<PAGE>



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


                                   FORM 10-QSB


         (MARK ONE)

 X       Quarterly report pursuant to Section 13 or 15(d) of the Securities
 --

 __      Exchange Act of 1934

         For the period ended:  JUNE 30, 2000

                                       OR

 __      Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

                        Commission File Number: 000-29417


                                 iCRYSTAL, INC.
             (Exact name of registrant as specified in its charter)

         DELAWARE                                 62-1581902
  (State or other jurisdiction of     (IRS Employer Identification No.)
   incorporation or organization)

                       3237 KING GEORGE HWY., SUITE 101-B
                           SURREY, BC V4P 1B7, CANADA
                    (Address of principal executive offices)

                        TELEPHONE NUMBER: (604) 542-5021

              (Registrant's telephone number, including area code)



         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:

              YES  X                                       NO
                  ---                                         ---

         At August 7, 2000, the Company had outstanding 15,682,800 shares of
common stock, $.01 par value per share (the "Common Stock").


<PAGE>


                         PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

         The June 30, 2000 condensed consolidated financial statements included
in this filing on Form 10-QSB have been reviewed by Moss Adams LLP, independent
certified public accountants, in accordance with established professional
standards and procedures for such review. The report of Moss Adams LLP
commenting upon their review accompanies the condensed financial statements is
included in Item 1 of Part I.


<PAGE>
                                                  [LETTERHEAD OF MOSS-ADAMS LLP]
--------------------------------------------------------------------------------



                        INDEPENDENT ACCOUNTANT'S REPORT


To the Board of Directors and Stockholders
iCrystal, Inc.

We have reviewed the accompanying condensed consolidated balance sheet of
iCrystal, Inc. and Subsidiary as of June 30, 2000, and the related condensed
consolidated statements of operations and cash flows for the three and six
months then ended. These financial statements are the responsibility of
iCrystal Inc.'s management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the condensed financial statements referred to above for them to be
in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred losses since its inception and
has a net stockholders' deficit. These conditions raise substantial doubt about
its ability to continue as a going concern. Management's plans regarding those
matters also are described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of iCrystal, Inc. and Subsidiary as
of December 31, 1999, and the consolidated related statements of operations,
stockholders' equity and cash flows for the year then ended (not presented
herein); and in our report dated March 31, 2000, which included an
explanatory paragraph describing conditions that raised substantial doubt
about the Company's ability to continue as a going concern, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1999, is fairly presented, in all material respects,
in relation to the consolidated balance sheet from which it has been derived.

/s/ MOSS ADAMS LLP
Bellingham, Washington
August 7, 2000


                                      F-1
<PAGE>

                                                   ICRYSTAL, INC. AND SUBSIDIARY
                                                      CONSOLIDATED BALANCE SHEET
                                             JUNE 30, 2000 AND DECEMBER 31, 1999
-------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                   ASSETS
                                                                  June 30,        December 31,
                                                                    2000             1999
                                                                 ---------         ---------
<S>                                                             <C>               <C>
CURRENT ASSETS
   Cash                                                         $     8,200      $    23,800
   Accounts receivable - Master Licensee                             78,800           75,700
   Prepaid expenses                                                    --                900
                                                                -----------      -----------
      Total current assets                                           87,000          100,400
PROPERTY AND EQUIPMENT, net                                          45,300           17,900
                                                                -----------      -----------
TOTAL ASSETS                                                    $   132,300      $   118,300
                                                                ===========      ===========

                    LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable                                             $   132,400      $    72,100
   Advances from related party                                      102,100           98,700
   Current portion of deferred revenue - Master Licensee             13,400             --
   Convertible debt                                                  78,200           78,200
                                                                -----------      -----------
      Total current liabilities                                     326,100          249,000
                                                                -----------      -----------
LONG-TERM LIABILITIES
   Deferred revenue - Master Licensee                               139,300           67,000
   Advances from stockholders                                        19,000           19,000
                                                                -----------      -----------
      Total liabilities                                             484,400          335,000
                                                                -----------      -----------
STOCKHOLDERS' DEFICIT
   Common stock, $0.01 par value, 30,000,000
    shares authorized; 15,682,800, and 14,682,800
    shares issued and outstanding                                   156,900          146,900
   Additional paid-in capital                                     5,843,800        5,471,300
   Deferred compensation                                            (29,400)         (59,300)
   Accumulated deficit                                           (6,323,400)      (5,775,600)
                                                                -----------      -----------
      Total stockholders' deficit                                  (352,100)        (216,700)
                                                                -----------      -----------
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT                      $   132,300      $   118,300
                                                                ===========      ===========

</TABLE>

SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
-------------------------------------------------------------------------------


