<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

[X]      QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
         SECURITIES EXCHANGE ACT OF 1934.


                      FOR QUARTER ENDED SEPTEMBER 30, 2001

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934.


                         Commission file number 0-18410



                     NETCURRENTS INFORMATION SERVICES, INC.
                          (FORMERLY NETCURRENTS, INC.)

             (Exact name of Registrant as specified in its charter)


              DELAWARE                                 95-4233050
   (State or other jurisdiction of                  (I.R.S. Employer
   incorporation or organization)                  Identification No.)

     9720 WILSHIRE BLVD., SUITE 700, BEVERLY HILLS, CA     90212
        (Address of Principal Executive Offices)         (Zip Code)

                                 (310) 860-0200
              (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
                                  ---     ---

Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date.

     Common Stock, $.001 par value 40,250,094 shares as of November 12, 2001

<PAGE>

                                NETCURRENTS, INC.

                                TABLE OF CONTENTS



                                                                     Page Number
                                                                     -----------

PART I FINANCIAL INFORMATION

       ITEM 1.  Financial Information

           Consolidated Balance Sheet as of September 30, 2001
           and December 31, 2000..............................................3

           Consolidated Statements of Operations For The
           Three Months Ended September 30, 2001 and 2000
           and for the Nine Months Ended September 30, 2001 and 2000..........5

           Consolidated Statements of Cash Flows
           For the Nine Months Ended September 30, 2001
           and 2000...........................................................7

           Notes to Consolidated Financial Statements.........................9

       ITEM 2.  Management's Discussion and Analysis or Plan of Operation.....12



PART II  OTHER INFORMATION ...................................................24

       ITEM 1.  Legal Proceedings ............................................24

       ITEM 2.  Changes In Securities And Use Of Proceeds ....................25

       ITEM 3.  Defaults Upon Senior Securities ..............................25

       ITEM 4.  Submission Of Matters To A Vote Of Security Holders ..........25

       ITEM 5.  Other Information ............................................25

       ITEM 6.  Exhibits And Reports On Form 8-K And Form 8-K/A ..............26

                                       2
<PAGE>

                                              NETCURRENTS, INC. AND SUBSIDIARIES
                                                     CONSOLIDATED BALANCE SHEETS
                  SEPTEMBER 30, 2001 (UNAUDITED) AND DECEMBER 31, 2000 (AUDITED)
--------------------------------------------------------------------------------

                                     ASSETS

                                                      September 30, December 31,
                                                          2001          2000
                                                      -----------   -----------
                                                      (UNAUDITED)
CURRENT ASSETS
     Cash and cash equivalents                        $       --    $2,754,487
     Accounts receivable, net of allowance for
         doubtful accounts of nil and nil                139,326       544,869
     Note receivable                                     511,990            --
     Prepaid assets                                      531,100       158,356
                                                      -----------   -----------

              Total current assets                     1,182,416     3,457,712

FIXED ASSETS, at cost, net                               850,619       913,876
GOODWILL, less accumulated amortization and
     write-off of $673,695 and $486,195                  312,500       500,000
INVESTMENTS                                                4,000        43,500
OTHER ASSETS                                              34,989        54,538
                                                      -----------   -----------

                  TOTAL ASSETS                        $2,384,524    $4,969,626
                                                      ===========   ===========

                                       3
<PAGE>

<TABLE>
                                                               NETCURRENTS, INC. AND SUBSIDIARIES
                                                                      CONSOLIDATED BALANCE SHEETS
                                   SEPTEMBER 30, 2001 (UNAUDITED) AND DECEMBER 31, 2000 (AUDITED)
-------------------------------------------------------------------------------------------------


<CAPTION>
                              LIABILITIES AND SHAREHOLDERS' EQUITY

                                                                   September 30,   December 31,
                                                                       2001             2000
                                                                   -------------   -------------
                                                                   (UNAUDITED)
<S>                                                                <C>             <C>
CURRENT LIABILITIES
     Bank overdraft                                                $    127,997    $         --
     Accounts payable and accrued expenses                            2,110,767       1,030,934
     Dividends payable                                                  343,663         237,413
     Current portion of accrued settlement                              190,000              --
     Current portion of capital lease obligation                         48,007              --
     Note payable                                                       250,000              --
                                                                   -------------   -------------

         Total current liabilities                                    3,070,434       2,041,669

Accrued settlement, net of current portion                               64,000
Capital Lease Obligation, net of current portion                         32,229              --
                                                                   -------------   -------------

              Total liabilities                                       3,166,663       2,041,669
                                                                   -------------   -------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
     Preferred stock, Series A, C, D, E, and F, $0.001 par value
         5,400,000 shares authorized
         1,100,000 and 2,625,000 shares issued and outstanding            1,400           1,500
     Preferred stock, Series G, $0.001 par value
         4,000 shares authorized
         30 and 1,875 shares issued and outstanding                          --              --
     Common stock, $0.001 par value
         100,000,000 shares authorized
         39,610,279 and 32,998,073 shares issued and outstanding         39,610          32,998
     Treasury stock, at cost
         93,536 shares                                               (1,010,192)     (1,010,192)
     Subscription receivable                                         (4,750,037)     (4,223,284)
     Additional paid-in capital                                      49,878,519      48,532,031
     Accumulated other comprehensive income                            (342,688)       (410,813)
     Accumulated deficit                                            (44,598,751)    (39,220,961)
                                                                   -------------   -------------

              Total shareholders' equity                               (782,139)      3,701,279
                                                                   ------------    ------------

                  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY       $  2,384,524    $  4,969,626
                                                                   =============   =============
</TABLE>

                                            4
<PAGE>

<TABLE>
                                                               NETCURRENTS, INC. AND SUBSIDIARIES
                                                            CONSOLIDATED STATEMENTS OF OPERATIONS
                               FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED)
                            AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED)

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

<CAPTION>
                                        For the Three Months Ended     For the Nine Months Ended
                                               September 30,                  September 30,
                                        ---------------------------   ---------------------------
                                           2001            2000           2001           2000
                                        ------------   ------------   ------------   ------------
                                        (unaudited)    (unaudited)    (unaudited)    (unaudited)

<S>                                     <C>            <C>            <C>            <C>
REVENUES                                $    65,642    $   477,103    $   808,639    $ 1,089,883
                                        ------------   ------------   ------------   ------------


SELLING GENERAL AND ADMINISTRATIVE
Recovery of accounts receivable                  --       (137,658)            --       (137,658)
Salaries and Benefits                       217,839      1,363,431      2,704,198      2,500,633
Selling and Marketing Expenses                1,595         94,625         71,531      1,231,467
Professional Fees                           249,696        330,879        675,364        854,713
Consulting Fees                             256,177        134,764        738,433        569,109
Occupancy Costs                              68,864         95,114        254,382        206,330
General and administrative expenses         449,709        490,217      1,311,402      1,756,720
                                        ------------   ------------   ------------   ------------
                                          1,243,880      2,371,372      5,755,310      6,981,314

LOSS FROM OPERATIONS                     (1,178,238)    (1,894,269)    (4,946,671)    (5,891,431)
                                        ------------   ------------   ------------   ------------

OTHER INCOME (EXPENSE)
   Interest and dividend income              74,843        112,028        220,589        340,622
   Interest and financing expense              (498)        (1,681)        (7,056)        (8,742)
   Write-off of notes receivable and
        other assets                         (8,584)       (31,790)       (72,358)       (87,195)
   Amortization of goodwill                 (62,500)       (22,500)      (187,500)       (67,500)
   Settlement expense                            --        (57,151)      (254,000)      (294,551)
   Gain on sale of investment                    --             --        (20,675)       168,250
   Other income (expense)                    11,480         (5,390)        (3,869)           485
                                        ------------   ------------   ------------   ------------

