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 MARCH 31, 2001

                                       OR

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


                         Commission file number 0-18410



                                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 31,853,485 shares as of April 30, 2001


<PAGE>


                                NETCURRENTS, INC.

                                TABLE OF CONTENTS


                                                                          PAGE
                                                                          NUMBER
PART I  FINANCIAL INFORMATION

   ITEM 1.  Financial Information

       Consolidated Balance Sheets as of March 31, 2001 (unaudited)
       and December 31, 2000..................................................3

       Consolidated Statements of Operations For the
       Three Months Ended March 31, 2001 and 2000 (unaudited).................5

       Consolidated Statements of Cash Flows
       For the Three Months Ended March 31, 2001 and 2000 (unaudited) ........7

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

   ITEM 2.  Management's Discussion and Analysis or Plan of Operation........10



PART II OTHER INFORMATION ...................................................26

   ITEM 1.  Legal Proceedings ...............................................26

   ITEM 2.  Changes In Securities And Use Of Proceeds .......................27

   ITEM 3.  Defaults Upon Senior Securities .................................27

   ITEM 4.  Submission Of Matters To A Vote Of Security Holders .............27

   ITEM 5.  Other Information ...............................................27

   ITEM 6.  Exhibits And Reports On Form 8-K And Form 8-K/A .................27


                                     Page 2
<PAGE>


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

<TABLE>
<CAPTION>
                                     ASSETS
                                                                    March 31,     December 31,
                                                                      2001            2000
                                                                -------------     ------------
                                                                  (UNAUDITED)
<S>                                                             <C>               <C>
CURRENT ASSETS
     Cash and cash equivalents                                  $    448,835      $ 2,754,487
     Accounts receivable, net of allowance for doubtful
         accounts of nil and nil                                     440,848          544,869
     Note receivable                                                 250,000                -
     Prepaid assets                                                  183,271          158,356
                                                                -------------     ------------
              Total current assets                                 1,322,954        3,457,712

FIXED ASSETS, net                                                    976,302          913,876
GOODWILL, less accumulated amortization & write-off of
     $548,695 and $486,195                                           437,500          500,000
INVESTMENTS                                                          138,000           43,500
OTHER ASSETS                                                          39,665           54,538
                                                                -------------     ------------
                  TOTAL ASSETS                                  $  2,914,421      $ 4,969,626
                                                                =============     ============
</TABLE>



                                     Page 3
<PAGE>


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

<TABLE>
<CAPTION>
                      LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                           March 31,      December 31,
                                                                             2001             2000
                                                                          ------------    ------------
                                                                          (UNAUDITED)
<S>                                                                       <C>             <C>
CURRENT LIABILITIES
     Current portion of capital lease obligation                          $     45,910    $          -
     Accounts payable and accrued expenses                                     885,555       1,030,934
     Dividends payable                                                         343,663         237,413
                                                                          -------------   -------------
         Total current liabilities                                           1,275,128       1,268,347

CAPITAL LEASE OBLIGATION, net of current portion                                45,046               -
                                                                          -------------   -------------
              Total liabilities                                              1,320,174       1,268,347
                                                                          -------------   -------------
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
     Preferred stock, Series A, C, D, E, and F, $0.001 par value
         5,400,000 shares authorized
         1,500,000 and 1,500,000 shares issued and outstanding                   1,400           1,500
     Preferred stock, Series G, $1,000 par value
         4,000 shares authorized
         no shares issued and outstanding                                            -               -
     Common stock, $0.001 par value
         50,000,000 shares authorized
         30,973,378 and 32,998,073 shares issued and outstanding                30,974          32,998
     Treasury stock, at cost
         93,536 shares                                                      (1,010,192)     (1,010,192)
     Subscription receivable                                                (4,282,914)     (4,223,284)
     Additional paid-in capital                                             48,534,155      48,532,031
     Accumulated other comprehensive loss                                     (316,313)       (410,813)
     Accumulated deficit                                                   (41,362,863)    (39,220,961)
                                                                          -------------   -------------
              Total shareholders' equity                                     1,594,247       3,701,279
                                                                          -------------   -------------
                  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY              $  2,914,421    $  4,969,626
                                                                          =============   =============
</TABLE>