                                      F-2
<PAGE>


                                                   ICRYSTAL, INC. AND SUBSIDIARY
                                  CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                             QUARTER AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                          Quarter          Quarter         Six Months       Six Months
                                           Ended            Ended           Ended            Ended
                                         June 30,         June 30,         June 30,        June 30,
                                           2000             1999            2000             1999
                                       ------------      ------------      ------------      ------------
<S>                                    <C>               <C>               <C>               <C>
REVENUE
   Software royalties                  $     54,200      $       --        $    159,700      $       --
                                       ------------      ------------      ------------      ------------
OPERATING EXPENSES
   General and administrative               315,900         1,813,400           524,900         4,258,300
   Research and development                 100,100           198,100           161,700           206,100
   Sales and marketing                       13,100            34,400            20,600            36,700
                                       ------------      ------------      ------------      ------------
      Total operating expenses              429,100         2,045,900           707,200         4,501,100
                                       ------------      ------------      ------------      ------------
LOSS FROM OPERATIONS                       (374,900)       (2,045,900)         (547,500)       (4,501,100)
OTHER EXPENSE
   Interest                                     100               200               300               300
                                       ------------      ------------      ------------      ------------
      Total other expense                       100               200               300               300
                                       ------------      ------------      ------------      ------------
NET LOSS BEFORE PROVISION                  (375,000)       (2,046,100)         (547,800)       (4,501,400)
FOR INCOME TAXES

PROVISION FOR INCOME TAXES                     --                --                --                --
                                       ------------      ------------      ------------      ------------
NET LOSS                               $   (375,000)     $ (2,406,100)     $   (547,800)     $ (4,501,400)
                                       ============      ============      ============      ============
EARNINGS (LOSS) PER SHARE
   Basic and diluted                   $      (0.02)     $      (0.23)     $      (0.04)     $      (0.49)
                                       ============      ============      ============      ============
   Weighted average common shares
    outstanding (basic and diluted)      15,583,900        10,558,100        15,136,100         9,175,600
                                       ============      ============      ============      ============

</TABLE>

SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
-------------------------------------------------------------------------------


                                      F-3
<PAGE>

                                                   ICRYSTAL, INC. AND SUBSIDIARY
                                  CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                         SIX MONTHS ENDED JUNE 30, 2000 AND 1999
-------------------------------------------------------------------------------

                         Increase (Decrease) in Cash

<TABLE>
<CAPTION>

                                                                 June 30,         June 30,
                                                                  2000             1999
                                                               -----------      -----------
<S>                                                          <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                    $  (547,800)     $(4,501,400)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED IN OPERATING ACTIVITIES
   Amortization of deferred compensation                            29,900           30,000
   Depreciation                                                      2,100              400
   Noncash expenses incurred in exchange for stock                 182,500        3,743,100
CHANGES IN OPERATING ASSETS AND LIABILITIES
   Accounts receivable                                              (3,100)            (800)
   Prepaid expenses                                                    900             (900)
   Accounts receivable - lawyer trust account                         --           (121,000)
   Accounts payable                                                 60,300             --
   Deferred revenue                                                 85,700             --
                                                               -----------      -----------
      Net cash from operating activities                          (189,500)        (850,600)
                                                               -----------      -----------
CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of property and equipment                             (29,500)          (4,900)
                                                               -----------      -----------
CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from stock issuances                                   200,000          800,300
   Advances from (to) related parties, net                           3,400           (8,800)
   Advances from stockholders                                         --             19,000
   Collection of stock subscription receivables                       --             45,000
                                                               -----------      -----------
      Net cash from financing activities                           203,400          855,500
                                                               -----------      -----------
NET CHANGE IN CASH                                                 (15,600)            --
CASH, beginning of period                                           23,800             --
                                                               -----------      -----------
CASH, end of period                                            $     8,200      $      --
                                                               ===========      ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Interest paid                                               $       300      $       300
                                                               ===========      ===========
   Income taxes paid                                           $      --        $      --
                                                               ===========      ===========

</TABLE>

SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
-------------------------------------------------------------------------------
                                      F-4
<PAGE>

                                                   ICRYSTAL, INC. AND SUBSIDIARY
                         NOTES TO CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                         SIX MONTHS ENDED JUNE 30, 2000 AND 1999
-------------------------------------------------------------------------------


NOTE 1 - ORGANIZATION AND CESSATION OF DEVELOPMENT STAGE OPERATIONS

     ORGANIZATION

     iCrystal, Inc. (the Company or iCrystal) was incorporated October 5,
     1994 in the state of Delaware as Cable Group South, Inc. In November
     1998, the Company changed its name to Softnet Industries, Inc.; and, in
     June 1999, to avoid a conflict with another company with a similar name,
     the name was changed again to I crystal, Inc. In June 2000, the name
     was changed again to iCrystal, Inc. The board believes the most recent
     name change better reflects the Company's business, given the popular
     usage of the letter "i" to characterize Internet related businesses.

     In July 1998, after giving affect to the reverse stock split discussed
     below, the Company president received 375,000 shares of common stock in
     exchange for services. Effective October 19, 1998, stockholders approved an
     eight to one reverse stock split, reducing the number of outstanding shares
     from 6,130,000 to 766,300. All references in the accompanying financial
     statements to number of shares and per share amounts have been restated to
     reflect the reduced number of shares outstanding.