         Total other income (expense)        14,741         (6,484)      (324,869)        51,369
                                        ------------   ------------   ------------   ------------
</TABLE>

                                                 5
<PAGE>

<TABLE>
                                                                                  NETCURRENTS, INC. AND SUBSIDIARIES
                                                                               CONSOLIDATED STATEMENTS OF OPERATIONS
                                                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED)
                                               AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED)

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

<CAPTION>
                                                        For the Three Months Ended       For the Nine Months Ended
                                                               September 30,                   September 30,
                                                       -----------------------------   -----------------------------
                                                           2001             2000           2001             2000
                                                       -------------   -------------   -------------   -------------
                                                        (unaudited)     (unaudited)     (unaudited)     (unaudited)

<S>                                                    <C>             <C>             <C>             <C>
LOSS BEFORE PROVISION FOR INCOME TAXES                   (1,163,497)     (1,900,753)     (5,271,540)     (5,840,062)

PROVISION FOR INCOME TAXES                                       --              --              --         (20,097)
                                                       -------------   -------------   -------------   -------------

NET LOSS                                               $ (1,163,497)   $ (1,900,753)   $ (5,271,540)   $ (5,860,159)

DIVIDEND REQUIREMENT OF SERIES A PREFERRED STOCK           (106,250)       (106,250)       (318,750)       (318,750)
DIVIDEND REQUIREMENT OF SERIES E PREFERRED STOCK                 --              --              --              --
DIVIDEND REQUIREMENT OF SERIES G PREFERRED STOCK            (24,663)         (2,213)        (24,663)        (24,463)
                                                       -------------   -------------   -------------   -------------

LOSS APPLICABLE TO COMMON SHAREHOLDERS                   (1,294,410)     (2,009,216)     (5,614,953)   $ (6,203,372)

UNREALIZED GAIN (LOSS)  ON INVESTMENT                       (34,000)        (81,200)         68,126        (398,363)
                                                       -------------   -------------   -------------   -------------

COMPREHENSIVE LOSS APPLICABLE TO COMMON SHAREHOLDERS   $ (1,328,410)   $ (2,090,416)   $ (5,546,827)   $ (6,601,735)
                                                       =============   =============   =============   =============

BASIC AND DILUTED LOSS PER COMMON SHARE                $      (0.04)   $      (0.07)   $      (0.17)   $      (0.22)
                                                       =============   =============   =============   =============

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING     35,759,533      30,674,692      32,947,131      30,674,692
                                                       =============   =============   =============   =============
</TABLE>

                                                 6
<PAGE>

<TABLE>
                                                 NETCURRENTS, INC. AND SUBSIDIARIES
                                              CONSOLIDATED STATEMENTS OF CASH FLOWS
    FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000 (UNAUDITED)

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

<CAPTION>
                                                          For the        For the
                                                         Nine Months    Nine Months
                                                           Ended          Ended
                                                        September 30, September 30,
                                                            2001           2000
                                                        ------------   ------------
                                                        (unaudited)    (unaudited)
<S>                                                     <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss                                                $(5,271,540)   $(5,860,159)
   Adjustments to reconcile net loss to net cash
     used in operating activities
       Depreciation and amortization of fixed assets        279,088        113,452
       Amortization of goodwill                             187,500         67,500
       Write-off of notes receivable and other assets        72,358             --
       Issuance of common stock for services                534,000             --
       Issuance of common stock for settlement                   --         96,400
       Interest from subscription receivable                (82,753)            --
       Gain on sale of investments                               --       (168,250)
   (Increase) decrease in
     Accounts receivable                                    333,185        122,672
     Other assets and prepaid expenses                     (353,195)       (19,360)
     Prepaid advertising expense                                 --        583,392
   Increase (decrease) in
     Accounts payable and accrued expenses                1,079,833       (434,527)
     Deferred revenue                                            --        (63,025)
     Accrued settlement                                     254,000             --
                                                        ------------   ------------

Net cash used in operating activities                    (2,967,524)    (5,561,905)
                                                        ------------   ------------
</TABLE>

                                       7
<PAGE>

<TABLE>
                                                  NETCURRENTS, INC. AND SUBSIDIARIES
                                               CONSOLIDATED STATEMENTS OF CASH FLOWS
     FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000 (UNAUDITED)

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

<CAPTION>
                                                          For the        For the
                                                        Nine Months     Nine Months
                                                           Ended           Ended
                                                       September 30,   September 30,
                                                           2001            2000
                                                       -------------   -------------
                                                        (unaudited)     (unaudited)
<S>                                                    <C>             <C>
   CASH FLOWS FROM INVESTING ACTIVITIES

   Capital expenditures on fixed assets                $   (117,731)   $   (782,126)
   Increase in note receivable                             (511,990)             --
   Proceeds from sale of investments                        107,625         213,809
                                                       -------------   -------------

Net cash used in investing activities                      (522,096)       (568,317)
                                                       -------------   -------------

   CASH FLOWS FROM FINANCING ACTIVITIES

   Payments on notes payable - related parties                   --         (44,046)
   Borrowings from notes payable - related parties          250,000              --
   Payments on capital lease obligation                     (17,864)         (4,320)
   Payment on subscription receivable                       200,000
   Proceeds from issuance of preferred stock                     --         311,525
   Proceeds from issuance of common stock                   400,000       8,754,933
   Offering costs                                           (25,000)             --
   Proceeds from convertible debentures, net of
     offering costs                                              --       1,000,026
                                                       -------------   -------------

Net cash provided by financing activities                   607,136      10,218,118
                                                       -------------   -------------

Net increase (decrease) in cash and cash equivalents     (2,882,484)      4,087,896
                                                       -------------   -------------

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD            2,754,487         798,855
                                                       -------------   -------------

CASH AND CASH EQUIVALENTS, END OF PERIOD               $   (127,997)   $  4,886,751
                                                       =============   =============
</TABLE>

                                       8
<PAGE>

  THESE FINANCIAL STATEMENTS HAVE NOT BEEN REVIEWED BY OUR INDEPENDENT AUDITORS
================================================================================

(1)      BASIS OF PRESENTATION
         The accompanying unaudited condensed consolidated financial statements
of NetCurrents, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
in accordance with the instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all material adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine months ended September 30, 2001 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2001. The information contained in this Form 10-QSB should be read in
conjunction with the audited financial statements filed as part of the Company's
Form 10-KSB for the six months ended December 31, 2000.

(2)      GOING CONCERN

         The accompanying unaudited financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As a result of the
Company's low stock price which is one reason we have not been able to complete
a financing as at the filing date of this report, the Company may not be able to
continue to operate as a going concern. Our ability to operate as a going
concern is dependent on our ability to successfully obtain the additional
financing.

(3)      GOODWILL

         Goodwill was recorded in connection with the acquisition of MWI
Distribution, Inc. in July 1998 and is being amortized over a period of two
years.

(4)      STOCKHOLDER APPROVAL

         Effective August 15, 2001, the stockholders approved our Company's name
change to NetCurrents Information Services, Inc. We also received approval to
increase the aggregate number of shares of common stock authorized for issuance
from 50,000,000 shares to 100,000,000 shares. In addition, our 2001 Stock
Incentive Plan was approved and the Incentive Plan has reserved 3 million
shares. The shareholders also approved a reverse stock split between 1:3 to 1:10
to be determined at the sole discretion of the Company's Board of Directors at
any time during one year from the date of the Annual Meeting.

