**U.S. Securities and Exchange Commission**

Washington, D.C. 20594 

**FORM 10-KSB**

**AMENDMENT #1**

(Mark One) 

**[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

For the fiscal year ended: **DECEMBER 31, 2004**

**[** **]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

For the transition period from: ________________to _________________

Commission file number 0-27145 

**1st Net Technologies, Inc.**

(Exact name of registrant as specified inits charter) 

Colorado (State of incorporation or organization

33-0756798 (I.R.S. Employer Identification No.) 

1869 W. Littleton Boulevard (Address of principal executiveoffices) 

80120 (Zip Code) 

Registrant’s telephone number: (303) 738-8994 

Securities registered under Section 12(b) of the ExchangeAct: None. 

Securities registered under Section 12(g) of the ExchangeAct:

6,395,357 shares of Common Stock, $.001par value

Title of each class 

Indicate whether the Registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for the past 90 days.Yes X No ____ 

Indicate if disclosure of delinquent filers pursuant toItem 405 of Regulation S-B is not contained in this Form, and will not be contained, tothe best of Registrant's knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or any amendment to this Form10-KSB. [ ] 

The issuer had no revenue for its most recent fiscal year. 

The aggregate market value of the voting stock held bynon-affiliates on March 31, 2005, calculated by taking the last sales price of theCompany’s common stock ($.15 as quoted on March 31, 2005) was $851,528.55. The numberof shares outstanding of the issuer’s common equity as of March 31, 2005 was6,395,357. 

Note: If determining whether a person is an affiliate willinvolve an unreasonable effort and expense, the issuer may calculate the aggregate marketvalue of the common equity held by non-affiliates on the basis of reasonable assumptions,if the assumptions are stated. 

(APPLICABLE ONLY TO CORPORATE REGISTRANTS) 

State the number of shares outstanding of each of theissuer’s classes of common equity, as of the latest practicable date. 6,395,357common shares issued and outstanding as of March 31, 2005 

Transitional Small Business Disclosure Format (check one):Yes ____ No X .

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TABLE OF CONTENTS 

| PART I                     |                                                                   |    |  |
|----------------------------|-------------------------------------------------------------------|----|--|
|                            |                                                                   |    |  |
|    ITEM 1.  | Description of Business                                           | 4  |  |
|    ITEM 2.  | Description of Property                                           | 6  |  |
|    ITEM 3.  | Legal Proceedings                                                 | 7  |  |
|    ITEM 4.  | Submission of Matters to a Vote of Security    Holders            | 7  |  |
|                            |                                                                   |    |  |
| PART II                    |                                                                   |    |  |
|                            |                                                                   |    |  |
|    ITEM 5.  | Market for Common Equity and Related    Stockholder Matters       | 7  |  |
|    ITEM 6.  | Management’s Discussion and Analysis or    Plan of Operation | 8  |  |
|    ITEM 7.  | Financial Statements                                              | 11 |  |
|    ITEM 8.  | Changes In and Disagreements With Accountants    on               |    |  |
|                            | Accounting and Financial Disclosure                               | 12 |  |
|    ITEM 8A. | Controls and Procedures                                           | 12 |  |
|    ITEM 8B. | Other Information                                                 | 12 |  |
|                            |                                                                   |    |  |
| PART III                   |                                                                   |    |  |
|                            |                                                                   |    |  |
|    ITEM 9.  | Directors, Executive Officers, Promoters and    Control Persons;  |    |  |
|                            | Compliance With Section 16(a) of the Exchange    Act              | 12 |  |
|    ITEM 10. | Executive Compensation                                            | 14 |  |
|    ITEM 11. | Security Ownership of Certain Beneficial    Owners and            |    |  |
|                            | Management and Related Stockholder Matters                        | 14 |  |
|    ITEM 12. | Certain Relationships and Related Transactions                    | 15 |  |
|    ITEM 13. | Exhibits and Reports on Form 8-K                                  | 15 |  |
|    ITEM 14. | Principal Accountant Fees and Services                            | 16 |  |
|                            |                                                                   |    |  |
| SIGNATURES                 | 17                                                                |    |

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**AMENDMENT INFORMATION**

***This amendment corrects the formatting of the ExhibitTable contained on page 16 for readability and the intended incorporation of exhibits byreference.***

**Additional information**

Descriptions in this Report are qualified by reference tothe contents of any contract, agreement or other documents and are not necessarilycomplete. Reference is made to each such contract, agreement or document filed as anexhibit to this Report, or previously filed by the Company pursuant to regulations of theSecurities and Exchange Commission (the “Commission”). (See “Item 13.Exhibits.”)

Reference in this document to “us”,“we”, “our”, “the Company”, or “the Registrant”refer to 1st Net Technologies, Inc. 

**Special Note Regarding Forward Looking Statements**

Certain statements contained herein constitute“forward looking statements” within the meaning of the Private SecuritiesLitigation Reform Act of 1995. Such forward looking statements include, withoutlimitation, statements regarding the Company’s plan of business operations andrelated expenditures, potential contractual arrangements, anticipated revenues and relatedexpenditures. Investors are cautioned not to put undue reliance on forward-lookingstatements. Except as otherwise required by applicable securities statutes or regulations,the Company disclaims any intent or obligation to update publicly these forward lookingstatements, whether as a result of new information, future events or otherwise. 

PART I 

ITEM 1. **Description of Business**

1st Net Technologies, Inc. (“we”, “us”,“our”, the "Company" or “1st Net”) had, prior toAugust 2001, primarily been in the Internet commerce and services business since itsinception in 1997. In August 2001, the Company's Board of Directors decided to suspend itsCalifornia operations and, subsequently, moved the Company’s headquarters toColorado, its original state of incorporation. With the closing of its Californiaoperations, the Company currently maintains no business operations, other than to manageits remaining assets and liabilities. Since August 2001, the Company has been a shellcompany in search of a merger candidate. Recent operations have consisted of debtrestructuring. 

As of December 31, 2004, the Company continues to havediscussions with its unsecured creditors to determine their willingness to negotiate theirclaims against the Company. The Company has a limited amount of capital from which to payits remaining obligations. If the Company is unable to negotiate favorable and final termswith its remaining creditors, the Company may have to seek protection from its creditorsthrough a Chapter 11 or Chapter 7 filing, at some point in the future. To date, nodefinitive decision has been made with regard to this course of action. 

On August 30, 2004, we entered into an Agreement and Planof Reorganization with VOS Systems, Inc., (“VOS”) a San Diego, California basedcompany that specializes in voice activated electronic controls. The Agreement providesfor the reorganization of VOS with 1st Net, with 1st Net adoptingthe name VOS Systems, Inc. In connection with the Agreement, we would acquire all of theissued and outstanding common shares of VOS in exchange for approximately 36,050,000shares of our common stock. At the closing of the Agreement, the current shareholder ofVOS would own approximately 85% of the outstanding common stock of 1st Net,resulting in a change in control. The Agreement had not closed as of the date of thisreport. 

Our historical financial information contained in thisAnnual Report on Form 10-KSB is that of 1st Net Technologies, Inc. and its subsidiarycorporation, SSP Management Corp., and is presented on a consolidated basis. 

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In January 1999, we acquired a 100 percent interest in SSPManagement Corp., a Colorado corporation ("SSP"), from a private company that isconsidered a related party. SSP was wholly owned by Entrepreneur Investments, LLC("EI") whose sole shareholder, James H. Watson, Jr., our currentChairman/President/CEO, was a member of 1st Net's Board of Directors at the time ofacquisition. Through our acquisition of that company, we built several investment-orientedInternet Web sites and online newsletter publications. In December 1999, we made astrategic decision to divest ourselves of the SSP types of clients and services and, whereapplicable, to sell our information-based assets to companies whose long-term objectivewas to participate in that business. Accordingly, we completed the sale of some of ouronline newsletters to other unrelated companies in February and August 2000 and thissubsidiary is no longer active in its former business.

At December 31, 2004, SSP and 1st NetTechnologies continue to hold common stock in the following former clients: 

| Name of Company               | Status  | Owner   | # of shares owned at 12/31/04 |
|-------------------------------|---------|---------|-------------------------------|
|                               |         |         |                               |
|                               |         |         |                               |
| a) SureCare, Inc              | Account | SSP     | 60,000 common                 |
| b) Zootech, Inc               | Account | SSP     | 5,000 common                  |
| c) Lyon Capital Venture Corp. | Account | 1st Net | 33 common                     |
| d) Phelps Engineer            | Account | 1st Net | 21,000 common                 |
| e) Uniprime Capital           | Account | 1st Net | 20 common                     |
| f) Zootech, Inc               | Account | 1st Net | 17,000 common                 |
| g) NOWAUTO, Inc               | Account | 1st Net | 2 common                      |

All the above securities trade on either the NASD’sBulletin Board system or the “Pink Sheets.”