     On December 1, 1998, the Company entered into a memorandum of agreement
     with Diversified Cosmetics International, Inc. (Diversified), a related
     party (Note 5), to license the rights to certain internet-based gaming
     software that was in the process of being developed by Diversified. Under
     terms of the agreement, Diversified had the option to require the Company
     to purchase the rights, including all source code and technical
     specifications, graphics, domain names and trademarks, in exchange for 2.5
     million shares of common stock. Diversified exercised its option on
     December 10, 1998. Consideration also included a $65,000 note payable given
     for the additional amount of development undertaken by Diversified
     subsequent to entering into the agreement. The note was paid in full during
     1999.

     Concurrent with the acquisition of the software rights, the Company issued
     two million shares to certain owners of Diversified. The shares were issued
     in exchange for stock subscriptions receivable and for future services to
     be provided in their capacity as corporate officers of iCrystal. Another
     2.5 million shares were issued to certain individuals in exchange for stock
     subscriptions receivable and for services provided in connection with
     facilitating the transfer of the software from Diversified to the Company.

     CESSATION OF DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN

     For the period October 5, 1994 through June 30, 1999, the Company's
     efforts were devoted to corporate structuring, financial and business
     planning, recruiting directors and advisors, raising additional
     financing, establishing the technological feasibility of the gaming
     software acquired from Diversified, and negotiating a master license
     agreement. Accordingly, through June 30, 1999, the Company was
     characterized as a development stage company. Development stage
     operations were financed primarily through the issuance of shares of
     common stock for services and, in March 1999, the issuance of 1,914,000
     shares of common stock for net proceeds of $800,300. Prior to the March
     1999 issuance, the Company had no material amount of assets or
     liabilities.

     In September 1999, the Company established offices in Surrey, British
     Columbia, where it engages in developing and licensing software related to
     the internet gaming industry. Products include various theme-oriented
     blackjack and poker games, slot machines, and bingo games. The Company does
     not conduct any gaming activities itself but has entered into a
     nonexclusive master license agreement with DCI, Inc. (Master Licensee), a
     related party (Note 5), for use of the Company's gaming technology. In the
     third quarter of 1999, the Company began realizing revenues from this
     agreement and development stage operations ceased.

     On August 17, 1999, I crystal Software Inc. (I crystal Software) was
     incorporated in the province of British Columbia, Canada. Upon
     incorporation, all founding shares were issued to the officers of
     iCrystal. Effective December 13, 1999, the officers contributed all shares
     to the Company, at which time I crystal Software became a wholly-owned
     subsidiary of iCrystal. I crystal Software has subsequently carried out
     essentially all of the Company's software development activity.


                                      F-5
<PAGE>

                                                   ICRYSTAL, INC. AND SUBSIDIARY
                         NOTES TO CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                         SIX MONTHS ENDED JUNE 30, 2000 AND 1999
-------------------------------------------------------------------------------


NOTE 1 - ORGANIZATION AND CESSATION OF DEVELOPMENT STAGE OPERATIONS (Continued)

     The Company has incurred net losses since inception, and, at June 30, 2000,
     it had a working capital deficiency of $239,100 and a stockholders' deficit
     of $352,100. The Company has not yet generated revenues sufficient to fund
     its operations. Accordingly, the Company's ability to accomplish its
     business strategy and to ultimately achieve profitable operations is
     dependent on its capacity to obtain additional financing and execute its
     business plan.

     Although cash flows from licensing revenues have been increasing as games
     and websites are developed and licensed, management does not anticipate
     that cash revenues will be adequate to fund its cash expenses until the
     third or fourth quarter of 2000. The high level of non-cash expenses
     incurred during 1999 in exchange for stock is not expected to be repeated
     in 2000 and future periods. Management also believes that it may be able to
     negotiate favorable terms of repayment for the $102,100 of advances from
     Diversified, a related party (Note 5).

     During the six months ended June 30, 2000, the Company raised $200,000 in
     private placements of common stock. During the remainder of 2000, the
     Company plans to raise another $1.5 million in private equity financing.
     Proceeds will be used to fund its software development projects. Success in
     raising this additional financing is dependent on the Company's ability to
     demonstrate that it can fulfill its business strategy to license its games
     and websites and generate significant royalty revenues. Management believes
     these plans will allow the Company to generate sufficient cash to support
     its operations through June 30, 2001.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     INTERIM FINANCIAL INFORMATION

     The financial information included herein is unaudited; however, the
     information reflects all adjustments (consisting solely of normal recurring
     adjustments) that are in the opinion of management, necessary to a fair
     presentation of the financial position, results of operations, and cash
     flows for the interim periods.

     PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements of iCrystal, Inc. and Subsidiary
     include the accounts of its wholly-owned subsidiary, I crystal Software,
     Inc. All material intercompany accounts and transactions have been
     eliminated in consolidation.

