  31,  2000,  582,255  shares of common  stock were  reserved for the
incentive stock option plan, 15,000 options were vested and exercisable at $2.50
per share and 10,000 options were vested and exercisable at $.29 per share.  The
weighted  average  contractual life on these options is six years. The remaining
290,000  options  were not vested and have a remaining  contractual  life of ten
years.

Under SFAS No. 123,  "Accounting for Stock Based  Compensation",  the Company is
required to provide pro forma information  regarding net income and earnings per
share as if  compensation  cost for the  Company's  stock  option  plan had been
determined in accordance with the fair value based method prescribed in SFAS No.
123. The Company estimates the fair value of each stock option at the grant date
by using the Black-Scholes  option-pricing model with the following  assumptions
used  for the  grant in  2000:  expected  volatility  of 90  percent,-risk  free
interest  rate of 5.1  percent and an  expected  option  life of 7.2 years.  For
options  granted  in  1999,  the  following   assumptions  were  used:  expected
volatility of 80%, -risk free interest rate of 6.02% and an expected option life
of 7.2  years.  Net  (loss)  earnings  for  2000 and 1999  would  not have  been
materially affected.  The fair value of the options granted during 2000 was $.18
per share and the fair value of the  options  granted  during  1999 was $.19 per
share.

As permitted by SFAS No. 123, the Company has elected to continue  following the
guidance of Accounting  Principals  Board (APB) Opinion No. 25,  Accounting  for
Stock Issued to  Employees,  for  measurement  and  recognition  of  stock-based
transactions  with  employees.   Accordingly,  no  compensation  cost  has  been
recognized in either 2000 or 1999 for the Company's option plan.

9. Investments
--------------
During  August  2000,  the  Company  discharged  a  customer  from  $209,000  of
indebtedness  and also  assigned  that  customer  certain  proprietary  computer
technology,  software and  trademark  for products  known as  Career/NET  and HR
Department. In exchange for this discharge and assignment,  the Company received
2,000,000  shares (18%  interest) each in common stock or units in two privately
held entities.  These entities provide  web-based resume tracking  solutions and
career  boards  and were  working  towards  raising  additional  capital to fund
expansion  and  growth.  During  the  third  quarter  of 2000,  the  raising  of
additional capital was suspended due to deteriorating market conditions for such
fund raising.  The Company determined that it was appropriate to writedown these
investments to their net realizable value at that time.

In  addition,  the  Company  holds a minority  equity  stake in  SEGOES,  Ltd, a
privately held Caymanian company which offers offshore securities trading on the
web. The Company  received  approximately  1,500,000  shares of SEGOES,  Ltd. in
January 1999 for the successful completion of the development,  installation and
operation of the SEGOES  website.  In January  2000,  Stek,  Ltd. the  Company's
wholly owned Caymanian  subsidiary,  sold approximately 20,000 shares of SEGOES,
Ltd. stock with net proceeds to the Company of approximately $28,000.
<PAGE>

                                                                     I/NET, Inc.

                                      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

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

10.  Supplemental Disclosure of  Cash Flow Information
--------------------------------------------------------------
Interest  paid for the years ended  December 31, 2000 and 1999,  was $27,000 and
$22,000, respectively. The Company paid no income taxes during 2000 and 1999.

Non-cash investing and financing activities are summarized as follows:

Forgiveness  of  indebtedness  in the amount of $74,000 in  exchange  for 25,000
shares of common  stock in April 2000 and  issuance of 120,000  shares of common
stock in exchange for public relations and related consulting services in August
2000 of $30,000.

11. Contingencies
-----------------
The Company is involved in various legal actions  arising from the normal course
of business.  Management  does not anticipate any material losses as a result of
these proceedings.

12.Earnings  (Loss) Per Share
-----------------------------
A reconciliation of shares used in calculating basic and diluted (loss) earnings
per share follows:

Year ended December 31,                         2000                1999
--------------------------------------------------------------------------------

Basic                                       31,106,401          31,037,652
Effect of assumed conversion of
options and warrants                             -                 621,375

--------------------------------------------------------------------------------
Diluted                                     31,106,401          31,659,027

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

For 2000, options to purchase 15,000 shares of common stock at $2.50, options to
purchase  50,000 shares of common stock at $.29 and options to purchase  250,000
shares of common stock at $.24 were not included in the  computation  of diluted
loss per  share as they  were  anti-dilutive.  For 1999,  warrants  to  purchase
115,000 shares of common stock at $1.00 per share and options to purchase 15,000
shares of common stock at $2.50 per share were not  included in the  computation
of diluted earnings per share because they were anti-dilutive.

13. Continued Existence
-----------------------
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company has suffered losses
from  operations,  has a  significant  working  capital  deficit,  and  requires
additional capital to continue its new product development.  Management believes
the Company  will  continue as a going  concern  and is actively  marketing  its
products,  which would  enable the Company to meet its current  obligations  and
provide  additional  funds for continued new product  development.  In addition,
management  is  currently  negotiating  several  additional  contracts  for  its
services  and  products.   Management  is  also  embarking  on  other  strategic
initiatives  to  expand  its  business  opportunities.  However  there can be no
assurance these activities will be successful.