UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                                   (Mark One)

     (X)  Annual  report  pursuant  to  Section  13 or 15(d)  of the  Securities
Exchange Act of 1934 (Fee Required) For the fiscal year ended December 31, 1999

     ( ) Transition report under section 13 or 15(d) of the Securities  Exchange
Act of 1934


                       For the transition period from      to

                         Commission file number 0-22341

                              AUGMENT SYSTEMS, INC.
             (Exact name of registrant as specified in its charter)
                  Delaware                                      04-3089539
                  --------                                      ----------
         (State or other jurisdiction of                (I. R. S. Employer
         incorporation or organization)               identification No.)

                       P.O. Box 1111, West Newbury, MA, 01985
                         (Address of principal executive
                               offices)(Zip Code)

                                  978-363-5349
              (Registrant's telephone number, including area code)

             Securities registered pursuant to Section 12(b) of the

                                  Exchange Act:

                                 Not Applicable

             Securities registered pursuant to Section 12(g) of the
                                 Exchange Act:

                          Common Stock, $.01 par value

                         Common Stock Purchase Warrants

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

        (1)      Yes ___   NO X           (2)      Yes   X   NO___


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

     The  issuer's  revenues  for the fiscal  year ended  December  31, 1999 was
$185,489.  As of June 08,  2000,  there were  15,178,007  shares of the Issuer's
Common Stock, $.01 par value, issued and outstanding. The aggregate market value
of the Issuer's voting stock held by non-affiliates  was approximately  $118,990
based upon the average of the bid and asking prices of such stock on that date.


<PAGE>






Item 1.  Description of Business

General/ Proposed Business

     Prior to January 15, 1999, Augment Systems, Inc., (the "Company") designed,
developed and sold fibre channel based network file server  systems  designed to
increase data transfer and file storage on computer networks.  While the Company
experienced  initial success with the introduction of its products to customers,
long-term  viability was  dependent,  in part,  on migrating  its  technology to
standard hardware and software. However, without additional capital, the Company
was unable to  complete  research  and  development,  maintain a sales force and
requisite administrative support.

     On January 15, 1999,  the Board of  Directors  elected to  discontinue  all
ongoing  operations,  layoff all but one of its  employees,  seek buyers for its
technology and inventory and look for a merger  partner.  The Company has ceased
sales, marketing and distribution of its products. On March 31, 1999, two of the
remaining  three  members of the Board of  Directors  resigned  to pursue  other
interests.  As of June 08, 2000, the Company's Chief Financial Officer, and only
board  member,  was  engaged  in  the  disposition  of  assets,   settlement  of
outstanding  debts,  sale  of  the  Company's  technology,  and  exploration  of
potential mergers. There are substantial risks that the Company will not be able
to settle its debts or find a suitable  merger  transaction.  The Company may be
compelled to voluntarily  file for bankruptcy or be forced by its creditors into
an  involuntary  bankruptcy.  See Item 1 - Potential  for  Bankruptcy - Need for
Financing  and  Item  6 -  Management's  Discussion  and  Analysis  or  Plan  of
Operation.

Prior Operations

         Prior to January 15, 1999, Augment Systems,  Inc.  designed,  developed
and sold fibre  channel-based  network file server systems  designed to increase
data  transfer  and file storage on computer  networks.  The  Company's  initial
target  market was the  electronic  printing and  publishing  industry  which is
rapidly  converting to digital  technology,  but suffered from critical workflow
bottlenecks  due to the very large file sizes of color  images  which  cannot be
efficiently  transported  over  conventional  networks.  The Company  sold fibre
channel-based  network  file  server  systems  which  included  (i)  one or more
end-to-end high speed fibre channel arbitrated loop ("FC-AL") interfaces; (ii) a
file server, the AFX 410, that performs a central file management function, high
speed  large  capacity  storage,  and  high  speed  interconnects  to the  FC-AL
interfaces;  and (iii) PCI cards and software for each client  workstation to be
connected to the file server.

Sale of Securities/Proposed Business

     On March 11,  2000,  the Company  entered into a Stock  Purchase  Agreement
pursuant  to which the Company  will sell to  Right2web.Com,  Inc  ("Right2web")
Company  preferred  shares for $10,000 in cash and a 7% note due in one year for
$40,000.  Right2web is a start-up business- -to- business internet venture, will
receive shares of the Company's Series A Convertible  Preferred Stock subject to
various conditions of closing, including conversion of all outstanding warrants,
options  and  convertible  notes into  equity,  of which all but  $25,000 of the
convertible  notes payable have been converted as of this date.  Upon conversion
of the  Preferred  Stock,  Right2Web.Com  will own 92% of the Company on a fully
diluted  basis.  After  dilution,  current  stockholders  would  hold  3% of the
Company's  common stock and the  convertible  note  holders  would hold 5%. This
transaction should close in the near future.

     Right2Web.Com, is owned principally by Jeffrey Leventhal, a former director
of the Company who resigned in March 1999. Mr.  Leventhal has  previously  owned
three information  technology  companies,  with his most previous venture having
been sold to a public company,  Netlogics  Communications,  Inc.  (NASDAQ:NETL).
Right2web's  business  model  is  to  build  a   business-to-business   internet
destination  portal  where small to medium  sized  companies  can host their web
sites and  direct  employees  to  procure  information,  productivity  tools and
products.  In addition,  Right2web intends to assist companies in developing and
hosting enabled web sites.  Right2web will seek to establish  services that will
complement  the small business  marketplace.  Right2web has also advised that it
intends to make strategic acquisitions in businesses,  which may provide related
services to small to mid-sized  businesses  such as  advertising,  marketing and
consulting firms, as well as other internet ventures.

     Since Right2web is a start-up  business-to-business  e-commerce venture, it
will,  among  other  things,  be subject to  intense  competition,  the need for
substantial financing,  unforeseen  technological changes, the risks inherent in
any internet  business such as security  concerns,  technological  difficulties,
development of new technology, the need to attract qualified personnel, reliance
on Jeffrey  Leventhal,  and the continuance of favorable  market  conditions for
internet companies, etc.

Employees

         As of April 12, 2000,  the Company  employed Duane Mayo, on a part-time
basis,  to  dispose of all  assets,  settle any  outstanding  debts and  explore
potential  mergers.  Mr. Mayo is the sole remaining  officer and director of the
Company.

Potential for Bankruptcy - Need for Additional Financing

     The  Company's  continued  viability  depends,  in part,  on its ability to
negotiate or litigate substantial  reductions in the amounts owed by the Company
to its  creditors and  successfully  settle or defend any  creditor's  claims or
actions. In the event the Company is unable to achieve this objective,  it would
not have  adequate cash  resources to meet its  obligations  and would,  in most
likelihood,  be forced into a petition in bankruptcy. In addition, the creditors
of the Company  could place the Company in  bankruptcy.  Either of the foregoing
events would have a material  adverse  effect on the value of the Company to its
current  shareholders,   secured  and  unsecured  creditors.  In  the  event  of
bankruptcy, current equity and warrant-holders could be substantially diluted.

     In  addition,  the  Company  may also  need to  raise  capital  from  other
financings to pay its debts. There can be no assurances that the Company will be
able to obtain such additional  financings on terms acceptable to the Company or
in a time frame required by the Company,  if at all. In such event,  the Company
may be required to materially alter its plans. Any such additional financing may
result in  significant  dilution to  existing  stockholders  or the  issuance of
securities  with rights superior to those of the existing  shareholders.  In the
event  that the  Company  is  unable to raise or borrow  additional  funds,  the
Company may be forced into bankruptcy.

     There can be no assurances  that the Company will be able to consummate the
Right2web  transaction  within an acceptable time frame required by the Company,
if at all. If the Right2web  transaction does close, the Company will still need
to  raise  substantial  additional  capital,  the  amount  of  which  cannot  be
determined  at this  time.  Any such  transaction  will  result  in  significant
dilution to existing  stockholders  or the  issuance of  securities  with rights
superior to those of the existing  stockholders.  (See Item 1.  General/Proposed
Business).  In the event that the Company is unable to consummate  the Right2web
transaction,  the Company may be forced to file for  bankruptcy or may cease all
activities.

ITEM 2.  Description of Property

Facilities

         The Company operates the day-to-day  operation from the Chief Financial
Officer's  residence.  The Company  believes that its facilities are adequate to
meet its current  business  requirements.  Assuming  completion of the Right2web
transaction,  the  Company's  principal  office  will be  moved  to  Right2web's
corporate headquarters in Florida.