     REVENUE RECOGNITION

     The Company recognizes revenue when earned, in accordance with American
     Institute of Certified Public Accountants Statement of Position (SOP) 97-2,
     SOFTWARE REVENUE RECOGNITION, and SOP 98-9, MODIFICATION OF SOP 97-2 WITH
     RESPECT TO CERTAIN TRANSACTIONS. Royalties based upon licensees' net gaming
     revenues are recognized as licensees' revenues are earned. In the event
     that licensee's revenue recognition criteria are not met, revenue is
     recognized when received. Revenue from packaged product sales to and
     through distributors and resellers is recorded when related products are
     shipped. Revenue attributable to significant undelivered elements,
     including maintenance and technical support, is recognized over the
     contract period as elements are delivered.


                                      F-6
<PAGE>

                                                   ICRYSTAL, INC. AND SUBSIDIARY
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                         SIX MONTHS ENDED JUNE 30, 2000 AND 1999
-------------------------------------------------------------------------------


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     NEW ACCOUNTING STANDARD

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
     ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. Among other
     provisions, SFAS No. 133 requires that entities recognize all derivatives
     as either assets or liabilities in the balance sheet and measure those
     financial instruments at fair value. Accounting for changes in fair value
     is dependent on the use of the derivatives and whether such use qualifies
     as hedging activity. The new standard, as amended, becomes effective for
     the Company in fiscal 2001, and management is currently assessing the
     impact, if any, it may have on financial position and results of
     operations.


NOTE 3 - CONVERTIBLE DEBT

     In August 1999, the Company received a $78,200 loan advance from West Peak
     Ventures of Canada, Inc. (West Peak). Under the terms of the loan, the
     advance is unsecured and bears interest at 2% above the prime banking
     lending rate. The loan is due in full on November 30, 1999, unless
     converted into 200,000 common shares of iCrystal, which the Company agrees
     to register for resale at the request of West Peak.

     On December 23, 1999 the Company issued 200,000 common shares to West Peak.
     West Peak did not accept the shares tendered based on its position that the
     shares were to be registered upon delivery. On February 15, 2000, after
     negotiations to resolve the issue failed, West Peak filed a claim against
     the Company in the Supreme Court of British Columbia, Canada, claiming
     breach of the loan agreement. West Peak is seeking $78,200 plus interest,
     costs and such other relief as the Court may deem necessary. Due to the
     uncertainties surrounding this matter, the Company continues to report an
     obligation for the $78,200 loan rather than present the 200,000 common
     shares as being issued and outstanding.


NOTE 4 - CAPITAL STOCK AND STOCK-BASED COMPENSATION

     The Company has a single class of $0.01 par value common stock. Thirty
     million shares are authorized and 15,682,800 shares are issued (or
     committed to be issued) and outstanding at June 30, 2000. During the first
     six months of 2000, the Company committed to be issued 1,000,000 shares for
     $200,000 of cash proceeds and consulting services.


NOTE 5 - RELATED PARTY TRANSACTIONS

     The Company is affiliated with the following entities:

     DIVERSIFIED COSMETICS INTERNATIONAL, INC. (DIVERSIFIED)

     The Company is affiliated with Diversified through common ownership.
     Diversified is an Alberta corporation that was previously listed on the
     Alberta Stock Exchange. As described in Note 1, in December 1998, the
     Company acquired certain software rights from Diversified. Subsequent to
     the transfer of the technology to the Company, Diversified has had no
     significant business operations; and, as of August 7, 2000, it was in
     the process of winding down its affairs.

     Prior to the Company establishing its own bank account, all cash
     transactions were deposited in and disbursed from Diversified's bank
     account. Diversified has also paid various expenses on the Company's
     behalf. The net effect of these circumstances has resulted in the Company
     owing Diversified $102,100 at June 30, 2000. Diversified has stipulated no
     terms of repayment.


                                      F-7
<PAGE>

                                                   ICRYSTAL, INC. AND SUBSIDIARY
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                         SIX MONTHS ENDED JUNE 30, 2000 AND 1999
-------------------------------------------------------------------------------


NOTE 5 - RELATED PARTY TRANSACTIONS (Continued)

     DCI, INC. (THE MASTER LICENSEE)

     Effective April 8, 1999, the Company entered into a ten-year nonexclusive
     master license agreement with the Master Licensee for use of the Company's
     technology. Essentially all of the Company's revenue has been realized
     under this agreement. Leonard Slamko, a consultant retained by the Master
     Licensee, is a stockholder of the Company and a relative of officers and
     directors of the Company. The Master Licensee is incorporated in the
     Commonwealth of Dominica, where it is licensed to conduct international
     wagering, lotteries and games of chance by way of telecommunications.

     Through June 30, 2000, the Company has received $156,000 of upfront fees
     from the Master Licensee for development of specified software packages.
     Recognition of the fees received is deferred until such time as the
     software packages have been fully developed. Once development is complete,
     the fees are recognized over a five-year term, the estimated period over
     which the Company expects to provide ongoing maintenance, support and
     upgrades.

     SLAMKO VISSER, CHARTERED ACCOUNTANTS (SLAMKO VISSER)

     The Company is affiliated with the Canadian chartered accounting firm
     Slamko Visser through common ownership. During the six months ended June
     30, 2000 and 1999, the Company paid $20,200 and $11,100, respectively,
     to Slamko Visser for consulting and accounting fees and related costs.