                                     Page 4
<PAGE>


                                             NETCURRENTS, INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED)

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

<TABLE>
<CAPTION>
                                                    For the Three Months Ended
                                                             March 31,
                                                  --------------------------------
                                                       2001              2000
                                                  ---------------   --------------
                                                   (unaudited)      (unaudited)
<S>                                               <C>               <C>
REVENUES                                                $457,055         $267,417
                                                  ---------------   --------------
SELLING GENERAL AND ADMINISTRATIVE
Salaries and Benefits                                  1,400,325          814,675
Selling and Marketing Expenses                            58,511          745,555
Professional Fees                                        229,366          242,317
Consulting Fees                                          141,267          208,413
Occupancy Costs                                           95,765           47,467
General and administrative expenses                      535,463          416,435
                                                  ---------------   --------------
                                                       2,460,697        2,474,862

LOSS FROM OPERATIONS                                  (2,003,642)      (2,207,445)
                                                  ---------------   --------------
OTHER INCOME (EXPENSE)
   Interest and dividend income                           75,417           70,819
   Interest and financing expense                         (2,625)          (6,661)
   Write-off of notes receivable and
        other assets                                     (24,982)         (55,405)
   Amortization of goodwill                              (62,500)         (22,500)
   Settlement expense                                          -          (71,400)
   Gain (loss) on sale of investment                     (20,395)         168,250
   Other income                                            3,074            5,958
                                                  ---------------   --------------
         Total other income (expense)                    (32,010)          89,061
                                                  ---------------   --------------
</TABLE>


                                     Page 5
<PAGE>


                                             NETCURRENTS, INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED)

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

<TABLE>
<CAPTION>
                                                    For the Three Months Ended
                                                             March 31,
                                                  --------------------------------
                                                       2001              2000
                                                  --------------   ---------------
                                                   (unaudited)      (unaudited)
<S>                                               <C>              <C>
LOSS BEFORE PROVISION FOR INCOME TAXES               (2,035,652)     (2,118,384)

PROVISION FOR INCOME TAXES                                    -          (9,750)
                                                  --------------  --------------
NET LOSS                                           $ (2,035,652)    $(2,128,134)

DIVIDEND REQUIREMENT OF SERIES A PREFERRED STOCK       (106,250)       (106,250)

DIVIDEND REQUIREMENT OF SERIES G PREFERRED STOCK              -         (22,250)
                                                  --------------  --------------
LOSS APPLICABLE TO COMMON SHAREHOLDERS               (2,141,902)     (2,256,634)

UNREALIZED GAIN (LOSS) ON INVESTMENT                    (94,500)        199,672
                                                  --------------  --------------

COMPREHENSIVE LOSS APPLICABLE TO COMMON
   SHAREHOLDERS                                    $ (2,236,402)   $ (2,056,962)
                                                  ==============   =============

BASIC AND DILUTED LOSS PER COMMON SHARE            $      (0.07)      $   (0.07)
                                                  ==============   =============
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
         OUTSTANDING                                 31,242,099      30,596,005
                                                  ==============   =============
</TABLE>


                                     Page 6
<PAGE>


                                             NETCURRENTS, INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED)

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

<TABLE>
<CAPTION>
                                                                For the                For the
                                                             Three Months           Three Months
                                                                 Ended                  Ended
                                                               March 31,              March 31,
                                                                 2001                   2000
                                                            ---------------        --------------
                                                              (unaudited)            (unaudited)
<S>                                                         <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss                                                    $  (2,035,652)         $  (2,128,134)
   Adjustments to reconcile net loss to net cash
     used in operating activities
       Depreciation and amortization of fixed assets               92,756                 24,976
       Amortization of goodwill                                    62,500                 22,500
       Interest from subscription receivable                      (59,630)               (53,662)
       Write-off of notes receivable and other assets              24,982                 55,405
       Issuance of common stock for services                            -                 71,400
       Gain on sale of investments                                                      (168,250)
   (Increase) decrease in
     Accounts receivable                                           79,039                243,263
     Other assets and prepaid expenses                            (10,042)                28,212
     Prepaid advertising expenses                                       -                583,392
   Increase (decrease) in
     Accounts payable and accrued expenses                       (145,379)              (184,168)
     Deferred revenue                                                   -                (61,030)
                                                            --------------         --------------
Net cash used in operating activities                          (1,991,426)            (1,566,096)
                                                            --------------         --------------
</TABLE>