(5)      MINDFULEYE, INC.

         On February 28, 2001, we entered into a letter of intent to acquire
MindfulEye, Inc., a subscription-based Internet monitoring company that
automatically alerts investors in real time to online news, rumors, information,
and changes in the public sentiment about companies in which they have interest.
On July 24, 2001, the discussions to acquire the company were discontinued due
to the market conditions and the low stock price of our stock at that time.
Although we entered into a license agreement with MindfulEye, the agreement was
rescinded due to the financial issues facing both companies. Notwithstanding,
the aforementioned, certain components of the software customization process for
integration of Lexant into PR Manager have commenced. As well, we are currently

                                       9
<PAGE>

in discussions as to finalizing the financial terms of a new license. Should we
complete our financing, and MindfulEye be able to secure its own financing, we
plan to license MindfulEye's technology again and enter into a strategic
alliance with MindfulEye.

         On February 21, 2001, we entered into a bridge loan agreement with
MindfulEye Inc, which was later amended as of October 2001. Under amended terms
of the bridge loan, we have provided them with advances totaling $490,000, plus
interest as of September 30,2001. Interest on the advances accrues at 10% per
annum and will be paid in a single installment on the earlier of (i) December
31, 2001 (ii) the closing of the acquisition of MindfulEye, Inc. (iii) or the
closing of any funding MindfulEye, Inc. if our acquisition does not close. If we
acquire MindfulEye, Inc., the principal and accrued interest shall be deemed
paid as of the closing date of the acquisition. These advances have been secured
by a pledge of all of the assets of MindfulEye, Inc. and its subsidiary.

 (6)     DIVIDENDS ON PREFERRED STOCK

         During the nine months ended September 30, 2001, the Company issued
536,901 shares of its Common Stock at a market value to pay a required $106,250
per quarter ending September 30, 2000 and December 31, 2000 on the Series A
Preferred Stock. The Company has not yet issued dividends on Series A Preferred
Stock for the quarters ended March 31, 2001, June 30,2001 and September 30,
2001.

(7)      AGREEMENTS

         On February 7, 2001, we entered into an investor relations agreement
for a term of twelve months under which the investor relations firm received
100,000 shares of the Company's common stock on May 10, 2001, valued at $40,000.
The investor relations firm also received 150,000 options exercisable at $1.50,
$2.00 and $2.50, valued at $10,000. The options vest immediately and expire 24
months from the date the registration statement registering the shares
underlying the option is deemed effective.

         On April 13, 2001, we entered into a consulting agreement under which
the consultant received 2,000,000 options valued at $160,000. The options vested
immediately and were exercised as of May 7, 2001, creating a promissory note for
$160,000. Interest shall accrue at an annual interest rate of five percent per
annum and shall be due on or before June 30, 2002. At any time prior to the due
date, the promissory note may be paid in cash and/or tendering 400,000 shares of
NetCurrents' common stock. On August 6, 2001, the Company received 250,000
shares of the Company's common stock as partial repayment of the promissory note
which was directly transferred to a consultant in lieu of payment valued at
$100,000.

         On August 29, 2001, we entered into a three year consulting agreement
under which the consultant received a warrant to purchase 6,000,000 shares of
common stock that were valued at $384,000. The warrant vested immediately and
the shares underlying the warrant were registered pursuant to an S-8 filed with
the Securities and Exchange Commission. The consultant has advanced to the
Company $100,000 as a partial payment against the exercise of the warrant for
all of the shares.

(8)      NOTE PAYABLE

         In May 2001, we received a $250,000 loan from a financing company,
which loan is secured by the assets of the Company. The loan bears interest at
10% per annum and the documents have not yet been executed.

                                       10
<PAGE>

(9)      SHAREHOLDERS' DEFICIT

         In May 2001, we received proceeds totaling $400,000, net of offering
costs, from a financing company, for the issuance of $400,000 of Convertible
Preferred Stock, which is convertible at ten percent 10% below the closing price
of the stock on the day of exercise. The certificates of designation have yet to
be executed. No shares have been converted to date.

(10)     SETTLEMENT AGREEMENTS

         On May 31, 2001, we entered into a settlement agreement with a former
management employee whereby we agree to pay $254,000 without interest as
follows: (i) $25,000 on or before July 1, 2001) (ii) $15,000, on or before the
first day of each month commencing on August 1, 2001, and continuing until such
time as the total sum is paid in full. As of the date of this filing, the
payments set forth above have not been made by the Company.

         If prior to the time the total sum has been paid in full, the Company
actually receives from a third party investor an amount of not less than
$1,500,000 in cash, the Company shall pay to the former employee, the lesser of
the balance of the total sum still unpaid or $50,000. Such amount shall be
payable within five days from the receipt of the financing, then the payments
above shall be increased to $20,000 per month commencing on the date when the
next monthly payment would otherwise be due, until the total sum is paid in
full.

         On September 7, 2001, the Company executed many settlement agreements
with former employees for unpaid wages at a hearing before the California Labor
Board. As of October 7, 2001, the Company is in breach of those settlement
agreements for failure to pay the amounts due. The California Labor Board will
move for judgment against the Company in the near future if these amounts are
not paid.

(11)     LEASES AND OTHER CONTRACTUAL OBLIGATIONS

        The Company has been notified that it is in default on two
non-cancelable office leases in Burlingame, California that provide for minimum
annual base rents and payment of certain operating expenses. One lease expires
in May 2005 and the other in January 2002. The remaining lease obligation under
of the lease expiring in January 2002 is partially offset by a security deposit
of approximately $21,000. In addition, total future minimum commitments under
this obligation as of September 30, 2001 amount to $419,000. The Company is
currently in negotiations with the landlords to sublease these facilities. The
Company is also in default of its lease in Los Angeles and is anticipating that
it will cure such default. The Company is in default of most of its contractual
obligations.

(12)     LOSS PER SHARE

         Loss per share for the three and nine months ended September 30, 2001,
has been computed after deducting the dividend requirements of the Series A and
Series G Preferred Stock. It is based on the weighted average number of common
and common equivalent shares reported outstanding during the entire period ended
on September 30, 2001.

                                       11
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

FORWARD LOOKING STATEMENTS.

         This report contains statements that constitute "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934 and Section 27A of the Securities Act of 1933 with respect to our
operations that are subject to various risks and factors which could cause our
future actual results of operations and future financial condition to differ
materially from those described herein. The words "expect," "estimate,"
"anticipate," "predict, "believe" "project" and similar expressions and
variations thereof are intended to identify forward-looking statements. These
statements appear in a number of places in this filing and include statements
regarding our intent, belief or current expectations with respect to, among
other things: our ability to complete a financing sufficient to execute the
Company's business plan, the ability to rebuild the operations of NetCurrents
Services Corporation from current levels, which we refer to as NC Services,
execution of business plans, completion of strategic alliances, the ability to
work effectively with our alliance partners, demand for our products and
services, the ability to continue to develop new products and services, the
ability to attract skilled personnel to meet our target in our business plan,
expected capital expenditures, anticipated business and economic conditions and
trends affecting our financial condition and our business and strategies. We
caution you not to put undue reliance on these forward-looking statements. We
further caution you that forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those projected in this filing, including, without
limitation, those risks and uncertainties discussed under the headings "Factors
That Could Impact Future Results" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our Annual Report on Form
10-KSB for the year ended December 31, 2000 as well as the information set forth
below. We do not ordinarily make projections of our future operating results and
we undertake no obligation to publicly update or revise any forward looking
statements, whether as a result of new information, future events or otherwise.