NOTE 6 - SEGMENT AND GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS

     SEGMENT INFORMATION

     The Company's primary operations consist of the development and licensing
     of internet-based gaming technology. Management assesses the performance of
     its operations as a single segment. Through June 30, 1999, the Company's
     efforts were focused primarily on development stage operations, and no
     material activities occurred within this segment prior to that date. The
     following tables and schedules summarize certain information about this
     segment.



<TABLE>
<CAPTION>

                                                                 Software Development
                                               -----------------------------------------------------------
                                                Quarter         Quarter       Six Months        Six Months
                                                 Ended           Ended          Ended             Ended
                                                June 30,        June 30,       June 30,          June 30,
                                                  2000            1999           2000             1999
                                               -----------     -----------    -----------     ------------
<S>                                            <C>             <C>            <C>             <C>
External revenues                              $   54,200      $     -        $  159,700      $     -
Intersegment revenues                                -               -              -               -
Segment income (loss) before tax                  (63,800)        (234,900)      (30,600)        (246,400)
Segment assets                                    119,100            4,500       119,100            4,500

Total income (loss) before tax
    for reportable segments                    $  (63,800)     $  (234,900)   $  (30,600)     $  (246,400)
Corporate headquarters expense                   (311,200)      (1,811,200)     (517,200)      (4,255,000)
                                               -----------     -----------    -----------     ------------
Consolidated total                             $ (375,000)     $(2,046,100)   $ (547,800)     $(4,501,400)
                                               ===========     ===========    ===========     ============

</TABLE>


                                      F-8
<PAGE>

NOTE 7 - SUBSEQUENT EVENTS

     2000 INCENTIVE PLAN

     Subject to stockholder approval, effective April 4, 2000, the Company
     adopted the 2000 Incentive Plan (the "Plan"). Under the Plan the Company
     may make awards to employees, non-employees, directors, consultants, and
     independent contractors of shares of common stock or derivative securities
     such as incentive and nonqualified stock options stock, purchase warrants,
     securities convertible into common stock, stock appreciation rights,
     phantom stock, or any other form of derivative, without limitation. The
     term of the Plan is ten years, and 3 million shares are reserved for awards
     made under the Plan. The Plan stipulates no terms or conditions for the
     awards to be granted. Subsequent to June 30, 2000, the Board of Directors
     plans to grant 1,350,000 stock options to employees, directors, and
     consultants, all of which have a one-year vesting period and an exercise
     price of $0.20.



                                      F-9

<PAGE>

ITEM 2.           MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
                  AND FINANCIAL CONDITION.

RESULTS OF OPERATIONS FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2000 AND
JUNE 30, 1999

QUARTERS ENDED JUNE 30, 2000 AND 1999

Revenues - Revenues for the quarters ending June 30, 2000 and June 30, 1999 were
$54,200 and $0, respectively. The increase of $54,200 reflects the cessation of
the Company's development stage operations in the third quarter of 1999, when it
began collecting revenues from its license agreement (the "Master License") with
DCI, Inc. (the "Master Licensee") and continued marketing strategies for revenue
growth. During the 2000 quarter the Company's Master Licensee had a large
portion of time where the websites were being revised which resulted in lower
than expected revenues.

Operating Expenses - Operating expenses are primarily comprised of research and
development and general and administrative costs. Operating expenses were
$429,100 and $2,045,900 for the quarters ended June 30, 2000 and 1999,
respectively. The decrease of $1,616,800 was largely attributable to the Company
recognizing $1,485,300 of non-cash services received during the second quarter
of 1999 in exchange for issuance of stock. Similar non-cash services received in
exchange for stock during the second quarter of 2000 were $79,600. The
balance of the decrease relates primarily to the avoidance of various costs
incurred in 1999 in connection with development stage operations.

Research and Development - The Company's research and development costs
consist primarily of costs associated with the continued development of its
Internet based casino software. Research and development costs were $100,100
and $198,000 for the quarters ended June 30, 2000 and 1999, respectively. The
$97,900 decrease reflects the avoidance of various costs incurred during 1999
when the Company was in the development stage. The Company is continuing to
develop, expand and maintain licensed Internet based gaming software.

General and Administrative - The Company's general and administrative costs
consist of salaries and wages, consulting fees, professional fees, investor
relation services, and office expenses. General and administrative costs were
$315,900 and $1,813,400 for the quarters ended June 30, 2000 and 1999,
respectively. The decrease of $1,497,500 consists mainly of the Company
recognizing $1,485,300 of non-cash consulting services received during the
second quarter of 1999 in exchange for issuance of stock. Non-cash services
received in exchange for stock during the second quarter of 2000 were
$79,600. Other decreases relate to the avoidance of certain costs incurred in
connection with development stage operations during the first part of 1999.

Net Loss - The Company incurred a net loss of $(375,000) and $(2,046,100) for
the quarters ended June 30, 2000 and 1999, respectively. The June 30, 1999 loss
was the result of the expenses incurred by the Company during its development
stage, which ceased in the third quarter of 1999, when it began to realize
revenues from licensing its Internet based casino software. The June 30, 2000
operating loss resulted because the research and development, administrative
costs, and sales and marketing costs of $429,100 exceeded the $54,200 in
licensing royalties and up-front fees recorded during that period.