SALE OF INTERNET PORTALS 

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

On February 23, 2000, SSP sold certain related assets toMarketByte, LLC. ("MarketByte") in exchange for a note receivable totaling$200,000 and 10 percent of any future non-cash consideration received by Marketbyte inconnection with the assets, through June 2, 2002. Under this Asset Purchase Agreement, inthe event that the consideration received from Marketbyte through June 2, 2002 did notequal or exceed $750,000, Marketbyte would be required to pay the Company the differencebetween $750,000 and the consideration previously paid to the Company in connection withthe original Asset Purchase Agreement. Subsequently, there have been two amendments tothis Agreement. They are:

In October 2000, the Company agreed to amend its Agreementwith 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 ThousandDollars ($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 thoseamounts received by Seller and Six Hundred Thousand Dollars and such shall become due andowing immediately upon such date and the conclusion of the aforementionednegotiation." In consideration for agreeing to reduce the total value of theagreement by $150,000, the Company received from Buyer 50,000 shares of marketablesecurities, which were valued at $3.00 per share.

In December 2001, the Company again agreed to amend theMarketByte Agreement. This amendment states that “By mutual agreement Buyer andSeller do hereby agree to extend the payment period of such non-cash consideration asfollows: a) MarketByte shall continue to pay 10 percent of any/all non-cash consideration(i.e. securities) it receives during its normal course of business until such time as thefull amount owed has been received by Seller, with no specified time limit,” and,“the parties also agree that as of the executed date of this Supplement the totalamount of non-cash consideration due to the Seller is $370,886.25, which is figured bysubtracting the amounts already paid by Buyer to date...minus the original amount owedof $400,000.”

At December 31, 2004, MarketByte owed the Company $289,109in other non-cash consideration. Due to the uncertainty related to the collection of the“other consideration”, no receivable has been recorded and any collections arerecorded as income when received. 

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In August 2000, our two remaining newsletter publicationsand their respective databases were sold to a different unaffiliated party, MillenniumFinancial Publishing, LLC. (“MFP”) for an aggregate of $115,000 in cash andpromissory notes for the remainder of the $1.5 million aggregate purchase price.Subsequent to the close of those agreements, MFP made payments to the Company totaling$50,000 before becoming in default on those Agreements. During the second quarter of 2001,the Company filed suit against MFP in District Court, Arapahoe County, Colorado for breachof contract and failure to pay under the promissory notes executed by the companies. On orabout February 28, 2002, the Company decided to settle its suit with MFP in considerationof them paying us $2,500 in cash and $5,000 in marketable securities, as well as returningto the Company the non-exclusive rights to the databases and the exclusive rights to theother properties sold. MFP has not chosen not to honor the stipulations of this settlementas of December 31, 2004. 

EMPLOYEES 

As of December 31, 2004, the Company had no employees otherthan our President/CEO Mr. Watson. Mr. Watson currently receives no compensation for hisservices, other than reimbursements for expenses incurred on behalf of the Company. 

ITEM 2. **Description of Property**

The Company maintains its executive offices at 1869 W.Littleton Blvd., Littleton, Colorado 80120. The Company paid $1,500 and $1,000 in rent forits office space during the years ended December 31, 2004 and 2003.

ITEM 3. **Legal Proceedings**

As described toward the end of Item 1 above, we decided tosettle our pending litigation against Millennium Financial Publishing, LLC("MFP") in February 2002 for total consideration of $7,500 and the return of thenon-exclusive rights to the databases and the exclusive rights to the other propertiesoriginally sold. MFP has so far chosen not to honor the stipulations of this settlementand thus no compensation has been received by the Company as a result of this action. TheCompany has chosen, at this time, not to expend the resources necessary to pursue thisaction, although we may pursue this suit in the future.

The Company was a party to the following lawsuit during theyears ended December 31, 2004 and 2003:

     In October, 2002, the Companyentered into a representation agreement with the Law Office of Roy R. Withers, of SanDiego, California, to represent the Company in a civil action against Mitchell & Shea,attorneys at law, for misuse of name and related damages. This action stemmed from thedismissal of the Company pursuant to a 2002 lawsuit, whereby the Company was seeking torecoup the fees and expenses it had to expend to defend itself in that suit. DuringJanuary 2004, the parties settled the action and the Company received net proceeds of$1,093, after deducting costs incurred to obtain the settlement.

ITEM 4. **Submission of Matters to a Vote of SecurityHolders**

We have not held any meetings where a vote on any mattersby the shareholders occurred during the reporting period. The Company is preparing for ashareholders meeting upon clearing comment on the associated materials required fordistribution to the shareholders.

PART II 

ITEM 5. **Market for Common Equity and Related ShareholderMatters**

Our common stock trades on the NASD’s Bulletin Boardsystem under the symbol “FNTT.OB”. Although an active trading market for ourCommon Stock has at times existed in the past, currently our shares are only sporadicallytraded. Consequently, no meaningful market information is currently available. 

To date, we have paid no dividends and do not anticipatepaying dividends until we receive revenues in an amount which management determines to besufficient. 

The number of shareholders of record of the Company's $.001par value Common Stock at December 31, 2004, was approximately 203. 

We did not issue or sell any shares of stock during theyear ended December 31, 2004.

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ITEM 6. **Management's Discussion and Analysis or Plan ofOperation**

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

OVERVIEW 

Prior to August 2001, the Company had primarily been in theInternet commerce and services business since its inception in 1997. During 2001, theCompany's Board of Directors decided to suspend its California operations and,subsequently, moved the Company’s headquarters to Colorado, its state ofincorporation. With the closing of its California operations, the Company maintains nocurrent business operations, other than to manage its remaining assets and liabilities.The Company maintains one subsidiary corporation; SSP Management Corp. Our historicalfinancial information contained in this Form 10-KSB is that of 1st Net Technologies, Inc.and SSP on a consolidated basis.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2004AND DECEMBER 31, 2003 

During the year ended December 31, 2004, the Companyrecognized net income totaling $38,284 as compared to net income of $342,671 during theyear ended December 31, 2003. The net income recognized in 2004 was related to thefollowing changes in revenues and expenses: 

Operating expenses

Operating expenses totaling $25,332 in 2004 increased$9,493 or 60 percent from $15,839 in 2003. The increase in operating expenses is due tothe professional and administrative costs related to the VOS Agreement and Plan ofReorganization.

Other Income and Expense

December 31, 2004

During the year ended December 31, 2004, other incomeincluded gains from sale of marketable securities totaling $12,431 and proceeds from alawsuit settled for $1,093 in January 2004 (see Item 3, Legal Proceedings). The $28,546installment sale was related to collections of “other consideration” on theMarketByte receivable, which is recorded as a gain when the consideration is received. Thegain on debt restructure resulted from the settlement of two account payables.

The Company incurred a $1,701 loss on impairment of itsidle assets during 2004. The assets were subsequently sold for $299. 

December 31, 2003

During the year ended December 31, 2003, other incomeincludes an installment sale of $45,380, a $55,681 gain on the settlement of payables, thewrite-down of $98,791 in accruals, and a gain resulting form the change in an accountingestimate totaling $158,668. There were no amounts recognized for these types of gainsduring the year ended December 31, 2002. The $45,380 installment sale is related tocollections of “other consideration” on the MarketByte receivable, which isrecorded as a gain when consideration is received.

The Company’s management recorded a corporaterestructuring liability at December 31, 2000 in the amount of $350,000. Managementestimated the liability based on costs associated with employee reductions, relocation ofthe corporate headquarters and other expenses related to its plan to restructure and ceaseoperations. The Company recognized liabilities totaling $191,332 during the years endedDecember 31, 2003, 2002 and 2001, which reduced the restructuring liability to $158,668.At December 31, 2003, management determined that it had over-estimated the originalrestructuring liability and revised its estimate, which reduced the liability to zero. 

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LIQUIDITY AND CAPITAL RESOURCES 

To date, we have been funded through sale of equitysecurities received from services, advances and loans from related parties, sale ofSSP’s operations, and proceeds from equity offerings. At December 31, 2004, theCompany had cash and a net working capital deficit of $12,800 and $145,180, respectively.Our future source of capital will come from the remaining receivable from prior sales ofSSP’s operations and disposal of equity securities held by the Company. 

As of December 31, 2004, we had total assets of $13,178,all of which were current assets (cash and marketable securities). We had totalliabilities (all current) of $158,358 as of December 31, 2004. We had an accumulateddeficit of $6,265,628 and a shareholders’ deficit of $145,180 at December 31, 2004.

As of December 31, 2003, we had total assets of $21,782,including current assets of $19,282, investments of $500 and $2,000 in idle equipment. Wehad total liabilities (all current) of $205,419 as of December 31, 2003. We had anaccumulated deficit of $6,303,912 and a shareholders’ deficit of $183,637 at December31, 2003.

Net cash used in operations was $31,229 in 2004 consistinglargely of the $38,284 of net income offset by the gain on sale of assets of $28,546, thegain on debt restructure of $23,247, realized gain on sale of marketable securities, andthe increase in payables and accruals of $7,490. Cash provided by investing activities was$51,276 in 2004 related to $38,546 in proceeds from SSP’s MarketByte receivable,$12,431 from the sale of marketable securities, and $299 from the sale of idle assets.Cash used in financing activities was $16,324 in 2004 all related to the repayment of arelated party promissory note. 

