U.S. SECURITIES AND EXCHANGE COMMISSION

                         Washington, D.C.  20594

                                FORM 10-KSB

(Mark One)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR
[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 OR THE TRANSITION PERIOD FROM __________ TO __________

                       Commission file number 0-27145


                         1st Net Technologies, Inc.
            ------------------------------------------------------
            (Exact name of registrant as specified in its charter)

           Colorado                               33-0756798
-------------------------------       ------------------------------------
(State or other jurisdiction of       (I.R.S. Employer Identification No.)
 incorporation or organization)

11415 West Bernardo Court, 2ndd Floor, San Diego, CA           92127
----------------------------------------------------        ----------
    (Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code:  (858) 675-4449

Securities registered under Section 12(b) and/or 12(g) of the Exchange Act:

                     Common Stock, $.001 par value
                     -----------------------------
                            (Title of Class)

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___

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-K contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this form 10-KSB. [  ]

State Issuer's revenues for its most recent fiscal year:  $247,099

The aggregate market value as of April 12, 2001 of voting stock held by
non-affiliates of the Registrant was $735,000 based upon an average of the
closing bid and asked prices on the Pink Sheets market as of that date.

As of April 12, 2001, 6,815,892 shares of Registrant's Common Stock, $.001
par value, were issued and outstanding.

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                              TABLE OF CONTENTS

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                                                                       ----
COVER PAGE


TABLE OF CONTENTS


PART I

  ITEM 1.  DESCRIPTION OF BUSINESS                                        1

  ITEM 2.  DESCRIPTION OF PROPERTY                                        9

  ITEM 3.  LEGAL PROCEEDINGS                                             10

  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS           10


PART II

  ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED
           SHAREHOLDER MATTERS                                           10

  ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS                 10

  ITEM 7.  FINANCIAL STATEMENTS                                          19

  ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS                 19


PART III

  ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
           PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT    21

  ITEM 10. EXECUTIVE COMPENSATION                                        23

  ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
           AND MANAGEMENT                                                24

  ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                25

  ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K                              25





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                                PART I

Item 1.  Description of Business

THIS ANNUAL REPORT ON FORM 10-KSB CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES.  THESE STATEMENTS RELATE TO THE COMPANY'S
FUTURE PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS AND MAY BE IDENTIFIED BY
WORDS LIKE "BELIEVE," "EXPECT," "MAY," "WILL," "SHOULD," "SEEK," OR
"ANTICIPATE," AND SIMILAR EXPRESSIONS.  OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN THIS BUSINESS SECTION
AND UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" BELOW.

     1st Net Technologies, Inc., a Colorado corporation (with our
subsidiaries, "1st Net," "the Company" or "we"), is an Internet products and
services company.  We were incorporated in Colorado on May 14, 1990 as Snow
Eagle Investments, Inc.  On April 2, 1997, we acquired the assets of 1st Net
Technologies, LLC, a California limited liability company. On April 22, 1997,
we amended and restated our Articles of Incorporation to change our name to
1st Net Technologies, Inc. In 1997, we commenced business operations.

     We have two subsidiaries, of which only one is currently active.  In
December 2000, we rescinded a prior Agreement with a company, Mariah
Communications, Inc., that was considered a subsidiary.

     In May 1999, we acquired a controlling interest in The Children's
Technology Group, Inc. ("CTG") (formerly Tummybusters, Inc.), a Nevada
corporation (for the details of this transaction, please see footnote 3 of our
Financial Statements which is located on page F-16 of this document). The
business model of CTG is to build a safe and enjoyable Internet community for
children on-line.  Prior to its acquisition by 1st Net, James R. Watson, Jr.
and Gregory D. Writer, Jr. served as members of the boards of directors of
both CTG and 1st Net.

     In January 1999, we acquired a 100% interest in SSP Management Corp., a
Colorado corporation ("SSP"), from a private company that is considered a
related party. SSP was wholly owned by Entrepreneur Investments, LLC ("EI")
whose sole shareholder, James H. Watson, Jr., was a member of 1st Net's Board
of Directors (for the details of this transaction, please see footnote 3 of
our Financial Statements which is located on page F-16 of this document).
Through our acquisition of that company, we built several investment-oriented
Internet Web sites and on-line newsletter publications.  In December 1999, we
made a strategic decision that EnvoyMail would be a better long term business
focus for us and we decided to divest ourselves of the SSP types of clients
and services and, where applicable, to sell our information-based assets to
companies whose long-term business objective is to participate in that
business.  Accordingly, we completed the sale of some of our online
newsletters to other unrelated companies in February and August 2000 and this
subsidiary is no longer active.

     On December 28, 2000, we entered into a "Technology Rescission and Stock
Purchase and Sale Agreement" with a former subsidiary Mariah Communications,
Inc. Subject to the terms and conditions set forth in this Agreement, the
parties agreed to rescind and cancel a prior "Technology Agreement," dated

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April 15, 1998. Under the Agreement, Mariah agreed to return and deliver all
technology it received under the prior agreement to 1st Net and 1st Net agreed
to return and deliver to Mariah the stock certificate evidencing 4,000,000
Mariah Common Shares owned of record and beneficially by 1st Net. Further, 1st
Net agreed to issue 493,600 newly-issued, restricted shares of common stock to
Mariah in consideration for Mariah's forgiveness our re-payment of the cash
consideration which was part of the prior agreement and, Mariah's forgiveness
of our re-payment and the cancellation of a $90,000 unpaid Loan, together with
all unpaid, accrued interest.

OUR COMPANY

     We provide E-business products and services that enable businesses to
develop and maintain an effective Web presence and to communicate effectively
on the Internet .  Our primary, day to day business focus is on the continued
development and deployment of our email administration and database
management software product called EnvoyMail. Through our subsidiary CTG,
we are continuing to develop and deploy a range of Internet products,
including private label community Web browsers (Web browsers that appear to
users as though they are owned and operated by our customers).

INFORMATIONAL/E-COMMERCE WEB SITES

     In the past, we have been engaged in various types of Internet Web
site development projects that have required a rapid Web site building cycle,
a combination of content and transaction processing capability, interactivity,
and personalization. Today, we still offer some of those services, but only on
a much more limited scale and project scope.

E-MAIL SERVICES AND SOFTWARE

     In 1999, we began development of a new software product called
EnvoyMail. EnvoyMail offers our customers valuable Web-based E-mail
information management tools. EnvoyMail allows subscribers to not only capture
and manage a database of E-mail visitors to their Web site, but also to
communicate effectively with that database, via mass E-mail capabilities. We
charge our customers on a three-tiered level based upon the number of members
in their database, the number of emails sent through our system, and finally
on the amount of personalized services we provide to them during a billing
period.

COMMUNITY-BASED WEB BROWSERS

     In association with our majority-owned subsidiary CTG, Crayon Crawler
helps to protect children in today's computing environment, and provides a
conduit for education, entertainment, and exploration of the Internet without
the worries associated with unsupervised browsing. Crayon Crawler generates
revenues for us through the sale of sponsorships, receipt of subscription fees
and through revenue sharing of income from e-commerce transactions generated
through the electronic community.

     In May 1999, we granted CTG exclusive world-wide marketing rights to the
Crayon Crawler Kid Safe Web Browser and the Kids Browser Marketplace in
exchange for 4,000,000 shares of common stock of CTG.  We determined through
negotiations between CTG's and 1st Net's management and Boards of Directors

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that this was fair consideration to be paid for the licenses.  Based on an
earlier private placement of CTG shares at $2.00 per share, this would give
the licenses a total valuation of $8,000,000.  However, due to the
relationship between the two companies (i.e., the existence of common
management and directors) and the fact that the technology was still in
process at the time of its license and subsequent acquisition by CTG, there
was no accounting value assigned to either the license of the technology or to
its subsequent purchase by CTG.

     In March 2000 we executed a Technology Purchase Agreement with CTG
whereby we sold all of the technology and proprietary rights in the software
previously licensed to CTG. In addition to an accelerated payment of the
200,000 shares of CTG's common stock pursuant to the Technology License
Agreement in May 1999, we received an additional 450,000 shares of CTG's
common stock.

SALE OF INTERNET PORTALS

     In December 1999, we made a strategic decision to divest ourselves of the
types of clients serviced by our subsidiary SSP Management and, where
applicable, sell our information-based assets to companies whose long-term
business objective is to participate in the investor information business.

     On February 23, 2000, SSP sold certain related assets to MarketByte,
L.L.C. ("MarketByte") in exchange for a note receivable totaling $200,000 and
10% of any future non-cash consideration received by Marketbyte in connection
with the assets, through June 2, 2002. Under this Asset Purchase Agreement, in
the event that the consideration received from Marketbyte by the Company
through June 2, 2002 does not equal or exceed $750,000, Marketbyte will be
required to pay the Company the difference between $750,000 and the
consideration previously paid to the Company in connection with the asset
purchase. In February 2000, the Company agreed to amend this Agreement with
MarketByte to read, "Upon expiration of the contract period of this Agreement,
and should Seller (Company) not have received the total sum of Six Hundred
Thousand Dollars ($600,000) in cash and market value securities received or
excess thereof, Buyer (MarketByte) shall agree to renegotiate in order to make
up the difference between those amounts received by Seller and Six Hundred
Thousand Dollars and such shall become due and owing immediately upon such
date and the conclusion of the aforementioned negotiation."

     In August 2000, our two remaining newsletter publications and their
respective databases were sold to a different unaffiliated party for an
aggregate of $115,000 in cash and promissory notes for the remainder of the
approximately $1.5 million aggregate purchase price.  As the result of these
transactions, SSP no longer owns any Internet or printed newsletters or other
publications.

SALES, MARKETING AND DISTRIBUTION

     We sell our products and services to our clients using a combination of
distribution channels, including a direct in-house sales force, online
distribution channels, and strategic relationships.

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DIRECT SALES FORCE

     Our direct sales force focuses primarily on sales to corporate customers.
Our sales representatives develop and pursue leads generated from inquiries on
our Web sites, downloads of our trial products, and other direct marketing and
networking efforts. As of March 31, 2001, we had four (4) individuals,
representing approximately 40% of our workforce, employed in the areas of
sales and marketing

ONLINE DISTRIBUTION CHANNELS

     Our Web site, available at http://www.1stnettech.com, allows users to
get information about the products and services that we offer as well as the
ability to download and purchase certain products through links that reach to
our subsidiary companies' Web sites.

     These online distribution channels provide us with a low-cost, globally
accessible, 24-hour sales channel.

STRATEGIC RELATIONSHIPS

     Where appropriate and advantageous to the Company, we will identify and
develop strategic relationships with other companies that significantly
enhance our ability to develop, market or distribute our products and
services.

MARKETING AGREEMENTS

     NO FEAR, Inc. (http://nofear.com). In April, 1999, we signed a Web Site
Development, Service and Revenue Sharing Agreement with NO FEAR, whereby we
developed a fully functional E-commerce Web site aimed at marketing NO FEAR's
line of over 500 sports apparel products. Per the terms of the original
agreement, we will be paid a commission of 10% on all Net Sales Revenues
generated by the site through November 2003.  Thereafter, the Agreement will
automatically renew for successive twelve (12) month terms unless terminated
by either party with three (3) months notice.  In August 1999, the Agreement
was amended to add an additional 2.5% commission payable to us for cost
overruns associated with the project.  The additional commissions were payable
through August 2000.

MARKETING ACTIVITIES

     Since our inception, we have invested in a broad range of marketing
activities to generate demand, gain corporate brand identity, establish
corporate and subsidiary Web sites and educate the market about our products
and services. These activities have included advertising (print, radio and
online), direct marketing via email, sponsoring seminars for potential
clients, participating in trade shows and conferences, and providing product
and service information through our Web sites. Our marketing programs are
aimed at informing our clients and customers of the capabilities and benefits
of our products and services, increasing brand awareness, stimulating demand
across market segments and encouraging other companies to enter into
co-marketing and distribution arrangements with us.

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PROFESSIONAL ONLINE CORPORATE AWARENESS PROGRAMS

     Prior to December 14, 1999, we provided certain online corporate
awareness programs for publicly traded companies to leverage their worldwide
exposure and improve their online shareholder relations.  As of December 14,
1999, however, we discontinued our involvement in our online corporate
awareness programs through the assignment of this portion of our business to a
former officer who at that time was actively involved in the operation of that
portion of our business.  This person is no longer employed by us. The Company
received no compensation in connection with this assignment.

DEVELOPMENT

     We have been in development of our MindWalker series Web browsers since
August 1998, when we began a relationship with Spirit 32 Development Corp. of
Denver, Colorado ("Spirit 32").  Most of that time has been spent on
developing Crayon Crawler, our Internet safe Web browser aimed at children
ages 5 - 11.

     Effective January 14, 2000 the Company entered into a new agreement
("Technology Purchase and Rescission Agreement") with Spirit 32 that
superceded and rescinded the prior Acquisition Agreement, dated January 21,
1999, between the Company and Spirit 32.