Item 3.  Legal Proceedings

         In March 1998,  the Company's  former  President and CEO,  Lorrin Gale,
left the Company at the request of the Board of Directors.  On May 29, 1998, Mr.
Gale  filed a  complaint  against  the  Company  in the  Superior  Court  of the
Commonwealth  of  Massachusetts  seeking  relief  for  breach  of an  employment
contract.  In September  1998, the Company  reached a settlement  with Mr. Gale,
which  required that the Company pay $150,000 in severance pay and an additional
$45,000 in  increments  of $15,000 over the next three years  commencing in July
1999.  In the event the Company  does not make  payments  under the terms of the
settlement  agreement or is unable to work out an arrangement  for payment,  Mr.
Gale could obtain a judgement  against the Company,  which would have a material
adverse affect on the prospects of the Company.

     The  Company  is not  involved  in any other  material  legal  proceedings.
Although  the Company has  effectively  ceased  operations,  there are  numerous
secured  and  unsecured  creditors  who could  commence  litigation  against the
Company.  In the event  that the  Company  has  insufficient  funds to settle or
defend these matters,  the Company or its creditors  could cause the filing of a
bankruptcy  proceeding.  See Item 1 - Business - Potential for Bankruptcy - Need
for Additional  Financing and Item 6 -  Management's  Discussion and Analysis or
Plan of Operation.  Mr. Gale died in March 2000,  and the Company is negotiating
with his estate to convert the balance due Mr. Gale to equity.

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

         No matters were submitted to a vote of security holders during the year
ending December 31, 1999.

Item 5. Market for Common Equity and Related Stockholder Matters

     The   Company's   Common   Stock   was   traded  on  the   Bulletin   Board
Over-the-Counter  ("OTC-BB)  under the symbol  "AUGS" and the  Company's  Common
Stock Purchase Warrants were traded on the Bulletin Board Over-the-Counter under
the symbol of "AUGSW". Until on or about June 1, 2000 (the Company was de-listed
due to its failure to timely file its latest annual and quarterly reports).  The
Company intends to immediately seek to re-list its securities on the OTC-BB.

     In February 1998, the NASD changed the listing  requirements  for companies
whose  securities  are  listed  on  NASDAQ  SmallCap  Market.  In light of those
changes,  on February 26, 1998,  NASDAQ  informed the Company it was to have net
tangible  assets of  $5,000,000  by June 30,  1998,  and  granted  the Company a
temporary  listing  exception  until that time.  Since,  at June 30,  1998,  the
Company did not meet the net tangible assets requirement, on July 7, 1998 NASDAQ
informed the Company that it's securities were no longer eligible for listing on
the NASDAQ SmallCap Market.

         The following  table sets forth the range of high and low prices quoted
for the  Common  Stock  for  the  periods  indicated.  Such  quotations  reflect
inter-dealer prices, without retail mark-up,  mark-down or commission and do not
necessarily represent actual transactions.

Common Stock
<TABLE>

                                                                             High Bid              Low Bid
                                                                               Price                Price
        <S>                                                                     <C>                <C>

         1998

           First Quarter......Privately held until May 1997..                  $1.50               $1.00

           Second Quarter....................................                  $1.4375             $ .50

           Third  Quarter....................................                  $ .5625             $ .21875

           Fourth Quarter....................................                  $ .375              $ .01



         1999

           First Quarter.......................................                $ .01                $ .01

           Second Quarter....................................                  $ .01                $ .01

           Third  Quarter..................................                    $ .01                $ .01

           Fourth Quarter.......................................               $ .01                $ .01


</TABLE>


Dividend Policy

         The Company has never paid any cash  dividends and does not  anticipate
payment of cash  dividends  on the  Company's  Common  Stock in the  foreseeable
future.  Under  Delaware  Corporation  Law,  dividends  may be paid  only out of
legally  available funds as prescribed by statute,  subject to the discretion of
the Company's Board of Directors.

Recent Sales of Unregistered Securities

         The Company did not have any securities  sold by the Company during the
period  covered by this  reporting  period  that were not  registered  under the
Securities Act of 1933 or otherwise reported on the Company's Form 10-QSBs filed
during this reporting period.

     1. In December 1998,  the Board of Directors  authorized the issuance of an
additional  3,592,816  shares of Common  Stock to 66  accredited  investors  who
participated in private  placements of the Company's Common Stock during January
and May 1998.  The issuance of the shares was pursuant to specific  terms of the
private placement relating to missing certain revenue milestones.  As of June 8,
2000, the Company had not authorized the issuing of 3,279,455 shares.

     2. In December  1998,  the Board of  Directors  authorized  the issuance of
warrants to purchase 359,282 shares of Common Stock to the underwriter  involved
in private  placements of the Company's Common Stock during January 1998 and May
1998. The issuance of the warrants was pursuant to specific terms of the private
placement relating to missing certain revenue milestones.  As of April 2000, the
Company had not issued those warrants.

         The offerings described in Numbers 1 through 2, inclusive,  were exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933 and the
Securities and Exchange Commission Rule 506.

ITEM 6.  Management's Discussion and Analysis or Plan of Operation

         The Private  Securities  Litigation  Reform Act of 1995  contains  safe
harbor provisions regarding  forward-looking  statements.  Except for historical
information contained herein, the matters discussed in the Liquidity and Capital
Resources  section below contain potential risks and  uncertainties,  including,
without  limitation,  risks  related to the  Company's  ability to  successfully
identify  potential  merger  partners,  retain  key  employees  and  settle  any
outstanding debts. The Company will need to attract partners in order to execute
its revised  business  strategy,  and there can be no assurance that the Company
will be successful in attracting such partners.

General

         In January  1999,  the Board of  Directors  elected to suspend  ongoing
operations,  layoff all but one of its employees, dispose of all assets, attempt
to settle  any  outstanding  short  and long term  debts,  seek  buyers  for its
technology, and explore merger opportunities.

         Prior to January 15, 1999, Augment Systems,  Inc.  designed,  developed
and sold fibre channel based  network file server  systems  designed to increase
data  transfer and file storage on computer  networks.  In September  1998,  the
Company  obtained   $1,500,000  in  bridge  financing  of  secured   convertible
promissory notes and common stock purchase warrants.  The Company used a portion
of the proceeds of the bridge  financing to repay in full its  indebtedness to a
major bank. In November  1998,  the Company was informed by an investment  bank,
that  provided  the  bridge  financing,  that they would be unable to secure the
additional  funding required to repay the outstanding  bridge loan,  provide the
Company  with the  necessary  working  capital to support the  execution  of its
business  plan and ongoing  operations.  The Company  began to seek  alternative
financing,  but, was unable to secure the funds  necessary  to maintain  ongoing
operations.

     From October 1995 through March 1997, the Company operated as a development
stage company and engaged  principally in research and development,  recruitment
of personnel and financing  activities.  The Company conducted limited marketing
activities  and did not commence beta  shipments of its initial  products  until
February  1997.  During the second  quarter  ended June 30,  1997,  the  Company
commenced  commercial  shipment  of its server  product and  recognized  initial
revenue in April 1997.  The Company's  initial  target market was the electronic
publishing  industry,  which required the rapid and efficient  movement of large
image and data files over networks.

Plan of Operation

     In  January  1999,  the  Board of  Directors  elected  to  suspend  ongoing
operations,  layoff all but one of its employees, dispose of all assets, attempt
to settle  any  outstanding  short  and long term  debts,  seek  buyers  for its
technology, and explore merger opportunities.

     Revenue  for the fiscal  year ended  December  31,  1999 were  $185,489  as
compared to $1,062,203 in revenues for the fiscal year ended  December 31, 1998.
Revenues in 1999 resulted from the sale of software and licenses versus revenues
in 1998 which were from products  sales.  During 1999 and 1998,  product revenue
were primarily generated through domestic end-user sales.

     The Company incurred no research and development  costs for the fiscal year
ended  December  31, 1999 as compared  to  $2,338,222  for the fiscal year ended
December  31,  1998.  The  $2,338,222  decrease was  primarily  attributable  to
discontinued  operations which resulted in a reduction in engineering  personnel
and consultants  associated with the development of the Company's server product
and a lack of capital.  The Company does not anticipate  spending any additional
funds on research and development in the foreseeable future.

     General and  administrative  costs for the fiscal year ended  December  31,
1999 were $177,757 as compared to $2,102,945  for the fiscal year ended December
31, 1998.  The  $1,925,188  decrease is  attributable  to decreased  spending on
employees, and legal fees. The Company anticipates that spending for general and
administrative costs for the next six months at less than $150,000.

     The Company incurred no sales and marketing costs for the fiscal year ended
December 31, 1999 as compared to $1,886,850  for the fiscal year ended  December
31, 1998. The  $1,886,850  decrease is  attributable  to a decrease in marketing
support and sales personnel.  The Company does not plan on spending any funds on
selling and marketing expenses in the foreseeable future.