Net cash used in operations was $50,674 in 2003 consistingthe $342,671 of net income offset by the gain on sale of assets of $45,380, the gain onwrite-down of liabilities of $98,791, the gain on change in accounting estimate of4158,668 and the increase in payables and accruals of $34,825. Cash provided by investingactivities was $80,380 in 2003 all related to proceeds from SSP’s MarketBytereceivable. Cash used in financing activities was $20,754 in 2003 all related to therepayment of promissory notes. 

On a forward-looking basis, 1st Net and its 100 percentowned subsidiary SSP maintain only minimal holdings of marketable securities. It isimpossible however to ascertain the actual amounts that will be eventually realized by theCompany when these securities are sold. Management is not sure that proceeds from the saleof investments held in addition to cash payments to be received from the transactionsdescribed above, will be sufficient to make up projected shortfalls from the results ofits operations through the next twelve months.

Prior to August 2001, the majority of our capital resourceswas expended: 1) on salaries and benefits to our employees, 2) to service our debt burdento vendors, and 3) to our professional consultants. Since September 2001, we haveeliminated our employee burden completely. Today, our greatest needs for capital are topay fees to our outside consultants, primarily legal and accounting, and to continuetrying to service and restructure our debt burden with past vendors.

Our main source of capital is our Asset Purchase and LoanAgreement with MarketByte, LLC. Entered into during the first quarter of 2000, SSPconcluded a sale of its newsletter OTCjournal.com for a $200,000 note receivable and 10percent of the gross non-cash compensation the buyer realizes from the operation ofOTCjournal.com. To date, there is $289,109 remaining to be paid to SSP from that contract.There can be no assurance that MarketByte can and will continue to honor its financialcommitment under this Agreement.

On August 30, 2004, we entered into an Agreement and Planof Reorganization with VOS Systems, Inc., (“VOS”).

*Result of the Transaction with VOS Systems, Inc. ifapproved by the shareholders*

Upon completion of the reorganization agreement by andbetween 1st Net Technologies, Inc. and VOS Systems, Inc., the strategicdirection and business plans of VOS Systems, Inc. will be adopted. Such strategies andplans are expected to include new product development, the enhancement of existingtechnologies, and the definition of specific applications for such products andtechnologies, and the expansion of business-to-business (wholesale) applications. 

Management is not aware of any required state or federalregulatory requirements that must be complied with or approvals obtained to complete thisreorganization with VOS Systems, Inc. 

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Management has not obtained any appraisals or expertopinions related to this reorganization with VOS systems, Inc. Factors management hasconsidered when evaluating the terms of the reorganization with VOS Systems, Inc. includebut are not limited to: The lack of business activities, market activity, businessprospects and the potential liabilities of 1st Net Technologies, Inc.Additionally, VOS Systems, Inc. has a qualified and active management team, intellectualproperty and potential for growth.

1st Net Technologies, Inc., VOS Systems, Inc.and their affiliates have had no prior contractual arrangements, relationships or engagedin other negotiations for the periods represented by the accompanying financialstatements. 

*Terms of the Share Exchange*

The Share Exchange in connection with the Agreement andPlan of Reorganization consists exclusively of newly issued shares of Common Stock, $.001par value per share, of 1st Net Technologies, Inc. and shall be a maximum of36,050,000 shares issued and exchanged on the basis of three (3) shares of 1stNet Technologies, Inc. common shares for each common share of VOS Systems, Inc. withfractional shares being rounded up to the next whole share.

These newly issued shares of 1st NetTechnologies, Inc. will be allocated among the Stockholders of VOS Systems, Inc. in theproportion of their share ownership of the outstanding shares of VOS Systems, Inc. CommonStock. Upon completion of the share exchange with the current shareholders of VOS Systems,Inc. they would own approximately 85% of the outstanding common stock of 1stNet Technologies, Inc., resulting in a change in control. 1st Net Technologies,Inc. would own 100% of the outstanding common stock of VOS Systems, Inc. and hold VOSSystems, Inc., a California Corporation as a wholly owned subsidiary. 

*Change in Control of 1st Net Technologies*

As of December 31, 2004, 1st net technologieshad 6,395,357 shares of common stock outstanding. These shares are held by approximately203 shareholders of record with the Company’s transfer agent.

Currently, our CEO James H. Watson is the only beneficialholder of our outstanding stock through his control of 11.23% of 1st Net’soutstanding common stock. The remaining 88% of the outstanding common stock is held insmall concentrations by many stockholders. 

If the reorganization with VOS Systems, Inc. is approved,up to 36,050,000 additional common shares will be issued to the 74 individual shareholdersof VOS. Upon this issuance the current shareholders of VOS Systems, Inc. would ownapproximately 85% of the outstanding common stock of 1st Net Technologies, Inc.

The officers and directors of VOS Systems as a group wouldcontrol over 33% of that outstanding and a single beneficial owner would control anadditional 15% of the outstanding stock. This changes the current ownership byconcentrating control of nearly half of the outstanding common stock of the company withsix individuals. 

Current 1st Net Shareholders would hold aminority position and due to the wide distribution of shares among those shareholderswould likely not have substantial ability to choose future management of 1stNet Technologies, Inc. with their current holdings.

RISKS AND UNCERTAINTIES 

The risks and uncertainties described below are those thatwe currently deem to be material and that we believe are specific to our Company. If anyof these or other risks actually occurs, the trading price of our Common Stock coulddecline. We have a history of losses and absent the gains on the MarketByte agreement, thesettlement of liabilities and the write-off of the liabilities reserve; we would havesuffered a net losses in 2004 and 2003. Also, because we expect our operating losses tocontinue into the future, we may never be profitable. We had an accumulated deficit of$6,265,628 at December 31, 2004. We incurred net income of $38,284 and $342,671 for theyears ended December 31, 2004 and 2003, respectively, due to the previously describednon-operating gains. While we are unable to predict accurately our future operatingexpenses, we currently expect our operating expenses to remain low, as we attempt to closethe Agreement and Plan of Reorganization with VOS. If we fail to close the VOS transactionor are unable to find a suitable business to acquire or combine with, we will not succeed.In addition, there is the potential that after a reorganization, profitable businessoperations could fail to develop with new management and any new business strategies. 

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We are also dependent upon the willingness of our soleofficer to continue providing services without compensation as well as the liquidity andadvances from the officer to maintain the Company in stasis with no firm commitments tocontinue. 

We are much less likely to succeed than a business with anestablished operating history. You should consider an investment in our stock in light ofthe risks, uncertainties and difficulties frequently encountered by early-stage companiesin new markets such as ours. We may not be able to successfully address any or all ofthese risks. Failure to adequately do so could cause our business, results of operationsand financial condition to suffer.

If we have to go to court and litigate for any reason, itwill be time consuming and expensive. Therefore, the threat of creditor lawsuits couldadversely affect the Company’s ability as a going concern.

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

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

ITEM 7. **Financial Statements**

The Financial Statements are included on Pages F-1 throughF-14. 

ITEM 8. **Changes In and Disagreements With Accountants onAccounting and Financial Disclosure**

There have been no disagreements between the Company andits independent accountants on any matter of accounting principles or practices orfinancial statement disclosure. 

ITEM 8A. **Controls and Procedures**

We maintain a system of controls and procedures designed toprovide reasonable assurance as to the reliability of the financial statements and otherdisclosures included in this report. As of December 31, 2004, under the supervision andwith the participation of our Chief Executive Officer and Chief Financial Officer,management has evaluated the effectiveness of the design and operation of our disclosurecontrols and procedures. Based on that evaluation, the Chief Executive Officer and theChief Financial Officer concluded that our disclosure controls and procedures wereeffective in timely alerting them to required information to be included in our periodicfilings with the Securities and Exchange Commission. 

**Changes in Internal Controls**

There have been no changes in internal controls or in otherfactors that could significantly affect those controls subsequent to the date of theirevaluation, including any corrective actions with regard to significant deficiencies andmaterial weaknesses. 

ITEM 8B. **Other Information**

No required disclosures.

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PART III 

ITEM 9. **Directors, Executive Officers, Promoters andControl 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.   | 42  | President, Chairman, Chief Executive          |
|                        |     | Officer, Chief Financial Officer and Director |
|                        |     |                                               |
| Daniel Nye             | 44  | Director                                      |

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

The Company presently has no committees, which is why we donot have an Audit Committee Financial Expert.

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

James H. Watson, Jr., 41, has served as our President sinceDecember 2000 and as our Chief Executive Officer and Chairman of our Board of Directorssince June 30, 1999. He has been a member of our Board since 1997. Mr. Watson devotesbetween 30%-50% of his time to our business. Currently Mr. Watson is a founding member ofThe 4 Horsemen, LLC a private equity capital firm that consults with and invests indevelopment stage companies. From 1996 – 2004, Mr. Watson was the Founder and GeneralManaging Member of Entrepreneur Investments, LLC (EI), a private financial consulting andinvestment firm that specialized in the unique needs of development stage companies. From1995 to 1996, he was a Founder and Chief Operating Member of N8 Concepts, LLC, a privatecompany that specialized in sports-related trademark licensing and event management. Mr.Watson has served on various Boards in recent years including Probook, Inc.,Nicklebys.com, Inc., Children’s Technology Group, Inc., and Mariah Communications. Atpresent, Mr. Watson does not sit on any other Boards. Mr. Watson graduated from theUniversity of Tennessee / Chattanooga in 1985 with a Bachelors degree in PoliticalScience/Public Administration. 