     As part of the January 14, 2000 Agreement, the Company agreed to acquire
all of Spirit 32's rights, title and interest in the Mariah internet protocol
telecomputing project, the MindWalker Series Browsers, the Crayon Crawler
Browser, the Spirit 32 Voice Mailer and all the trade names associated with
the names "CrayonCrawler," "Mindwalker" and "Mariah."  The sale was closed on
February 14, 2000.  At closing, the Company delivered 250,000 shares of its
restricted Common Stock together with cash in the amount of $100,000 and
Spirit 32 transferred all its rights to and interest in the assets listed
above.

     Our former subsidiary, Mariah Communications, Inc., through a
pre-existing arrangement with Spirit 32 Development, had been in the
development of a PC gateway for telecommunications through an IP telephony
switch, which eliminates the need for hardware-based routers.

     We have incurred significant development costs in the production of
EnvoyMail.  Further enhancement of EnvoyMail continues currently.

COMPETITION

     The market for Internet services, software and products is relatively
new, intensely competitive and rapidly changing.  The number of Web sites on
the Internet competing for consumers' attention and spending has proliferated
and we expect that competition will continue to intensify.  We all compete,
directly and indirectly, for advertisers, viewers, members and content
providers.

     We anticipate that the number of direct and indirect competitors will
increase in the future.  Many of our existing competitors, as well as a number
of potential new competitors, have longer operating histories in the Web
market, greater name recognition, larger customer bases and higher amounts of

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user traffic and significantly greater financial, technical and marketing
resources.  Such competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies, make more attractive offers
to potential employees, distribution partners, advertisers and content
providers and may be able to respond more quickly to new or emerging
technologies and changes in Web user requirements.  Further, there can be no
assurance that they will not develop services that are equal or superior to
ours or that they will not achieve greater market acceptance than our product
and service offerings.  Increased competition could also result in price
reductions, reduced margins or loss of market share, any of which could
materially adversely affect our business, results of operations and financial
condition.

     The Web, and 1st Net specifically, also must compete with traditional
advertising media, such as print, radio and television, for a share of
advertisers' total advertising budgets. Web companies and 1st Net would lose
revenue if the Web were not perceived as an effective advertising medium.  In
addition, well-established traditional media companies may acquire, invest or
otherwise establish commercial relationships with our competitors.  Greater
competition resulting from such relationships could have a material adverse
effect on our business and, ultimately, our stock price.  As a result, there
can be no assurance that we will be able to compete successfully against our
current or future competitors or that competition will not have a material
adverse effect on our business, results of operations and financial condition.

INTELLECTUAL PROPERTY

     Our success and ability to compete are dependent to a significant degree
on our proprietary technology.  We rely primarily on state and federal
copyright, trade secret and trademark common law to protect our proprietary
technology.  We have several unregistered trademarks, various unregistered
copyrights and certain licenses of technology with third parties.  We have no
patents or other registered intellectual property, other than certain
trademarks.  The source code for our proprietary software is protected as a
trade secret but not as a formally copyrighted work.  At present, some of our
trademarks or copyrights are not registered with the United States government;
therefore, we do not enjoy the same degree of protection that we might
otherwise have if they were already registered (as registration puts others on
notice that particular copyrights and trademarks are in use and protected).
The Company intends to eventually register all of its proprietary names and
marks.  The loss of any of our unregistered trademarks or copyrights
(particularly source codes) could have a material adverse effect on our
business.

     It is our policy to enter into confidentiality and non-competition
agreements with our associates and generally to control access to and
distribution of our proprietary technology.  Notwithstanding the precautions
taken by us to protect our intellectual property rights, it is possible that
third parties may copy or otherwise obtain and use our proprietary technology
without authorization or otherwise infringe on our proprietary rights.  It is
also possible that third parties may independently develop technologies
similar to those of our own.  Policing unauthorized use of our intellectual
property rights may be difficult, particularly because it is difficult to
control the ultimate destination or security of information transmitted over

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the Internet.  In addition, the laws of foreign countries may afford
inadequate protection of intellectual property rights.

     We may need to engage in litigation in order to enforce our intellectual
property rights in the future or to determine the validity and scope of the
proprietary rights of others.  Such litigation could result in substantial
costs and diversion of management and other resources, either of which could
have a material adverse effect on our business, operating results and
financial condition.  We also use certain third-party technology, such as
Agent(TM) software from Microsoft, and data and content from third parties.
In these license agreements, the licensors have generally agreed to defend,
indemnify and hold us harmless with respect to any claim by a third party that
the licensed software or content infringes any person's proprietary rights.
There can be no assurance that the outcome of any litigation between such
licensors and a third party or between us and a third party will not lead to
royalty obligations for which we are not indemnified or for which such
indemnification is insufficient, or that we will be able to obtain any
additional license on commercially reasonable terms, if at all.

     In the future, we may seek to license additional technology or content in
order to enhance our current features or to introduce new services, such as
certain of the community features we may introduce.  There can be no assurance
that any such licenses will be available on commercially reasonable terms, if
at all.  The loss of or inability to obtain or maintain any of these
technology licenses could result in delays in introduction of new services
until equivalent technology, if available, is identified, licensed and
integrated, which could have a material adverse effect on our business,
results of operations and financial condition.

     Because we license some data and content from third parties, our exposure
to copyright infringement actions may increase because we must rely upon such
third parties for information as to the origin and ownership of such licensed
content.  We generally obtain representations as to the origins and ownership
of such licensed content and generally obtain indemnification to cover any
breach of any such representations.  However, there can be no assurance that
such representations will be accurate or that such indemnification will be
sufficient to provide adequate compensation for any breach of such
representations.  There can be no assurance that infringement or other claims
will not be asserted or prosecuted against us in the future, whether resulting
from our internally developed intellectual property or licenses or content
from third parties.  Any future assertions or prosecutions could materially
adversely affect our business, results of operations and financial condition.
Any such claims, with or without merit, could be time-consuming, result in
costly litigation and diversion of technical and management personnel or
require us to introduce new content or trademarks, develop non-infringing
technology or enter into royalty or licensing agreements.  Such royalty or
licensing agreements, if required, may not be available on acceptable terms,
if at all. In the event of a successful claim of infringement and our failure
or inability to introduce new content or trademarks, develop non-infringing
technology or license the infringed or similar technology on a timely basis,
our business, results of operations and financial condition could be
materially adversely affected.


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GOVERNMENT REGULATION

     The laws and regulations applicable to the Internet and our services are
evolving and unclear and could damage our business.  There are currently few
laws or regulations directly applicable to access to, or commerce on, the
Internet.  Due to the increasing popularity and use of the Internet, it is
possible that laws and regulations may be adopted covering issues such as user
privacy, defamation, pricing, taxation, content regulation, quality of
products and services, and intellectual property ownership and infringement.
Such legislation could expose us to substantial liability, as well as dampen
the growth in use of the Internet, decrease the acceptance of the Internet as
a communications and commercial medium, or require us to incur significant
expenses in complying with any new regulations.

     The European Union has recently adopted privacy and copyright directives
that may impose additional burdens and costs on international operations.  In
addition, several telecommunications carriers, including America's Carriers'
Telecommunications Association, are seeking to have telecommunications over
the Internet regulated by the Federal Communications Commission ("FCC"), in
the same manner as other telecommunications services.  Because the growing
popularity and use of the Internet has burdened the existing
telecommunications infrastructure and many areas with high Internet usage have
begun to experience interruptions in phone services, local telephone carriers
have petitioned the FCC to regulate the Internet and to impose access fees.
Increased regulation or the imposition of access fees could substantially
increase the costs of communicating on the Internet, potentially decreasing
the demand for our service.

     A number of proposals have been made at the federal, state and local
level that would impose additional taxes on the sale of goods and services
through the Internet.  Such proposals, if adopted, could substantially impair
the growth of electronic commerce and could adversely affect us.  Also, the
United States Congress ("Congress") recently enacted the Digital Millennium
Copyright Act, which is intended to reduce the liability of online service
providers for listing or linking to third-party Web sites that include
materials that infringe copyrights.

     We are aware of this legislation, but cannot currently predict the
effect, if any, that this legislation will have on our business.  There can be
no assurance that such legislation will not add significant additional costs
to our business or subject us to additional liabilities.  Moreover, the
applicability to the Internet of existing laws governing issues such as
property ownership, copyright, defamation, obscenity and personal privacy is
uncertain.  We may be subject to claims that our services violate such laws.
Any new legislation or regulation in the United States or abroad or the
application of existing laws and regulations to the Internet could damage our
business and cause the price of our Common Stock to decline.  Due to the
global nature of the Internet, it is possible that the governments of other
states and foreign countries might attempt to regulate its transmissions or
prosecute us for violations of their laws.  We might unintentionally violate
such laws.  Such laws may be modified or new laws may be enacted in the
future.  Any such development could damage our business.

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EMPLOYEES

     As of March 31, 2001, we employed (9) full-time employees and (1) part-
time.  We also, from time to time, may utilize independent contractors for
various related or necessary functions.  None of our employees is represented
by a labor union. We have not experienced any work stoppages and consider our
employee relations to be satisfactory.

ITEM 2.  Description of Property.

     The Company presently maintains its executive offices at 11415 W.
Bernardo Ct., 2nd Floor, San Diego, California 92127 in 4,000 sq. ft. of
leased office space at a rate of $7,600 per month on a three-year lease
entered into on November 1, 2000. This lease calls for rate increase of $228
per month in the second year and $235 per month in the third year.  Its
subsidiary, CTG, presently maintains their executive and administrative
offices at 11423 West Bernardo Court, San Diego, California 92127.  The space
is approximately 8,000 square feet. The space is leased from EI.  EI is
controlled by James H. Watson, Jr., our Chief Executive Officer, Chairman and
a Director of 1st Net and CTG. CTG signed a three-year lease from November 1,
2000 to October 31, 2003 at a monthly rate of $16,400, increasing to $17,220
on November 1, 2001 and $18,040 on November 1, 2002.

     Our property and equipment as of December 31, 2000, including equipment
under capital leases, consists of the following:

  Office Furniture and Fixtures and Equipment............... $ 191,046
  Computer Equipment and Peripherals........................   127,686
  Tradeshow Displays .......................................    55,960
  Leasehold Improvements....................................    22,559
                                                              --------
          Total.............................................   397,251

  Less Accumulated Depreciation.............................  (133,812)
                                                              --------
          Net Property and Equipment........................  $263,439
                                                              ========

     The future minimum annual aggregate rental payments required under both
capital and operating leases that have initial or remaining non-cancelable
lease terms in excess of one year are as follows:

YEARS ENDING DECEMBER 31,
-------------------------
2001........................................................  $337,541
2002........................................................   353,976
2003........................................................   178,274
2004........................................................    46,527
2005........................................................    10,880
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          Total.............................................  $927,198
                                                            ==========

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ITEM 3.  Legal Proceedings.

     The Securities and Exchange Commission (the "Commission") had been
investigating the business affairs of our wholly-owned subsidiary, SSP
Management, Inc. ("SSP").  By letter dated October 31, 2000, the Commission
advised SSP that the investigation had terminated and that, at this time, no
further enforcement recommendation is anticipated.

ITEM 4.   Submission of Matters to a Vote of Security Holders

     We did not submit any matters to a vote of security holders during the
quarter ended December 31, 2000.

                               PART II

ITEM 5.  Market for Common Equity and Related Shareholder Matters.

     Although a trading market for our Common Stock has at times existed in
the past during periods while our shares were quoted on the OTC Bulletin
Board, it is currently quoted in the "Pink Sheets" and only sporadically
traded. Consequently, no meaningful market information is currently available.

     To date, we have paid no dividends and do not anticipate paying
dividends until we receive revenues in an amount which management determines
to be sufficient.

     The number of record holders of the Company's $.001 par value Common
Stock at March 31, 2001, was approximately 1,500.

     During the quarter ended December 31, 2000, we issued securities in an
unregistered transaction as described below.

     In December 2000 we issued 493,600 shares of restricted common stock to
Mariah Communications, Inc., a former subsidiary ("Mariah") in consideration
for Mariah's forgiveness of a Technology Cash Consideration payment in the
amount of $150,000, and a $90,000 loan including accrued interest.

     In connection with this transaction we relied on the exemption provided
by Section 4(2) of the Securities Act.  The investor was given complete
information concerning 1st Net, the certificate issued contained a restrictive
legend, and stop transfer orders were entered concerning the shares.

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

     This discussion may contain forward-looking statements that involve risks
and uncertainties. Our actual results may differ materially from the results
discussed in such forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in "Risks and
Uncertainties" below. We undertake no obligation to release publicly the
results of any revisions to these forward-looking statements to reflect events
or circumstances arising after the date hereof.

                                    10
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<PAGE>
OVERVIEW

     1st Net derives its revenue from services provided to the Internet
community, both business to business and business to consumer.  Also, 1st Net
and our majority owned subsidiary CTG have developed certain proprietary
technologies that management feels will in the future increase our overall
capability to generate revenue and add value for our shareholders.  The
Company now maintains two subsidiary corporations.