OVERVIEW

         Since our last 10Q, the world has been plunged into turmoil as a result
of the events of September 11, 2001 making the securing of financing even more
difficult than before. The economy has been severely impacted and is clearly
showing indications of recession. The stock markets have continued to be
volatile and weak. We have continued to source required funding over the last
quarter and to date have been unsuccessful in completing a financing that would
permit the Company to execute its business plan. Further, as a result of the
lack of funding, we have been forced to continue to terminate employees thereby
reducing our ability to operate or expand the business and service client
requirements. We are in presently in arrears of leases with all of our
landlords. We are in default on our contracts and leases with our ASP and
software providers and have not been able to pay most suppliers for the last
quarter. We failed to pay our existing AI supplier, Webmind and, as a result,
our license has been rescinded. Webmind has also filed a petition in bankruptcy
thereby affecting our ability to obtain technical support were we to secure
financing. We are also unable to enter into a license agreement with MindfulEye
until our financing is in place, however, notwithstanding this issue, certain
components of the software customization process for the integration of Lexant
into PR Manager have commenced. As well, we are currently in discussions as to
finalizing the financial terms of a new license with MindfulEye. Should we
complete our financing, and MindfulEye be able to secure its own financing, we
plan to license MindfulEye's technology again and enter into a strategic
alliance with MindfulEye. However, unless we are able to quickly complete the
financing we are currently negotiating, we could be forced to consider steps to
protect our assets.

                                       12
<PAGE>

PATENT GRANT

         On September 26,2001, we received notice of allowance of a second
patent on our FIRST technology and anticipate issuance of the patent shortly.
The patent is also very broad and addresses the relationship of our FIRST
technology to software applications, as opposed to the first patent that is more
related to hardware and its operation. FIRST is used for monitoring the Internet
and delivering specific information to our clients. We have additional patent
applications pending in an effort to create a multi-layer protection strategy
for our technology. If granted, these patents would afford us further patent
protection, which we believe will assist us in becoming a leader in providing
up-to-the-minute real-time monitoring and online analysis of Internet message
activity.


FINANCIAL DEVELOPMENTS

         Although we are actively negotiating with several investment groups who
have informed us that they are prepared to fund a Bulletin Board company, until
a financing is concluded, we cannot assure you that we will be able to secure
the amount of funds needed to continue operations or execute on our business
plan. We have a very serious current, immediate need for capital in order to
meet our existing debt obligations and pay our day-to-day expenses and past due
accounts payable. If we are unable to secure financing in a timely manner, we
will not be able to accomplish any or all of our initiatives and could be forced
to consider steps that would protect our assets against our creditors.


MINDFULEYE

         As announced on July 24, 2001, we discontinued our acquisition
negotiations with MindfulEye. Although we entered into a license agreement with
MindfulEye in June 2001, the agreement was rescinded due to the financial issues
facing both companies. Notwithstanding, the aforementioned, certain components
of the software customization process for integration of Lexant into PR Manager
have commenced. As well, we are currently in discussions as to finalizing the
financial terms of a new license. Should we complete our financing, and
MindfulEye be able to secure its own financing, we plan to license MindfulEye's
technology again and enter into a strategic alliance with MindfulEye under which
we will represent MindfulEye in the sale of its SURVEILLANCE technology to the
financial industry and jointly develop platform technology systems for our
corporate clients' sales team. We anticipate these sales will be made primarily
through outside third parties rather than through a direct sales force, as a
further measure to minimize operating costs.

         Over the past few months we advanced funds to MindfulEye secured by a
first lien on their LEXANT technology. Should we decide to proceed with another
AI technology, from another company, it could take as long as six months during
product integration. As a protective measure, we are currently investigating
other companies with similar artificial intelligence technology should
MindfulEye discontinue operations.

                                       13
<PAGE>

REVISED STRATEGIC PLAN

         In our last 10-Q dated June 30,2001 we provided an outline of our
revised strategic plan. Due to our inability to secure financing, we have been
unable to proceed with this plan. We are currently in negotiations for another
financing, however, if it is not completed in the near term, it is likely that
we will be unable to proceed with this plan and may be forced to consider steps
to protect our assets.


OPERATIONAL DEVELOPMENTS

         As a result of our failure to secure a new financing, the following
measures have been taken:

         >>   We have further reduced our staff so that we now have in our
              technology department two people, one providing hardware support
              and the other providing technology support. We continue to have
              one customer support person. We continue to have two people in our
              accounting department. We have not been able to outsource any of
              the technology operations to MindfulEye in Vancouver.


         >>   Irwin Meyer (CEO), Michael Iscove (CFO), Arthur Bernstein
              (Exec.VP) and Michael O'Hara (VP) have not been paid their
              salaries and expenses since May 15, 2001. They have continued to
              work for the Company in order to source financing and maintain
              basic operations. Should the Company secure financing, they will
              be paid retroactively.

STRATEGIC PARTNERS

         HILL & KNOWLTON
         ---------------

         Hill & Knowlton has now informed us that they have moved their launch
date to January 2002. We continue to work closely with Hill & Knowlton and,
assuming we are able to secure financing, we anticipate the rollout of PR
Manager to their clients according to their schedule.

         KROLL RISK CONSULTING SERVICES
         ------------------------------

         We have continued to service Kroll's crisis management clients on an
"as needed" basis. However, we no longer have a strategist department and are
using management personnel to provide the service at this time. This approach is
only a short-term solution. If we secure financing, we plan to rebuild our
strategist team and continue to work with Kroll toward the development of a
desktop tool and a uniform pricing program and pricing structure for their case
managers.

         BURRELLES INFORMATION SERVICES
         ------------------------------

         We were unable to negotiate a financially acceptable license with
Burrelles and, as a result, they have terminated their relationship with us.

                                       14
<PAGE>

         THOMSON FINANCIAL
         -----------------

         Our financial situation and resulting staff reductions and operational
changes led to an inability to execute on the Thomson Financial program and, as
a result, it has been terminated. However, they have agreed to review new
programs and opportunities in the future and we plan to present revised programs
once we are financially capable of executing them.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2001 (Fiscal 2001) COMPARED TO THE THREE MONTHS
ENDED SEPTEMBER 31, 2000 (Fiscal 2000)

         Revenues for the three months ended September 30, 2001 were $65,642,
comprised of $58,905 for our Internet division and $6,737 for our Entertainment
division. Our Internet revenues represent a decrease of 86% from the same period
in 2000. Revenues for Fiscal 2000 were $477,103 and consisted of sales of
$370,998 attributable to our Internet division and $106,105 attributable to our
Entertainment division.

         Selling, general and administrative expenses were $1,243,880 for Fiscal
2001 as compared to $2,371,372 for Fiscal 2000. Salaries and Benefits for Fiscal
2001 were $217,839 compared to $1,363,431 in Fiscal 2000. The major decrease is
attributed to the downsizing of the San Francisco office since June 2001.

         Sales and marketing expenses were $1,595 for Fiscal 2001 and $94,625 in
Fiscal 2000. These expenses were significantly higher in Fiscal 2000 because we
incurred initial launch and marketing costs in that period. Current marketing
expenditures are focused on specific target markets.