                                     Page 7
<PAGE>


                                             NETCURRENTS, INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED)

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

<TABLE>
<CAPTION>
                                                                For the                For the
                                                             Three Months           Three Months
                                                                 Ended                  Ended
                                                               March 31,              March 31,
                                                                 2001                   2000
                                                            ---------------        --------------
                                                              (unaudited)            (unaudited)
<S>                                                         <C>                    <C>
CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures on fixed assets                        $    (57,082)           $    (78,969)
Increase in subscriptions receivable                                   -                 (50,000)
Note receivable                                                 (250,000)                      -
Proceeds from sale of investments                                      -                 383,125
                                                           --------------          --------------
Net cash provided by (used in) investing activities              307,082)                254,156
                                                           --------------          --------------
CASH FLOWS FROM FINANCING ACTIVITIES

Payments on notes payable - related parties                            -                 (44,046)
Payments on capital lease obligation                              (7,144)                 (4,320)
Proceeds from issuance of preferred stock                              -                 311,525
Proceeds from issuance of common stock, net of
   offering costs                                                      -               8,501,241
Proceeds from convertible debentures, net of
  offering costs                                                       -               1,098,000
                                                           --------------          --------------
Net cash provided by (used in )financing activities               (7,144)              9,862,400
                                                           --------------          --------------
Net increase (decrease) in cash and cash equivalents          (2,305,652)              8,550,460
                                                           --------------          --------------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                 2,754,487                 798,855
                                                           --------------          --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                    $    448,835            $  9,349,315
                                                           ==============          ==============
</TABLE>



                                     Page 8
<PAGE>


(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 three months ended March 31, 2001 are not necessarily indicative
of the results that may be expected for the year ended 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 Annual Report on
Form 10-KSB for the year ended December 31, 2000.

(2)      GOODWILL

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

(3)      NOTE RECEIVABLE

         On February 21, 2001, we entered into a bridge loan agreement with
MindfulEye.com, Inc. Under the terms of the letter of intent, we agreed to
provide them with advances totaling $375,000 prior to the closing of the
acquisition, of which $250,000 was funded by March 31, 2001. Interest on
advances accrues at 10% per annum and will be paid in a single installment on
the earlier of (i) August 21, 2001 (ii) the closing of the acquisition of
MindfulEye.com, Inc. (iii) or the closing of any funding of MindfulEye.com, Inc.
if our acquisition does not close. If we acquire MindfulEye.com, 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.com, Inc. and its subsidiary.

(4)      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.
The closing of the proposed acquisition is subject to satisfaction of due
diligence, applicable corporate approvals, the negotiation and execution of a
definitive merger agreement and other customary closing conditions.

         Under the terms of the letter of intent, we have agreed to purchase all
of the outstanding stock of MindfulEye, Inc. in exchange for shares of our
common stock with an aggregate fair market value equal to $4,000,000.

(5)      SUBSEQUENT EVENTS

         In April 2001, we issued 240,292 shares of our common stock with a fair
market value of $106,250 in payment of the required quarterly dividend on the
Series A Preferred Stock.


                                     Page 9
<PAGE>


         On April 13, 2001, we entered into a consulting agreement under which
the consultant received 2,000,000 options, which vested immediately and were
exercised in full as of May 7, 2001.

(6)      LOSS PER SHARE

         Loss per share for the three months ended March 31, 2001, has been
computed after deducting the dividend requirements of the Series A Preferred
Stock. It is based on the weighted average number of common and common
equivalent shares reported outstanding during the period ended on March 31,
2001.