Daniel Nye, 43, has been the President of NYCON ResourcesInc. since its inception in 1992. NYCON is a private corporation involved in naturalresource exploration and investment, real estate investment, and securities speculation.Mr. Nye is responsible for identifying and structuring investment opportunities andstrategic planning for NYCON. Mr. Nye received a BS degree in Aerospace Technology fromIndiana State University.

SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE 

Section 16(a) of the Securities Exchange Act of 1934requires the Company's directors and executive officers, and persons who own more than 10%of a registered class of the Company's equity securities to file with the Securities andExchange Commission initial reports of ownership and reports of changes in ownership ofCommon Stock and other equity securities of the Company. Officers, directors and greaterthan 10% shareholders are required by SEC regulations to furnish the Company with copiesof all Section 16(a) forms they file.

To the Company's knowledge, based solely on its review ofthe copies of such reports furnished to the Company and written representations that noother reports were required during the year ended December 31, 2004, all Section 16(a)filing requirements applicable to its officers, directors and greater than 10% beneficialowners were complied with. 

Page 10 

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**Code of Ethics**

The Company has always encouraged its employees, includingofficers and directors to conduct business in an honest and ethical manner. Additionally,it has always been the Company’s policy to comply with all applicable laws andprovide accurate and timely disclosure. Despite the foregoing, we currently do not have aformal written code of ethics for either our directors or employees. We do not have aformal written code of ethics because we currently only have one employee, ourpresident/CEO, who is employed on a part-time basis. Our president/CEO is held to thehighest degree of ethical standards. Once we locate a suitable merger candidate, we willadopt a written code of ethics for all of our directors, executive officers and employees.

ITEM 10. **Executive Compensation**

COMPENSATION SUMMARY 

The following table sets forth the annualized base salarythat we paid to our Chief Executive Officer. Mr. James H. Watson became our CEO on June29, 1999 and has not received any cash compensation since accepting the position. None ofour other executives or directors has received compensation. We reimburse our officers anddirectors for any reasonable out-of-pocket expenses incurred on our behalf. 

|       Name and |      |  | Salary       |       | Other        |
|----------------------------------------------|------|--|--------------|-------|--------------|
|    Principal Position         | Year |  | Compensation | Bonus | Compensation |
|                                              |      |  |              |       |              |
| James H. Watson, Jr.                         | 2004 |  | $ -          | $ -   | $ -          |
| President, CEO                               | 2003 |  | $ -          | $ -   | $ -          |

Notes: 

As of December 31, 2004, we had no group life, health,hospitalization, medical reimbursement or relocation plans in effect. Further, we had nopension plans or plans or agreements, which provide compensation on the event oftermination of employment or change in control of the Company. 

We do not pay members of our Board of Directors any feesfor attendance or similar remuneration or reimburse them for any out-of-pocket expensesincurred by them in connection with our business. 

COMPENSATION OF DIRECTORS 

There was no compensation paid to any directors of 1stNet. 

EMPLOYMENT AGREEMENTS 

Currently, no employment agreements exist with any officeror employee. 

LONG-TERM INCENTIVE PLAN 

None. 

Page 11 

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ITEM 11. **Security Ownership of Certain Beneficial Ownersand Management and Related Stockholder Matters**

BENEFICIAL OWNERS 

The following table sets forth information regarding thebeneficial ownership of the shares of the Common Stock (the only class of sharesoutstanding) of 1st Net on December 31, 2004 (at which date there were 6,395,357 sharesissued and outstanding), by each person known by us to be the beneficial owner of morethan five percent of the outstanding shares of our Common Stock and by each person knownby us to be a director or nominee or executive officer owning a beneficial interest in ourequity securities. 

| Name and Address of        | Amount of      |  | Percent of |                |
|----------------------------|----------------|--|------------|----------------|
| Beneficial Owner(a)        | Class (Shares) |  | Class      | Title of Class |
|                            |                |  |            |                |
|                            |                |  |            |                |
| Entrepreneur Investments,  |                |  |            |                |
| LLC (a)(b)                 | 118,500        |  | 1.85%      | Common Stock   |
|                            |                |  |            |                |
| JW Holdings Corp. (a)(b)   | 600,000        |  | 9.38%      | Common Stock   |
|                            |                |  |            |                |
| All Officers and Directors |                |  |            |                |
| as a Group (One Person)    | 718,500        |  | 11.23%     | Common Stock   |

(a) All entities or persons listed have sole voting andinvestment power with respect to their shares of Common Stock, except to the extentauthority is shared by spouses under applicable law. 

(b) James H. Watson is the managing member of EntrepreneurInvestments, LLC., and also the President and sole shareholder of JW Holdings Corp. 

CHANGES IN CONTROL 

On August 30, 2004, we entered into an Agreement and Planof Reorganization with VOS Systems, Inc., (“VOS”). The Agreement provides forthe reorganization of VOS with 1st Net, with 1st Net adopting thename VOS Systems, Inc. In connection with the Agreement, we would acquire all of theissued and outstanding common shares of VOS in exchange for approximately 36,050,000shares of our common stock. At the closing of the Agreement, the current shareholder ofVOS would own approximately 85% of the outstanding common stock of 1st Net,resulting in a change in control. The Agreement had not closed as of the date of thisreport. 

ITEM 12. **Certain Relationships and Related Transactions**

In prior years, the Company has borrowed funds from JWHoldings Corporation (“JW Holdings”), an affiliate under common control, forworking capital. At December 31, 2002, the Company was indebted to JW Holdings in theamount of $45,078. The Company borrowed $-0- and $27,882 from JW Holdings and madepayments of $16,342 and $48,636 during the years ended December 31, 2004 and 2003,respectively. Borrowings from JW Holdings are non-interest bearing unless so stated at thetime funds are advanced. The Company owed JW Holdings $8,000 at December 31, 2004. 

Page 12 

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ITEM 13. **Exhibits and Reports on Form 8-K**

Reports on Form 8-K

During the fiscal year ending December 31, 2004 and throughthe date of filing of this Annual Report on Form 10-KSB; 1st Net Technologies,Inc. had filed the following Reports on Form 8-K with the Securities and ExchangeCommission on the dates indicated: 

| February 24, 2005 | re: Other Events; announcing postponement of    upcoming shareholders’ meeting. |
|-------------------|--------------------------------------------------------------------------------------|
| September 2, 2004 | re: Other Events; acquisition of VOS Systems,    Inc. (a California corporation).    |

Exhibits

1st Net Technologies, Inc. includes, byreference, the following exhibits: 

| Number | Description                                                                                       |
|--------|---------------------------------------------------------------------------------------------------|
|        |                                                                                                   |
| 2.0    | Agreement and Plan of Reorganization, 1st    Net Technologies, Inc. (a Colorado corporation)      |
|        | and VOS Systems, Inc. (a California    corporation), entered into on August 30, 2004,             |
|        | filed as Exhibit 2 to 1st Net    Technologies, Inc.’s Report on Form 8-K filed with the      |
|        | Securities and Exchange Commission on    September 2, 2004.                                       |
| 3.1    | Articles of Incorporation of 1st Net    Technologies, Inc., as amended and restated, filed        |
|        | as Exhibit 3.1 to 1st Net    Technologies, Inc.’s Registration Statement on Form 10SB,       |
|        | as amended, filed with the Securities and    Exchange Commission March 14, 2001.                  |
| 3.2    | Bylaws of 1st Net Technologies,    Inc., as amended and restated, dated June 24, 1999,            |
|        | filed as Exhibit 3.1 to 1st Net    Technologies, Inc.’s Registration Statement on Form 10SB, |
|        | as amended, filed with the Securities and    Exchange Commission March 14, 2001.                  |

1st Net Technologies, Inc. includes herewith thefollowing exhibits: 

| Number |  | Description                                                                      |
|--------|--|----------------------------------------------------------------------------------|
|        |  |                                                                                  |
| 31.1   |  | Certification of Principal Executive Officer    and Principal Accounting Officer |
|        |  | (Rule 13a-14(a)/15d-14(a))                                                       |
| 32.1   |  | Certification of Principal Executive Officer    and Principal Accounting Officer |
|        |  | (18 U.S.C. 1350)                                                                 |

ITEM 14. **Principal Accountant Fees and Services**

1. Audit and Audit-Related Fees 

During the year ended December 31, 2004, the Company’sprincipal accountant billed $5,800 in fees that were directly associated with thepreparation of annual audit reports and quarterly review reports. 

During the year ended December 31, 2003, the Company’sprincipal accountant billed $6,700 in fees that were directly associated with thepreparation of annual audit reports and quarterly review reports. 