<PAGE>

SIX MONTHS ENDED JUNE 30, 2000 AND 1999

Revenues - Revenues for the six months ending June 30, 2000 and June 30, 1999
were $159,700 and $0, respectively. The increase of $159,700 reflects the
cessation of the Company's development stage operations in the third quarter of
1999, when it began collecting revenues from the Master License with the Master
Licensee and continued marketing strategies for revenue growth.

Operating Expenses - Operating expenses are primarily comprised of research
and development and general and administrative costs. Operating expenses were
$707,200 and $4,501,100 for the six months ended June 30, 2000 and 1999,
respectively. The decrease of $3,793,900 was largely attributable to the
Company recognizing $3,773,100 of non-cash services received during the first
six months of 1999 in exchange for issuance of stock. Similar non-cash
services received in exchange for stock during the first six months of 2000
were $212,400. The balance of the decrease relates primarily to the avoidance
of various costs incurred in 1999 in connection with development stage
operations.

Research and Development - The Company's research and development costs
consist primarily of costs associated with the continued development of its
Internet based casino software. Research and development costs were $161,700
and $206,100 for the six months ended June 30, 2000 and 1999, respectively.
The $44,400 decrease reflects the avoidance of various costs incurred during
1999 when the Company was in the development stage. The Company is continuing
to develop, expand and maintain licensed Internet based gaming software.

General and Administrative - The Company's general and administrative costs
consist of salaries and wages, consulting fees, professional fees, investor
relation services, and office expenses. General and administrative costs were
$524,900 and $4,258,200 for the six months ended June 30, 2000 and 1999,
respectively. The $4,258,200 reflects the Company recognizing $3,773,100 of
non-cash investor relation and consulting services received during the first six
months of 1999 in exchange for issuance of stock. Non-cash services received in
exchange for stock during the first six months of 2000 were $212,400. Other
decreases relate to the avoidance of certain costs incurred in connection
with development stage operations during the first part of 1999.

Net Loss - The Company incurred a net loss of $(547,800) and $(4,501,400) for
the six months ended June 30, 2000 and 1999, respectively. The June 30, 1999
loss was the result of the expenses incurred by the Company during its
development stage, which ceased in the third quarter of 1999, when it began to
realize revenues from licensing its Internet based casino software. The June 30,
2000 operating loss resulted because the research and development,
administrative costs, and sales and marketing costs of $707,200 exceeded the
$159,700 in licensing royalties and up-front fees recorded during that period.

FLUCTUATIONS IN ANNUAL AND QUARTERLY RESULTS

         The Company's annual and quarterly operating results may fluctuate
significantly in the future as a result of numerous factors, including:

         1.       the amount and timing of expenditures required to develop the
                  Company's casino and bingo software and its licensing and
                  strategic relationships to enhance sales and marketing;

<PAGE>

         2.       changes in the growth rate of Internet usage and the interest
                  of consumers in using Internet based casino and bingo websites
                  for recreation; and

         3.       the emergence of new services and technologies in the market
                  in which the Company now competes.

         The Company also faces foreign currency exchange risk as a majority of
its revenue is denominated in U.S. currency and a majority of its operating
costs are incurred in Canadian currency. Significant fluctuations in the foreign
exchange rate between U.S. and Canadian currency will result in fluctuations in
the Company's annual and quarterly results.

LIQUIDITY AND CAPITAL RESOURCES

         Effective April 8, 1999, the Company entered into the Master License
with the Master Licensee for use of the Company's technology. Under the terms of
the Master License, the Company is obligated to provide a minimum of six new
theme-oriented software packages and websites per year, along with updates and
technical support, and development of specified electronic payment and
accounting technology. During the first year of the Master License the Company
provided the six packages required, however, the Master Licensee has requested
special upgrades to the graphics and the games in two of the packages. The
special modifications were completed by June 30, 2000. The Company is also
obligated to provide a monthly advertising rebate equal to the lesser of 10% of
monthly net gaming revenue derived from the Master Licensee's use of its
software or the amount expended by the Master Licensee on advertising. The
Company, in return, is to receive 40% of monthly net gaming revenue derived from
use of the software by the Master Licensee and 50% of upfront fees charged by
the Master Licensee to any sub-licensee. In the event the Company produces
certain of its games on CD-ROM and enters into a reseller agreement with the
Master Licensee, the Company will receive 10% of gross revenue derived from the
Master Licensee's sales of the software. The Master Licensee is also obligated
to spend $10,000 per month on advertising for each software package and website
licensed from the Company. Under terms of an amendment to the Master License
dated May 1, 1999, the Company had the option to spend up to a specified amount
on promotion of the Master Licensee's website in exchange for an additional 10%
share of net gaming revenue, not to exceed the total amount spent by the Company
on promotion. The term of the amendment, but not the underlying master License,
has expired and no amount was spent by the Company in furtherance of that
amendment during its term.