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 certain 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: integration of
NetCurrents Services Corporation, which we refer to as NC Services into
NetCurrents, Inc., execution of business plans, completion of strategic
alliances, the ability to work effectively with our alliance partners:
Burrelle's Information Services, Inc., Thomson Financial Carson, Kroll Risk
Consulting Services, Bowdens Media Monitoring Limited, Webmind, Datalink.net,
and demand for PR Manager, SMARTWATCH, NetDetect, AgencyFacts, CyberTalk,
CyberWatch, CyberPerceptions and the other premium products and services, the
ability to continue to develop new products and services, the ability to attract
skilled personnel to meet our targets in the business plans, expected capital
expenditures, anticipated business and economic conditions and trends affecting
our financial condition and our business and strategies. Readers are cautioned
not to put undue reliance on these forward-looking statements. With respect to
the NC Services business, these forward-looking statements involve risks and
uncertainties, including the intensity of competition from other technology
companies, the ability of NC Services to meet its staffing requirements, the
ability of NC Services to execute its business plans and the status of our
future liquidity. Readers are further cautioned that any such 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


                                    Page 10
<PAGE>


or revise any forward looking statements, whether as a result of new
information, future events or otherwise.

OVERVIEW

         In fiscal 2000, our first year of operations in the Internet business,
we believe we created the critical components necessary for long-term success
and profitability: a strong management team, an international sales
organization, a product development and technology group comprised of
experienced personnel, key leveraged sales channel relationships and technology
alliances.

         In our first year transitioning into our new business sector, we made
product and technology modifications as our markets, clients and global economic
conditions experienced significant changes. As the focus of our clients moved
from the financial markets to optimization of performance and enhancing
competitive capabilities, we began to create new products which were tailored to
assisting them to more effectively compete in the changing global economic
environment.

         While we continue to provide financial message board information as
part of our premium CyberPerceptions modules and more specifically as part of
our security based services with Kroll Risk Consulting Services, we also have
begun to focus on providing a broad range of business intelligence, competitive
intelligence, perception, and demographic data derived from an ever increasing,
vast universe of sites. During Fiscal 2001, we plan to release several new
products that we expect will be critical tools for all of our target clients.
Launched on May 1, 2001, PR Manager is the first of these new products.

         We faced a number of challenges in the fourth quarter of Fiscal 2000.
In the fourth quarter of Fiscal 2000, an internal review of the readiness of
WebClipper 2.0 and PR Manager uncovered technical issues which needed to be
addressed before PR Manager could be launched. Realizing the importance of
addressing these issues quickly, we augmented our in-house technical team with
subject matter experts to facilitate a rapid assessment and cure. This process
was successfully completed for both PRManager and WebClipper 2.0, now called
PressClipper, on April 30, 2001. Since one of the CyberPerceptions modules is
PressClipper, the delay in its release, coupled with the decline of the stock
market and accompanying financial misfortune of a number of our clients, led to
lower Internet revenues from direct sales during the first quarter of fiscal
2001 compared to the fourth quarter of fiscal 2000.

         We believe we have corrected the technology problems associated with
Webclipper 2.0, now PressClipper, and PR Manager. We currently are providing
product trials to a broad range of PR firms. In addition, certain of our clients
and strategic partners are evaluating our Digital Tracking product, which we
license from Cobion, and we are receiving strong indications of interest for
this product. The release of the CyberPerceptions upgrade is currently on
schedule for June 2001 and we expect that our planned merger with MindfulEye.com
will provide us with significant additional technical strength. Assuming this
transaction is completed, it will provide us with our own state-of-the-art
artificial intelligence solution thereby eliminating the need and costs
associated with licensing of similar technology. As well, we will inherit a
suite of infrastructure tools that we plan to license to a


                                    Page 11
<PAGE>


wide range of prospective clients.

PRODUCT LAUNCHES

         On March 6, 2001, we entered into a strategic technology partnership
with Cobion, the recognized world leader in providing global solutions for
brand, copyright and identity protection. Cobion's technology is unrivaled at
visually finding corporate brands, logos, marks and symbols in websites,
irrespective of their size, placement, and the native language of the site.
Using Cobion's technology, we launched our co-branded Digital Tracking product
in April 2001, and received strong indications of interest from our alliance
partners and existing clients. We anticipate Digital Tracking will begin to
generate sales over the course of the year.