2. Tax Fees 

During the year ended December 31, 2004, the Company’sprincipal accountant billed $1,500 in fees that were directly associated with thepreparation of tax filings. 

During the year ended December 31, 2003, the Company’sprincipal accountant billed $-0- in fees that were directly associated with thepreparation of tax filings. 

3. All Other Fees 

The Company’s principal accountant did not bill anyother fees during the years ended December 31, 2004 and 2003. 

Page 13 

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**Audit Committee’s Pre-Approval Policies andProcedures**

Due to the fact that 1st Net Technologies hasonly one active officer and two directors, the Company does not have an audit committee atthis time. 

**Percentage of Hours Expended**

All hours expended on the principal accountant’sengagement to audit the registrant’s financial statements for the most recent fiscalyear were attributable to work performed by persons that are the principalaccountant’s full-time, permanent employees. 

**SIGNATURES**

In accordance with Section 13 or 15(d) of the Exchange, theRegistrant has caused this report to be signed on its behalf by the undersigned, thereuntoduly authorized. 

**1st Net Technologies, Inc.**

Dated: April 26, 2005

| By:/s/ James H. Watson, Jr.                   |
|-----------------------------------------------|
|                                               |
| James H. Watson, Jr., Chief Executive Officer |
| Officer and Chief Financial Officer of        |
| the Registrant                                |

Pursuant to the requirements of the Security Exchange Actof 1934, as amended, this Report has been signed by the following persons in thecapacities and on the dates indicated. 

Dated: April 26, 2005

| By:/s/ James H. Watson, Jr.                   |
|-----------------------------------------------|
|                                               |
| James H. Watson, Jr., Chief Executive Officer |
| Officer and Chief Financial Officer of        |
| the Registrant                                |

Page 14 

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1ST NET TECHNOLOGIES, INC. 

Index to Consolidated Financial Statements 

|                                                                     | Page |  |
|---------------------------------------------------------------------|------|--|
|                                                                     |      |  |
|                                                                     |      |  |
| Report of Independent Registered Public Accounting    Firm          | F-2  |  |
|                                                                     |      |  |
| Consolidated Balance Sheet at December 31, 2004                     | F-3  |  |
|                                                                     |      |  |
| Consolidated Statements of Operations for the years    ended        |      |  |
|    December 31, 2004 and 2003                        | F-4  |  |
|                                                                     |      |  |
| Consolidated Statement of Changes in Shareholders'    Deficit       |      |  |
|    for the years ended December 31,    2004 and 2003 | F-5  |  |
|                                                                     |      |  |
| Consolidated Statements of Cash Flows for the years    ended        |      |  |
|    December 31, 2004 and 2003                        | F-7  |  |
|                                                                     |      |  |
| Notes to Consolidated Financial Statements                          | F-8  |  |

----

| To the Board of Directors and Shareholders: |
|---------------------------------------------|
| 1st Net Technologies, Inc.                  |

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We have audited the accompanying consolidated balance sheetof 1st Net Technologies, Inc. (a Colorado corporation) and subsidiary, as ofDecember 31, 2004 and the related consolidated statements of operations, changes inshareholders’ deficit and cash flows for the years ended December 31, 2004 and 2003.These consolidated financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these consolidated financialstatements based on our audits.

We conducted our audits in accordance with the standards ofthe Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether theconsolidated financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in theconsolidated financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion. 

In our opinion, the consolidated financial statementsreferred to above present fairly, in all material respects, the financial position of 1stNet Technologies, Inc., as of December 31, 2004 and the results of their operations andtheir cash flows for the years ended December 31, 2004 and 2003 in conformity withaccounting principles generally accepted in the United States of America. 

The accompanying consolidated financial statements havebeen prepared assuming the Company will continue as a going concern. As shown in Note 2 tothe consolidated financial statements, the Company has incurred net losses since inceptionand has a net capital deficit at December 31, 2004. These and other factors discussed inNote 2 to the consolidated financial statements raise a substantial doubt about theability of the Company to continue as a going concern. Management’s plans in regardto those matters are also described in Note 2. The Company’s ability to achieve itsplans with regard to those matters, which may be necessary to permit the realization ofassets and satisfaction of liabilities in the ordinary course of business, is uncertain.The consolidated financial statements do not include any adjustments that might resultfrom the outcome of this uncertainty.

| Cordovano and Honeck LLP |
|--------------------------|
| Denver, Colorado         |
| March 30, 2005           |

Page F2 

----

1ST NET TECHNOLOGIES, INC. ConsolidatedBalance Sheet 

|                                                                    | December 31, 2004                     |             |           |
|--------------------------------------------------------------------|---------------------------------------|-------------|-----------|
|                                                                    |                                       |             |           |
|    Assets                                           |                                       |             |           |
| Current assets:                                                    |                                       |             |           |
|       Cash                           |                                       | $           | 12,800    |  |
| Marketable securities (Note 5)                                     |                                       | 378         |           |
|                                                                    |                                       |             |           |
|                                                                    |                                       |             |           |  |
|                                                                    |                                       | $           | 13,178    |  |
|                                                                    |                                       | =========== |           |
|                                                                    |                                       |             |           |  |
|                                                                    | Liabilities and Shareholders' Deficit |             |           |  |
| Current liabilities:                                               |                                       |             |           |  |
| Accounts payable and accrued    liabilities                        | $                                     | 61,319      |           |
| Indebtedness to related    parties (Note 3)                        |                                       | 8,000       |           |
| Capital lease obligations    (Note 1)                              |                                       | 49,039      |           |
| Accrued payroll taxes                                              |                                       | 40,000      |           |
|                                                                    |                                       |             |           |
|                                                                    | Total current liabilities             |             | 158,358   |  |
|                                                                    |                                       |             |           |
|                                                                    |                                       |             |           |  |
| Shareholders' deficit (Note    8):                                 |                                       |             |           |
| Preferred stock, $.001 par    value; 10,000,000 shares authorized, |                                       |             |
| -0- shares issued and    outstanding                               |                                       | --          |           |
| Common stock, $.001 par value;    40,000,000 shares authorized,    |                                       |             |           |
| 6,395,357 shares issued and    outstanding                         |                                       | 6,395       |           |
| Additional paid-in capital                                         |                                       | 6,192,941   |           |
|       Retained deficit               |                                       | (6,265,628) |           |
| Accumulated other    comprehensive income:                         |                                       |             |           |
| Unrealized holding loss on    marketable securities                |                                       | (78,888)    |           |
|                                                                    |                                       |             |           |
|                                                                    |                                       |             |           |  |
|                                                                    | Total shareholders' deficit           |             | (145,180) |  |
|                                                                    |                                       |             |           |
|                                                                    |                                       |             |           |  |
|                                                                    |                                       | $           | 13,178    |  |
|                                                                    |                                       | =========== |           |

See accompanying notes to consolidatedfinancial statements 

Page F3 

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     1ST NET TECHNOLOGIES,INC. Consolidated Statements of Operations 

|                                                                           | For the Years    Ended |           |
|---------------------------------------------------------------------------|------------------------|-----------|
|                                                                           | December 31,           |           |
|                                                                           |                        |           |
|                                                                           | 2004                   |           | 2003 |  |
|                                                                           |                        |           |  |  |
| Costs and expenses:                                                       |                        |           |  |  |
|    General and administrative expenses                     | $                      | 25,332    |  | $ | 15,839 |  |
|                                                                           |                        |           |  |  |
|                                                                           |                        |           |  |  |  |  |
|       Loss from    operations               |                        | (25,332)  |  |  | (15,839) |  |
|                                                                           |                        |           |  |  |  |  |
| Other income (expense):                                                   |                        |           |  |  |  |  |
|    Realized gain/(loss) on sale of    investments (Note 5) |                        | 12,431    |  |  | -- |  |
|    Interest expense                                        |                        | --        |  |  | (10) |  |
|    Installment sale (Note 4)                               |                        | 28,546    |  |  | 45,380 |  |
|    Gain on debt restructure (Note 1)                       |                        | 23,247    |  |  | 55,681 |  |
|    Impairment of idle assets (Note 6)                      |                        | (1,701)   |  |  | -- |  |
|    Other income (Notes 1 and 7)                            |                        | 1,093     |  |  | 257,459 |  |
|                                                                           |                        |           |  |  |
|                                                                           |                        |           |  |  |  |  |
|       Income before    income taxes         |                        | 38,284    |  |  | 342,671 |  |
|                                                                           |                        |           |  |  |  |  |
| Provision for income taxes (Note 9)                                       |                        | --        |  |  | -- |  |
|                                                                           |                        |           |  |  |
|                                                                           |                        |           |  |  |  |  |
|       Net income                            | $                      | 38,284    |  | $ | 342,671 |  |
|                                                                           | ===========            |           | =========== |  |
|                                                                           |                        |           |  |  |  |  |
| Basic and diluted income per share                                        | $                      | 0.01      |  | $ | 0.05 |  |
|                                                                           | ===========            |           | =========== |  |
|                                                                           |                        |           |  |  |  |  |
| Weighted average common shares outstanding                                |                        | 6,395,357 |  |  | 6,395,357 |  |
|                                                                           | ===========            |           | =========== |  |

See accompanying notes to consolidatedfinancial statements 

Page F4 

----

1ST NET TECHNOLOGIES, INC. 