     Our historical financial information contained in this registration
statement is that of 1st Net Technologies, Inc. and its subsidiary
corporations on a consolidated basis.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000 AND
DECEMBER 31, 1999

     Revenue

     Revenue is recognized when earned.  The Company's revenue recognition
policies are in compliance with all applicable accounting regulations,
including Securities and Exchange Commission Staff Accounting Bulletin No.
101, Revenue Recognition, American Institute of Certified Public Accountants
(AICPA) Statement of Position (SOP) 97-2, Software Revenue Recognition, and
SOP 98-9, Modification of SOP 97-2, with Respect to Certain Transactions.
Revenues from technology consulting, user fees and marketing services are
recognized ratably over the contract period in accordance with the period in
which the services are performed. Revenues attributable to undelivered
elements, including technical support, are recognized ratably on a
straight-line basis over the contract period.

     The Company's revenues from technology consulting, user fees and
marketing services during 2000 decreased $1,513,014 or 86.0% from the prior
year.  The decrease was primarily attributable to the elimination of the
Company's prior, dominant business activities in the areas of corporate public
relations and the subsequent sale of the assets of SSP. CTG contributed
revenue of $80,240 in 2000 versus $65,209 in 1999.  Because the Company made a
strategic decision late in 1999 to redirect its efforts away from the business
of SSP, revenue levels in 2000 have been significantly lower.  Included in
revenues in 1999 were stocks received for services totaling $348,798 (there
were no such revenues in 2000). The Company recognized related party revenues
totaling $501,121 during 1999.

     Operating Expenses

     Operating expenses consist of product development, marketing and
general and administrative expenses.  Operating expenses totaling $5,348,034
in 2000 decreased $3,076,989 or 36.5% from $8,425,023 in 1999.  Included in
operating expenses for 2000 were significantly higher levels of expenses for
CTG totaling $3,274,211.  Mariah and SSP operating expenses totaled $19,590
for 2000, while 1st Net's operating expenses totaled $2,054,233.

     Included in the total of operating expenses for 1999 were
charges related to the issuance or future issuance of stock for employees and
outsiders totaling $2,431,400.

                                    11
<PAGE>

<PAGE>
     Other Income and Expense

     Included in other income were gains from sales of investments totaling
$1,220,877 in 2000 compared to $919,518 in 1999.  The Company has now almost
completely divested itself of securities obtained in the course of business
during 1997 through 1999.  The Company wrote down the remainder of its
investment in LaForza during 2000, resulting in a charge to operations of
$100,000.  The Company had previously realized a charge of $162,600 in 1999.

     Interest expense totaled $82,333 in 2000 and included interest paid to EI
totaling $35,000.  The remaining interest expense arose from borrowings under
notes payable and amounts recognized in connection with capital leases.

     The Company realized a gain from the sale of its newsletters totaling
$663,962 in 2000.  Interest and dividend income arose primarily from interest
income recognized in connection with the Marketbyte sale noted above.

LIQUIDITY AND CAPITAL RESOURCES

     Our greatest need for cash is payment of salaries and benefits to our
employees and fees to our outside consultants. Through December 31, 2000, we
expended significant effort and committed substantial resources toward the
continued development of CTG's Crayon Crawler and 1st Net's EnvoyMail product
lines.  Management believes that these investments will begin showing a return
to the Company in the future in the form of increased revenues.  However, we
are unable to predict with any degree of certainty the future results of our
operations, and accordingly, make no assurance as to future cash flows from
these products.

     During the first quarter of 2000, SSP concluded a sale of its newsletter
OTCjournal.com for a $200,000 note receivable and 10% of the gross non-cash
compensation the buyer realizes from the operation of OTCjournal.com through
June 2002.  In the event that the Company does not realize a minimum of
$750,000 from the sale of OTCjournal.com through June 2002, the buyer is
required to pay the Company $750,000, which was later amended to $600,000,
less all proceeds previously received in connection with OTCjournal.com.
Payments of $50,000 made in connection with this note receivable are due on
January 1st and June 1st during 2001 and 2002.

     In May 2000, CTG sold 2,000,000 shares of preferred stock and warrants to
purchase Common Stock to an unrelated investor for net proceeds totaling
$3,593,525.  Additionally, 1st Net realized proceeds totaling $114,570 from
the sale of 42,356 shares of CTG during January 2000.  Management believes
that CTG will have to raise $3.0 million in gross cash proceeds in the first
half of 2001 in order to have sufficient capital to advance the business in
accordance with its plans through the end of 2001.  This funding would allow
it to sharply increase its selling and marketing expenditures and expand
product development efforts to enhance existing products and add new ones.
However, there can be assurance that CTG will be able to obtain such funding.

     At December 31, 2000, the Company had cash and a net working capital
deficit of $553,388 and $467,805, respectively.  CTG's cash balance made up
substantially all of the cash on-hand at December 31, 2000 and 1st Net owned
59.8% of the outstanding common stock of CTG as of that date.  On a going
forward basis, 1st Net and its 100% owned subsidiary SSP continue to maintain

                                    12
<PAGE>

<PAGE>
holdings of restricted and marketable securities. It is impossible however to
ascertain the actual amounts that will be eventually realized by the Company
when these securities are sold.  Management is not sure that proceeds from the
sale of investments held in addition to cash payments to be received from the
transactions described above, will be sufficient to make up projected
shortfalls from the results of its operations through the next twelve months.
Accordingly, the Company is currently in the process of raising additional
equity to make up this shortfall.

RISKS AND UNCERTAINTIES

     The risks and uncertainties described below are those that we currently
deem to be material and that we believe are specific to our Company and our
industry.  If any of these or other risks actually occurs, the trading price
of our Common Stock could decline.  We have a history of losses and absent the
realized gains on securities held and sold and the sale of assets during 2000,
we would have suffered a significantly greater loss in 2000.  Also, because we
expect our operating expenses to continue into the future, we may never be
profitable.  We had an accumulated deficit of $8,705,764 at December 31, 2000.
We incurred net losses of $1,931,871 and $5,767,253 for the years ended
December 31, 2000 and 1999, respectively.  We expect to continue to incur
significant net losses until we are able to generate sufficient revenues from
1st Net's EnvoyMail product and services and/or CTG's community based Web
browser-related products and services.  While we are unable to predict
accurately our future operating expenses, we currently expect these expenses
to increase substantially, as we, among other things:

     *  expand our selling and marketing activities;

     *  increase our development efforts to upgrade existing and develop new
        products and technologies;

     *  upgrade our operational and financial systems, procedures and
        controls; and

     *  hire additional necessary personnel.

     Some of the risks and uncertainties in connection with the Company's
business include the following:


If we fail to generate revenues and achieve profitability, we will not
succeed.

     We will need to significantly increase our revenues to achieve and
maintain profitability.  If we fail to generate significant revenues from
software licensing of 1st Net's EnvoyMail or from subscription fees to CTG's
community based browsers and related sales of merchandise and advertising
revenues, we will continue to experience losses indefinitely.  We may not be
able to achieve or maintain profitability.  We also may fail to accurately
estimate and assess our increased operating expenses as we grow.  If our
operating expenses exceed our expectations, our financial performance will be
adversely affected, which could cause the price of our Common Stock to
decline.  We are an early-stage company with an unproven business model, which
makes it difficult to evaluate our current business and future prospects.  We

                                    13
<PAGE>

<PAGE>
have only a limited operating history upon which to base an evaluation of our
current business and future prospects.

We do not know if there is a viable market for our existing products and
services.

     We only recently began focusing on the EnvoyMail product.  Also, CTG is
still in the early stages of procuring distribution agreements for its
community Web browsers.  As a result, the revenue and income potential of our
business and our market are unproven. Because of our limited operating history
and because the markets for the Company's products are relatively new and
rapidly evolving, we have limited insight into trends that may emerge and
affect our business.  We may make errors in predicting and reacting to
relevant business trends, which could harm our business.


We are much less likely to succeed than a business with an established
operating history.

     You should consider an investment in our stock in light of the risks,
uncertainties and difficulties frequently encountered by early-stage companies
in new and rapidly evolving markets such as ours.  We may not be able to
successfully address any or all of these risks.  Failure to adequately do so
could cause our business, results of operations and financial condition to
suffer.  Our future financial performance also will depend, in part, on our
ability to diversify our offerings by successfully developing, introducing and
gaining customer acceptance of new products and enhanced versions of existing
products.  We cannot assure you, however, that we will be successful in
achieving market acceptance of any new products that we develop or of enhanced
versions of existing products.  Any failure or delay in diversifying our
existing offerings could harm our business, results of operations and
financial condition.

     The market for CTG's community based browsers is emerging and if we are
not successful in promoting the benefits to children of our products, our
growth may be limited.  In addition, there may be a time-limited opportunity
to achieve and maintain a significant share of the market for children safe
Internet communities due to the emerging nature of this market and the
substantial resources available to our existing and potential competitors.


Because we don't have an established operating history, we are not sure if our
product distribution methods will work.

     We currently sell our products both indirectly and directly.  We intend
to primarily market 1st Net's EnvoyMail product directly with a sales force
built internally.  Due to the new nature of the product, its market potential
is uncertain.  Also, if 1st Net is not able to attract and retain effective
members of its sales force, its prospects for realizing profits from the
licensing of EnvoyMail will be diminished.

     For CTG's community based Web browsers, we intend to rely on distribution
agreements with large consumer product companies that will include our Web
browser with their product.  We will custom brand the software according to
the specifications of our distribution partners.  We will depend heavily on

                                   14
<PAGE>

our distribution partners to get our software in the hands of the targeted
consumer market.  We will need to enter into new relationships to increase our
current and future market share and revenue.  We cannot assure you that we
will be able to enter into new relationships, or that any new relationships
will be available on commercially reasonable terms.  If we are unable to enter
into new relationships, we would not have a viable and cost effective channel
to reach our target market and our operating results could suffer.  Our
reliance on our distribution partners could result in reduced revenue growth
because we have little control over them.  None of these parties is obligated
to continue distributing our products.


Our competitors may keep us from being successful.

     We face increasing competition from better-established companies that may
have significantly greater resources, which could prevent us from increasing
revenue or achieving profitability. The market for our products is intensely
competitive and is likely to become even more so in the future.  Increased
competition could result in pricing pressures, reduced sales, reduced margins
or the failure of either EnvoyMail or our community based browsers to achieve
or maintain more widespread market acceptance, any of which would have a
material adverse effect on our business, results of operations and financial
condition.

     Many of our current and potential competitors could enjoy substantial
competitive advantages, such as:

     *  greater corporate name recognition and larger marketing budgets and
        resources;
     *  established marketing relationships and access to larger customer
        bases; and
     *  substantially greater financial, technical and other resources.

     As a result, they may be able to respond more quickly and effectively
than we can to new or changing opportunities, technologies, standards or
customer requirements.  Also, such competitors may be able to undertake more
extensive marketing campaigns, adopt more aggressive pricing policies, make
more attractive offers to potential employees, distribution partners,
advertisers and content providers and may be able to respond more quickly to
new or emerging technologies and changes in Web user requirements.  Further,
there can be no assurance that they will not develop services that are equal
or superior to ours or that they achieve greater market acceptance than our
product and service offerings.  For all of the foregoing reasons, we may not
be able to compete successfully against our current and future competitors.


In order to be successful we will need to grow, and problems associated with
growth may eventually cause us to fail.

     Our future success will depend in part upon the ability of our senior
management to manage growth effectively. This will require us to hire and
train additional personnel to manage our expanding operations. In addition, we
will be required to continue to improve our operational, financial and
management controls and our reporting systems and procedures.  If we fail to

                                    15
<PAGE>

<PAGE>
successfully manage our growth, we will be unable to execute our business
plan.  If we acquire any companies or technologies in the future, they could
prove difficult to integrate, disrupt our business, dilute shareholder value
and adversely affect our operating results.  We may acquire or make
investments in complementary companies, services and technologies in the
future.  As a result, if we fail to properly evaluate and execute acquisitions
or investments, our business and prospects may be seriously harmed.


If we lose our key personnel, it will be very difficult to find any suitable
replacements.

     We are dependent on our employees and management, and the loss of any key
member of this team may prevent us from implementing our business plan in a
timely manner.  Our success depends largely upon the continued services of our
executive officers and other key management and development personnel.  We are
also substantially dependent on the continued services of our existing
engineering personnel and our outside development partners because of the
complexity of our products and technologies.  We do not have employment
agreements with a majority of our executive officers, key management or
development personnel and, therefore, they could terminate their employment
with us at any time without penalty.  We do not maintain key person life
insurance policies on any of our employees.  The loss of one or more of our
key employees could seriously harm our business, results of operations and
financial condition. We cannot assure you that in such an event we would be
able to recruit personnel to replace these individuals in a timely manner, or
at all, on acceptable terms.


If we don't adequately protect our technology, it is much less likely that we
will be able to succeed.

     Our success and ability to compete are dependent to a significant degree
on our proprietary technology.  We rely primarily on state and federal
copyright, trade secret and trademark common law to protect our proprietary
technology.  We have several unregistered trademarks, various unregistered
copyrights and certain licenses of technology with third parties.  We have no
patents or other registered intellectual property, other than certain
trademarks.  The source code for our proprietary software is protected as a
trade secret but not as a formally copyrighted work.  At present, some of our
trademarks or copyrights are not registered with the United States government;
therefore, we do not enjoy the same degree of protection that we might
otherwise have if they were already registered (as registration puts others on
notice that particular copyrights and trademarks are in use and protected).
The Company intends to eventually register all of its proprietary names and
marks.  The loss of any of our unregistered trademarks or copyrights
(particularly source codes) could have a material adverse effect on our
business.