         The Company began realizing revenues from its licensing activities in
July of 1999, and such revenues amounted to $90,900 through December 31, 1999,
$54,200 for the June 30, 2000 quarter and $159,700 for the six months ended June
30, 2000. The Company anticipates sales revenue for the remaining fiscal period
ending December 31, 2000 to grow at $5,830 per month. Although cash outflows
from licensing revenues have been increasing as games and websites are developed
and licensed, management does not anticipate that cash revenues will equal cash
expenses until sometime during the fourth quarter of 2000. The Company's
liquidity over the next 12 months is contingent on its ability to raise money
through debt or equity financings to meet its short term needs.

<PAGE>

         In October 1999, the Company entered into a second ten-year agreement
with the Master Licensee related to licensing three specific theme-oriented
Internet casino websites. Under this agreement, once all three sites are ready
for operation, the Company is to receive a $100,000 upfront fee. It will then
receive 40% of the first $100,000 of monthly net gaming revenue derived from the
sites and 30% of monthly net gaming revenue in excess of $100,000. In January
2000, the Company received $67,000 of the upfront fee. The balance of $33,000 is
due once the third casino website is delivered. The Company's disclosure of the
terms of the Master License may impact the Company's ongoing relationships with
future licensees who now have full access to the information. Disclosure of such
terms may also negatively affect the Company's ability to negotiate more
favorable licenses with other licensees since they will be able to refer to the
terms of the Master License.

         In March 2000, the Company launched a free gaming website where
people can play the game Keno for free prizes. This site is structured to
generate banner-advertising revenue for the Company. Given the recent launch
of this site, no significant revenues have yet been recorded and management
has not determined whether the current traffic is indicative of future
traffic or potential traffic growth and whether future revenues to the
Company from this or similar free sites will be significant.

         In April 2000, the Company entered into a third ten-year agreement with
the Master Licensee related to licensing four specific theme-oriented Internet
casino websites. Under this agreement the Company is to receive $80,000 per
casino staged over 3 payments. It will then receive 20% of the monthly net
gaming revenue derived from the sites. In April 2000, the Company received
$22,000 as a deposit on this software.

         Although cash flows from licensing revenues have been increasing as
games and websites are developed and licensed, management does not anticipate
that cash revenues will equal cash expenses until sometime during the fourth
quarter of 2000. However, the high level of non-cash expenses incurred by the
Company during 1999 in exchange for stock issued is expected to be reduced in
2000 and future periods as the Company matures.

         The Company's budgeted capital expenditures for the fiscal year ending
December 31, 2000 are approximately $50,000, of which $29,500 had been spent as
of June 30, 2000.

         During 1999, the Company raised $915,300 of net cash proceeds
(including funding of subscription receivables) from exempt offerings or the
private placements of Common Stock. Another $78,200 of cash was raised in
connection with a convertible loan agreement. The loan obligation remains
outstanding, although the Company tendered the specified Common Stock. (See
Legal Proceedings). Financing was also provided in 1999 in the form of
advances from Diversified, a related party. The $102,100 in advances
outstanding at June 30, 2000 represent various expenses paid by Diversified
on the Company's behalf, prior to the Company establishing its own bank
account. Though the advances bear no interest, during 1999, the Company paid
Diversified $6,700 of management fees for handling its cash receipts and
disbursements. Diversified has stipulated no terms for repayments of the
advances. Because the liability is due to a related party,

<PAGE>

management believes it can negotiate repayment terms that are flexible and
favorable to the Company's financial circumstances.

         In January 2000 the Company commenced negotiations to raise an
additional $200,000 of equity financing, which was completed by the end of April
2000. This financing raised an aggregate of $200,000 in cash in exchange for
1,000,000 shares of Common Stock of the Company, issued to approximately 6
investors. During the remainder of 2000, the Company hopes to raise another $1.5
million in private equity financing principally to fund its software development
projects. Management is pursuing numerous potential financing sources for the
$1.5 million, including existing equity holders and new sources, but no
commitments have been received. Management believes that the Company's success
in raising this additional financing will depend on the Company's ability to
demonstrate that it can fulfill its business strategy to license its games and
websites and generate significant royalty revenues. Management also believes
that stockholders will continue to support the financing efforts of the Company
as long as it continues to demonstrate that it can fulfill that business
strategy. Although cash operating expenses have stabilized at approximately
$80,000 per month, management estimates that monthly cash from licensing
royalties and other revenues will not be sufficient to cover these expenses
until sometime during the fourth quarter of 2000. Subsequent to that time,
management believes that cash from operations, coupled with the $1.5 million of
private equity financing discussed above will allow the Company to generate
sufficient cash to support its operations for the next twelve months. However,
there can be no certainty that the Company will be able to meet its financing
goals or raise sufficient financing to fund such future business plans. In the
event that the Company is unsuccessful in its efforts to raise the capital
expected to be required over the next twelve months, the Company will need to
modify its business strategy accordingly, to adjust its operating requirements
to meet its available liquidity and may need to consider reductions in
operations until capital resources or operating cash flows are sufficient to
meet operating needs.