Consolidated Statement of Changes in Shareholders'Deficit 

*** SPLIT TABLE - SEE BELOW *** 

|                                                                                   | Preferred Stock | Common Stock |
|-----------------------------------------------------------------------------------|-----------------|--------------|
|                                                                                   |                 |              |
|                                                                                   | Shares          | Par Value    | Shares | Par Value |
|                                                                                   |                 |              |  |  |
|                                                                                   |                 |              |  |  |
| Balance at January 1, 2003                                                        | --              | $ --         | $ | 6,395,357 | $ | 6,395 |
|                                                                                   |                 |              |  |  |  |  |
| Capital contribution (Note 1)                                                     | --              | --           |  | -- |  | -- |
| Comprehensive loss:                                                               |                 |              |  |  |  |  |
|    Unrealized loss on investments                                  |                 |              |  |  |  |  |
|       held for sale                                 | --              | --           |  | -- |  | -- |
|    Net income                                                      | --              | --           |  | -- |  | -- |
|                                                                                   |                 |              |  |  |  |  |
|          Total    comprehensive loss |                 |              |  |  |  |  |
|                                                                                   |                 |              |  |  |
|                                                                                   |                 |              |  |  |  |  |
| Balance at December 31, 2003                                                      | --              | --           |  | 6,395,357 |  | 6,395 |
|                                                                                   |                 |              |  |  |  |  |
| Comprehensive loss:                                                               |                 |              |  |  |  |  |
|    Unrealized loss on investments                                  |                 |              |  |  |  |  |
|       held for sale                                 | --              | --           |  | -- |  | -- |
|    Net income                                                      | --              | --           |  | -- |  | -- |
|                                                                                   |                 |              |  |  |  |  |
|          Total    comprehensive loss |                 |              |  |  |  |  |
|                                                                                   |                 |              |  |  |
|                                                                                   |                 |              |  |  |  |  |
| Balance at December 31, 2004                                                      | --              | $ --         |  | 6,395,357 | $ | 6,395 |
|                                                                                   | =======         | =======      | =========== | ======== |

See accompanying notes to consolidatedfinancial statements 

Page F5 

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1ST NET TECHNOLOGIES, INC. 

Consolidated Statement of Changes in Shareholders'Deficit 

(CONTINUED) 

*** SPLIT TABLE - SEE ABOVE *** 

|                                                                                   |             |             | Other         |             |   |
|-----------------------------------------------------------------------------------|-------------|-------------|---------------|-------------|---|
|                                                                                   |             |             | Comprehensive |             |   |
|                                                                                   |             |             | Income        |             |   |
|                                                                                   |             |             |               |             |   |
|                                                                                   | Additional  |             | Unrealized    |             |   |
|                                                                                   | Paid-in     | Retained    | Holding       |             |   |
|                                                                                   | Capital     | Deficit     | Loss          | Total       |   |
|                                                                                   |             |             |               |             |   |
|                                                                                   |             |             |               |             |   |
| Balance at January 1, 2003                                                        | $           | 6,093,485   | $             | (6,646,583) | $ | (56,675) | $ | 603,378) |  |
|                                                                                   |             |             |               |             |   |  |  |  |  |
| Capital contribution (Note 1)                                                     |             | 99,456      |               | --          |   | -- |  | 99,456 |  |
| Comprehensive loss:                                                               |             |             |               |             |   |  |  |  |  |
|    Unrealized loss on investments                                  |             |             |               |             |   |  |  |  |  |
|       held for sale                                 |             | --          |               | --          |   | (22,386) |  | (22,386) |  |
|    Net income                                                      |             | --          |               | 342,671     |   | -- |  | 342,671 |  |
|                                                                                   |             |             |               |             |   |  |  |  |  |
|          Total    comprehensive loss |             |             |               |             |   |  |  | 320,285 |  |
|                                                                                   |             |             |               |             |   |
|                                                                                   |             |             |               |             |   |  |  |  |  |
| Balance at December 31, 2003                                                      |             | 6,192,941   |               | (6,303,912) |   | (79,061) |  | (183,637) |  |
|                                                                                   |             |             |               |             |   |  |  |  |  |
| Comprehensive loss:                                                               |             |             |               |             |   |  |  |  |  |
|    Unrealized loss on investments                                  |             |             |               |             |   |  |  |  |  |
|       held for sale                                 |             | --          |               | --          |   | 173 |  | 173 |  |
|    Net income                                                      |             | --          |               | 38,284      |   | -- |  | 38,284 |  |
|                                                                                   |             |             |               |             |   |  |  |  |
|          Total    comprehensive loss |             |             |               |             |   |  |  | 38,457 |  |
|                                                                                   |             |             |               |             |   |
|                                                                                   |             |             |               |             |   |  |  |  |  |
| Balance at December 31, 2004                                                      | $           | 6,192,941   | $             | (6,265,628) | $ | (78,888) | $ | (145,180) |  |
|                                                                                   | =========== | =========== | ===========   | =========== |   |

See accompanying notes to consolidatedfinancial statements 

Page F6 

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     1ST NET TECHNOLOGIES,INC. Consolidated Statements of Cash Flows 

|                                                                                                                                  | For the Years    Ended |          |
|----------------------------------------------------------------------------------------------------------------------------------|------------------------|----------|
|                                                                                                                                  | December 31,           |          |
|                                                                                                                                  |                        |          |
|                                                                                                                                  | 2004                   |          | 2003 |  |
|                                                                                                                                  |                        |          |  |  |
|                                                                                                                                  |                        |          |  |  |
| Cash flows from operating activities:                                                                                            |                        |          |  |  |
|    Net income (loss)                                                                                              | $                      | 38,284   |  | $ | 342,671 |  |
|    Adjustments to reconcile net income    (loss) to                                                               |                        |          |  |  |  |  |
|       net cash used by    operating activities:                                                    |                        |          |  |  |  |  |
|          Gain    on sale of assets                                                  |                        | (28,546) |  |  | (45,380) |  |
|          Asset    impairment                                                        |                        | 1,701    |  |  | -- |  |
|          Realized    gain on sale of investments                                    |                        | (12,431) |  |  | -- |  |
|          Gain    on debt restructure (Note 1)                                       |                        | (23,247) |  |  | (55,681) |  |
|          Gain    on write-off of liabilities (Note 1)                               |                        | --       |  |  | (98,791) |  |
|          Gain    on change in accounting estimate (Note 1)                          |                        | --       |  |  | (158,668) |  |
|          Changes    in current assets and liabilities:                              |                        |          |  |  |  |  |
|             Other assets                                             |                        | 500      |  |  | -- |  |
|             Accounts payable and accrued liabilities                 |                        | (7,490)  |  |  | (34,825) |  |
|                                                                                                                                  |                        |          |  |  |
|                Net cash used in                       |                        |          |  |  |  |  |
|                   operating activities |                        | (31,229) |  |  | (50,674) |  |
|                                                                                                                                  |                        |          |  |  |
|                                                                                                                                  |                        |          |  |  |  |  |
| Cash flows from investing activities:                                                                                            |                        |          |  |  |  |  |
|    Proceeds from receipt of note    receivable\                                                                   |                        | 38,546   |  |  | 80,380 |  |
|    Proceeds from sale of equipment                                                                                |                        | 299      |  |  | -- |  |
|    Proceeds from sale of marketable    securities, net                                                            |                        | 12,431   |  |  | -- |  |
|                                                                                                                                  |                        |          |  |  |
|                Net cash provided by                   |                        |          |  |  |  |  |
|                   investing activities |                        | 51,276   |  |  | 80,380 |  |
|                                                                                                                                  |                        |          |  |  |
|                                                                                                                                  |                        |          |  |  |  |  |
| Cash flows from financing activities:                                                                                            |                        |          |  |  |  |  |
|    Repayment of notes payable                                                                                     |                        | --       |  |  | -- |  |
|    Proceeds from related party loans    (Note 3)                                                                  |                        | --       |  |  | 27,882 |  |
|    Repayment of related party loans    (Note 3)                                                                   |                        | (16,324) |  |  | (48,636) |  |
|                                                                                                                                  |                        |          |  |  |
|                Net cash used in                       |                        |          |  |  |  |  |
|                   financing activities |                        | (16,324) |  |  | (20,754) |  |
|                                                                                                                                  |                        |          |  |  |
|                                                                                                                                  |                        |          |  |  |  |  |
|                   Net change in cash   |                        | 3,723    |  |  | 8,952 |  |
|                                                                                                                                  |                        |          |  |  |  |  |
| Cash, beginning of period                                                                                                        |                        | 9,077    |  |  | 125 |  |
|                                                                                                                                  |                        |          |  |  |
|                                                                                                                                  |                        |          |  |  |  |  |
| Cash, end of period                                                                                                              | $                      | 12,800   |  | $ | 9,077 |  |
|                                                                                                                                  | =========              |          | ========= |  |
|                                                                                                                                  |                        |          |  |  |  |  |
| Supplemental disclosure of cash flow information:                                                                                |                        |          |  |  |  |  |
|    Cash paid for:                                                                                                 |                        |          |  |  |  |  |
|       Interest                                                                                     | $ --                   |          |  | $ -- |  |
|                                                                                                                                  | =========              |          | ========= |  |
|       Income taxes                                                                                 | $ --                   |          |  | $ -- |  |
|                                                                                                                                  | =========              |          | ========= |  |

See accompanying notes to consolidatedfinancial statements 

Page F7 

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**1ST NET TECHNOLOGIES, INC.**

**Notes to Consolidated FinancialStatements**

**1.** **Organization**

1st Net Technologies, Inc. (the "Company" or"1st Net") was primarily in the Internet commerce and services business from itsinception in 1997 through August 2001. The Company conducted its business operationsthrough SSP Management Corp. ("SSP"), its wholly owned subsidiary. SSP providedInternet public relations and Internet newsletters and sold substantially all of itsoperations in 2000. At December 31, 2003, SSP remains wholly-owned by 1st Net. The Companyceased operations and moved its headquarters from San Diego, California to Denver,Colorado in August 2001. Since August 2001, the Company has been a shell company in searchof a merger candidate. Recent operations have consisted of debt restructuring. 