     The Company  recognized a net profit for the fiscal year ended December 31,
1999 of $184,527 as  compared  to a net loss of  $7,239,529  for the fiscal year
ended December 31, 1998.

     The Company currently has one part-time employee to dispose of all physical
assets, attempt to settle any outstanding short and long-term debts, seek buyers
for its technology, and explore merger opportunities.

Liquidity and Capital Resources

     The Company has funded its operations since October 1995 principally from a
combination of debt and equity financings  totaling  approximately  $22,975,000.
Prior to May  1997,  the  Company  issued  convertible  promissory  notes in the
aggregate principal amount of approximately $864,000.  Approximately $802,000 of
the principal  balance of these notes plus accrued  interest was converted  into
shares of  Common  Stock in  November  1996 at a  conversion  price of $4.00 per
share.  In December 1996 and February 1997, the Company raised gross proceeds of
$3,585,000 in a private  placement of promissory notes and common stock purchase
warrants.  The promissory notes,  bearing interest at 12% per annum, were repaid
from the proceeds of its initial public  offering.  In addition,  from September
1995 through  August 1996,  the Company  issued  1,653,623  shares of its Common
Stock for approximately $3,372,000 in gross proceeds.

     On May 16,  1997,  the Company  completed  its initial  public  offering of
1,800,000 shares of its Common Stock at a price of $5.50 per share and 2,070,000
Redeemable Common Stock Purchase  Warrants at $.15 per warrant.  Each Redeemable
Common  Stock  Purchase  Warrant  entitles  the holder to purchase  one share of
Common Stock for $6.60 during the four-year period  commencing May 12, 1998. The
net  proceeds  from the  Company's  initial  public  offering,  after  deducting
underwriting  discounts and  commissions and estimated  expenses  payable by the
Company, were approximately $8,220,000.

     In October 1997,  the Company  obtained a $750,000 loan from Fleet National
Bank.  The loan was secured by all of the  Company's  assets,  bore  interest at
Fleet National Bank's prime rate plus 2% and was originally  payable by December
31, 1997 or upon  completion  of a financing  resulting  in net  proceeds to the
Company of at least  $5,000,000.  Pursuant to the terms of the loan, the Company
issued  detachable  warrants to purchase  100,000  shares of Common  Stock at an
exercise  price of $1.00 per share  exercisable  over five years.  This loan was
extended  through and until July 31, 1998. On July 31, 1998,  the Company made a
payment in the amount of $300,000 to Fleet  National Bank and the final $450,000
balance was retired on August 31, 1998.

     During  December 1997 and January 1998, the Company  secured  $1,000,000 in
bridge financing from institutional and private investors in anticipation of the
private placement of the Company's Common Stock. The bridge financing promissory
notes accrued  interest at 8% per annum with  interest and principal  payable at
maturity  on the initial  closing of the private  placement.  In  addition,  the
Company issued to bridge  investors five year warrants to purchase up to 750,000
shares in the  aggregate of the  Company's  Common Stock at $1.00 per share.  In
February  1998,  the  Company  repaid  $200,000 of these  promissory  notes plus
interest and the holders of $800,000 of these  promissory  notes converted their
notes into shares of the Company's  Common Stock at $1.00 per share.  In January
1998,  the  Company  closed  on an  initial  amount of  $6,180,000  of a private
placement  initiated in December  1997. In early May 1998, the Company closed on
an additional $575,000 and terminated the offering started in December 1997. The
aforementioned  funds were used to repay  outstanding  accounts  payable  debts,
incurred during 1997, of  approximately  $1,400,000,  repay bridge  financing of
approximately $200,000 and bank debt of approximately $300,000, support research
and  development  expenses  of  approximately  $2,000,000,  sales and  marketing
expenses of approximately  $1,700,000,  and $675,000 in administrative and other
expenses.

     In September 1998, the Company  obtained  $1,500,000 in bridge financing of
secured  convertible  promissory  notes and common stock purchase  warrants from
certain investors (the  "Convertible Note holders").  The Company used a portion
of the proceeds of the bridge  financing to repay, in full, its  indebtedness to
Fleet National Bank. The convertible  promissory notes were due and payable upon
the  earlier of the  closing of a  financing  of a minimum of  $4,000,000  or in
September  1999. In November  1998,  the Company was informed by the  investment
bank,  that provided the bridge  financing,  that they would be unable to secure
the additional funding required to repay the outstanding bridge loan and provide
the Company with the necessary  working capital to support its business plan and
ongoing operations.  The Company began to seek alternative  financing,  but, was
unable  to  secure  the funds  necessary.  On  January  15,  1999,  the Board of
Directors decided to shut down operations, lay-off all but one of its employees,
liquidate assets,  seek buyers for the Company's  technology and look for merger
partners.  On April 7, 2000,  the Company  requested that the  Convertible  Note
holders  convert  their  interest into the aggregate of five percent (5%) of the
equity of the Company after  completion of the  Right2web  transaction.  To date
1,475,000  convertible  note  holders  have agreed to convert  their rights into
equity in the Company as previously described.


     These  factors  raise  substantial  doubt  about the  Company's  ability to
continue as a going  concern.  The Company is dependent on its ability to settle
all debts with  creditors,  attract  purchasers of the Company's  technology and
attract potential merger partners,  which will undoubtedly result in substantial
dilution to existing  shareholders.  Although the Company has effectively ceased
operations,  there  are  numerous  secured  and  unsecured  creditors  who could
commence litigation against the Company - see Item 3 - Legal Proceedings. In the
event that the Company has insufficient funds to settle or defend these matters,
the Company or its creditors could cause the filing of a bankruptcy  proceeding.
See  Item  1 -  Business  -  Potential  for  Bankruptcy  - Need  for  Additional
Financing.

     The Company is authorized  to issue up to  50,000,000  shares of its Common
Stock and up to 2,000,000  shares of Preferred Stock. As of June 08, 2000, there
were 11,898,951  shares of the Company's Common Stock issued and outstanding and
no Preferred Stock issued and outstanding.  The Company has issued an additional
3,279,455  shares of Common  Stock to  certain  investors  who  participated  in
private  placements  of the Company's  Common Stock during  January 1998 and May
1998.  The shares had been  authorized  for  issuance by the Board of  Directors
during  1998.  In addition,  the Company has  7,413,111  Common  Stock  Purchase
Warrants issued and outstanding,  of which all 7,413,111 are substantially above
the existing market price.  Pursuant to the Right2web  transaction,  the Company
will issue  Preferred  Stock after a reverse  split of the Company  Common Stock
such that Right2web will own, through its convertible  preferred shares,  92% of
the Common Stock of the Company on a fully diluted basis.

Capital Expenditures

         The  Company  does  not  have  any  material  commitments  for  capital
expenditures at this time.

Effects of Inflation

         The Company  believes  that the  relatively  moderate rate of inflation
over the past few years has not had a significant  impact on the Company's sales
or operating results.

Income Taxes

     The Company adopted Statement No. 109 "Accounting for Income Taxes" in 1993
and its implementation has had no effect on the Company's financial position and
results of operation.

Year 2000 Disclosure

         The Company believes that its products are year 2000 compliant and does
not anticipate any claims relating  thereto.  As the Company  effectively has no
operations, the year 2000 problem is not an issue at this point.

ITEM 7.  Financial Statements

         See Pages F-2 through F-19.

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

         On April 10,  2000,  the  Company's  Board of Directors of the Company,
dismissed  its  independent  accountants  BDO Seidman,  LLP ("BDO  Seidman") and
appointed the  accounting  firm of Bloom & Company  ("Bloom & Company"),  as the
Company's new outside  auditors,  subject to  shareholder  ratification  of such
appointment at the Company's  next annual or, if called prior  thereto,  special
shareholders'  meeting. Due to the reduction in the Company's  manufacturing and
distribution  activities,  as well as the Company's  expected future operations,
the  Board  had  determined  that it did not  need  outside  auditors  with  the
resources  and breadth of  operations  of BDO Seidman and,  based on a review of
several accounting firms,  selected Bloom & Company which has public company and
auditing experience.