     It is our policy to enter into confidentiality and non-competition
agreements with our associates and generally to control access to and
distribution of our proprietary technology.  Notwithstanding the precautions
taken by us to protect our intellectual property rights, it is possible that
third parties may copy or otherwise obtain and use our proprietary technology
without authorization or otherwise infringe on our proprietary rights.  It is

                                    16
<PAGE>

<PAGE>
also possible that third parties may independently develop technologies
similar to those of our own.  Policing unauthorized use of our intellectual
property rights may be difficult, particularly because it is difficult to
control the ultimate destination or security of information transmitted over
the Internet.  In addition, the laws of foreign countries may afford
inadequate protection of intellectual property rights.


If we have to go to court and litigate for any reason, it will be time
consuming and expensive.

     We may need to engage in litigation in order to enforce our intellectual
property rights in the future or to determine the validity and scope of the
proprietary rights of others.  Such litigation could result in substantial
costs and diversion of management and other resources, either of which could
have a material adverse effect on our business, operating results and
financial condition.  We also use certain third-party technology, such as MS
Agent (TM) software from Microsoft, and data and content from third parties.
In these license agreements, the licensors have generally agreed to defend,
indemnify and hold us harmless with respect to any claim by a third party that
the licensed software or content infringes any person's proprietary rights.
There can be no assurance that the outcome of any litigation between such
licensors and a third party or between us and a third party will not lead to
royalty obligations for which we are not indemnified or for which such
indemnification is insufficient, or that we will be able to obtain any
additional license on commercially reasonable terms, if at all.


If we need to obtain or protect licenses for our business, it will be
expensive.

     In the future, we may seek to license additional technology or content in
order to enhance our current features or to introduce new services, such as
certain of the community features we may introduce. There can be no assurance
that any such licenses will be available on commercially reasonable terms, if
at all.  The loss of or inability to obtain or maintain any of these
technology licenses could result in delays in introduction of new services
until equivalent technology, if available, is identified, licensed and
integrated, which could have a material adverse effect on our business,
results of operations and financial condition.

     Because we license some data and content from third parties, our exposure
to copyright infringement actions may increase because we must rely upon such
third parties for information as to the origin and ownership of such licensed
content.  We generally obtain representations as to the origins and ownership
of such licensed content and generally obtain indemnification to cover any
breach of any such representations.  However, there can be no assurance that
such representations will be accurate or that such indemnification will be
sufficient to provide adequate compensation for any breach of such
representations.  There can be no assurance that infringement or other claims
will not be asserted or prosecuted against us in the future, whether resulting
from our internally developed intellectual property or licenses or content
from third parties.  Any future assertions or prosecutions could materially
adversely affect our business, results of operations and financial condition.

                                    17
<PAGE>

<PAGE>
Any such claims, with or without merit, could be time-consuming, result in
costly litigation and diversion of technical and management personnel or
require us to introduce new content or trademarks, develop non-infringing
technology or enter into royalty or licensing agreements.  Such royalty or
licensing agreements, if required, may not be available on acceptable terms,
if at all. In the event of a successful claim of infringement and our failure
or inability to introduce new content or trademarks, develop non-infringing
technology or license the infringed or similar technology on a timely basis,
our business, results of operations and financial condition could be
materially adversely affected.

We are not sure of the scope or the impact on us of all of the laws, rules and
regulations that are likely to affect our business in the future.

     The laws and regulations applicable to the Internet and our services are
evolving and unclear and could damage our business. There are currently few
laws or regulations directly applicable to access to, or commerce on, the
Internet. Due to the increasing popularity and use of the Internet, it is
possible that laws and regulations may be adopted, covering issues such as
user privacy, defamation, pricing, taxation, content regulation, quality of
products and services, and intellectual property ownership and infringement.
Such legislation could expose us to substantial liability, as well as dampen
the growth in use of the Internet, decrease the acceptance of the Internet as
a communications and commercial medium, or require us to incur significant
expenses in complying with any new regulations.

     The European Union has recently adopted privacy and copyright directives
that may impose additional burdens and costs on international operations.  In
addition, several telecommunications carriers, including America's Carriers'
Telecommunications Association, are seeking to have telecommunications over
the Internet regulated by the Federal Communications Commission ("FCC"), in
the same manner as other telecommunications services.  Because the growing
popularity and use of the Internet has burdened the existing
telecommunications infrastructure and many areas with high Internet usage have
begun to experience interruptions in phone services, local telephone carriers,
have petitioned the FCC to regulate the Internet and to impose access fees.
Increased regulation or the imposition of access fees could substantially
increase the costs of communicating on the Internet, potentially decreasing
the demand for our service.

     A number of proposals have been made at the federal, state and local
level that would impose additional taxes on the sale of goods and services
through the Internet.  Such proposals, if adopted, could substantially impair
the growth of electronic commerce and could adversely affect us.  Also, the
United States Congress ("Congress") recently enacted the Digital Millennium
Copyright Act, which is intended to reduce the liability of online service
providers for listing or linking to third-party Web sites that include
materials that infringe copyrights.

     We are aware of this legislation, but cannot currently predict the
effect, if any, that this legislation will have on our business.  There can be
no assurance that this legislation will have significant additional costs on
our business or subject us to additional liabilities.  Moreover, the
applicability to the Internet of existing laws governing issues such as

                                     18
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<PAGE>
property ownership, copyright, defamation, obscenity and personal privacy is
uncertain.  We may be subject to claims that our services violate such laws.
Any new legislation or regulation in the United States or abroad or the
application of existing laws and regulations to the Internet could damage our
business and cause the price of our Common Stock to decline.  Due to the
global nature of the Internet, it is possible that the governments of other
states and foreign countries might attempt to regulate its transmissions or
prosecute us for violations of their laws.  We might unintentionally violate
such laws.  Such laws may be modified, or new laws may be enacted, in the
future.  Any such development could damage our business.

     The securities industry in the United States is subject to extensive
regulation under both federal and state laws.  In addition, the Securities and
Exchange Commission (the "Commission"), the NASD, various stock exchanges, and
other regulatory bodies, such as state securities commissions, require strict
compliance with their rules and regulations.  As a matter of public policy,
regulatory bodies are charged with safeguarding the integrity of the
securities and other financial markets and with protecting the interests of
customers participating in those markets.  Our failure to comply with any of
these laws, rules or regulations could result in censure, fine, the issuance
of cease-and-desist orders, any of which could have a material adverse effect
on our business, financial condition and operating results.

     Because the equity securities that we currently hold amount to more than
40% of our total assets, we may be deemed to be an "Investment Company" and be
required to register under the Investment Company Act of 1940 (the "Act"). We
view this situation to be an anomaly, however, and we do not intend to be
engaged in the business of investing, reinvesting owning, holding or trading
in securities. We intend to rectify this situation within the next twelve
months so that the amount of our equity securities will not exceed 40% of our
assets.  Our Board of Directors has adopted a resolution to take this action.
In the event that we are unsuccessful (or in the event that this situation
occurs more than once in any three year period), it is likely that we would be
forced to register under the Act which would significantly increase out
regulatory burdens and professional fees.

ITEM 7.  Financial Statements

     Financial Statements are included on Pages F-1 through F-19.

ITEM 8.  Changes in and Disagreements With Accountants on Accounting and
         Financial Disclosure.

     Our independent accounting firm, Bewley, Argy & Company, San Diego,
California, resigned in July, 1999.  Bewly, Argy & Company's report on our
1997 financial statements and audit report on our 1998 financial statements
did not contain an adverse opinion or disclaimer of opinion, or modification
of the type required to be disclosed in this Item 3.  The decision to change
accountants was approved by the board of directors. There have been no
disagreements with Bewly, Argy & Company and management of the type required
to be reported under this Item 3 since the date of Bewly, Argy & Company's
engagement.

     By letter dated April 14, 2000, our former independent certified
accountants, Corbin & Wertz, informed us that they were resigning as our

                                   19
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independent certified accountants effective April 14, 2000.  The letter states
that the reason for the resignation is that we could not come to an agreement
with Corbin & Wertz on the scope of the audit work to be performed by them on
the December 31, 1999 audit.  In addition, Corbin & Wertz stated that they
were also withdrawing their previously issued opinion on the separate April
30, 1999 financial statements of Children's Technology Group, Inc., our
majority-owned subsidiary.

     After Corbin & Wertz had commenced their audit of our consolidated
financial statements, they informed us that the audit would be more work than
originally anticipated because of the state of our financial records and the
need to expand audit scope to comply with Statement of Auditing Standards No.
82 relating to the state of our financial records and an enforcement
investigation commenced by the Securities and Exchange Commission with respect
to certain aspects of our business, and informed us that they would need to
increase their fees accordingly.  We could not come to an agreement with
Corbin & Wertz with respect to the amount of the increase in fees, and a
decision was mutually made to terminate the relationship.  Our Board of
Directors discussed the problem with Corbin & Wertz, and we have authorized
Corbin & Wertz to respond fully to inquiries from the new certified public
accounting firm regarding any matters deemed appropriate by the new auditors,
including, but not limited to, the scope of the audit.

      Corbin & Wertz's report on the Children's Technology Group, Inc.'s
financial statements for the period of inception (July 30, 1998) through April
30, 1999 contained a going concern paragraph but otherwise did not contain a
disclaimer of opinion and was not qualified or modified as to uncertainty,
audit scope or accounting principles.  Other than the Children's Technology
Group, Inc. report, Corbin & Wertz has never issued any report on any
financial statements for us or any of our parents or subsidiaries.  During our
two most recent fiscal years and the interim period up to the date of
resignation, there were no disagreements between us and Corbin & Wertz that
are required to be disclosed under Item 3-04(a)(1)(iv) of Regulation S-K, and
there were no reportable events involving Corbin & Wertz as described under
paragraphs (A) through (D) of Item 3-04(a)(1)(iv) of Regulation S-K.

     Subsequent to the resignation of Corbin & Wertz, we re-engaged Argy &
Company as our independent accountants.

     On March 28, 2001, we dismissed Argy & Company as our principal
accountant.  The decision to change accountants was approved by our Board of
Directors.

     Neither of the reports of Argy & Company on our financial statements for
each of the past two fiscal years ended December 31, 1999 and December 31,
2000 contained an adverse opinion or disclaimer of opinion, nor was any such
report modified as to uncertainty, audit scope or accounting principles.  We
do not believe that there were any disagreements with Argy & Company on any
matter of accounting scope or procedure during the subsequent interim period
through March 28, 2001, which, if not resolved to Argy & Company's
satisfaction, would have caused Argy & Company to make reference to the
subject matter of the disagreement(s) in connection with its reports.

     On March 28, 2001, we engaged Cordovano and Harvey, P.C. as our new
independent accountants.  During the two most recent fiscal years and through

                                    20
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<PAGE>
March 28, 2001, we have not consulted with Cordovano and Harvey, P.C.
regarding either (i) the application of accounting principles to a specific
transaction, either completed or proposed; or consulted with Cordovano and
Harvey, P.C. regarding the type of audit opinion that might be rendered on our
financial statements (Cordovano and Harvey, P.C. has not provided us with any
reports or advice, either written or oral, that would be an important factor
in reaching a decision as to an accounting, auditing or financial reporting
issue); or (ii) any matter that was either the subject of a disagreement, as
that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related
instructions to Item 304 of Regulation S-K, or a reportable event, as that
term is defined in Item 304(a)(1)(iv) of Regulation S-K.  We did, however,
consult with Cordovano and Harvey, P.C. regarding our responses to SEC
comments to our Form 10-SB Amendments #2 and #4.

                                 PART III

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

     The Directors and Officers of the Company are as follows:

          Name                Age       Positions and Offices Held
          ----                ---       --------------------------

     James H. Watson, Jr.     38       President, Chairman, Chief Executive
                                       Officer, Chief Financial Officer and
                                       Director

     Scott B. Baker           32       Senior Vice President Sales and
                                       Marketing and Director

     Scott Quattromani        31       Secretary, Treasurer, Chief
                                       Operations Officer and Director

     Steve Weingartner        45       Chief Technology Officer


     There is no family relationship between any Director or Executive Officer
of the Company.

     The Company presently has no committees.

     Set forth below are the names of all Directors and Executive Officers of
the Company, all positions and offices with the Company held by each such
person, the period during which he has served as such, and the business
experience of such persons during at least the last five years:

     James H. Watson, Jr., 38, has served as our President since December 2000
and as our Chief Executive Officer and Chairman of our Board of Directors
since June 30, 1999. He has been a member of our Board since 1997.  Mr. Watson
currently devotes 40-50% of his time to our business.  Mr. Watson is Founder
and the General Managing Member of Entrepreneur Investments, LLC (EI), a
private financial consulting and investment firm that specializes in the
unique needs of development stage companies. Started in 1996, EI has worked

                                    21
<PAGE>

<PAGE>
hand in hand with both public and private companies, assisting them with such
critical issues as corporate capitalization, mergers/acquisitions, management
placement, and business strategy.  From 1995 - 1996, he was a Founder and
Chief Operating Member of N8 Concepts, LLC, a private company that specialized
in sports-related trademark licensing and event management. Currently, Mr.
Watson is the Chairman of the Board and CEO of 1st Net Technologies, Inc., as
well as a member of the Board of Directors of its subsidiary, CTG. Mr. Watson
serves on the Board of Directors of Nicklebys.com, Inc., an Internet art
auction company.  Mr. Watson graduated from the University of Tennessee at
Chattanooga in 1985 with a B.S. in Political Science.