         On April 30, 2001, we completed the redevelopment of WebClipper 2.0,
now renamed PressClipper. PressClipper includes the following features among
others: coverage of more than 2,500 online publications, selected web site
pages, COMTEX news feed integration to capture press releases upon distribution,
elimination of duplicate articles, advanced archive search capability, daily
client reporting and an e-mail alert capability, all in an easy-to-use
interface. We expect that PressClipper will be sold as a stand-alone product as
well as forming part of PR Manager.

RESOURCE ALLOCATION

         We have taken steps to enhance efficiency and refocus resources. We
redeployed our resources in order to ensure that we are able to complete the
enhancement of our existing products as well as finalize the development of new
products. We reduced the size of our sales force and targeted the remaining
sales personnel on the sale of both direct and channel sales until we completed
the CyberPerceptions upgrades planned for June 2001. We also have made and
continue to make significant additions to our technology department and plan to
significantly increase its size over the balance of 2001. We also are evaluating
a number of strategic technology acquisitions for 2001 that we expect will
further enhance our technology and development capabilities.

MINDFULEYE.COM

         On February 28, 2001, we entered into a letter of intent to acquire
MindfulEye.com, Inc., a subscription-based Internet monitoring company that
automatically alerts investors in real time to online news, rumors, information
and changes in public sentiment about companies in which they have interests.
Under the terms of the letter of intent, we have agreed to purchase all of the
outstanding stock of MindfulEye.com, Inc. in exchange for shares of our common
stock with an aggregate value equal to $4,000,000. The closing of the
acquisition is subject to, among other customary closing conditions, reciprocal
due diligence, applicable corporate and regulatory approvals and the negotiation
and execution of a definitive merger agreement. Founded in 1999, Vancouver-based
MindfulEye.com has created a new


                                    Page 12
<PAGE>


class of artificial intelligence (AI) technology that can read and understand
language in real-time on the Internet. Called LEXANT(TM), this patent-pending
technology utilizes natural language processing, neural networks and a lexicon
of thousands of rules of grammar to determine the true meaning of words in
context. In July 2000, MindfulEye.com filed a patent application with the United
States Patent Office that covers MindfulEye.com's artificial intelligence-based
technology that uses advanced ranking algorithms and natural language processing
to analyze textual content in real-time as it occurs on the Internet.
MindfulEye.com has applied LEXANT(TM) to develop a suite of products that
monitor, analyze and rank Internet content in real time according to sentiment,
then further gauge the "mood" score to interpret the qualitative aspects of
what's being said online. Currently, MindfulEye.com monitors all major financial
discussions on the Internet, and processes more than half a million individual
mentions each day.

PATENT - NOTICE OF ALLOWANCE

         On May 7, 2001, we received a Notice of Allowance from the United
States Patent and Trademark Office with respect to its patent application
entitled, "APPARATUS AND METHOD OF IMPLEMENTING FAST INTERNET REAL-TIME SEARCH
TECHNOLOGY (FIRST)." A patent is expected to be issued in the second quarter of
2001. The allowed patent application is the first in a series of patent
applications related to our unique Fast Internet Real-Time Search Technology
(FIRST). We have filed additional patent applications relating to various
software applications and uses of the proprietary technology.

RESULTS OF OPERATIONS

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

         Revenues for Fiscal March 31, 2001 were $457,055, comprised of $379,120
for our Internet division and $77,935 for our Entertainment division. Our
Internet revenues represent an increase of 98% from the same period in 2000.
Revenues for Fiscal 2000 were $267,417 and consisted of sales of $191,669
attributable to our Internet division and $75,748 attributable to our
Entertainment division.