***Debt restructurings and write-offs***

During the years ended December 31, 2004 and 2003, theCompany settled certain accounts payable balances for less than the carrying value. Theresulting gains of $23,247 and $55,681, respectively, are included in the accompanyingconsolidated financial statements as "Gain on debt restructure". 

The Company defaulted on certain equipment leaseobligations during 2001. One lease was assumed from an affiliate that was the lessee. Theaffiliate subsequently dissolved its corporate existence. As a result, the Companywrote-off the $99,456 lease obligation and recorded a capital contribution during the yearended December 31, 2003. The Company remains liable for the remaining lease obligationswhich totaled $49,039 at December 31, 2004. 

The Company relocated in August 2001 and defaulted on itsoffice lease. Due to a change in ownership of the building where the office lease waslocated and the lack of contact with the landlord since 2001, management believes theprobability of collection actions on the office lease is remote. Therefore, the Companywrote-off the $45,000 lease obligation during the year ended December 31, 2003. 

During the year ended December 31, 2004, the Companyadjusted its payroll tax accruals based on negotiations with the Internal Revenue Service.The Company reversed $53,791 of payroll tax accruals as a result of the adjustment. 

***Change in accounting estimate***

The Company's management recorded a corporate restructuringliability at December 31, 2000 in the amount of $350,000. Management estimated theliability based on costs associated with employee reductions, relocation of the corporateheadquarters and other expenses related to its plan to restructure and cease operations.The Company recognized liabilities totaling $191,332 during the years ended December 31,2003, 2002 and 2001, which reduced the restructuring liability to $158,668. At December31, 2003, management determined that it had over-estimated the original restructuringliability and revised its estimate, and reversed the remaining liability of $158,668. 

***Agreement and Plan of Reorganization***

On August 30, 2004, the Company entered into an Agreementand Plan of Reorganization with VOS Systems, Inc., ("VOS") a San Diego,California based company that specializes in voice activated electronic controls. TheAgreement provides for the reorganization of VOS with the Company, with the Companyadopting the name VOS Systems, Inc. In connection with the Agreement, the Company wouldacquire all of the issued and outstanding common shares of VOS in exchange forapproximately 36,050,000 shares of the Company's common stock. At the closing of theAgreement, the current shareholder of VOS would own approximately 85% of the outstandingcommon stock of the Company, resulting in a change in control. The Agreement had notclosed as of the date of this report. 

Page F8 

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**1ST NET TECHNOLOGIES, INC.**

**Notes to Consolidated FinancialStatements**

**2.** **Significantaccounting policies**

***Going concern***

The Company's financial statements have been prepared underthe assumption it will continue as a going concern. Realization of the Company's assets inthe accompanying financial statements is dependent upon the continued operation of theCompany. The Company plans to remain a going concern through its Agreement and Plan ofReorganization with VOS. If the Company fails to close the agreement, it must raiseadditional funds by incurring new debt, raising new equity or liquidating investmentsecurities in order to continue its limited operations. There is no assurance the Companywill be successful in closing the VOS agreement or in acquiring the working capitalnecessary to continue as a going concern. The Company is operating through the forbearanceof its creditors. 

***Principles of consolidation***

The consolidated financial statements include the accountsof the Company and SSP. All significant intercompany accounts and transactions have beeneliminated in consolidation. The accompanying financial statements have been prepared on aconsolidated basis as if common control was established as of the inception of SSP. 

***Estimates and assumptions***

The preparation of the financial statements in conformitywith generally accepted accounting principals requires management to make estimates andassumptions that affect certain reported amounts of assets and liabilities; disclosure ofcontingent assets and liabilities at the date of the financial statements; and thereported amounts of revenues and expenses during the reporting period. Accordingly, actualresults could differ from those estimates. 

***Cash and cash equivalents***

The Company considers all highly liquid debt instrumentspurchased with an original maturity of three months or less to be cash equivalents. TheCompany had no cash equivalents at December 31, 2004. 

***Investments***

Marketable securities are stated at market value asdetermined by the most recently traded price of the security at the balance sheet date.The Company's marketable securities have been classified as available-for-sale securitiesin accordance with Statement of Financial Accounting Standards ("SFAS") No. 115,Accounting for Certain Investments in Debt and Equity Securities. The unrealized gains andlosses on available-for-sale securities are reported as a separate component ofshareholders' equity, using the specific identification method. 

***Impairment and disposal of long-lived assets***

The Company evaluates the carrying value of its long-livedassets under the provisions of SFAS No. 144, Accounting for the Impairment or Disposal ofLong-Lived Assets. Statement No. 144 requires impairment losses to be recorded onlong-lived assets used in operations when indicators of impairment are present and theundiscounted future cash flows estimated to be generated by those assets are less than theassets' carrying amount. If such assets are impaired, the impairment to be recognized ismeasured by the amount by which the carrying amount of the assets exceeds the fair valueof the assets. Assets to be disposed of are reported at the lower of the carrying value orfair value, less costs to sell. An impairment was recorded on the Company's idle equipmentduring the year ended December 31, 2004 (see Note 6). 

Page F9 

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**1ST NET TECHNOLOGIES, INC.**

**Notes to Consolidated FinancialStatements**

***Fair value of financial instruments***

The Company estimates that the carrying values of itsmonetary assets and liabilities approximate their fair values as of December 31, 2004 dueto the short-term maturity of those instruments. 

***Comprehensive income***

SFAS No. 130, Reporting Comprehensive Income, requires thatall components of comprehensive income, including net income, be reported in the financialstatements in the period in which they are recognized. Comprehensive income is defined asthe change in equity during a period from transactions and other events and circumstancesfrom non-owner sources. Net income and other comprehensive income, including unrealizedgains and losses on investments held for sale, shall be reported net of their related taxeffect, to arrive at comprehensive income. 

***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 theprovisions of SFAS No. 128, basic earnings per share is computed by dividing the net lossfor the period by the weighted average number of common shares outstanding during theperiod. Diluted earnings per share is computed by dividing the net loss for the period bythe weighted average number of common and common equivalent shares outstanding during theperiod. 

Potentially dilutive securities include options andwarrants that were excluded from basic and diluted earnings per share because of theiranti-dilutive effect. Anti-dilutive securities outstanding totaled -0- and 625,000 atDecember 31,2004 and 2003, respectively. 

***Stock-based compensation***

The Company accounts for compensation expense for itsstock-based employee compensation plans using the intrinsic value method prescribed inAccounting Principles Board Opinion No. 25, "Accounting for Stock Issued toEmployees" ("APB 25"), and complies with the disclosure provisions of SFASNo. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), andSFAS No. 148, "Accounting for Stock-Based Compensation-Transition andDisclosure". Under APB 25, compensation expense of fixed stock options is based onthe difference, if any, on the date of the grant between the deemed fair value of theCompany's stock and the exercise price of the option. Compensation expense is recognizedon the date of grant or on the straight-line basis over the option-vesting period. TheCompany accounts for stock issued to nonemployees in accordance with the provisions ofSFAS 123 and EITF Issue No. 96-18, "Accounting for Equity Instruments That Are Issuedto Other Than Employees for Acquiring, or in Conjunction with Selling, Goods orServices". 

Pro forma information regarding the results of operationsis determined as if the Company had accounted for its employee stock options using thefair-value method. The fair value of each option grant is estimated on the date of grantusing the Black-Scholes method. The Company did not grant any stock-based awards duringthe years ended December 31, 2004 and 2003. 

***Reclassifications***

Certain 2003 balances have been reclassified to conformwith the 2004 presentation. These reclassifications have no effect on net income. 