     Scott B. Baker, 32, is Senior Vice President/Director of Sales and
Marketing of 1st Net Technologies, Inc. Mr. Baker currently devotes 100% of
his time to the business of the Company.  He is responsible for the strategic
direction of the Company's sales and marketing efforts.  He has been employed
by us since June 19, 2000.  Mr. Baker was an original founder of 1st Net
Technologies, LLC. before that company was sold to an investor group in 1996.
Under his direction, 1st Net {LLC} helped build one of the first Internet
shopping malls.  He was employed by 1st Net Technologies, LLC from October
1995 to April 1997. From May 5, 1997 until approximately June 18, 2000, Mr.
Baker was the Internet Marketing Strategist for MicroAge Technology Services,
a Fortune 500 computer company.  Mr. Baker originally joined MicroAge working
for ECadvantage. There he was a consultant helping MicroAge's national
branches integrate their electronic commerce solutions. Over the years, Mr.
Baker has also served in the capacity of expert witness in the accident
reconstruction industry. He has worked directly with attorneys and government
entities to offer expert advice on how automobile collisions occurred. Mr.
Baker holds a B.S. Degree in Business and Marketing from San Diego State
University.

     Scott Quattromani, 31, joined 1st Net in November 2000 and serves as our
Secretary, Treasurer, and Chief Operations Officer, and as a member of the
Board of Directors.  Mr. Quattromani spends 90% of his time on the business of
the Company. He oversees 1st Net's corporate, transactional, and securities
needs and manages our intellectual property portfolio.  After serving four
years in the U.S. Navy's Special Warfare Community, he graduated summa cum
laude with a Bachelor of Arts Degree in Government and Political Science from
George Mason University in 1995 and earned his law degree from the University
of San Diego School of Law in 1997, and LLM in Taxation from the University of
San Diego School of Law in 1998.  As a BIA Fellow, he also completed extensive
coursework in financial analysis at the University of San Diego School of
Business, and was awarded the Ernest W. Hahn Scholarship, the Home Builders
Council Scholarship, and the Burnham Foundation Scholarship.  Mr. Quattromani
began his legal career as a tax consultant with Ernst & Young LLP, and later
as an associate with Procopio Cory Hargreaves & Savitch LLP, San Diego's
premiere business and technology law firm.  Mr. Quattromani was first admitted
into the practice of law in California in 1998 and is also licensed to appear
before the U.S. District Court, Southern District of California and the United
States Tax Court.

     Steve Weingartner, 45, became our Chief Technology Officer in December,
2000.  Mr. Weingartner currently devotes 100% of his time to our business. He
is responsible for converting our client needs and marketing wants into
reality through our technology portfolio.  From 1996 to early 2000, Steve was

                                    22
<PAGE>

<PAGE>
the Information Systems Manager for Asset Recovery Concepts, where he managed
their medium sized LAN / WAN and administered their internal MS-SQL & MS-
Exchange servers. He also did all development, training and implementation of
enhancements to the company's ERP system. More recently, Steve worked at
Darwin Networks in San Diego as the IS Manager providing implementation,
training and internal technical support for their Great Plains manufacturing
software. He has experience in both IT management and application development.
In addition to IT, Steve has had many years of business experience mostly in
manufacturing. Steve holds a BSBA in Management Science from Chapman
University.

SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE

     Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and certain written representations, no persons who were either a
director, officer, or beneficial owner of more than 10% of the Company's
Common Stock failed to file on a timely basis reports required by Section
16(a) of the Exchange Act during the most recent fiscal year, except that
Scott B. Baker, Scott Quattromani and Steve Weingartner did not file Form 3's.

ITEM 10.  Executive Compensation.

     The following table sets forth the annualized base salary that we paid to
our Chief Executive Officer.  Mr. James H. Watson became our CEO on June 29,
1999 and did not receive any cash compensation for serving in such capacity
during 1999 and 2000. All other compensation for our executives or directors
has not exceeded $100,000 on an annualized basis. Prior to 1997, we had not
paid compensation to executives. We reimburse our officers and directors for
any reasonable out-of-pocket expenses incurred on our behalf.
<TABLE>
<CAPTION>
                            SUMMARY COMPENSATION TABLE

                              ANNUAL COMPENSATION
                              -------------------     RESTRICTED    SECURITIES
NAME AND PRINCIPAL                                      STOCK       UNDERLYING    ALL OTHER
POSITION                   YEAR   SALARY($)  BONUS($)   AWARDS      OPTIONS      COMPENSATION
------------------         ----   ---------  -------- ----------    ----------   ------------
<S>                        <C>    <C>        <C>      <C>           <C>          <C>

James H. Watson, Jr.       2000         _         0           0            0            0
  Chairman and Chief       1999         _         0           0            0            0
  Executive Officer        1998         0         0           0            0            0
  since June 29, 1999

</TABLE>

COMPENSATION OF DIRECTORS

     When traveling from out-of-town, members of the Board of Directors are
eligible for reimbursement for their travel expenses incurred in connection
with attendance at Board meetings and meetings of committees of the Board of
Directors. Non-employee directors will be paid $1,000 for their participation
in Board or Board committee meetings. Non-employee directors will also be
eligible for initial options granted upon becoming a member of the Board and
annual option grants so long as they remain on the Board. See "1999 Incentive
Plan."
                                    23
<PAGE>
     In 1999, we entered into a two (2) year Outside Director's Agreement with
Steven J. Santamaria, which entitled him to be paid an annual base
compensation of 25,000 shares of our Common Stock, but since Mr. Santamaria
resigned as a Director on January 1, 2000, he was only entitled to receive one
year's compensation under this agreement. No other directors have received
compensation for serving on our Board of Directors.

OPTION GRANTS

     During 1999, the Company announced its intention to issue options to
employees to purchase Common Stock at an exercise price of $5.00 per share,
subject to the future approval of the Company's Board of Directors.  The
employee stock option plan was not subsequently approved.  However, in
September 2000, the Company issued 58,592 shares of its common stock to it's
employees in consideration for a release.

EMPLOYMENT AGREEMENTS

     On June 5, 2000, the Company entered into an employment agreement with
Mr. Scott Baker that provides for a monthly salary of $5,000.  Mr. Baker was
also issued options to purchase up to 100,000 shares of the Company's Common
Stock at an exercise price of $1.00 per share.  All options offered are based
upon a two year commitment with the first 50,000 shares vested after one year
of service and the remaining 50,000 shares vested after the second year of
service. The Company retains a first right of refusal to purchase any of these
shares from the employee.

     On November 1, 2000, the Company entered into an employment agreement
with Mr. Scott Quattromani, which provides for a monthly salary of $2,000 and
5,000 shares of the Company's Common Stock.

ITEM 11.  Security Ownership of Certain Beneficial Owners and Management.

     The following table sets forth information regarding the beneficial
ownership of the shares of the Common Stock (the only class of shares
outstanding) of 1st Net on December 31, 2000 (at which date there were
6,555,892 shares issued and outstanding), by each person known by us to be the
beneficial owner of more than five percent of the outstanding shares of our
Common Stock and by each person known by us to be a director or nominee or
executive officer owning a beneficial interest in our equity securities.

Name and Address of          Amount of       Percent of
Beneficial Owner(a)        Class (Shares)      Class      Title of Class
-------------------        --------------    ---------    --------------

Entrepreneur Investments,
 LLC/James H. Watson, Jr.       691,000      11.36%      Common Stock
 Chief Executive Officer
 and Chairman (b)

Scott Baker                       1,000          0%      Common Stock

Scott Quattromani                     0          0%      Common Stock

Steve Weingartner                     0          0%      Common Stock

                                     24
<PAGE>

<PAGE>
All Officers and Directors
 as a Group (Four Persons)      692,000      11.70%      Common Stock

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

(a) All beneficial owners referenced are at the same address: 11415 West
Bernardo Court, 2nd Floor, San Diego, California 92127. Unless otherwise
indicated, all persons listed have sole voting and investment power with
respect to their shares of Common Stock, except to the extent authority is
shared by spouses under applicable law.

(b) Includes 33,500 shares owned of record by James H. Watson and 657,500
shares owned of record by Entrepreneur Investments, LLC.  James H. Watson is
the sole owner of Entrepreneur Investments, LLC.

     CHANGES IN CONTROL.  We are not aware of any arrangement that might
result in a change in control of 1st Net in the future.

ITEM 12.  Certain Relationships and Related Transactions.

     We issued 58,592 shares of our Common Stock to employees during 2000 as
bonuses for the 1999 year. During 2000 we issued options to Scott Baker, an
Officer and Director, to purchase up to 100,000 shares of our Common Stock, as
an incentive to his employment.  Such options are not earned or vested until
after his first (50%) and second (remaining 50%) years of employment with the
Company.

     Entrepreneur Investments, LLC ("EI ") currently owns approximately 11.4%
of our outstanding shares and is our largest percentage owner.  The sole
shareholder of EI also serves on the Board of each of our subsidiaries.  The
Company and/or EI also have officers or directors in common with various other
entities.

     The Company has borrowed funds from EI, and we owed EI $29,800 and
$284,800 on December 31, 2000 and December 31, 1999, respectively.  Unless
otherwise agreed at the time of the advance, we are not charged interest on
the loans we have with EI.  There was no interest charged in 1999.  For the
fiscal year ended December 31, 2000, we had interest expense of $35,000 on
loans from EI.

     We lease office space from EI.  In 2000 and 1999, we paid $140,878 and
$89,823, respectively, in rent expense to EI.

     We believe that all of the related party transactions discussed above
were on terms no less favorable to us than we would have received if the
transactions were negotiated with disinterested third parties.

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

     Reports on Form 8-K:

     No reports on Form 8-K were filed during the quarter ended December 31,
2000.

                                    25
<PAGE>

<PAGE>
     Exhibits:

     The Exhibits listed below in the Index to Exhibits are filed as part of
this report.

Index to Exhibits:

Exhibit Number               Description

  3.1       Articles Of Amendment And Restatement Of 1st Net
            Technologies, Inc. Filed On December 11, 1998 (1)

  3.2       Amended And Restated Bylaws Of 1st Net Technologies, Inc.
            Dated June 24, 1999 (1)

  4.3       Specimen Of 1st Net Technologies, Inc.'s Common Stock
            Certificate (1)

  4.4       Warrant Agreement Dated April 1, 1999  By And Between 1st
            Net Technologies, Inc. And No Fear, Inc. (1)

  4.5       Warrant Agreement Dated April 1, 1999  By And Between 1st Net
            Technologies, Inc. And Eric Baker (1)

  4.6       1st Net Technologies, Inc.'s Series "A" Preferred Warrant
            Agreement (1)

  4.7       Warrant Agreement By And Between 1st Net Technologies, Inc.
            And Children's Technology Group Dated April 19, 1999 (1)

  4.8       1st Net Technologies, Inc.'s 1999 Incentive Stock Option
            Plan (1)

  4.9       1st Net Technologies, Inc.'s 1999 Non-Qualified Stock Option
            Plan Dated January 4, 1999 (1)

 10.1       Investment Banking Agreement Dated As Of March 1, 1998 By
            And Between 1st Net Technologies, Inc. And Entrepreneur
            Investments, LLC (1)

 10.2       Internet Marketing And Joint Venture Agreement By And Between
            1st Net Technologies, Inc. And Nicklebys.com, Inc. Dated
            January 14, 1999 (1)

 10.3       Web Site Development, Service And Revenue Sharing Agreement
            By And Between 1st Net Technologies, Inc. And No Fear,
            Inc. Dated April 1, 1999 (1)

 10.4       Profit Sharing Agreement By And Between 1st Net Technologies,
            Inc. And Netsol USA, Inc. Dated July 6, 1999 (1)



                                    26
<PAGE>

<PAGE>
 10.5       Stock Acquisition Agreement By And Between 1st Net
            Technologies, Inc. And MC32, Inc. Dated As Of August 15,
            1998 (1)

 10.6       Stock Acquisition Agreement By And Between 1st Net
            Technologies, Inc. And Spirit 32 Development Corporation
            Dated As Of January 22, 1999 (1)

 10.7       Stock Acquisition Agreement By And Between 1st Net
            Technologies, Inc. And SSP Management Corporation
            Dated As Of January 26, 1999 (1)

 10.8       Technology License Agreement By And Between 1st Net
            Technologies, Inc. And  Children's Technology Group, Inc.
            Dated As Of April 19, 1999 (1)

 10.9       Technology License Agreement By And Between 1st Net
            Technologies, Inc. And Children's Technology Group, Inc.
            Dated As Of May 1, 1999 (1)

10.10       Employment Agreement By And Between 1st Net Technologies,
            Inc. And Lawrence K. Kimball Dated April 19, 1999 (1)

10.11       Outside Director's Agreement By And Between 1st Net
            Technologies, Inc. And Steven J. Santamaria Dated May 1,
            1999 (1)

10.12       Standard Industrial/Commercial Multi-Tenant Lease By And
            Between 1st Net Technologies, Inc. And Entreprenuer
            Investments, LLC Dated June 1, 1998 (1)

10.13       Stock Option Agreement Dated January 10, 1999 By And Between
            1st Net Technologies, Inc. And Gregory D. Writer, Jr.,
            Entrepreneur Investments, LLC, Clifford J. Smith And
            Jeffrey Chatfield (1)

10.14       Consulting Agreement By and Between 1st Net Technologies,
            Inc. and Mariah Communications, Inc. Dated As Of August 15,
            1998 (1)

10.15       Internet Web Site Development Agreement Dated November 9,
            1998 By And Between 1st Net Technologies, Inc., And La Jolla
            Fresh Squeezed Coffee, Inc. (1)

10.16       Mariah Communications, Inc. Asset Purchase and Sale Agreement
            dated September 21, 1999 (1)

10.17       SSP Management Corp. Asset Purchase Agreement dated
            February 23, 2000 (1)

10.18       Spirit 32 Development Corporation Technology Purchase and
            Rescission Agreement dated January 14, 2000 (1)


                                    27
<PAGE>

<PAGE>
10.19       Children's Technology Group, Inc. Technology Purchase
            Agreement dated March 22, 2000 (1)

10.20       Standard Internet Web Site Development Agreement (1)

10.21       Executive Employment Agreement between 1st Net Technologies, Inc.
            and F. Scott Quattromani. (Filed electronically herewith.)