         Selling, general and administrative expenses were $2,460,697 for Fiscal
2001 as compared to $2,474,862 for Fiscal 2000. Salaries and Benefits for Fiscal
2001 were $1,400,325 compared to $814,675 in Fiscal 2000. The major changes in
cost were as follows: Technology and Product Development increased by 270%,
Client Operations increased by 155%, Sales salaries and commissions increased by
63% and San Francisco management and administrative wages decreased by 42%.
These increases are primarily attributable to our efforts to address our
technology needs through the use of added internal and independent personnel,
organize


                                    Page 13
<PAGE>


and implement client support capabilities for the release of PR Manager
and other toolset based products and refocus our sales capabilities.

         Sales and marketing expenses were $58,511 for Fiscal 2001 and $745,555
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 $229,366 for Fiscal 2001 and $242,317 for Fiscal
2000. Of this amount, 63 % related to litigation in Fiscal 2001 and 22% related
to litigation in Fiscal 2000. As well, 34 % related to audit, NASD and SEC
filings in Fiscal 2001 and 38% in Fiscal 2000. In Fiscal 2000, 23% related to
the acquisition of Infolocity and financing matters.

         Consulting fees decreased to $141,267 for Fiscal 2001 from $208,413 in
Fiscal 2000 as some of these fees related to our funding efforts in Fiscal 2000.

         Occupancy costs increased to $95,765 in Fiscal 2001 from $47,467 in
Fiscal 2000 as the size of our San Francisco operations grew and a small sales
office was opened in Toronto. The increase is primarily due to an increase in
rent of 125% in Fiscal 2001 associated with our San Francisco operations.

         General and Administrative costs were $535,463 in Fiscal 2001 and
$416,435 in Fiscal 2000. The major components of these costs for Fiscal 2001
were: travel 36 %, and depreciation 17%. For Fiscal 2000, these costs were:
travel 30%, and depreciation 6%.

         The net comprehensive loss applicable to common shareholders was
$2,236,402 and $2,056,962 for the three months ended March 31, 2001 and 2000,
respectively.

LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 2000, having spent a year building client
relationships, alliances and NSC infrastructure, we required additional
resources to roll out our new products, complete the enhancements to our
existing products, continue development of future products and continue to
execute our business plan, reach profitability and increase our presence in the
Internet industry.

         Net cash provided by (used in) operating activities for the Fiscal 2001
was ($1,991,426) and for the Fiscal 2000 was ($1,566,096). Net cash provided by
(used in) investing activities during Fiscal 2001 was ($307,082) and during
Fiscal 2000 was $254,156. Net cash provided by (used in) financing activities
during Fiscal 2001 was ($7,144) and during Fiscal 2000 was $9,862,400.

         Our total cash and cash equivalent balance at March 31, 2001 was
$448,835 as compared to December 31, 2000 which was $2,754,487.

         On March 3, 2000, we entered into an equity securities purchase
agreement with the Brown Simpson Strategic Growth Fund Ltd. and the Brown
Simpson Strategic Growth Fund



                                    Page 14
<PAGE>


L.P. to purchase up to $34,000,000 of common stock directly and through
warrants. If Brown Simpson exercises its warrants, Brown Simpson could own
5,698,000 shares of our common stock. In March 2000, we received $8,500,000 of
this financing for the purchase of the initial 1.7 million shares of common
stock. The balance is due through the exercise of warrants to purchase 3,998,000
shares of our common stock initially at exercise prices ranging from $6 to $9
per share. On December 27, 2000, we amended our original agreement with Brown
Simpson Strategic Growth Fund, Ltd. and Brown Simpson Strategic Growth Fund,
L.P. and repriced these warrants to an exercise price of $1. If, at any time
after the effective date of the registration statement registering the resale of
the shares of common stock underlying the warrants, the per share market value
of our common stock equals or exceeds prices ranging from $2.125 to $3, for any
period of 10 consecutive trading days, then the warrant holder will be required
to exercise the warrant.