         BDO Seidman had included a "going  concern"  paragraph in its auditor's
reports on the  financial  statements  for the  Company's two fiscal years ended
December 31, 1998 and December 31, 1997,  which also  indicated that the Company
had  suspended  operations  and  liquidated  its  assets.  As a  result  of this
uncertainty,  BDO  Seidman  was not able to  express,  and did not  express,  an
opinion on the 1998 and 1997  financial  statements.  During the two most recent
fiscal  years  and  any  subsequent   interim  period  preceding  BDO  Seidman's
dismissal,  there  were no  disagreements  between  the  Company  and the former
auditors  on  any  matter  of  accounting  principles  or  practices,  financial
statement  disclosure,  or auditing scope or procedure which, if not resolved to
the satisfaction of the former auditors, would have caused BDO Seidman to make a
reference  to the subject  matter of the  disagreement  in  connection  with its
auditors' reports in such financial statements other than their refusal to issue
an unqualifying opinion on the Company's operations for 1998.

         Prior to engaging Bloom & Company,  the Company  consulted with several
of its clients as to its  qualifications,  experiences  and ability to audit the
Company's  financial  statements.  The  Company and Bloom & Company did not have
substantive  discussions regarding the application of accounting principles to a
specified transaction, either complete or proposed, or the type of audit opinion
that might be rendered on the registrant's financial statements and there are no
reports nor written or oral advice provided by the new accountants'  experience,
provided in deciding to retain Bloom & Company.  Further, as noted, there was no
matter that was the subject of a disagreement as described in Item 304(a)(1)(iv)
of Regulation S-K, promulgated by the Securities and Exchange Commission.

         Prior to BDO  Seidman's  termination,  BDO  Seidman  did not  express a
difference  of  opinion  regarding  any  events  listed in Item  304(a)(2)(v)(A)
through (D) of Regulation S-K.

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

      The  current  directors,  executive  officers  and  key  employees  of the
Company, their ages and their positions held in the Company are as follows:

NAME                           AGE        POSITION
----                           ---        --------

Duane A. Mayo                  46         Chief Executive Officer
                                          Vice President of Finance
                                          and Administration, Chief Financial
                                          Officer, Treasurer, Secretary and
                                          Director

         All directors hold office until the next annual meeting of stockholders
of the Company and until their  successors have been duly elected and qualified.
The executive  officers are appointed  annually by, and serve at the  discretion
of, the Board of Directors.  In January 1999, Mr. Laurence  Liebson,  the former
President  and CEO,  resigned as an officer and member of the Board of Directors
and as of March 31, 1999, Mr. Fred Chanowski and Mr. Jeffrey Leventhal  resigned
from the Board of Directors.

         DUANE  A.  MAYO  has  served  as  Vice   President   of   Finance   and
Administration  since March 1995 and as a  director,  Chief  Financial  Officer,
Secretary and Treasurer since May 1995.  From April 1993 through  February 1995,
he served as Chief Financial Officer for Xerographic Laser Images Corporation, a
publicly-held   company  involved  in  development  of  resolution   enhancement
technology. From April 1988 to April 1993, Mr. Mayo was Corporate Controller for
Howtek,  Inc., a publicly-held  company and supplier of desktop scanners for the
color prepress marketplace.

COMMITTEES

         The Board of Directors currently does not have any committees.

DIRECTOR COMPENSATION

         The Company's directors do not receive  compensation for serving on the
Board of  Directors,  however,  the  Company  reimburses  directors  for  travel
expenses incurred to attend Board meetings.

ITEM 10. Executive Compensation

         The  following  table sets forth  actual  compensation,  for the fiscal
years ended  December 31, 1997,  1998 and 1999,  including  salary,  bonuses and
certain other compensation,  paid by the Company to its Chief Executive Officer.
None of the Company's executive officers received cash compensation in excess of
$100,000 in 1999.



<TABLE>

                                                   SUMMARY COMPENSATION TABLE


                                                                                Long-Term Compensation
                                                     Awards                           Payouts

                                                    Other     Restricted

                                   Annual Compensation           Annual       Stock                LTIP     All Other
     Name and Position         Year     Salary($)  Bonus($)   Compensation Awards($)  Options(#) Payouts($)Compensation  Principal
            (a)                 (b)       (C)       (d)           (e)         (f)        (g)       (h)         (i)

<S>                             <C>         <C>      <C>        <C>          <C>        <C>        <C>        <C>        <C>
Duane Mayo (3)                 1999       8,333       -         -             -        -           -          -          -
Chief Executive Officer


Lorrin G. Gale

Chairman, President and        1999         -         -          -            -        -           -          -          -
Chief                          1998      73,253       -          -            -        -           -      195,000        -
Executive Officer *            1997      120,000      -          -            -   75,000 (2)       -         (1)         -
                                                                                                     -
Laurence Liebson
Chairman, President and
Chief
Executive Officer **

                               1999      12,500       -       -       -       -           -         -          -          -
                               1998      97,956       -       -       -       -  1,763,955(3)       -          -          -


</TABLE>

     (1) In March 1998, Mr. Gale left the Company at the request of the Board of
Directors.  Pursuant to an employment  agreement  with the Company,  he received
$150,000 in severance  and is obligated to receive an  additional  $45,000 to be
paid in equal installments of $15,000 per year beginning July 1999.

     (2) In January 1997, pursuant to an employment contract, the Company issued
incentive stock options to purchase up to 75,000 shares of Common Stock. Options
to purchase  15,000  shares of Common  Stock  vested upon the  execution  of the
agreement  and options to purchase  30,000 shares of Common Stock vested on each
of the first and second  anniversaries  of the  agreement.  All options  have an
exercise price of $4.00 per share.

(3) In May 1998, Laurence Liebson joined the Company as Chairman,  President and
Chief Executive  Officer.  Pursuant to an employment  contract,  Mr. Liebson was
issued  incentive  stock  options to purchase up to  1.763,955  shares of Common
Stock.  Options to purchase 563,881 shares of Common Stock vested upon execution
of the  agreement  and  options to purchase  300,019  shares vest on each of the
first, second, third and fourth anniversaries of the agreement.  All options had
an exercise price of $.40 per share.

     4) In January 1999, the former chairman, President and CEO resigned. Before
he resigned  Laurence Liebson  appointed Duane Mayo CEO and Mr. Mayo was left to
discontinue operations of the Company.

*    In March 1998,  Mr. Gale left the Company as President and Chief  Executive
     Officer

**   In January  1999,  Mr.  Liebson  left the  Company as  President  and Chief
     Executive Officer.

EMPLOYMENT CONTRACTS

         As of June 8, 2000, the Company had no employment  contracts with its
employee.

         Prior to 1999,  the  Company  had  entered  into a two-year  employment
agreement  with Mr. Lorrin Gale.  Pursuant to such  contract,  Mr. Gale would be
paid a base salary of $125,000 and had been granted  incentive  stock options to
purchase up to 75,000 shares of Common Stock.  Options to purchase 15,000 shares
of Common  Stock  vested  upon the  execution  of the  agreement  and options to
purchase  30,000  shares of Common Stock vesting on each of the first and second
anniversaries  of the agreement.  All options had an exercise price of $4.00 per
share. Pursuant to his employment agreement, Mr. Gale agreed not to compete with
the Company during the term of his employment and for one year  thereafter.  Mr.
Gale left the Company as President and Chief Executive Officer in March 1998.

     Effective as of May 1998,  the Company  entered into a two-year  employment
agreement with Mr. Laurence  Liebson.  Pursuant to such  agreement,  Mr. Liebson
would be paid a base  salary of  $150,000  and  receive  $75,000  in  relocation
expenses,  which the  Company was unable to pay. In  addition,  Mr.  Liebson was
granted  incentive  stock options to purchase up to 1,763,955 at $.40 per share.
Mr. Liebson left the Company as President and Chief Executive Officer in January
1999.





                                       (This page left intentionally blank.)


<PAGE>


ITEM 11. Security Ownership of Certain Beneficial Owners and Management

         The  following  table sets, as of April 12, 2000,  certain  information
with respect to the beneficial ownership of the capital stock of the Company for
(i) each  person who is known by the Company to own  beneficially  5% or more of
the  outstanding  shares of its Common  Stock;  (ii) each of the  directors  and
executive  officers of the Company;  and (iii) all  directors  and officers as a
group. Except as otherwise indicated,  the stockholders listed in the table have
sole voting and investment  powers with respect to the shares  indicated.  As of
April 12, 2000, the Company had 172  Stockholders  of record.  Unless  otherwise
indicated, the address for directors,  executive officers and 5% stockholders is
P.O. Box 1111, West Newbury, Massachusetts 01985.
<TABLE>

---------------------------------------------------------- ---------------------------------- ------------
Name and Address of Beneficial Owner               Number of Shares of                Percentage Class

                                                   Common Stock

                                                   Beneficially Owned(1)
-------------------------------------------------- ---------------------------------- --------------------
<S>                                                    <C>                          <C>

Duane A. Mayo                                         105,176                          .9%
Nathan Low                                            972,942(2)                      7.9%
Trussel & Co.                                       1,000,000                         8.4%

-------------------------------------------------- ---------------------------------- --------------------
All directors and executive officers as a group       105,176                         .9%
   (1 person)
-------------------------------------------------- ---------------------------------- --------------------

</TABLE>

1.        Pursuant  to the  rules of the  Securities  and  Exchange  Commission,
          shares of Common  Stock  which an  individual  or group has a right to
          acquire within 60 days pursuant to the exercise of options or warrants
          are  deemed  to be  outstanding  for  the  purpose  of  computing  the
          percentage  ownership of such individual or group,  but are not deemed
          to be beneficially  owned and outstanding for the purpose of computing
          the percentage ownership of any other person shown in the table.