10.22       Employment Termination Agreement between Mariah Communications,
            Inc. and Steven J. Santamaria. (Filed electronically herewith.)

10.23       General Release Agreement dated April 13, 2001 between 1st Net
            Technologies, Inc. and Clifford J. Smith. (Filed electronically
            herewith.)

10.24       Contribution Agreement between 1st Net Technologies, Inc. and
            1st Look Interactive, Inc. (Filed electronically herewith.)

10.25       Technology Rescission and Stock Purchase and Sale Agreement dated
            December 28, 2000 between 1st Net Technologies, Inc. and Mariah.
            (Filed electronically herewith.)

21          Subsidiaries Of 1st Net Technologies, Inc. (1)

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

(1)  Incorporated by reference to the Registrant's Form 10SB, as amended.


























                                    28
<PAGE>

<PAGE>
1st NET TECHNOLOGIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                        Page
                                                                        ----

Independent auditors' report ......................................     F-2

Consolidated balance sheet, December 31, 2000 .....................     F-3

Consolidated statements of operations, for the years ended
   December 31, 2000 and 1999 .....................................     F-4

Consolidated statements of changes in stockholders' equity,
   for the years ended December 31, 2000 and 1999 .................     F-5

Consolidated statements of cash flows, for the years ended
   December 31, 2000 and 1999 .....................................     F-6

Notes to consolidated financial statements ........................     F-8
































                                   F-1
<PAGE>

<PAGE>
To the Board of Directors and Stockholders
1st Net Technologies, Inc.

                       INDEPENDENT AUDITORS' REPORT

We have audited the accompanying consolidated balance sheet of 1st Net
Technologies, Inc. (a Colorado corporation) and Subsidiaries, as of December
31, 2000 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the year ended December 31, 2000.
These consolidated financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.  The financial
statements of 1st Net Technologies, Inc. for the year ended December 31, 1999,
were audited by other auditors whose report dated January 22, 2001, expressed
an unqualified opinion on those statements.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of 1st Net
Technologies, Inc., as of December 31, 2000 and the results of their
operations and their cash flows for the year ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States
of America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern.  As shown in Note 2 to the
consolidated financial statements, the Company has incurred net losses
throughout its entire operating history resulting in an accumulated deficit of
$8,705,764 at December 31, 2000.  This and other factors discussed in Note 2
to the consolidated financial statements raise a substantial doubt about the
ability of the Company to continue as a going concern.  Management's plans in
regard to those matters are also described in Note 2.  The Company's ability
to achieve its plans with regard to those matters, which may be necessary to
permit the realization of assets and satisfaction of liabilities in the
ordinary course of business, is uncertain.  The consolidated financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.



/s/ Cordovano and Harvey, P.C.
Cordovano and Harvey, P.C.
Denver, Colorado
April 13, 2001


                                  F-2
<PAGE>


1st NET TECHNOLOGIES, INC.
and Subsidiaries
CONSOLIDATED BALANCE SHEET
December 31, 2000

ASSETS

Current assets:
  Cash                                                      $    553,388
  Accounts receivable, net of allowance for
    doubtful accounts of $40,093                                   2,316
  Marketable securities                                           89,283
  Current portion of notes receivable                             96,932
  Other current assets                                            29,168
                                                            ------------
Total current assets                                             771,087

Notes receivable                                                 441,882

Property and equipment, at cost net of accumulated
  depreciation of $133,812                                       263,439

Other assets                                                      26,676
                                                            ------------
                                                            $  1,503,084
                                                            ============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable and accrued liabilities                  $    903,866
  Notes payable                                                   50,000
  Notes payable and amounts due to related parties                39,800
  Current portion of capital lease obligations                    48,919
  Accrued personnel costs                                        153,732
  Deferred revenues                                               39,375
  Income taxes payable                                             3,200
                                                            ------------
  Total current liabilities                                    1,238,892

Long term portion of capital lease obligations                   154,099
                                                            ------------
  Total liabilities                                            1,392,991

Commitments and contingencies

Minority interests in subsidiaries                               100,565

Stockholders' equity:
  Preferred stock                                                      -
  Common stock                                                     6,556
  Common stock warrants                                          275,272
  Additional paid in capital                                   8,422,179
  Accumulated deficit                                         (8,705,764)
  Accumulated other comprehensive income                          11,285
                                                            ------------
  Total stockholders' equity                                       9,528
                                                            ------------
                                                            $  1,503,084
                                                            ============
See accompanying notes.
                                   F-3
<PAGE>
<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
                                                      For the years ended
                                                   December 31,  December 31,
                                                       2000         1999
                                                   ------------  ------------
Revenues:
  Technology consulting, user fees and
    marketing services                              $   247,099   $ 1,760,113

Operating expenses                                    5,348,034     8,425,023
                                                    -----------   -----------
Loss from operations                                 (5,100,935)   (6,664,910)

Other income and expense:
  Realized gain on investments sold                   1,220,877       919,518
  Unrealized loss on investments held                  (100,000)     (162,600)
  Interest expense                                      (82,333)      (21,719)
  Gain on sale of assets                                663,962             -
  Interest and dividend income                           87,026         8,924
                                                    -----------   -----------
Loss before provision for income taxes and
  minority interest in loss of subsidiaries          (3,311,403)   (5,920,787)

Provision for income taxes                               (3,200)       (4,000)
                                                    -----------   -----------
Loss before provision for minority interest in
  undistributed loss of subsidiaries                 (3,314,603)   (5,924,787)

Minority interest in undistributed loss
  of subsidiaries                                     1,382,732       157,534
                                                    -----------   -----------
Net loss                                            $(1,931,871)  $(5,767,253)
                                                    ===========   ===========
Loss per share:
  Net loss                                          $(1,931,871)  $(5,767,253)

  Beneficial conversion of preferred stock
    accounted for as a preferred dividend                     -      (698,247)
                                                    -----------   -----------
  Net loss applicable to common shareholders        $(1,931,871)  $(6,465,500)
                                                    ===========   ===========

  Basic and diluted loss per common share           $     (0.32)  $     (1.17)
                                                    ===========   ===========
Weighted average common shares outstanding:
  Basic and diluted                                   5,993,833     5,513,752
                                                    ===========   ===========






See accompanying notes.



                                     F-4
<PAGE>

<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                                          Accumulated
                                 Preferred  Stock     Common Stock                                           other
                                -------------------------------------                                       compre-       Total
                                 Number              Number              Common   Additional                hensive       stock-
                                   of                  of                stock     paid-in    Accumulated   income        holders'
                                 shares    Amount    Shares    Amount   warrants   Capital      deficit      (loss)       equity
----------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>      <C>        <C>        <C>     <C>        <C>         <C>          <C>         <C>
Balance at December 31, 1998     20,000  $  49,352  3,513,000  $3,513  $    648   $1,237,850  $  (849,199) $  (27,070) $   415,094

Shares issued to employees            -          -    595,300     596         -    1,785,304            -           -    1,785,900

Common stock issued in
 exchange for services                -          -    173,000     173         -      518,827            -           -      519,000

Common stock of Mariah
 issued to investors                  -          -          -       -         -      760,000            -           -      760,000

Common stock of CTG
 issued to investors                  -          -          -       -         -      750,764            -           -      750,764

Common stock of 1st Net
 issued in exchange for SSP          -           -  1,000,000   1,000         -            -            -           -        1,000

Series A preferred shares
 and warrants issued to
 investors                     452,400     831,539          -       -   176,374      698,247     (698,247)          -    1,007,913

Common stock warrants issued
 in exchange for services            -           -          -       -    98,250            -            -           -       98,250

Conversion of preferred stock
 to common stock              (472,400)   (880,891)   472,400     472         -      880,419            -           -            -

Comprehensive loss
 Net loss                            -           -          -       -         -            -   (5,767,253)          -   (5,767,253)
 Unrealized gain on investments
  held for sale, net of
  realized gains and losses          -           -          -       -         -            -            -     696,134      696,134
                              ----------------------------------------------------------------------------------------------------
Balance at December 31, 1999         -           -  5,753,700   5,754   275,272    6,631,411   (7,314,699)    669,064      266,802

Shares issued to employees           -           -     58,592      59         -       49,941            -           -       50,000

Common stock issued in exchange
 for technology                      -           -    250,000     250         -      282,250            -           -      282,500

Net proceeds from issuance of
 common stock by CTG                 -           -          -       -         -       25,000            -           -       25,000

Additional paid-in capital from
 issuance of preferred stock
 by CTG in excess of cost-basis
 in CTG                              -           -          -       -         -    2,150,006            -           -    2,150,006

Issuance of common stock in
 connection with rescission of
 Mariah purchase                     -           -    493,600     493         -      137,715            -           -      138,208

Adjustment to reflect the
  rescission of  the Mariah
  purchase and its exclusion
 from the Company's consolidated
 financial results                   -           -          -       -         -     (854,144)     540,806           -     (313,338)

Comprehensive loss
 Net loss                            -           -          -       -         -            -   (1,931,871)          -   (1,931,871)
 Unrealized loss on investments
  held for sale, net of realized
  gains and losses                   -           -          -       -         -            -            -    (657,779)    (657,779)
                              ----------------------------------------------------------------------------------------------------
Balance at December 31, 2000         -   $       -  6,555,892 $ 6,556 $ 275,272   $8,422,179  $(8,705,764)  $  11,285  $     9,528
                              ====================================================================================================
</TABLE>
See accompanying notes.
                                       F-5
<PAGE>
<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     For the years ended
                                                                  December 31,  December 31,
                                                                      2000         1999
                                                                  ------------  ------------
<S>                                                               <C>           <C>
Operating activities
Net loss                                                          $(1,931,871)  $(5,767,253)
Adjustments to reconcile net loss to net cash flows from
  operating activities:
  Depreciation and amortization                                         89,831      115,447
  Changes in minority interests in subsidiaries                    (1,382,732)       39,778
  Loss on disposal of property and equipment                            1,497       102,480
  Loss on rescission of Mariah purchase                               358,208             -
  Gain on sale of assets                                             (663,962)            -
  Realized gain on investments sold                                (1,220,877)     (919,518)
  Reduction of note payable in exchange for services                  (18,000)            -
  Stock based employee compensation                                         -     1,785,900
  Stock based payments for services and technology                    282,500       645,500
  Unrealized loss on decline of restricted stock investment           100,000       162,600
  Revenues received in the form of stock                                    -      (348,798)
  Changes in operating assets and liabilities:
    Accounts receivable                                                65,182       (52,348)
    Other assets                                                      (43,602)        5,530
    Accounts payable and accrued liabilities                          248,075       506,995
    Accrued personnel costs                                           (81,920)      232,507
    Deferred revenues                                                  39,375       (58,500)
    Income taxes payable                                                  800             -
    Other liabilities                                                       -       (10,000)
                                                                  -----------   -----------
Net cash flows from operating activities                           (4,157,496)   (3,559,680)

Investing activities
Additions to property and equipment                                   (41,014)     (162,636)
Adjustment to reflect the recission of the Mariah purchase           (313,338)            -
Investment in Last Mile Communication Corporation                           -      (220,000)
Changes in marketable securities                                    1,632,181       941,939
Repayments of notes and loans receivable                              139,789       330,882
                                                                  -----------   -----------
Net cash flows from investing activities                            1,417,618       890,185

Financing activities
Repayment of capital lease obligations                                (41,960)      (39,808)
Additions to notes payable                                             10,000       429,245
Repayments of notes payable                                          (306,172)     (244,542)
Net proceeds from issuance of common stock of Mariah                        -       760,000
Net proceeds from issuance of common stock by CTG                      25,000       750,764
Net proceeds from issuance of CTG preferred stock and warrants      3,593,525             -
Net proceeds from issuance of preferred stock and warrants                  -     1,007,913
                                                                  -----------   -----------
Net cash flows from financing activities                            3,280,393     2,663,572
                                                                  -----------   -----------
Change in cash                                                        540,515        (5,923)

Cash at beginning of period                                            12,873        18,796
                                                                  -----------   -----------
Cash at end of period                                             $   553,388   $    12,873
                                                                  ===========   ===========
</TABLE>

See accompanying notes.
                                   F-6
<PAGE>
<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS


Supplemental disclosures of noncash activities:
The Company acquired net assets of $7,687 in connection with the acquisition
of SSP Management Corp in exchange for 1,000,000 shares of common stock in
January 1999.
The Company acquired the net assets of Children's Technology Group, Inc.
totaling $705,657 in exchange for a license to in-process proprietary
technology that had no recorded accounting value in May 1999.
The Company incurred capital lease obligations totaling $309,881 in connection
with lease agreements to acquire equipment during the year ended December 31,
1999.