         Professional fees were $249,696 for Fiscal 2001 and $330,879 for Fiscal
2000. Of this amount, 76% related to audit, NASDAQ, SEC filings and the yearly
board meeting. In Fiscal 2001, 64% related to audit, Sec filings, litigation and
alliance contracts.

         Consulting fees increased to $256,177 for Fiscal 2001 from $134,764 in
Fiscal 2000. A majority of these fees related to our funding efforts. Of the
total for Fiscal 2001, $110,667 was paid in stock rather than cash.

         Occupancy costs increased to $68,864 in Fiscal 2001 from $95,114 in
Fiscal 2000 as the size of our San Francisco operations grew and a small sales
office was opened in Toronto as of May 2000. The San Francisco operations have
been downsized since June 30, 2001 and we are attempting to sub-lease our office
space in San Francisco.

         General and Administrative costs were $449,709 in Fiscal 2001 and
$490,217 in Fiscal 2000. The major components of these costs for Fiscal 2001
were: travel 20%, depreciation 12% and investor relations 13%. For Fiscal 2000,
these costs were: travel 69%, and depreciation 13%.

         The comprehensive loss applicable to common shareholders was $1,328,410
and $2,090,416 for the three months ended September 30, 2001 and 2000,
respectively.


NINE MONTHS ENDED SEPTEMBER 30, 2001 (Fiscal 2001) COMPARED TO THE NINE MONTHS
ENDED SEPTEMBER 31, 2000 (Fiscal 2000)

         Revenues for Fiscal September 30, 2001 were $808,639, comprised of
$666,688 for our Internet division and $141,951 for our Entertainment division.

                                       15
<PAGE>

Revenues for Fiscal 2000 were $1,089,883 and consisted of sales of $796,545
attributable to our Internet division and $293,338 attributable to our
Entertainment division. Revenues decreased because of our inability to secure
the financing necessary to execute our business plan resulting in a decrease in
staff and sales and marketing efforts, as well as economic conditions.

         Selling, general and administrative expenses were $5,755,310 for Fiscal
2001 as compared to $6,981,314 for Fiscal 2000. Salaries and Benefits for Fiscal
2001 were $2,704,198 compared to $2,500,633 in Fiscal 2000. The major changes in
cost were as follows: Technology and Product Development increased by 130%,
Client Operations increased by 175%, Sales salaries and commissions decreased by
38%, Strategists salaries and commissions decreased by 10% and San Francisco
management and administrative wages decreased by 63%. The increases are
primarily attributable to our efforts to address our technology needs through
the use of added internal and independent personnel, organize and implement
client support capabilities for the release of PR Manager and other toolset
based products and refocus our sales capabilities. The decrease is primarily
attributed to the reorganization of the San Francisco office.

         Sales and marketing expenses were $71,531 for Fiscal 2001 and
$1,231,467 in Fiscal 2000. These expenses were significantly higher in Fiscal
2000 because we incurred initial launch and marketing costs in that period.
Current marketing expenditures are focused on specific target markets.

         Professional fees were $675,364 for Fiscal 2001 and $854,713 for Fiscal
2000. Of this amount, 16% related to litigation in Fiscal 2001 and 44% related
to litigation and the acquisition of Infolocity in Fiscal 2000. As well, 46%
related to audit, NASDAQ, SEC filings and the annual meeting in Fiscal 2001 and
25% in Fiscal 2000. In Fiscal 2001, 5% related to the Mindfuleye, Inc,
acquisition negotiations.

         Consulting fees increased to $738,433 for Fiscal 2001 from $569,109 in
Fiscal 2000. A majority of these fees related to our funding efforts. Of the
total for Fiscal 2001, $160,667 was paid in stock rather than cash.

         Occupancy costs increased to $254,382 in Fiscal 2001 from $206,330 in
Fiscal 2000 as the size of our San Francisco operations grew and a small sales
office was opened in Toronto as of May 2000. The San Francisco operations have
been downsized since June 30, 2001 and we are attempting to sub-lease our office
space in San Francisco.

         General and Administrative costs were $1,311,402 in Fiscal 2001 and
$1,756,720 in Fiscal 2000. The major components of these costs for Fiscal 2001
were: travel 37%, and depreciation 23%. For Fiscal 2000, these costs were:
travel 32%, and depreciation 17%.

         The comprehensive loss applicable to common shareholders was $5,546,827
and $6,601,735 for the nine months ended September 30, 2001 and 2000,
respectively.

LIQUIDITY AND CAPITAL RESOURCES

         Net cash used in operating activities for the Fiscal 2001 was
$3,269,144 and for the Fiscal 2000 was $5,561,905. Net cash used in investing
activities during Fiscal 2001 was $522,096 and during Fiscal 2000 was $568,317.
Net cash provided by financing activities during Fiscal 2001 was $707,136 and
during Fiscal 2000 was $10,218,118.

                                       16
<PAGE>

         Our total cash and cash equivalent balance at September 30, 2001 was
($127,997) as compared to December 31, 2000 which was $2,754,487.

         As indicated in the Overview section of this filing, the investor who
provided the financing commitment at the time of our last 10Q failed to continue
to fund our operations in accordance with the agreement, as specified.
Currently, our cash on hand, together with cash generated by operations, cannot
sufficiently fund future operating losses and capital requirements. If we are
unable to obtain other financing on terms acceptable to us, or at all, or if we
are not able immediately to recognize significant revenue from sales of our
products, we may not be able to accomplish any or all of our initiatives and
could be forced to consider steps that would protect our assets against our
creditors.

RISKS RELATED TO OUR BUSINESS

         IF WE ARE NOT ABLE TO OBTAIN ADDITIONAL CAPITAL QUICKLY, WE WILL HAVE
TO SHUT DOWN OUR OPERATIONS AND WILL NOT BE ABLE TO EXECUTE ON OUR BUSINESS
PLAN.

         We experienced significant operating losses in the fiscal year ended
December 31, 2000 and we expect that these losses will continue through the
fourth quarter of fiscal 2001. Our cash and short-term investment balances have
continued to decline since December 31, 2000 and we expect to experience further
declining balances until we either obtain additional capital or our accounts
receivable and other collections exceed our cash outflows. We actively continue
to pursue additional equity or debt financings but to date have not received any
other funding commitments. We have been forced to reduce our operations to a
level where we are currently providing very limited services to our client base
and if we do not secure funding quickly, we will have to shut down our
operations entirely. Currently, our cash on hand, together with cash generated
by operations, cannot sufficiently fund future operating losses and capital
requirements. If we are unable to obtain other financing on terms acceptable to
us, or at all, or if we are not able immediately to recognize significant
revenue from sales of our products, we may not be able to accomplish any or all
of our initiatives and could be forced to consider steps that would protect our
assets against our creditors.

WE HAVE A HISTORY OF LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE.

         We have a history of revenues and losses as follows:

         The Company has a history of revenues and losses as follows:

                                                        Revenues      Losses
                                                      ------------  ------------
               Year ended June 30, 1999               $ 2,991,953   $ 2,722,239
               Six months ended June 30, 2000         $   612,780   $ 3,950,950
               Year ended December 31, 2000           $ 1,665,225   $ 8,360,125
               Three months ended March 31, 2001      $   457,055   $ 2,035,652
               Three months ended June 30, 2001       $   285,942   $ 2,072,388
               Three months ended September 30, 2001  $    65,642   $ 1,163,497

(without giving effect to the payment in 1997, 1998, 1999 and 2000 of dividends
of $425,000 annually, and $212,500 for the six months ended December 31, 1999 on
the Series A Preferred Stock and a payment in 1999 of dividends of $66,250 on
the Series E Preferred Stock). Because a substantial portion of our expenses are
fixed, achieving profitability depends upon our ability to generate and sustain
substantially higher revenues. We cannot assure you that we will be able to do
so and consequently we may experience additional losses in fiscal 2001.