Page F10 

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**1ST NET TECHNOLOGIES, INC.**

**Notes to Consolidated FinancialStatements**

***Recent accounting pronouncements***

In December 2004, the FASB issued SFAS No. 153,"Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29." ThisStatement eliminates the exception for nonmonetary exchanges of similar productive assetsand replaces it with a general exception for exchanges of nonmonetary assets that do nothave commercial substance. A nonmonetary exchange has commercial substance if the futurecash flows of the entity are expected to change significantly as a result of the exchange.This Statement is effective for nonmonetary asset exchanges occurring in fiscal periodsbeginning after June 15, 2005. The Company does not expect application of SFAS No. 153 tohave a material affect on its financial statements. 

In December 2004, the FASB issued a revision to SFAS No.123, "Share-Based Payment." This Statement supercedes APB Opinion No. 25,"Accounting for Stock Issued to Employees" and its related implementationguidance. It establishes standards for the accounting for transactions in which an entityexchanges its equity instruments for goods or services. It also addresses transactions inwhich an entity incurs liabilities in exchange for goods or services that are based on thefair value of the entity's equity instruments or that may be settled by the issuance ofthose equity instruments. This Statement does not change the accounting guidance forshare-based payment transactions with parties other than employees provided in StatementNo. 123 as originally issued and EITF Issue No. 96-18. This Statement is effective forpublic entities that file as small business issuers as of the beginning of the firstfiscal period that begins after December 15, 2005. The Company has not yet determined theimpact of SFAS No. 123 (revised) on its financial statements. 

***3.*** ***Related party transactions***

In prior years, the Company has borrowed funds from anaffiliate for working capital. At December 31, 2002, the Company was indebted to theaffiliate in the amount of $45,078. The Company borrowed $-0- and $27,882 from theaffiliate and made payments of $16,342 and $48,636 during the years ended December 31,2004 and 2003, respectively. Borrowings from the affiliate are non-interest bearing unlessso stated at the time funds are advanced. The Company owed the affiliate $8,000 atDecember 31, 2004. 

***4.*** ***Installment sale of Internet newsletter***

On February 23, 2000, SSP sold an Internet newsletterpublished by the Company along with certain related assets to Marketbyte, L.L.C.("Marketbyte") for a $200,000 promissory note and $400,000 in other futureconsideration. Other future consideration consisted of 10% of any future considerationreceived by Marketbyte in connection with the newsletter through June 2, 2002. Marketbytehas repaid $200,000 the promissory note and has paid $110,891 in other considerationthrough December 31, 2004. Due to the uncertainty related to the collection of the"other consideration", no receivable has been recorded and any collections arerecorded as income when received. 

Page F11 

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**1ST NET TECHNOLOGIES, INC.**

**Notes to Consolidated FinancialStatements**

**5.** **Marketablesecurities**

Marketable securities are stated at their fair value andconsisted of the following at December 31, 2004: 

|                        |   |        |  | Unrealized | Unrealized |      | Fair     |  |
|------------------------|---|--------|--|------------|------------|------|----------|--|
|    2004 |   | Cost   |  |            | Gain       |      | Loss     |  | Value |  |
|                        |   |
| Equity Securities      | $ | 205    |  | $          | 173        | $ -- |          |  | $ | 378 |  |
|                        |   |        |  |            |            |      |          |  |  |  |  |
|                        |   |        |  |            |            |      |          |  |  |  |  |
|                        |   |        |  | Unrealized | Unrealized |      | Fair     |  |
|    2003 |   | Cost   |  |            | Gain       |      | Loss     |  | Value |  |
|                        |   |
| Equity Securities      | $ | 22,591 |  | $ --       |            | $    | (22,386) |  | $ | 205 |  |

The Company received net proceeds from sale of equitysecurities held in the amount of $12,431 and $-0- and realized a gain in the amount of$12,431 and $-0-, during the years ended December 31, 2004 and 2003 respectively. TheCompany recorded net accumulated comprehensive gains/(losses) on available-for-salesecurities totaling $173 and $(22,386) during the years ended December 31, 2004 and 2003,respectively. 

**6.** **Saleof idle equipment**

At December 31, 2003, the Company held idle computerequipment with a book value of $2,000. During April 2004, the Company sold the idleequipment for net proceeds of $299, after deducting costs to sell the equipment. TheCompany had previously recorded an asset impairment charge of $1,701 to reduce the bookvalue of the idle equipment to its fair value as of March 31, 2004. 

There was no depreciation expense recorded during the yearsended December 31, 2004 and 2003. 

**7.** **Lawsuitsettlement**

In October, 2002, the Company entered into a representationagreement with the Law Office of Roy R. Withers, of San Diego, California, to representthe Company in a civil action against Mitchell & Shea, attorneys at law, for misuse ofname and related damages. This action stemmed from the dismissal of the Company pursuantto a 2002 lawsuit, whereby the Company was seeking to recoup the fees and expenses it hadto expend to defend itself in that suit. During January 2004, the parties settled theaction and the Company received net proceeds of $1,093, after deducting costs incurred toobtain the settlement. The net proceeds are included in the accompanying condensedconsolidated financial statements as "Other Income". 

**8.** **Shareholders'deficit**

***Preferred stock***

The Board of Directors is authorized to issue shares ofpreferred stock in series and to fix the number of shares in such series as well as thedesignation, relative rights, powers, preferences, restrictions, and limitations of allsuch series. The Company had no preferred shares issued and outstanding at December 31,2004. 

Page F12 

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**1ST NET TECHNOLOGIES, INC.**

**Notes to Consolidated FinancialStatements**

***Common stock awards***

The Company accounts for all stock awards under SFAS No.123. However, as permitted by SFAS No. 123, the Company accounts for stock awards grantedto employees and stock awards granted to nonemployees, in a different manner. Directors,acting in their capacity as directors, are considered employees. 

The Company has elected to account for stock awards grantedto employees under the "intrinsic value method" whereby no compensation expenseis recorded if the award's price equals or exceeds the fair value of the underlying stock.The Company accounts for stock awards granted to consultants and other providers under the"fair value method" whereby compensation expense is recorded for the excess ofthe fair value of the award over the market price of the underlying stock. 

Under SFAS No. 123, when the intrinsic value method iselected, compensation expense is also measured under the fair value method, but reportedon a "pro forma" basis. The Company granted no stock awards during the yearsended December 31, 2004 and 2003. 

Following is a schedule of changes in the Company'soutstanding stock awards for the years ended December 31, 2004 and 2003: 

|                                  |           |             | Weighted       | Weighted Avg |
|----------------------------------|-----------|-------------|----------------|--------------|
|                                  |           | Number      | Avg            | Remaining    |
|    Stock Awards   | Number    | Exercisable | Exercise Price | Life         |
|                                  |
| Outstanding at January 1, 2003   | 625,000   | 625,000     | $              | 2.60         | 1 year |
| Granted                          | -         | -           |                | -            | - |
| Exercised                        | -         | -           |                | -            | - |
| Expired                          | -         | -           |                | -            | - |
| Cancelled                        | -         | -           |                | -            | - |
|                                  |           |
| Outstanding at December 31, 2003 | 625,000   | 625,000     | $              | 2.60         | 2 months |
| Granted                          | -         | -           |                | -            | - |
| Exercised                        | -         | -           |                | -            | - |
| Expired                          | (625,000) | (625,000)   |                | -            | - |
| Cancelled                        | -         | -           |                | -            | - |
|                                  |           |
| Outstanding at December 31, 2004 | -         | -           |                | -            | - |
|                                  | ========= |             |                |              |  |

Page F13 

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**1ST NET TECHNOLOGIES, INC.**

**Notes to Consolidated FinancialStatements**

**9.** **Incometaxes**

A reconciliation of the U.S. statutory federal income taxrate to the effective rate is as follows: 

|                                               | 2004     |  | 2003     |  |
|-----------------------------------------------|----------|--|----------|--|
|                                               |          |  |          |  |
| Federal income tax rate                       | 15.00%   |  | 34.00%   |  |
| State income tax rate, net of Federal benefit | 3.94%    |  | 3.06%    |  |
| Net operating loss for which no tax benefit   |          |  |          |  |
|    is currently available      | -18.94%  |  | -37.06%  |  |
|                                               |          |  |          |  |
|                                               | 0.00%    |  | 0.00%    |  |
|                                               | ======== |  | ======== |  |

At December 31, 2004, deferred taxes consisted of a net taxasset of $2,093,504, due to operating loss carryforwards of $6,165,697, which was fullyallowed for, in the valuation allowance of $2,093,504. The valuation allowance offsets thenet deferred tax asset for which there is no assurance of recovery. The change in thevaluation allowance for the years ended December 31, 2004 and 2003 totaled $(7,339) and$(163,834). Net operating loss carryforwards will expire through 2021. 

The valuation allowance will be evaluated at each balancesheet date, considering positive and negative evidence about whether the asset will berealized. At that time, the allowance will either be increased or reduced; reduction couldresult in the complete elimination of the allowance if positive evidence indicates thatthe value of the deferred tax asset is no longer impaired and the allowance is no longerrequired. 

Should the Company undergo an ownership change as definedin Section 382 of the Internal Revenue Code, the Company's tax net operating losscarryforwards generated prior to the ownership change will be subject to an annuallimitation, which could reduce or defer the utilization of these losses. 

Page F14 

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