2.        Includes 210,440 shares of Common Stock held in Nathan A. Low and Ruth
          I. Low JTWROS,  and 95,000  shares held in Sunrise  Foundation  Trust.
          Also includes 325,775 shares of Common Stock issuable upon exercise of
          warrants  held in Nathan A. Low and Ruth I. Low JTWROS,  50,000 shares
          of Common Stock  issuable  upon  exercise of warrants  held in Sunrise
          Foundation  Trust,  and 34,007  shares of Common Stock  issuable  upon
          exercise of warrants held by Nathan Low.

Item 12. Certain Relationships and Related Transactions

         In July 1995,  the Company issued 105,176 shares of Common Stock valued
at $.021 per share to Duane Mayo for services rendered.

     On March 11,  2000,  the Company  entered into a Stock  Purchase  Agreement
pursuant to which the Company  will sell to Right2web  for  $50,000,  a start-up
business-to-business   internet  venture,  shares  of  the  Company's  Series  A
Convertible Preferred Stock subject to various conditions of closing,  including
conversion  of all  outstanding  warrants,  options and  convertible  notes into
equity,  of which there can be no  assurance.  Upon  conversion of the Preferred
Stock,  Right2web  will own 92% of the Company on a fully diluted  basis.  After
dilution,  current  stockholders  would receive 3% of the Company's Common Stock
and the Convertible Note holders would receive 5%. This transaction should close
within the near future.  In order for Right2web to hold 92% of the issued common
stock of the Company,  the Company will have to authorize  the reverse  split of
its common stock which is subject to shareholder approval.

         Right2Web, is owned principally by Jeffrey Leventhal, a former director
of the Company who resigned in March 1999. Mr.  Leventhal has  previously  owned
three information  technology  companies,  with his most previous venture having
been sold to a public company,  Netlogics  Communications,  Inc.  (NASDAQ:NETL).
Right2web's  business  model  is  to  build  a   business-to-business   internet
destination  portal  where small to medium  sized  companies  can host their web
sites and  direct  employees  to  procure  information,  productivity  tools and
products.  In addition,  Right2web intends on assisting  companies in developing
and hosting  enabled web sites.  Right2web will seek to establish  services that
will complement the small business marketplace.  Right2web has also advised that
it intends to make  strategic  acquisitions  in  businesses,  which may  provide
related services to small to mid-sized businesses such as advertising, marketing
and consulting firms, as well as other internet ventures.

     Since Right2web is a start-up business to business  e-commerce  venture. It
will,  among  other  things,  be subject to  intense  competition,  the need for
financing,  unforeseen technological changes, the risks inherent in any internet
businesses such as security concerns, technological difficulties, development of
new technology,  the need to attract  qualified  personnel,  reliance on Jeffrey
Leventhal,  and the  continuance  of favorable  market  conditions  for internet
companies, etc.

Item 13. Exhibits and Reports on Form 8-K (a) Exhibits.

             27           -  Financial Data Schedule.


             (b)      Reports of Form 8-K.
                      The Company filed a Form 8-K on April 14, 2000.

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
     Exchange  Act of 1934,  the  registrant  has duly  caused this report to be
     signed on its behalf by the undersigned thereunto duly authorized.

                                            AUGMENT SYSTEMS, INC.

                                            By:/s/Duane A. Mayo
                                            -------------------

                                            Duane A. Mayo
                                            Chief Financial Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
     report  has been  signed  below by the  following  persons on behalf of the
     registrant in the capacities and on the dates indicated.

/s/Duane A. Mayo             Chief Financial Officer, Treasurer and Secretary
--------------------         Principal Financial & Accounting Officer)
June  9, 2000                Member of the Board of Directors
--------------------



<PAGE>



                              Augment Systems, Inc.

                          Index to financial Statements



Financial statements:

    Balance sheet as of December 31, 1999

    Statements of operations for the years ended
     December 31, 1999 and 1998

    Statements of stockholders' deficit for the years ended
     December 31, 1999, and 1998

    Statements of cash flows for the years ended December 31, 1999 and 1998

    Notes to financial statements

Report of Independent Certified Public Accountants

<PAGE>


                              Augment Systems, Inc.

                                  Balance Sheet

                                    (Note 1)

<TABLE>
                                                                December 31,
                                                                     1999
                                                                     ----
       Assets

Current assets:
<S>                                                                <C>

   Cash (Note 2)                                              $     74,420
              -                                                -----------

     Total current assets                                     $     74,420
                                                               ===========


       Liabilities and Stockholders' Deficit

Current liabilities:

   Bridge financing (Note 4)                                    $ 1,395,701
   Accounts payable                                                  54,942
   Accrued expenses (Note 3)                                        195,000
   Convertible promissory notes (Note 4)                              6,432
   Current portion of obligations under
     capital leases (Note 5)                                         46,760
                                                                -----------

     Total current liabilities                                   1,698,835
                                                                -----------

Commitments (Note 5)

Stockholders' deficit (Notes 4, 6, 8, 9 and 11):

   Preferred stock, $.01 par value; 2,000,000 shares
   authorized;  none issued                                              --
   Common stock, $.01 par value; 50,000,000 shares authorized;
     11,898,951 shares issued and outstanding                       118,989
   Additional paid-in capital                                    21,750,866
   Deficit                                                     ( 23,494,270)
                                                                -----------

     Total stockholders' deficit                               (  1,624,415)
                                                                -----------

     Total liabilities and stockholders' deficit             $       74,420
                                                                ===========
</TABLE>

See accompanying notes to financial statements.


<PAGE>

                              Augment Systems, Inc.

                            Statements of Operations

                                    (Note 1)

<TABLE>
                                                                  December 31,
                                                           -------------------------
                                                           1999                 1998

<S>                                                        <C>                  <C>

Net sales                                             $  10,489            $1,062,203
Cost of sales                                                --             1,311,031
                                                       --------             ---------

Gross margin (loss)                                      10,489            (  248,828)
                                                        --------             ---------

Operating expenses:

   Research and development expenses                         --             2,338,222
   General and administrative expenses                  177,757             2,102,945
   Selling and marketing expenses                            --             1,886,850
   Loss on impairment of long-lived assets               10,000               449,975
                                                     ----------        --------------

     Total operating expenses                           187,757             6,777,992
                                                    -----------         -------------

     Operating loss                                (   177,268)         (  7,026,820)
                                                     ----------           -----------

Other income (expense):

   Interest income, net                                     --                56,847
   Interest expense (Notes 4 and 6)                (   165,850)        (     269,556)
   Sale of license rights                              175,000                    --
                                                      ---------         -------------

     Total other expense, net                            9,150         (     212,709)
                                                    ----------          ------------

Net loss before extraordinary items                (   168,118)        (   7,239,529)
Gain from extinguishments of debt                      352,645                    --
                                                    ----------          ------------

   Income (loss)                                       184,527          (  7,239,529)

Tax expense                                             55,358                    --
Tax benefit                                         (   55,358)                   --
                                                     ---------          ------------

 Net (loss) income                                 $   184,527         $(  7,239,529)
                                                     ---------           -----------
Number of shares

Net (loss) per share of common stock (Note 10):
   Basic and diluted                                 $  0.02              $(0.65)
                                                        ====                ====

See accompanying notes to financial statements.