                                       17
<PAGE>

         Our new business strategy, including our investment and acquisition
activities, requires substantial working capital. We spent substantial funds in
our acquisition of NetCurrents Services Corporation and since the acquisition
have spent a significant amount of money developing our technology and bringing
products to market. If we are able to secure financing, we expect to continue to
spend significant amounts developing new products and enhancements to existing
products, in our related marketing efforts and in expanding our existing
management team with additional experienced Internet personnel. We estimate
that, as of September 30, 2001, our cash commitments for the next twelve months
will be approximately $853,000; a significant portion of this amount is
allocated to the business of NC.

         We incur expenses associated with general and administrative costs
including:

    o    staff salaries;

    o    employee benefits;

    o    employer taxes;

    o    premiums on insurance policies;

    o    advertising and marketing costs;

    o    office expenses;

    o    professional fees;

    o    consulting fees; and

    o    other expenses.

         In addition to general and administrative expenses, the required
dividends on the shares of Series A Preferred Stock are $425,000 annually. The
dividends on the Series A Preferred Stock may be paid either in shares of our
common stock or in cash.

         In addition, while we attempt to accurately forecast our capital
requirements, we cannot anticipate all of our future capital needs. We need to
obtain additional funds to continue our product development efforts and
otherwise to execute our business plan. If we raise additional funds by issuing
equity or convertible debt securities, the percentage ownership of our
stockholders will be diluted. Any new securities may have rights, preferences,
and privileges senior to those of our common stock. If we do not obtain
sufficient funds to further develop and market our products, or to enhance our
management team, we may not successfully penetrate our Internet market sectors,
establish any brand recognition or successfully grow our business, all of which
may adversely affect our sales, revenues and overall financial condition.

UNANTICIPATED TECHNOLOGICAL PROBLEMS MAY AFFECT OUR ABILITY TO MEET OUR RELEASE
AND DELIVERY SCHEDULES AND ADVERSELY AFFECT OUR OVERALL FINANCIAL CONDITION.

                                       18
<PAGE>

         During fiscal 2000, we launched several new products. In addition, we
plan to release additional new products and enhancements to our existing
products in fiscal 2001. All of our products undergo thorough quality assurance
testing prior to release. We have experienced delays in bringing our products to
market due to unanticipated technological issues. While we believe we have
resolved these issues, we cannot anticipate all of the technological and other
issues that may arise in connection with our planned product enhancements and
future product development. We may be unable to meet delivery commitments if
technological or other development issues arise in connection with our continued
product development and enhancement. Our reputation may suffer if we fail to
meet our release and delivery schedules or if our products upon release do not
perform as expected. Consequently, it may become more difficult forming
strategic alliances with distribution and other partners, and our results of
operations and financial condition could be materially and adversely affected.

OUR PRODUCTS MAY NOT BE COMMERCIALLY ACCEPTED WHICH WILL ADVERSELY AFFECT OUR
REVENUES AND PROFITABILITY.

         Our ability to enter into the online commerce market, establish brand
recognition and compete effectively depends upon many factors, including broad
commercial acceptance of our products. The success of our products will depend
in large part on the breadth of the information these products capture and the
timeliness of delivery of that information to the client. The commercial success
of or products also depends upon the quality and acceptance of other competing
products, in-house capabilities of our clients to perform the same or similar
functions as do our products, general economic conditions and other tangible and
intangible factors, all of which can change and cannot be predicted with
certainty. We cannot assure you that our new products will achieve significant
market acceptance or will generate significant revenue. If the marketplace does
not broadly accept our products, our results of operations and financial
condition could be materially and adversely affected.

OUR ABILITY TO UTILIZE ANY AI TECHNOLOGY DEPENDS ON THE OPERATIONS OF OTHER
PARTIES. WE CURRENTLY ARE NO LONGER UNDER LICENSE WITH WEBMIND AND, WITHOUT
FUNDING WE CANNOT LICENSE THE MINDFULEYE AI TECHNOLOGY. THESE PROBLEMS HAVE
AFFECTED OUR PRODUCT INTEGRATION.

         Our revised strategic plan calls for the migration of our AI to
MindfulEye's Lexant technology from our present licensor, Webmind. As we have
failed to pay Webmind and they have since filed a petition in bankruptcy, we are
no longer licensed to use their AI with our products, nor is there technical
support available. Should we obtain financing, we plan to license MindfulEye's
AI for use with our products. As we outlined above, certain components of the
software customization process for integration of Lexant into PR Manager have
commenced and these efforts will reduce the period for completion of migration
to Lexant. As, we are currently in discussions as to finalizing the financial
terms of a new license. Should we complete our financing, and MindfulEye be able
to secure financing, we plan to license MindfulEye's technology again and enter
into a strategic alliance with MindfulEye. Should we decide to proceed with
another AI technology, from another company, it could take as long as six months
during product integration. As a protective measure, we are currently
investigating other companies with similar artificial intelligence technology
should MindfulEye discontinue operations.

FUTURE ACQUISITIONS INVOLVE RISKS FOR US.

         We evaluate future acquisitions of complementary product lines and
businesses as part of our business strategy. Acquisitions may result in dilutive
issuances of equity securities, the use of our cash resources, the incurrence of
additional debt and increased goodwill, intangible assets, and amortization
expense, which could negatively impact our profitability. In addition,
acquisitions involve numerous risks, including difficulties in the integration

                                       19
<PAGE>

of the operations and products of the acquired companies, the diversion of
management's attention from other business concerns, risks of entering markets
in which we have no or limited direct prior experience, and the potential loss
of key employees of the acquired company.

OUR FUTURE OPERATING RESULTS MAY FLUCTUATE AND ARE UNPREDICTABLE. IF WE FAIL TO
MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS, THE MARKET PRICE
OF OUR COMMON STOCK AND REDEEMABLE WARRANTS MAY DECLINE SIGNIFICANTLY.

         Our limited operating history in the Internet and online commerce
industries makes it difficult to forecast accurately our revenues, operating
expenses and operating results. As a result, we may be unable to adjust our
spending in these areas in a timely manner to compensate for any unexpected
revenue shortfall. Consequently, we may not satisfy the expectations of analysts
or investors that may cause our stock price to decline. Investors may not be
able to resell their shares of our common stock at or above the cost of their
purchase prices.

BECAUSE OF THE LIMITED BARRIERS TO ENTRY IN THE INTERNET COMPETITION IN THESE
MARKETS IS INTENSE. IF WE ARE UNABLE TO COMPETE SUCCESSFULLY AGAINST CURRENT AND
FUTURE COMPETITORS THAT ENTER THESE MARKETS, OUR REVENUES AND OPERATING RESULTS
COULD BE IMPAIRED.

         The Internet markets are new, rapidly evolving and intensely
competitive, and we expect that competition could further intensify in the
future. Barriers to entry are limited, and current and new competitors can
launch web sites and other similar businesses at a relatively low cost. Many of
our current and potential competitors have significantly greater financial,
marketing, and other resources than us. Increased competition may result in
reduced operating margins, additional barriers to our entry into the Internet
and online commerce fields and to establishing brand recognition, and loss of
market share.