The Company recorded revenues totaling $348,798 for services performed in
exchange for clients' stocks during the year ended December 31, 1999.


































                                  F-7
<PAGE>

<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
Notes to consolidated financial statements


1.   Organization

1st Net Technologies, Inc. ("the Company" or "1st Net") is primarily in the
Internet commerce and services business.  These financial statements include
the financial results of the following subsidiaries:

     -  Mariah Communications, Inc. ("Mariah") is in the business of
        developing Internet protocol telephony technologies.  It was acquired
        in August 1998 in exchange for technology owned by 1st Net.  The
        agreement to acquire Mariah was subsequently rescinded effective
        December 28, 2000 (see below).

     -  SSP Management Corp. ("SSP") provides Internet public relations and
        Internet newsletters.  It was acquired in January 1999 in exchange for
        1,000,000 common shares of 1st Net.  At December 31, 2000, SSP remains
        wholly owned by 1st Net.

     -  Children's Technology Group, Inc. ("CTG") is in the business of
        creating Internet communities for children.  CTG was acquired in May
        1999 in exchange for the rights to certain technologies.  At December
        31, 2000, the Company owned approximately 59.2% of CTG's outstanding
        stock.

All three of the Company's subsidiaries had shareholders and management in
common with the Company's management prior to their acquisition.

2.   Significant accounting policies

The Company's financial statements have been prepared in conformity with
generally accepted accounting principles.

Going concern

The Company's financial statements have been prepared under the assumption it
will continue as a going concern.  However, the Company has incurred net
losses throughout its entire history resulting in an accumulated deficit of
$8,705,764 at December 31, 2000.  Realization of a portion of the Company's
assets in the accompanying financial statements is dependent upon the
continued operation of the Company.  In order to continue operations, the
Company must raise additional funds through incurring new debt, raising new
equity or liquidating investment securities held.  These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management believes that actions presently being taken and current revenues
being generated will provide the opportunity for the Company to continue as a
going concern.



                                   F-8
<PAGE>

<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
Notes to consolidated financial statements


Cash and cash equivalents

The Company considers all liquid interest-earning investments with original
maturities of three months or less to be cash equivalents.  There were no cash
equivalents at December 31, 2000.

Principles of consolidation

The financial statements include the results of operations of 1st Net and its
three subsidiaries for 1999 and substantially all of 2000, and the ending
balance sheet accounts for 1st Net, CTG and SSP at December 31, 2000.  Because
all three of the Company's subsidiaries had shareholders and management in
common with 1st Net prior to their acquisition, the Company has accounted for
them in a manner similar to pooling-of-interests accounting.  The accompanying
financial statements have been prepared on a consolidated basis as if common
control was established as of the inception of the three subsidiaries during
the year ended December 31, 1998.  Significant intercompany transactions and
balances have been eliminated in consolidation.

Estimates and assumptions

Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses. Examples include provisions for bad debts and the value of
securities received in exchange for services. Actual results may differ from
these estimates.

Revenue recognition

Revenue is recognized when earned.  The Company's revenue recognition policies
are in compliance with all applicable accounting regulations, including
Securities and Exchange Commission Staff Accounting Bulletin No. 101, Revenue
Recognition, American Institute of Certified Public Accountants (AICPA)
Statement of Position (SOP) 97-2, Software Revenue Recognition, and SOP 98-9,
Modification of SOP 97-2, With Respect to Certain Transactions.  Revenues from
technology consulting, user fees and marketing services are recognized ratably
over the contract period in accordance with the period in which the services
are performed. Revenues attributable to undelivered elements, including
technical support are recognized ratably on a straight-line basis over the
contract period.

Computer software costs

Computer software costs are expensed as incurred.  Statement of Financial
Accounting Standards (SFAS) 86, Accounting for the Costs of Computer Software
to Be Sold, Leased, or Otherwise Marketed, does not materially affect the
Company.  In March 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-1 Accounting for Costs of Computer


                                    F-9
<PAGE>

<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
Notes to consolidated financial statements

Software Developed or Obtained for Internal Use (SOP 98-1).  This standard
requires companies to capitalize qualifying computer software costs, which are
incurred during the application development stage and amortize them over the
software's estimated useful life.

In addition, the Company adopted the Emerging Issues Task Force Issue No. 00-2
("EITF 00-2"), "Accounting for Web Site Development Costs," during the year
ended December 31, 2000.  EITF 00-2 requires the implementation of SOP 98-1
when software is used by a vendor in providing a service to a customer but the
customer does not acquire the software or the right to use it.

Marketable and restricted securities

Marketable securities consist primarily of stock received for services
performed on behalf of clients.  Publicly traded equity securities are
classified as available for sale and are recorded at market using the specific
identification method.  Unrealized gains and losses are reflected in other
comprehensive income.  Restricted securities are recorded at cost.  Restricted
shares of LaForza Automobiles, Inc. declined in value from their original book
basis of $400,000 to $100,000 at December 31, 1999, and were completely
written off as of December 31, 2000.  Because management believed these
declines to be of an other than temporary nature, the investment was written
down to its new values as of these dates and the losses of $162,600 and
$100,000 were charged to operations in 1999 and 2000, respectively.

Property and equipment

Property and equipment consists primarily of office equipment and furniture,
is stated at cost and is depreciated using the straight-line method over the
estimated useful lives of the assets of three to five years.  Expenditures for
maintenance and repairs are expensed; expenditures for renewals and
improvements are generally capitalized.  Upon sale or retirement of an asset,
the related costs and accumulated depreciation are removed from the accounts
and any gain or loss is recognized.  When events or changes in circumstances
indicate that assets may be impaired, an evaluation is performed comparing the
estimated future undiscounted cash flows associated with the asset to the
asset's carrying amount to determine if a write-down to market value or
discounted cash flow value is required.

Property and equipment consists of the following at December 31, 2000:

          Office furniture and equipment  $   191,046
          Computer equipment                  127,686
          Leasehold improvements               22,559
          Tradeshow accessories                55,960
                                          -----------
                                              397,251
          Less accumulated depreciation      (133,812)
                                          -----------
                                          $   263,439
                                          ===========
                                    F-10
<PAGE>

<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
Notes to consolidated financial statements


Capital lease property

Capital lease property and equipment at December 31, 2000 totaled $187,466 net
of accumulated amortization of $90,039.

Fair value of financial instruments

The Company estimates the fair value of its monetary assets and liabilities
based upon existing interest rates related to such assets and liabilities
compared to current rates of interest for instruments with a similar nature
and degree of risk.  The Company estimates that the carrying value of its
monetary assets and liabilities approximates their fair value as of December
31, 2000.

Advertising costs

Advertising costs are expensed as incurred.  Advertising expenses totaled
$11,067 and $300,927 in 2000 and 1999, respectively.

Concentration of risk

The Company sells its services to customers in the United States.  The Company
maintains a reserve for potential credit losses and historically such losses
have been within management's estimates.   In 1999, revenues from one
unrelated major customer totaled $970,500, which represented 56.7% of total
revenues.

Comprehensive income

The Company has adopted SFAS No. 130, Reporting Comprehensive Income, which
requires that all components of comprehensive income, including net income, be
reported in the financial statements in the period in which they are
recognized.  Comprehensive income is defined as the change in equity during a
period from transactions and other events and circumstances from non-owner
sources.  Net income (loss) and other comprehensive income, including
unrealized gains and losses on investments held for sale, shall be reported
net of their related tax effect, to arrive at comprehensive income (loss).
Accumulated other comprehensive income (loss) totaled $(657,779) and $696,134
in 2000 and 1999, respectively.

Earnings per share

Earnings per share is computed in accordance with SFAS No. 128, Earnings Per
Share and SEC Staff Accounting Bulletin (or SAB) No. 98.  Under the provisions
of SFAS No. 128, basic earnings per share is computed by dividing the net loss
for the period by the weighted average number of common shares outstanding


                                    F-11
<PAGE>

<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
Notes to consolidated financial statements


during the period.  Diluted earnings per share is computed by dividing the net
loss for the period by the weighted average number of common and common
equivalent shares outstanding during the period.  Under the provisions of SAB
No. 98, common shares issued for nominal consideration are included in the per
share calculations as if they were outstanding for all periods presented.

Weighted average shares outstanding of 5,993,833 and 5,513,752 for the years
ended December 31, 2000 and 1999, respectively includes common stock
outstanding.  Potentially dilutive securities include options, warrants and
preferred stock that were excluded from basic and diluted earnings per share
because of their anti-dilutive effect.  Anti-dilutive securities outstanding
totaled 536,200 and 336,200 at December 31, 2000 and 1999, respectively.

Stock-based compensation

The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"), and related
interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under SFAS No. 123, Accounting
for Stock-Based Compensation, requires the use of option valuation models that
were not developed for use in valuing employee stock options.  Under APB 25,
when the exercise price of the Company's employee stock options is not less
than the deemed fair value for the underlying stock on the date of grant, no
compensation expense is recognized.  At the time stock options were granted,
the Company believed that the exercise price was at a price not less than the
fair value of the underlying common stock.

Recently issued accounting standards

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments and hedging activities.  The Statement
will require the recognition of all derivatives on the Company's balance sheet
at fair value.  The Financing Accounting Standards Board has subsequently
delayed implementation of the standard for the financial years beginning after
June 15, 2000.  The Company will adopt the new Statement effective January 1,
2001.  The impact on the Company's financial statements is not expected to be
material.

3.   Acquisitions and proposed acquisition of subsidiaries

Mariah

At its inception in August 1998, Mariah issued all of its outstanding common
stock totaling 4,000,000 shares to 1st Net in exchange for certain in-process
technology research and development owned by 1st Net.  Additionally, the
Company issued options to purchase 1,500,000 shares of common stock to
Entrepreneur Investments, LLC for services rendered in Mariah's formation.
The options are exercisable at $.10 per share and expire on August 15, 2001.

                                     F-12
<PAGE>

<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
Notes to consolidated financial statements


Mariah had shareholders and management in common with 1st Net at the time of
its formation and acquisition by 1st Net.  The acquisition was accounted for
in a manner similar to a pooling-of-interests.  Mariah subsequently sold stock
to outside investors for proceeds totaling $854,700 (net of offering costs)
and the Company owned approximately 87.8% of Mariah's outstanding shares at
December 31, 1999.

In 1999, Mariah received a note receivable from Last Mile Communications
Corporation ("Last Mile") in exchange for $220,000 cash.  The note was
subsequently converted into the restricted shares of Last Mile.  Last Mile's
chief executive officer and chairman of the board of directors formerly held
the same position with Mariah.  In March 2000, Mariah subsequently sold
substantially all of its operating assets to Last Mile in exchange for Last
Mile's assumption of future expense commitments.  Mariah retained the rights
to its IP telephony technology.

On December 28, 2000, the Company entered into an agreement to rescind the
acquisition of Mariah.  The rescission agreement released the Company and
Mariah from any mutual liability that may have arisen under the terms of the
original agreement for 1st Net to acquire Mariah, including funds totaling
$95,109 advanced by Mariah to 1st Net.  In connection with the rescission
agreement, 1st Net agreed to issue 493,600 shares of its common stock and to
return all the common stock of Mariah held by 1st Net.  The results of Mariah
are included in operations from the time of its inception through the
rescission of the acquisition in December 2000.  Mariah had no revenues in
either 2000 or 1999 and a net loss of $7,887 and $446,018 in 2000 and 1999,
respectively.

SSP

In January 1999, the Company acquired 100% of the outstanding shares of SSP in
exchange for 1,000,000 shares of the 1st Net stock.  SSP had directors and
management in common with 1st Net prior to the acquisition.  In consideration
for the stock of SSP, 1st Net issued 1,000,000 shares of its common stock to
the shareholder of SSP.  The shares were issued in January 1999 when the
shares closed on the OTC market at $3.00, giving a total value for the
transaction of $3,000,000.  The transaction was accounted for in a manner
similar to a pooling-of-interests and the results of SSP's operations from its
inception in 1998 are included in the accompanying financial statements of the
Company.  SSP continues to be wholly owned by 1st Net as of December 31, 2000.
SSP had revenues and net income of $32,502 and $1,784,213 in 2000 ($1,175,386
and $566,921 in 1999).