</TABLE>

<PAGE>



<TABLE>

                              Augment Systems, Inc.
                       Statements of Stockholders' Deficit
                          (Notes 2, 4, 6, 8, 9 and 11)
                                                                                                                Additional
                                                                                Common Stock                      Paid-in
                                                                         Shares                Amount             Capital


<S>                                                                     <C>                     <C>              <C>

Balance, December 31, 1997                                              4,713,319            $    47,132         15,286,410

Issuance of warrants associated with bridge financing                           -                      -            211,588
Issuance of common stock in connection with
 private placement of common stock at $1.00 per share,
 including 378,910 shares issued in lieu of fees to
 placement agent, net of placement fees of $453,881                     5,758,910                 57,589          4,868,530

Issuance of common stock upon conversion of
 bridge financing                                                         300,000                  3,000            297,000
Issuance of common stock upon conversion of
 notes payable                                                            500,000                  5,000            495,000
Issuance of common stock in connection with a
 Private  placement of common stock at $1.00 per share,
 Including 51,722 shares issued in lieu of fees to
 placement agent, net of placement fees of $28,200                        626,722                  6,268            540,532
Issuance of warrants in consideration for consulting                           --                     --             17,138
Issuance of warrants as financing fees for bridge financing                    --                     --             34,668
Net loss                                                                       --                     --                  -
                                                                      -----------               --------         ----------

Balance December 31, 1998                                              11,898,951                118,989         21,750,866

Net income                                                                     --                     --                 --
                                                                      -----------               --------         ----------

Balance, December 31, 1999                                             11,898,951             $  118,989       $ 21,750,866

                                                                      ===========               ========         ==========
                                                                                           (concluded below)
</TABLE>

See accompanying notes to financial statements.

<TABLE>


                                                                                                                Total
                                                                                                            Stockholders'
                                                                                      Deficit                  Deficit

<S>                                                                                      <C>                   <C>

Balance, December 31, 1997                                                           (16,439,268)           (1,105,726)

Issuance of warrants associated with bridge financing                                          -               211,588
Issuance of common stock in connection with
 private placement of common stock at $1.00 per share,
 including 378,910 shares issued in lieu of fees to
 placement agent, net of placement fees of $453,881                                            -             4,926,119

Issuance of common stock upon conversion of
 bridge financing                                                                              -               300,000
Issuance of common stock upon conversion of
 notes payable                                                                                 -               500,000
Issuance of common stock in connection with a
 Private  placement of common stock at $1.00 per share,
 Including 51,722 shares issued in lieu of fees to
 placement agent, net of placement fees of $28,200                                             -               546,800
Issuance of warrants in consideration for consulting                                           -                17,138
Issuance of warrants as financing fees for bridge financing                                    -                34,668
Net loss                                                                            (  7,239,529)          ( 7,239,529)
                                                                                     -----------            ----------
Balance December 31, 1998                                                           ( 23,678,797)          ( 1,808,942)
Net income                                                                               184,527               184,527
                                                                                    ------------             ---------
Balance, December 31, 1999                                                        $( 23,494,270)          $( 1,624,415)
                                                                                  ==============            ==========
See accompanying notes to financial statements.
</TABLE>

<PAGE>


                              Augment Systems, Inc.

                    Statements of Cash Flows (Notes 2 and 12)
<TABLE>

                                                                            December 31,
                                                                   ----------------------------
                                                                    1999                 1998

Cash flows from operating activities:
<S>                                                                  <C>              <C>

   Net income                                                    $  184,527          $(7,239,529)
   Adjustments to reconcile net loss to net
   cash used for operating activities:
     Depreciation and amortization                                       --              193,652
     Finance fees paid in warrants                                       --               34,668
     Consulting expense paid in warrants                                 --               17,138
     Loss on impairment of long-lived assets                         10,000              449,975
     Provision for doubtful accounts                                     --              204,955
     Provision for inventories                                           --              226,455
     Sale of license rights                                      (  175,000)                  --
     Gain on extinguishments of debt                                352,645                   --
     Interest on warrants associated with debt                           --              165,647
     Changes in operating assets and liabilities:
       Accounts receivable                                               --               20,014
       Inventories                                                       --              936,465
       Prepaid expenses                                              27,936               91,763
       Other assets                                                      --                9,145
       Accounts payable                                          (  675,639)         (   993,697)
       Accrued expenses                                               12,988         (   429,621)
                                                                   ---------           ----------

     Net cash used for operating activities                      (  262,543)         ( 6,312,970)
                                                                   ---------           ----------

   Cash flows from investing activities:

     Purchase of property and equipment                                  --          (    43,779)
     Sale of license rights                                         175,000                   --
     Sale of equipment                                               65,000                   --
                                                                  ---------           ----------

   Net cash used for investing activities                           240,000          (    43,779)
                                                                   ---------           ----------

   Cash flows from financing activities:

     Proceeds from issuance of common stock                              --            5,472,919
     Proceeds from bridge financing                                      --            1,800,000
     Proceeds from issuance (payments) of note payable          (    14,311)         (   750,000)
     Payments on capital lease obligations                      (    76,541)         (     4,827)
     Payments on convertible promissory notes                            --          (    20,752)
                                                                  ----------          -----------

   Net cash provided by financing activities                          90,852            6,497,340
                                                                  ----------           ----------

   Net increase (decrease) in cash                               (   113,395)             140,591
   Cash, beginning of year                                           187,815               47,224
                                                                  ----------           ----------
   Cash, end of year                                           $      74,420          $   187,815
                                                                  ==========            =========

See accompanying notes to financial statements.

</TABLE>

<PAGE>
                             Augment Systems, Inc.
                         Notes to Financial Statements


1.    Organization, Business and Basis of Presentation:

      The Company was incorporated in 1990 to develop and distribute fiber optic
printed circuit boards in the publishing and printing  markets.  The fiber optic
products had limited  success and in fiscal 1994 the Company  began  phasing out
the fiber optic  operations and began the transition into a systems  integration
and engineering consulting business. In 1995, the Company made a strategic shift
in its business operation into the server market.

      Since October 1995 and through March 1997,  the Company had been operating
as a development stage company and had been engaged  principally in research and
development,  recruitment  of personnel  and financing  activities.  During this
time,  the  Company  had  engaged in limited  marketing  activities  and had not
commenced  the  selling  of  its  initial  products,  which  are  high-end  file
management  network systems.  During the second quarter ended June 30, 1997, the
Company  commenced  commercial  shipment of its server  product  and  recognized
initial revenue in April 1997.

      The  Company's  initial  target  market  was  the  electronic   publishing
industry,  which  requires the rapid and  efficient  movement of large image and
data files over networks.  In September  1997, the Company  introduced a windows
NT-based client server for its file management network systems.

      Although  the Company  commenced  shipment of its products in fiscal 1997,
the  revenues  recognized  were  less than  originally  anticipated  by  Company
management. The shortfall in 1997 revenues was attributed to product development
delays and problems with the Company's initial products sold. Such shortfalls in
revenues continued throughout the course of fiscal 1998.

      In November  1998,  the Company was informed by the  investment  bank that
provided  the  September  1998  bridge  financing,  that they would be unable to
secure the additional  funding required to repay the outstanding bridge loan and
provide the Company with the necessary  working  capital to support its business
plan and ongoing  operations.  The Company began to seek alternative  financing,
but was unable to secure the necessary funds.

      In  January  1999,  the  Board of  Directors  decided  to  accomplish  the
following:

     1. Seek buyers,  strategic partners,  and merger  opportunities to make the
Company economically viable.

     2. Suspend ongoing operations, layoff all but one of its employees, dispose
of all assets, attempt to settle any outstanding short and long term debts, seek
buyers  or  strategic  partners  for the  further  development  of its  existing
technology as well as explore merger opportunities.

     The secured  creditors formed a representative  committee of two people who
initiated a plan to auction off all remaining  inventory and  substantially  all
remaining  fixed assets  (retaining  only those assets  necessary to effectively
shut down operations, valued at approximately $10,000). On January 28, 1999 with
the aid of the  committee-appointed  auctioneer,  the Company  held the auction,
with proceeds amounting to approximately  $65,000,  indicating that the carrying
value of such assets exceeded their fair values. Accordingly, a loss of $184,975
was recorded in operations in 1998 which  represents  the excess of the carrying
value  over the fair  value of  $75,000.  Also  included  in  operations  is the
write-off of  capitalized  software  costs of $265,000 to reduce their  carrying
value to $0. The Company also recorded charges to cost of sales of approximately
$542,000  related to the  write-down  of unique  inventory  associated  with the
Company's products.

      Company's strategic financial and operating plans were as follows:

Financial Plan

     1. Sell the license  rights to the Company's  technology  that is no longer
        needed.
     2. Settle the  accounts  payable  related to the  previous  operations
     3. Provide incentive to the short-term note holders to exchange their notes
        and warrants for 5% of the Company's common stock.
     4. Negotiate the termination of operating and capital lease agreements.
     5. Maintain  the status of the  corporation  as a public  Company  through
        required SEC filings and compliance with other governmental regulations.
     6. Seek and  acquiring  entity  through the  issuance of Series A preferred
        shares that are convertible to 92% of the Company's common stock.