         On May 9, 2001, we entered into an agreement under which we may sell
$2.0 million of convertible preferred stock on an as needed basis. The investor
will receive 10% of the amount of the proceeds in warrants to purchase our
common stock at an exercise price equal to the fair market value of our common
stock on the date we sell the preferred stock. The investor may convert the
preferred shares into shares of our common stock at a conversion price equal to
90% of the average closing price of our common stock during the five trading
days prior to the date of the notice of the conversion. The investor will
receive an origination fee equal to 5% of the proceeds of the sale for arranging
the financing. The investor will also provide us with an Equity Credit Line
under which we will be able to draw down a minimum of $100,000 per month based
upon a predetermined formula. The maximum amount we may draw down under this
Equity Credit Line is $10,000,000. At such time as we draw down on the Equity
Credit Line, we will issue to the investor shares with a market value, based on
the fair market value of our common stock on the date of notice of draw down,
equal to one hundred seven and one-half percent of the amount of the draw. With
each draw under the Equity Line, we will grant to the investor warrants to
purchase that number of shares of our common stock equal to 10% of the number of
shares issued in connection with that draw at an exercise price equal to 110% of
the closing bid price of our common stock on the day we receive the funds. An
Equity Credit Line fee of 3% of the amount of each draw will also be payable.

         The financing commitment we received on May 9, 2001 replaces the
financing commitment received on February 28, 2001, which was terminated by the
parties thereto.

         We believe that cash flow from operations, cash on hand as well as the
financing commitment we received on May 9, 2001, should be sufficient to fund
our operations and service our debt through fiscal 2001. However, there are a
number of factors that could change our anticipated needs, and could require
that we raise additional financing.


                                    Page 15
<PAGE>


RISKS RELATED TO OUR BUSINESS

         IF WE ARE NOT ABLE TO OBTAIN ADDITIONAL CAPITAL, WE MAY SUBSTANTIALLY
REDUCE OUR OPERATIONS AND MAY 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
second 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. On May 9, 2001, we
entered into an investment agreement under which we may sell $2.0 million of
convertible preferred stock on an as needed basis. We actively continue to
pursue additional equity or debt financings but to date have not received any
other funding commitments. We intend to improve liquidity by enhancing the
efficiency of our operations, the continued monitoring and reduction of
administrative costs and through sales of existing products including PR Manager
and our Digital Trademark Product, new products released in April 2001.
Currently, our cash on hand, together with cash generated by operations, cannot
sufficiently fund future operating losses and capital requirements. If the
investor fails to fund the remaining amount of the $2.0 million commitment or 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
new 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:

<TABLE>
<CAPTION>
                                                    Revenues          Losses
                                                 -------------     ------------
          <S>                                    <C>               <C>
          Year ended June 30, 1999               $  2,991,953      $  2,722,239
          Six months ended December 31, 1999     $    342,985      $  4,724,582
          Year ended December 31, 2000           $  1,665,225      $  8,360,125
          Three months ended March 31, 2001      $   457,055       $  2,035,652
</TABLE>

(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.

         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


                                    Page 16
<PAGE>


developing our technology and bringing products to market. 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 March 31, 2001, our cash commitments for the next twelve
months will be approximately $1,072,440; a significant portion of this amount is
allocated to the business of NSC.

         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.


                                    Page 17
<PAGE>


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

         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 depend 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.

FUTURE ACQUISITIONS INVOLVE RISKS FOR US.

         We evaluate future acquisitions of complementary product lines and
businesses as part of our business strategy. On February 28, 2001, we entered
into a letter of intent to acquire MindfulEye.com, Inc., the developer of
Lexant(TM), an artificial intelligence technology that can read and understand
material as it appears on the Internet. Closing of the MindfulEye acquisition is
subject to reciprocal due diligence, applicable corporate and regulatory
approvals and the negotiation and execution of definitive documents, among other
customary closing conditions. The MindfulEye acquisition and any other
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 of the operations and products of the acquired
companies, the diversion of management's attention from other business concerns,
risks of entering markets


                                    Page 18
<PAGE>


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 which 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;


                                    Page 19
<PAGE>


     o    ease of use; and

     o    bandwidth availability.

         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 May 15, 2001, we have granted options and warrants to purchase a
total of 8,996,502 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.