OUR GROWTH AND OPERATING RESULTS WILL BE IMPAIRED IF THE INTERNET AND ONLINE
COMMERCE INDUSTRIES DO NOT CONTINUE TO GROW.

         Our growth and operating results depend in part on widespread
acceptance and use of the Internet as a point of convergence in the
telecommunications, entertainment and technology industries, as well as on
continued consumer and corporate acceptance of the Internet as a communications
medium and for other forms of communication. These practices are at an early
stage of development, and demand and market acceptance are uncertain.

         The Internet may not become a viable medium for telecommunications,
entertainment and technology convergence or a healthy commercial marketplace due
to inadequate development of network infrastructure and enabling technologies
that address the public's concerns about:

    o    network performance;

    o    reliability;

    o    speed of access;

    o    ease of use; and

    o    bandwidth availability.

                                       20
<PAGE>

         In addition, the Internet's overall viability could be adversely
affected by increased government regulation. Changes in or insufficient
availability of telecommunications or other services to support the Internet
could also result in slower response times and adversely affect general usage of
the Internet. Also, negative publicity and consumer concern about the security
of transactions conducted on the Internet and the privacy of users may also
inhibit the growth of commerce on the Internet.

BURDENSOME GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD IMPAIR OUR
RESULTS OF OPERATIONS.

         It is possible that a number of laws and regulations may be adopted
concerning the Internet, relating to, among other things:

    o    user privacy;

    o    content;

    o    copyrights;

    o    distribution;

    o    telecommunications; and

    o    characteristics and quality of products and services.

         The adoption of any additional laws or regulations may decrease the
popularity or expansion of the Internet. A decline in the growth of the Internet
could decrease demand for our services and increase our cost of doing business.
The application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the Internet and other online services could also harm our
business.

OUR OUTSTANDING OPTIONS AND WARRANTS MAY DILUTE OUR STOCKHOLDERS' INTERESTS AND
COULD HINDER US FROM OBTAINING ADDITIONAL FINANCING.

         As of November 12, 2001, we have granted options and warrants to
purchase a total of 8,091,515 shares of common stock that have not been
exercised. To the extent that these outstanding options and warrants are
exercised, our stockholders' interests will be diluted. Also, we may not be able
to obtain additional equity capital on acceptable terms, since the holders of
the outstanding options and warrants may exercise those securities at a time
when we may be able to obtain such capital on better terms than those in the
options and warrants.

THE CONVERSION OF OUR CONVERTIBLE PREFERRED STOCK MAY DILUTE OUR STOCKHOLDERS'
INTERESTS AND COULD HINDER US FROM OBTAINING ADDITIONAL FINANCING.

         As of November 12, 2001, we have issued and outstanding 1,000,000
shares of our Series A Preferred Stock, and 400,000 shares of our Series C
Preferred Stock. At our option, we can pay the dividends on our Series A
Preferred Stock in cash or in shares of common stock. We are required to pay
dividends on our Series C Preferred Stock if we have net income in excess of
$1,000,000 in the applicable fiscal year. We have not yet paid dividends on the
Series A Preferred Stock for the periods ended March 31, 2001, June 30, 2001 and
September 30, 2001. No dividends are currently due on the Series C Preferred
Stock.

                                       21
<PAGE>

         Holders of shares of our convertible preferred stock may convert their
shares into shares of our common stock at any time in the future. To the extent
all of the shares of our outstanding convertible preferred stock are converted
into shares of our common stock, our common stockholders' interests will be
diluted. Since these shares of common stock will be registered for resale in the
marketplace, future offers to sell these shares could potentially depress the
price of our common stock. In the future, this could make it difficult for us or
our stockholders to sell the common stock. Also, we may have problems obtaining
additional equity capital on acceptable terms, since we can expect the holders
of our convertible preferred stock to convert their shares into common stock at
a time when we would be able to obtain any needed capital on more favorable
terms than those of the convertible preferred stock.

STOCK PRICES OF INTERNET-RELATED COMPANIES HAVE FALLEN DRAMATICALLY IN RECENT
MONTHS AND THE TRADING PRICE OF OUR COMMON STOCK AND REDEEMABLE WARRANTS IS
LIKELY TO BE VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES TO INVESTORS.

         The trading price of our common stock and redeemable warrants is
volatile and could fluctuate widely in response to factors including the
following, some of which are beyond our control:

    o    variations in our operating results;

    o    announcements of technological innovations or new services by us or our
         competitors;

    o    changes in expectations of our future financial performance, including
         financial estimates by securities analysts and investors;

    o    changes in operating and stock price performance of other
         Internet-related companies similar to us;

    o    conditions or trends in the Internet and technology industries;

    o    additions or departures of key personnel;

    o    future sales of our common stock; and

    o    acceptance by the market of our acquisitions.

         Domestic and international stock markets often experience significant
price and volume fluctuations. These fluctuations, as well as general economic
and political conditions unrelated to our performance, may adversely affect the
price of our common stock and redeemable warrants.

TAKEOVER EFFORTS COULD BE DETERRED AS A RESULT OF OUR RIGHT TO ISSUE PREFERRED
STOCK IN THE FUTURE AND CERTAIN PROVISIONS IN OUR CERTIFICATE OF INCORPORATION.

         Our Certificate of Incorporation permits our Board of Directors to
issue up to 20,000,000 shares of "blank check" Preferred Stock. Our Board of
Directors also has the authority to determine the price, rights, preferences,
privileges and restrictions of those shares without any further vote or action
by our stockholders. We have issued and outstanding 1,000,000 shares of Series A
Preferred Stock, and 400,000 shares of Series C Preferred Stock. If we issue
additional shares of preferred stock with voting and conversion rights, the
rights of our common stockholders could be adversely affected by, among other

                                       22
<PAGE>

things, the loss of their voting control to others. Any additional issuances
could also delay, defer or prevent a change in our control, even if these
actions would benefit our stockholders.

         Additionally, provisions of Delaware law and our Certificate of
Incorporation could make it more difficult for a third party to acquire us, even
if doing so would be beneficial to our stockholders.

WE HAVE NEVER PAID DIVIDENDS ON OUR COMMON STOCK. WE PAY ANNUAL CASH OR STOCK
DIVIDENDS ON CERTAIN SERIES OF OUR PREFERRED STOCK.

         We have never paid cash dividends on our common stock and we do not
expect to pay these dividends in the foreseeable future. Holders of our Series A
Preferred Stock are entitled to annual dividends of 8 1/2% (aggregating $425,000
annually, in cash or stock at our option, assuming no conversion). Holders of
our Series C Preferred Stock are entitled to dividends of 8% annually, so long
as we have net income in excess of $1,000,000 in the applicable fiscal year. We
pay these dividends, if any, quarterly, in cash or in shares of our common
stock. For the foreseeable future, we anticipate that we will retain all of our
cash resources and earnings, if any, for the operation and expansion of our
business, except to the extent required to satisfy our obligations under the
terms of the Series A Preferred Stock and Series C Preferred Stock.

SALES OF ADDITIONAL SHARES OF OUR COMMON STOCK INTO THE PUBLIC MARKET MAY CAUSE
OUR STOCK PRICE TO FALL.