<PAGE>
                             Augment Systems, Inc.
                         Notes to Financial Statements
                                  (Continued)


1.    Organization, Business and Basis of Presentation: (continued)

Operating Plan

          1. Build a  business-to-business  Internet  destination  portal  where
     small to medium  sized  companies  can host  their  web  sites  and  direct
     employees to procure information, productivity tools and products.

          2. Assist  businesses in developing and hosting enabled web sites. The
     Company  will seek to establish  services  that will  complement  the small
     business  marketplace.

          3. Acquire businesses,  which may provide related services to small to
     mid-sized  businesses such as advertising,  marketing and consulting firms,
     as well as other Internet ventures.

      In 1999,  the Company  began  implementing  its  financial  and  operating
strategies.

          1. The Company sold the license rights to its technology for $175,000.

          2. The Company  entered an agreement  with the landlord and  cancelled
     the operating  lease for its offices  located at 2 Robbins Road,  Westford,
     Massachusetts.  No  additional  obligations  were  incurred  as a result of
     cancellation.

          3. The Company  returned to the supplier  certain  equipment  that was
     obtained under capital lease agreement. In exchange for the cancellation of
     lease,  the Company paid $6,800 in cash and  transferred  certain  accounts
     receivable to settle additional $6,800 payable to the supplier.

          4. The Company entered a release  agreement  regarding  payment of any
     future royalties.

     5.  Management  began  negotiations  with new  management  who  proposed to
purchase  92% of the Company  stock and develop its Internet  business.  Also, a
proposal was made the note holders to convert their notes to 5% of the Company's
common stock.

     The Company has incurred  substantial  losses since  inception and has been
engaged  primarily  in product  development.  The  Company has funded its losses
primarily  from a combination  of debt and equity  financings.  In addition,  at
December  31,  1999,  the  Company  had  a  working  capital  deficiency  and  a
stockholders'  deficit.  Also,  as a  start-up  business-to-business  e-commerce
venture, the Company's new business,  assuming the Right2web transaction closes,
is subject to various risks including intense competition,  need for substantial
funds  and  qualified   personnel,   internet   security   concerns,   potential
technological  difficulties,  development  of new  technology,  reliance  on key
personnel,  and the  continuance  of favorable  market  conditions  for internet
companies.

      These  factors  raise  substantial  doubt about the  Company's  ability to
continue as a  going-concern.  The accompanying  financial  statements have been
prepared on a going concern basis,  which contemplates the realization of assets
and the  satisfaction  of  liabilities  and  commitments in the normal course of
business.  The financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.


<PAGE>
                            Augment Systems, Inc.
                         Notes to Financial Statements
                                  (Continued)



2.    Summary of Significant Accounting Policies

      Estimates and Assumptions

      The  preparation  of financial  statements  in conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

      Cash Equivalents

     The Company  considers  all highly  liquid  investments  with a maturity of
three months or less, when purchased, to be cash equivalents. There were no cash
equivalents at December 31, 1999.

      Inventories

      The Company had no  inventories  for the fiscal  year ended  December  31,
1999.  Inventories  were recorded at $0 at December 31, 1998, which reflected in
charges to cost of sales of $542,000 for the  write-down to market.  Inventories
were stated at the lower of cost (first-in, first-out) or market.

      Property and Equipment

     Property and  equipment  were recorded at cost.  Depreciation  was computed
using the  straight-line  method over the estimated  useful lives of the related
assets ranging from three to five years.  Property held under capital leases are
being  amortized  over the  lesser of the lease term or their  estimated  useful
lives.  The Company  reduced the cost of property and  equipment to its carrying
value of  $75,000 in  December  1998,  resulting  in a charge to  operations  of
$184,975 in fiscal year 1998.  In 1999,  the Company sold most of its  equipment
for $65,000 and wrote off the balance.  As of December 31, 1999, the Company had
no fixed assets.

      Long-Lived Assets

     The Company follows the provisions of the Statement of Financial Accounting
Standards  ("SFAS") No. 121 "Accounting for the Impairment of Long-Lived  Assets
and for Long-Lived  Assets to be Disposed of". SFAS 121  establishes  accounting
standards  for the  impairment  of  long-lived  assets and certain  identifiable
intangibles  to  be  held  and  used  and  for  long-lived  assets  and  certain
identifiable intangibles to be disposed of.

The Company  reviews the  carrying  values of its  long-lived  and  identifiable
intangible  assets  for  possible  impairment  whenever  events  or  changes  in
circumstances  indicate  that  the  carrying  amount  of the  assets  may not be
recoverable. Due to the change in circumstances related to the operations of the
Company in fiscal 1998,  impairment charges were recorded to reduce the carrying
value of long-lived assets in December 1998(see Note 1).

      Revenue Recognition

      Revenue was recognized on sales to end users when the product was accepted
by the customer.

      Research and Development

      When  research and  development  costs were incurred they were expensed as
incurred.

      In accordance  with  Statement of Financial  Accounting  Standards No. 86,
Accounting  for the Costs of Computer  Software To Be Sold,  Leased or Otherwise
Marketed,  the Company  capitalized  software  development  costs incurred after
technological  feasibility of the software  development  projects is established
and the  reliability  of such  capitalized  costs through  future  operations is
expected.  The Company  wrote-off  all  capitalized  software  costs during 1998
resulting in a charge of $265,000 to operations.


<PAGE>

                           Augment Systems, Inc.
                         Notes to Financial Statements
                                  (Continued)


2.    Summary of Significant Accounting Policies (continued)

      Income Taxes

          Income taxes are calculated  using the liability  method  specified by
     Statement of Financial  Accounting Standards No. 109, Accounting for Income
     Taxes.

      Financial Instruments

      The estimated  fair value of the Company's  financial  instruments,  which
include  accounts  payable,   related  party  accounts,   debt  instruments  and
convertible promissory notes, approximate their carrying value.

      Concentrations of Credit Risk and Major Customers

      A significant  portion of the Company's sales in 1998 were to customers in
the  electronic  publishing  industry.  The Company  extended  credit terms on a
customer-by-customer  basis  based  on  its  evaluation  of  its  collectibility
exposure. The Company's sales in 1999 represented a one time license fee for its
technology to one  customer.  In fiscal 1998,  the Company  derived sales from 5
customers which represented 69% of net sales approximately as follows:
<TABLE>


                <S>             <C>                     <C>
                                                      % Total
              Customer           Sales                 Sales
                  A             182,000                  17%
                  B             180,000                  17%
                  C             116,000                  11%
                  D             142,000                  13%
                  E             113,000                  11%
</TABLE>

In 1999,  the  Company  terminated  the sale of  products  and  services  to all
customers.

      Stock Options

      The  Company  follows  the  provisions  of SFAS No.  123,  Accounting  for
Stock-Based  Compensation.  The  Company  has elected to continue to account for
stock options at their  intrinsic  value with  disclosure of the effects of fair
value  accounting on net earnings  (loss) and earnings (loss) per share on a pro
forma basis.

      Net Loss Per Share of Common Stock

          The Company  follows the Statement of Financial  Accounting  Standards
     No. 128,  Earnings  Per Share ("SFAS No.  128").  SFAS No. 128 requires the
     presentation of both basic and diluted earnings per share.

      New Accounting Standard Not Yet Adopted

      In June 1998,  the Financial  Accounting  Standards  Board issued SFAS No.
133,  "Accounting for Derivative  Instruments and Hedging Activities" ("SFAS No.
133"). SFAS No. 133 requires companies to recognize all derivative  contracts as
either  assets or  liabilities  in the balance sheet and to measure them at fair
value.  If  certain  conditions  are  met,  a  derivative  may  be  specifically
designated as a hedge,  the objective of which is to match the timing of gain or
loss  recognition  on the hedging  derivative  with the  recognition  of (i) the
changes in the fair value of the hedged assets or liability or (ii) the earnings
effect of the hedged forecasted transaction.  For a derivative not designated as
a hedging instrument,  the gain or loss is recognized in income in the period of
change.  SFAS No. 133 is  effective  for all  fiscal  quarters  of fiscal  years
beginning after June 15, 1999.
<PAGE>

                           Augment Systems, Inc.
                         Notes to Financial Statements
                                  (Continued)


2.    Summary of Significant Accounting Policies (continued)

      Historically, the Company has not entered into derivative contracts either
to hedge existing risks or for speculative  purposes.  Accordingly,  the Company
does not expect  adoption of the new  standard  in 1999 to affect its  financial
statements.


4.    Financing Arrangements

      Private Placement

     In January  1998,  the Company  completed a private  placement of 6,180,000
shares of the Company's common stock at a price of $1.00 per share. The proceeds
from the private  placement less  placement fees of $453,881 were  approximately
$4,926,000.  An additional  378,910  shares were issued as part of the placement
fees.