                                    Page 20
<PAGE>


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

         As of May 15, 2001, we have issued and outstanding 1,000,000 shares of
our Series A Preferred Stock, 400,000 shares of our Series C Preferred Stock,
50,000 shares of our Series D Preferred Stock and 50,000 shares of our Series F
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 are not required to pay dividends
on the Series D and Series F Preferred Stock. We have not yet paid dividends on
the Series A Preferred Stock for the periods ended December 31, 2000 and March
31, 2001. No dividends are currently due on the Series C Preferred Stock.

         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 FLUCTUATED WIDELY 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;


                                    Page 21
<PAGE>


     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, 400,000 shares of Series C Preferred Stock, 50,000 shares of
our Series D Preferred Stock and 50,000 shares of Series F 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 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


                                    Page 22
<PAGE>


shares of our convertible preferred stock) in the public market, the market
price of our common stock could fall. As of May 15, 2001, we had outstanding
33,853,485 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 May 15, 2001, holders of options and warrants may
acquire approximately 8,996,502 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 3,479,579 options held by our
employees at exercise prices ranging from $0.38 to $3.03. This figure also
represents 1,866,667 warrants exercisable at $5.25 (the warrant holder must
tender three warrants and $5.25 for one share of our common stock), which expire
in September 2001, and 3,498,000 warrants held by one investor exercisable at
$1, which expire in March 2005.

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.

         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


                                    Page 23
<PAGE>


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 trade 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 registration statement, we are not aware of any
claims for damage or rescission.

WE MAY BE DELISTED FROM THE NASDAQ SMALLCAP MARKET IF WE DO NOT MEET THE
CONTINUED LISTING REQUIREMENTS.

         On December 27, 2000, we were notified by The Nasdaq Stock Market that
we did not meet the minimum bid price requirement of the continued listing
requirements of the Nasdaq Small Capital Market and that we had 90 calendar
days, or until March 27, 2001, to regain compliance. On March 28, 2001, we were
notified that we had not demonstrated compliance within the 90 day period, and
that we would be delisted from The Nasdaq Small Cap Market on April 5, 2001,
unless we appealed the determination. On April 4, 2001, we appealed the
determination and requested an oral hearing. A hearing date has been set for May
17, 2001. The hearing request stays the delisting of our common stock pending a
decision by a Nasdaq Listing Qualifications Panel. In order to continue to be
listed on Nasdaq, we must meet the following requirements:

     o    minimum bid price of $1.00;

     o    net tangible assets of at least $2,000,000, or a market capitalization
          of $35,000,000 or $500,000 in net income for two of the last three
          years;

     o    two market makers;


                                    Page 24
<PAGE>


     o    300 stockholders;

     o    at least 500,000 shares in the public float or a minimum market value
          for the public float of $1,000,000; and

     o    compliance with certain corporate governance standards.

If we are delisted from The Nasdaq Small Capital Market, we anticipate that we
would apply for our common stock to trade on the Over The Counter Bulletin
Board. If we are delisted, it may be more difficult to raise additional debt or
equity financing and an investor likely would find it more difficult to sell or
obtain quotations as to the price of our common stock and/or redeemable
warrants.


                           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
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 arise 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 has not responded to the First Amended Complaint in the Lawsuit
but has responded to the Demand for Arbitration with a general denial. In
addition, Holtorf has 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 has not responded to Holtorf's Counter-Claims in the
Arbitration.


                                    Page 25
<PAGE>


         There has been no discovery initiated in either the Lawsuit or the
Arbitration. Both proceedings are currently at a standstill and the parties have
agreed to grant each other an extension of time to further respond to their
respective claims so that they may attempt to resolve their disputes amicably. A
mediation session was held on February 23, 2001, and NetCurrents and Holtorf are
presently continuing to discuss the possibilities of a settlement of all claims
between them.

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.

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.


                                    Page 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:  May 15, 2001                         /S/ IRWIN MEYER
                                             --------------------------
                                             Irwin Meyer
                                             Chief Executive Officer


Dated:  May 15, 2001                         /S/ MICHAEL ISCOVE
                                             --------------------------
                                             Michael Iscove
                                             Chief Financial Officer


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