On February 23, 2000, SSP sold a newsletter published by the Company along
with certain related assets to Marketbyte, L.L.C. ("Marketbyte") for $600,000
in notes and other future consideration.   The Company received a note
receivable for $200,000 and other future consideration consisting of common
stock and 10% of any future consideration received by Marketbyte in connection
with the newsletter through June 2, 2002, totaling  $400,000.  Under the sale

                                    F-13
<PAGE>

<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
Notes to consolidated financial statements


agreement (as subsequently amended), in the event that the consideration
received from Marketbyte by the Company through June 2, 2002 does not equal or
exceed $600,000, Marketbyte will be required to pay the Company the difference
between $600,000 and the consideration previously paid to the Company in
connection with the newsletter.

In July 2000, SSP agreed to sell its SmallCapDigest.com and
InvestmentOpportunity.com Internet newsletters, including their Web sites,
opt-in databases, and URL's, to Millennium Financial Publishing, LLC
("Millennium"), an unrelated business.  The Company is scheduled to receive
consideration totaling $1,500,000 as follows: 1) $100,000 was paid to SSP at
signing; 2) monthly installments ranging from $15,000 to $20,000 through
December 1, 2001 totaling $325,000; 3) $325,000 due on or before January
1,2002; 4) 25% of all stock consideration paid to the buyer by its client
companies until the total stock consideration totals $750,000; and 5) cash
totaling up to $750,000 to the extent the stock consideration does not have a
total value (as defined) equal to $750,000.  The Company realized a gain from
the sale of the newsletters totaling $100,000 in the third quarter that
represented the cash received to date.  The Company will recognize additional
gains from the sale of the newsletters to the extent that future proceeds are
received on the notes receivable from the buyer.  The Company has chosen to
recognize the gain on sale of the newsletter in accordance with the
installment method due to uncertainties in connection with the receipt of
future payments from the buyer.  Currently, the Company and Millennium are
disputing the payment terms of the transaction and there exists a substantial
risk that the two parties will not be able to come to a mutual agreement
concerning the ultimate consideration for the newsletters.

CTG

In May 1999, the Company obtained 4,000,000 shares or approximately 86.4% of
CTG's common stock in exchange for technology marketing and licensing rights
on in-process technology research and development (the license was later
converted to an outright sale of the technology and marketing rights). CTG had
directors and management in common with 1st Net prior to the acquisition.  The
transaction was accounted for in a manner similar to a pooling-of-interests
and CTG's results from its commencement of operations in 1999 are included in
the accompanying financial statements of the Company.  In 1999, CTG also sold
630,000 shares of its common stock to outsiders for net proceeds totaling
$750,764.  In March 2000, 1st Net received an additional 285,000 shares of CTG
in exchange for technology and in lieu of unpaid previous royalties owed by
CTG to 1st Net.

On May 19, 2000, CTG sold 2,000,000 shares of Series A convertible preferred
stock at a cost of $2.00 per share to an unrelated investor.  The preferred
shares are convertible into an equal number of shares of common stock and
automatically convert upon the earlier of a firmly underwritten public
offering of the Company's common stock with total proceeds of at least
$5,000,000 or the date at which the public price per common share is equal to

                                    F-14
<PAGE>

<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
Notes to consolidated financial statements


or greater than $4.00 (as adjusted).  The Series A preferred stock contains no
provisions for mandatory dividends except as declared at the discretion of the
Board of Directors.  The Series A preferred shares have voting rights in
proportion to the number of common shares into which they are convertible and
carry a liquidation preference of $2.00 per share plus any declared but unpaid
dividends.  The Series A shares were sold with warrants to purchase 1,000,000
shares of common stock at $4.00 per share. The warrants expire on the earlier
of May 19, 2003 or one year after the closing of a firmly underwritten public
offering of not less than $5,000,000.

Revenues and net loss totaled $80,240 and $3,141,607 in 2000 ($65,209 and
$822,295 in 1999, respectively).  1st Net continues to own approximately 59.2%
of CTG as of December 31, 2000.

Spirit 32 Development Corporation

In January 1999, the Company entered into an agreement to purchase, in the
future, all of the issued and outstanding stock of Spirit 32 Development
Corporation ("SP32") in exchange for 450,000 shares of 1st Net's common stock.
The acquisition was not consummated and was formally rescinded in February
2000.  The rescission agreement released the Company and SP32 from any
liability that may have arisen under the terms of the original agreement for
1st Net to acquire SP32, including funds previously advanced by 1st Net for
the licensing and development of in-process technology.

Included in the rescission agreement, SP32 sold all of its rights, title and
interest in technology being developed by both Mariah and CTG.  The release
also included trade names in connection with the technology.  At the close of
the rescission agreement, 1st Net delivered 250,000 shares of its restricted
common stock to SP32 together with cash totaling $100,000.  In March 2000, 1st
Net sold the technology obtained from SP32 in exchange for 250,000 shares of
CTG common stock.

4.   Related party transactions, major customers and noncash revenues

The Company recognized related party revenues totaling $501,121 during the
year ended December 31, 1999.

Entrepreneur Investments, LLP ("EI") is a large percentage stockholder of 1st
Net.  The sole shareholder of EI is also 1st Net's Chief Executive Officer and
serves on the Board of Directors of 1st Net and until recently, Mariah.  EI
owns the building in which both 1st Net and CTG are housed.  Rent expense
under the lease from EI totaled $140,878 and $89,823 in 2000 and 1999,
respectively.

Additionally, the Company had borrowings outstanding from EI totaling $29,800
and $284,800 at December 31, 2000 and 1999, respectively.  Borrowings from EI
are generally non-interest bearing unless so stated at the time funds are

                                     F-15
 <PAGE>

<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
Notes to consolidated financial statements

advanced.  Interest expense from EI borrowings totaled $35,000 in 2000.  There
was no interest expense from EI borrowings in 1999.

At December 31, 2000, SSP had certain holdings of corporate securities that
were obtained in connection with past services provided by the Company.  SSP
has agreed to pay a former independent contractor of the Company a commission
of 8% of the proceeds realized by SSP from the future sale of these
securities.

5.   Sales and issuances of preferred and common stock

The Company issued 58,592 and 595,300 restricted shares of common stock to
employees during the years ended December 31, 2000 and 1999, respectively.
The Company recognized compensation expense for the shares issued of
$1,785,900 for the year ended December 31, 1999 (the shares issued in 2000
were for services performed in 1999).  The compensation expense recognized was
calculated based on the most recent trading prices of the common stock at the
time management approved the grant of stock to employees.

1st Net sold 452,400 and 20,000 shares of its Series A preferred stock to
outside investors during 1999 and 1998, respectively.  The Company's Series A
preferred stock was convertible into an equal number of common shares at the
time the common stock traded at $5 per share or higher.  This occurred in the
first quarter of 1999 and accordingly, all of the preferred stock was
converted into common stock at that time.

In connection with the sale of preferred stock in 1998 and 1999, the Company
issued warrants to purchase 236,200 shares of common stock at $5 per share.
The warrants expire on the earlier of the one-year anniversary of an
underwritten public offering of the Company's shares or October 31, 2002.  All
of the warrants remain outstanding at December 31, 2000.

During 2000, the Company granted employees stock options to purchase a total
of 200,000 shares of its common stock as follows:

     -  On June 5, 2000, the Company granted an option to an employee that
        entitles the employee to purchase 100,000 shares of the Company's
        common stock at $1.00 per share.  The option expires on June 5, 2003.

     -  On December 15, 2000, the Company granted an option to an employee
        that entitles the employee to purchase 100,000 shares of the Company's
        common stock at $.50 per share.  The option expires on December 15,
        2003.

As provided for under SFAS 123, the Company has provided the required
additional pro forma disclosures.  In accordance with the intrinsic value
method followed by APB 25, no compensation expense has been recognized in the
consolidated statement of operations in connection with the granting of stock
options.  Had compensation cost been recognized in accordance with the fair
value method called for by SFAS 123, the Company's net loss in 2000 would have
increased $68,000 to $1,999,871.

                                   F-16
<PAGE>

<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
Notes to consolidated financial statements


The fair value of the options issued was estimated using the Black-Scholes
option pricing model with the following weighted average assumptions used for
grants: dividend yield   0%; expected volatility   80%; risk-free investment
rate   6%; and an expected life of seven years.  The compensation cost as
generated by the Black-Scholes model may not be indicative of the future
benefit, if any, which may be realized by the option holders.  The fair value
of the option grant was $.34 per share.

The Company issued 75,000 warrants to a client during 1999 in connection with
a service agreement.  The warrants had an exercise price of $3.50 per share
and expired unexercised on March 31, 2001.  The Company recorded a charge of
$98,750 to operations in 1999 in connection with the issuance of the warrants.

In connection with an employment agreement with an officer of the Company, the
Company is required to pay for a portion of the officer's services with common
stock at the rate of 5,000 shares per month.  The Company is liable to the
officer for the issuance of 10,000 shares of common stock as of December 31,
2000.

6.   Notes payable

The Company's notes payable and notes payable and amounts due to related
parties outstanding at December 31, 2000 consist of the following:

     Demand notes payable to EI, unsecured and non-interest
       bearing, varying or no stated maturity dates          $     29,800
     Amounts advanced from Grey Mare, LLC, unsecured,
       non-interest bearing, no stated maturity date               10,000
                                                             ------------
     Notes payable and amounts due to related parties              39,800
     Note payable to an individual, unsecured and bearing
       interest at 10%, interest only payments due annually
       in August, no stated maturity date                          50,000
                                                             ------------
                                                             $     89,800
                                                             ============

7.   Commitments

Rent expense totaled $160,788 and $89,823 for the years ended December 31,
2000 and 1999, respectively.   Future minimum annual aggregate rental payments
required under both capital and operating leases as of December 31 are as
follows.




                                    F-17
<PAGE>

<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
Notes to consolidated financial statements


                                        Operating              Capital
                                      -----------------------------------
          2001                        $     259,756          $     77,785
          2002                              282,996                70,980
          2003                              112,608                65,666
          2004                                    -                46,527
          2005                                    -                10,880
                                      -----------------------------------
                                            655,360               271,838
          Less interest portion of
           capital lease obligations                              (68,820)
          Less current portion of
           capital lease obligations                              (48,919)
                                                             ------------
                                                             $    154,099
                                                             ============

8.   Income taxes

At December 31, 2000, the Company has federal and California net operating
loss carryforwards of approximately $8,032,000 and $8,032,000, respectively.
The federal and California net operating loss carryforwards will begin to
expire in 2012, unless previously utilized.  Pursuant to Sections 382 and 383
of the Internal Revenue Code, annual use of the Company's net operating loss
and credit carryforwards may be limited in the event of a cumulative change in
ownership of more than 50% occurs within a three year testing period.

The Company's provision for income taxes for the years ended December 31, 2000
and 1999 consist of minimum franchise taxes levied by the state of California.

The components of the Company's deferred tax assets as of December 31, 2000
are shown below.  A valuation allowance has been recognized to offset the
deferred tax assets, as the future realization of such assets is uncertain.

     Deferred tax assets:
       Net operating loss carryforwards                $  8,032,000
       Valuation allowance for deferred tax assets       (8,032,000)
                                                       ------------
       Net deferred tax assets                         $          -
                                                       ============







                                   F-18
<PAGE>

<PAGE>
1st NET TECHNOLOGIES, INC.
and Subsidiaries
Notes to consolidated financial statements


A reconciliation of the statutory tax rates to the Company's provision for
income tax expense for the years ended December 31, 2000 and 1999 is as
follows:

                                                          2000        1999

     Federal income tax rate                             (34.0)%      (35.0)%
     State income tax rate, net of federal benefit        (5.9)        (5.9)
     Valuation allowance                                  39.9         40.9
                                                         --------------------
                                                             - %          - %
                                                         ====================

9.   Contingencies

The Company is currently involved in disputes with several former employees
concerning compensation and termination decisions.  Although the outcome of
these disputes is indeterminable, management is confident that these matters
will be settled favorably.  No reserves have been established in connection
with these disputes in the accompanying financial statements.

10.  Subsequent event

In January 2001, the Company sold certain operational assets, consisting of a
trade name, marketing process, and multimedia properties to a former employee
for a note receivable of $200,000 and a 25 percent equity interest in the
former employee's new business.



















                                    F-19
<PAGE>

<PAGE>
                             SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

                            1st Net Technologies, Inc.



Dated:  April 17, 2001      By:/s/ James H. Watson, Jr.
                               James H. Watson, Jr., Chief Executive Officer
                               Officer and Principal Accounting Officer of
                               the Registrant

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

Signature                     Title                          Date


/s/ James H. Watson, Jr.                                      April 17, 2001
James H. Watson, Jr.          President, Chief Executive
                              Officer, Chief Financial
                              Officer, Chairman of the
                              Board


/s/ Scott B. Baker                                            April 17, 2001
Scott B. Baker                Senior Vice President Sales,
                              and Marketing and Director


/s/ Scott Quattromani                                         April 17, 2001
Scott Quattromani             Secretary, Treasurer, Chief
                              Operations Officer and Director