IMPACT OF INFLATION

         The Company believes that inflation has not had a material effect on
its past business.



<PAGE>

                           PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

         On February 15, 2000 West Peak Ventures of Canada, Inc. ("West
Peak") filed a claim against the Company in the Supreme Court of British
Columbia, Canada (the "Court") claiming breach of a loan agreement (the
"Loan") by the Company. West Peak had asked for a judgment in the amount of
$78,196.20, plus interest, costs and such other relief as the court may deem
necessary. On March 1, 2000 the Company filed an appearance in the Court. On
March 9, 2000 the Company filed its Statement of Defense and on March 14,
2000 filed an Amended Statement of Defense on March 14, 2000 generally
denying the claims made by West Peak. The proceeding has been scheduled for a
hearing on August 24, 2000, at which time a trial date will likely be set.

ITEM 2.  CHANGES IN SECURITIES

         In the first quarter of 2000 the Company agreed to issue 500,000 shares
and in April 2000 the Company agreed to issue an additional 500,000 shares of
its common stock to approximately 6 non-U.S. resident investors for an aggregate
of $200,000 in cash. All 1,000,000 shares were issued on July 6, 2000. To the
extent U.S. securities laws were applicable to the issuances, the issuances were
made in reliance of Rule 506 under Regulation D and in any event under Section
4(2) as private transactions, not involving a public offering.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None.

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

         On June 15, 2000, the Company submitted for a vote of it stockholders
at its Annual Meeting the following matters: (1) stockholders ratification of
past actions of the Board of Directors changing the name of the Company to
"Softnet Industries, Inc." and subsequently to "I crystal, Inc." (the
"Ratification Vote"); (2) stockholders approval of an amendment of the Company's
Certificate of Incorporation to change the Company's name to "iCrystal, Inc."
(the "Name Change"); (3) stockholder approval of Amended and Restated Bylaws for
the Company (the "Amended Bylaws"); (4) the election of Larry J. Hrabi, Derek
Bodnarchuk and H. Rex Hollett as directors of the Company; and (5) stockholder
approval of the Company's 2000 Incentive Plan which would allow the Company to
issue options and stock based awards entitling the holders to exercise the
awards to acquire up to 3,000,000 shares of the Company's common stock, par
value $.01 per share (the "Incentive Plan").

         The Ratification Vote was approved by the vote of 9,250,826 shares of
the Company with 0 shares voting against, 0 shares abstaining and 0 broker
non-votes.


<PAGE>

         The Name Change was approved by the vote of 9,250,826 shares of the
Company with 0 shares voting against, 0 shares abstaining and 0 broker
non-votes.

         The Amended Bylaws were approved by the vote of 9,250,826 shares of the
Company with 0 shares voting against, 0 shares abstaining and 0 broker
non-votes.

         All nominated directors were unopposed and elected at the Annual
Meeting, with Mr. Larry Hrabi receiving 9,250,826 votes in favor, with 0 shares
voting against and 0 shares abstaining, while authority was withheld on 0
shares, Mr. Derek Bodnarchuk receiving 9,250,826 votes in favor, with 0 shares
voting against and 0 shares abstaining, while authority was withheld on 0
shares, and with Mr. H. Rex Hollett receiving 9,250,826 votes in favor, with 0
shares voting against and 0 shares abstaining, while authority was withheld on 0
shares. The Incentive Plan was approved by the vote of 9,250,826 shares of the
Company with 0 shares voting against, 0 shares abstaining and 0 broker
non-votes.

ITEM 5.  OTHER INFORMATION

         On June 15, 2000 the stockholders of the Company approved an amendment
to the Company's Certificate of Incorporation changing the name of the Company
to "iCrystal, Inc." and subsequently, June 29, 2000, the Company filed its
Certificate of Amendment to the Certificate of Incorporation of I crystal, Inc.
submitted herewith as Exhibit 3.1. The Company also adopted Amended and Restated
Bylaws as of June 15, 2000 submitted herewith as Exhibit 3.2.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8K

(a)      Exhibits:

                  3.1      Amendment to the Certificate of Incorporation of I
                           crystal, Inc. filed June 29, 2000.
                  3.2      Amended and Restated Bylaws of iCrystal, Inc. adopted
                           June 15, 2000.
                  10.1     Agreement dated April 25, 2000 by and among the
                           Company, the Master Licensee, Stefan Schoenung
                           and Kurt Neuer.
                  27.1     Financial Data Schedule.

(b)      Reports on Form 8-K:

         The Company filed no reports on Form 8K during the period covered by
this report.


<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Dated:   August 18, 2000


                             iCRYSTAL, INC.
                             (REGISTRANT)


                             By:            /s/ LARRY HRABI
                                            -----------------------------------
                                            LARRY HRABI
                                            CHAIRMAN OF THE BOARD,
                                            CHIEF EXECUTIVE OFFICER


                             By:            /s/ GERALD P. SLAMKO
                                            -----------------------------------
                                            GERALD P. SLAMKO
                                            CHIEF FINANCIAL OFFICER