         If our stockholders or we sell substantial amounts of our common stock
(including shares issued upon the exercise of outstanding options and warrants
or upon the conversion of shares of our convertible preferred stock) in the
public market, the market price of our common stock could fall. As of November
12, 2001, we had outstanding 40,250,094 shares of our common stock. The
unregistered shares of common stock and the shares of common stock held by our
officers and directors are "restricted" securities, as that term is defined by
Rule 144 under the Securities Act. In the future, these restricted securities
may be sold only in compliance with Rule 144 or if they are registered under the
Securities Act or under an exemption. Generally, under Rule 144, each person who
holds restricted securities for a period of one year may, every three months,
sell in ordinary brokerage transactions an amount of shares which does not
exceed the greater of 1% of our then-outstanding shares of common stock, or the
average weekly volume of trading of our common stock as reported during the
preceding four calendar weeks. A person who has not been an affiliate of ours
for at least the three months immediately preceding the sale and who has
beneficially owned shares of common stock for at least two years can sell such
shares under Rule 144 without regard to any of the limitations described above.
Sales of substantial amounts of common stock in the public market, or the
perception that such sales could occur, may adversely affect the prevailing
market price for our common stock and could impair our ability to raise capital
through a public offering of equity securities.

         In addition, as of November 12, 2001, holders of options and warrants
may acquire approximately 8,091,515 shares of common stock and holders of shares
of our Series A Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, and Series F Preferred Stock may acquire shares of common stock at
various conversion rates. This figure consists of 1,865,875 options held by our
employees at exercise prices ranging from $0.38 to $3.03. This figure also
represents 6,225,640 warrants and options held by investors at exercise prices
ranging from $0.82 to $2.50.

WE MAY BE EXPOSED TO CONTINGENT LIABILITY ARISING FROM OUR FAILURE TO MAINTAIN
AN EFFECTIVE REGISTRATION STATEMENT COVERING OUR REDEEMABLE WARRANTS AND
UNDERLYING COMMON STOCK.

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<PAGE>

         We initially registered the issuance of the redeemable warrants and the
offer to purchase the shares of common stock issuable upon exercise of the
redeemable warrants with the SEC though the filing of a registration statement
in 1996. We did not update the registration statement with current information
until August 30, 2000. A warrant holder may claim that our failure to maintain
an effective registration statement covering the exercise of the redeemable
warrants for the period of time that the price of our common stock exceeded the
cost associated with the exercise of the warrants constituted a breach of their
Warrant Agreement. If all warrant holders made this assertion, which we believe
has no legal basis based on federal case law, the amount of damages they could
allege, may aggregate up to $9.5 million, which represents the difference
between the highest closing trading price of the common stock ($11.06) which
occurred on March 27, 2000, and the cash exercise price ($5.25), multiplied by
the number of outstanding warrants divided by three - as three warrants need to
be tendered in addition to the cash exercise price in order to receive one share
of common stock. However, a warrant holder who was unable to realize $5.81 by
tendering three warrants and $5.25 in cash to the Company, could have on March
27, 2000, sold those three warrants and realized $6.27, thereby eliminating any
lost opportunity, since the warrants publicly traded on the Nasdaq Small Capital
Market.

         Accordingly, we also believe that this opportunity to mitigate any
damages incurred by a warrant holder resulting from an inability to exercise his
or her warrants further diminishes the likelihood of a successful claim for any
damages by a warrant holder.

         We do not believe that the warrant holders, or any warrant holder,
would be successful in this claim in light of the fact that no warrant holder
complied with the contractual obligations to exercise their redeemable warrants
and no warrant holder ever indicated to us or our transfer agent a desire to
exercise his or her warrants.

         Our failure to maintain an effective registration statement covering
the exercise of the warrants also may constitute a violation of Section 5 of the
Securities Act of 1933. A violation of Section 5 of the Securities Act may give
a warrant holder who exercised warrants the right for some period of time up to
one year, to demand rescission of that exercise in which event the warrant
holder would be required to return to us the shares of common stock acquired
upon exercise and we would return to the warrant holder the warrants tendered
and the cash exercise price previously paid. Rescission would result in no
proceeds to us from the warrant offering and no damages to us except for minimal
transactional costs associated with the rescission.

         As of the date of this statement, we are not aware of any claims for
damage or rescission.

                           PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

          In the normal course of our business, we are subject to various claims
and legal actions. We believe that we will not be materially adversely affected
by the ultimate outcome of any of these matters either individually or in the
aggregate. At this time, the Company is not engaged in any legal proceeding with
the exception of the following:

         On November 13, 2000, NetCurrents, Inc. and NetCurrents Services Corp.
(collectively "NetCurrents") initiated a lawsuit entitled NETCURRENTS, INC., ET
AL. v. HOLTORF ET AL., Los Angeles Superior Court, Case No. BC 240089 (the
"Lawsuit"). A First Amended Complaint was filed on December 18, 2000, alleging
claims against Victor Holtorf ("Holtorf") for defamation, unfair competition and

                                       24
<PAGE>

conversion. In addition, NetCurrents also filed a Demand for Arbitration against
Holtorf with the American Arbitration Association on December 18, 2000,
Reference No. 72 160 01297 00 RSR (the "Arbitration"), alleging claims for
breach of contract, breach of fiduciary duty and breach of the implied covenant
of good faith and fair dealing. The claims alleged against Holtorf by
NetCurrents in both the Lawsuit and the Arbitration arose out of alleged
wrongful conduct by Holtorf following the termination of his employment with
NetCurrents in late August 2000, including the public dissemination of
defamatory and disparaging statements about NetCurrents.

         Holtorf did not respond to the First Amended Complaint in the Lawsuit
but had responded to the Demand for Arbitration with a general denial. In
addition, Holtorf filed counter-claims against NetCurrents for the following:
breach of contract, breach of covenant of good faith and fair dealing, fraud in
the inducement and negligent misrepresentation relating to his previous
Employment Agreement with NetCurrents; breach of contract, breach of covenant of
good faith and fair dealing, fraud in the inducement and negligent
misrepresentation relating to the Consulting Agreement he entered into with
NetCurrents as part of his termination of employment in August 2000; defamation;
false light; and constructive termination of his previous employment with
NetCurrents. NetCurrents did not respond to Holtorf's Counter-Claims in the
Arbitration.

         On May 31, 2001, we entered into a settlement agreement with Holtorf
whereby we agree to pay $254,000 without interest as follows: (i) $25,000 on or
before July 1, 2001 (ii) $15,000, on or before the first day of each month
commencing on August 1, 2001, and continuing until such time as the total sum is
paid in full. As of the date of this filing, the payments set forth above have
not been made by the Company.

         On September 7, 2001, the Company executed many settlement agreements
with former employees for unpaid wages at a hearing before the California Labor
Board. As of October 7, 2001, the Company is in breach of those settlement
agreements for failure to pay the amounts due. The California Labor Board will
move for judgment against the Company in the near future if these amounts are
not paid.

         Other creditors have threatened legal action against the company for
non-payment and may soon proceed with litigation.



ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None.

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

         None.

ITEM 5.  OTHER INFORMATION

         None.

                                       25
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits.

                  None

         (b)      Reports on Form 8-K

                  Current Report on Form 8-K filed March 7, 2001, Items 5 and 7.

                                       26
<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.


                                                   NetCurrents, Inc.
                                                   (Registrant)


Dated:  November 16, 2001                          /s/ IRWIN MEYER
                                                   -----------------------------
                                                   Irwin Meyer
                                                   Chief Executive Officer


Dated:  November 16, 2001                          /s/ MICHAEL ISCOVE
                                                   -----------------------------
                                                   Michael Iscove
                                                   Chief Financial Officer

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