      In May 1998, the Company  completed a private  placement of 575,000 shares
of the Company's  common stock at a price of $1.00 per share.  The proceeds from
the  private  placement  less  placement  fees  of  $28,200  were  approximately
$546,800. An additional 51,722 shares were issued as part of the placement fees.

      Bridge Financing

      In January 1998, the Company  entered into bridge  financing made up of 10
units each  consisting  of (i) a  convertible  promissory  note in the principal
amount of $50,000 bearing  interest  payable at maturity,  at the rate of 8% per
annum, which shall be converted into shares of the Company's common stock at the
rate of one share of common stock per dollar loaned plus accrued  interest as of
the date and upon the  earlier of (a) the  consummation  of a  financing  by the
Company which  results in net proceeds to the Company of at least  $3,000,000 or
(b) June 30, 1998; and (ii) a warrant to purchase  25,000 shares of common stock
at an exercise  price of $1.00 per share.  Gross  proceeds  were  $500,000.  The
Company allocated proceeds of $47,689 to the detachable warrants and $452,131 to
the promissory notes. Upon the completion of a separate private equity placement
in January 1998,  the above 10 units were  converted  into 500,000 shares of the
Company's common stock. The discount on the debt for the detachable  warrants of
$47,689 was charged to interest expense upon conversion.

      In September  1998, the Company  obtained  $1,500,000 in bridge  financing
consisting  of secured  convertible  promissory  notes and 750,000  common stock
purchase warrants.  The promissory notes bear interest at the rate of 8% and are
to be repaid at the earlier of July 31, 1999 or (i) any sale, pledge, assignment
or disposition of any assets of the borrower (ii) any merger or consolidation of
the  borrower  or "change of control"  of the  borrower or (iii)  proceeds of at
least  $4,000,000 from the sale or issuance of any debt or equity  securities or
proceeds  of any loans.  Each  warrant  shall be  exercisable  for the number of
shares  equal to 50% of the  principal  amount of the loans.  The  warrants  are
exercisable at $.40 per share and expire five years from the date of issuance.

      In October 1997, the Company  entered into a note agreement with a bank in
the principal amount of $750,000,  with interest at the banks prime rate plus 2%
(9.75% at December 31, 1998).  This loan was originally  payable upon completion
of  financing,  resulting  in net proceeds of at least  $5,000,000.  In December
1997,  the loan  agreement  was  amended  to extend  the due date on the loan to
February 28, 1998. In accordance with the original terms of the bridge loan, the
Company issued  detachable  warrants to purchase 100,000 shares of the Company's
common stock at an exercise price of $3.00 per share  exercisable  over 5 years.
In consideration  of the extension  granted in December 1997, the exercise price
of the detachable  warrants was reduced from $3.00 per share to $1.00 per share.
Of the  $750,000  in  gross  proceeds,  the  Company  allocated  $81,077  to the
detachable  warrants  and  $668,923  to the note.  The  discount on the debt was
amortized over 5 months,  the term of the extended loan. In September  1998, the
Company  repaid the  principal  balance with a portion of the proceeds  from the
September  1998 bridge  financing.  During the year ended December 31, 1998, the
remaining discount of $32,431 was charged to interest expense.  Accrued interest
related to this  bridge  note of  approximately  $17,000 is  included in current
liabilities at December 31, 1998.
<PAGE>
                              Augment Systems, Inc.
                         Notes to Financial Statements
                                  (Continued)

4.    Financing Arrangements (continued)

      In  December  1997,  the  Company  entered  into  bridge  financing  which
consisted of the sale of 10 units.  Each unit consisted of (i) a promissory note
in the principal  amount of $50,000 bearing  interest payable at maturity at the
rate of 8% and  payable  on the  earlier  of (a) the  date  of  consummation  of
financing by the Company resulting in net proceeds of at least $3,000,000 or (b)
January 30, 1998;  and (ii) a warrant to purchase  50,000 shares of common stock
at an  exercise  price of $1.00  per share and  having an  exercise  period of 5
years.  Proceeds were $500,000.  The Company allocated gross proceeds of $51,852
to the detachable warrants and $448,148 to the promissory notes. The discount on
the debt was  amortized  over 2 months,  the term of the loan.  During  the year
ended  December  31,  1998,  the  remaining  discount  of $25,926 was charged to
interest expense.  The Company extinguished this debt by paying $200,000 in cash
and  converting the remaining  balance into 300,000 shares the Company's  common
stock in conjunction with the January 1998 private placement of 6,180,000 shares
of the Company's common stock at $1.00 per share.

      Convertible Promissory Notes

      At June 30,  1996,  the Company had  outstanding  $752,602 of  convertible
promissory notes issued to various  stockholders of the Company during September
1995 and May 1996 in connection with a private placement, as well as $111,674 of
convertible promissory notes issued (collectively referred to as the "Notes") to
MTDC and First Stage in  connection  with the  conversion  of demand  promissory
notes  issued in 1991.  The Notes mature three years from date of issue and bear
interest  of 10 percent  per annum  payable at  maturity  or upon the earlier of
redemption or conversion. The notes provided that following the public offering,
any portion of the  principal  and interest of the Notes not so converted may be
converted  at the  option of the  holder at the  offering  price  plus $1.33 per
share.  However,  if the price of the common  stock is at least  $4.00 above the
initial public  offering price for a period of 10 consecutive  trading days, the
Company may convert any of the  remaining  principal  and accrued  interest at a
price equal to $1.33 per share  above the  initial  public  offering  price.  On
November 30, 1996, $802,018 of the outstanding  convertible promissory notes and
$71,488 of accrued interest, net of financing costs of $133,969,  were converted
into 218,374 shares of the Company's  common stock at a conversion rate of $4.00
per share.  Outstanding  balances on these notes amounted to $20,743 at December
31, 1998 and $6,432 at December 31, 1999.

5.    Commitments

      Leases

     The Company was obligated for rental  payments  under two operating  leases
for  facilities  that expire  through  August  2001.  Rent  expense  under these
agreements for the year ended December 31, 1999 and 1998 was approximately  $-0-
and $522,000,  respectively. In addition, the Company is obligated under capital
leases for equipment that continue through July 2000.  Future minimum  payments,
by year and in the  aggregate,  under capital  leases and operating  leases with
initial or remaining terms of one year or more was  approximately  as follows at
December 31, 1999:
<TABLE>
        Year ended December 31,              Capital Leases    Operating Leases
          <S>                                    <C>             <C>

          2000                                    $      0                  0
          2001                                           0                  0
                                                   -------         ----------
        Total minimum lease payments                     0                  0
                                                                  ==========
        Less amount representing interest                0
                                                   -------
        Present value of minimum lease payments   $      0
                                                   =======
</TABLE>
     Subsequent  to 1998  year-end,  the Company  returned all  equipment  under
capital leases and cancelled the operating  leases. No amounts have been accrued
or recorded by the Company as a result of  cancelling  the  operating  leases in
1999. The Company has negotiated a settlement  for the  non-cancellable  capital
lease of all equipment and the operating lease for the Company headquarters,  at
2 Robbins Road, Westford,  Massachusetts,  and has been released from any future
obligations.  The remaining obligation,  under non-cancellable capital lease, is
for the Company's telephone  equipment.  The amount owed is estimated at $46,700
and is included under current liabilities.
<PAGE>

                              Augment Systems, Inc.
                          Notes to Financial Statements
                                   (Continued)

5.    Commitments (continued)

      License Agreements

     On  September  27,  1995,  the Company  obtained a worldwide  license  from
Radius, Inc. ("Radius") to use certain of Radius' technology in its products. In
addition,   the   Company   granted   to  Radius  an   irrevocable,   perpetual,
non-exclusive,  worldwide,  royalty-free  license  to any  modifications  to the
Radius technology made by the Company.  During 1998 and 1997, the Company failed
to meet the unit sales  requirement.  As a result, the Company no longer has the
exclusive  right  to the  Radius  technology  and it may be  licensed  to  other
parties.  Royalty expense under this license amounted to approximately  $-0- and
$3,000 in 1999 and 1998, respectively.

      The Company entered into a Development and License  Agreement dated August
1, 1996 with  Polybus  Systems  Corporation  ("Polybus")  pursuant  to which the
Company obtained an irrevocable,  perpetual, worldwide,  nonexclusive (except as
to publishing for which the license is exclusive)  license to a high-speed  file
manager software package in consideration  for royalty  payments.

In 1999, the Company cancelled its agreement with Polybus and obtained a release
from any obligations.

      Employment Contracts

     Effective  January 1, 1997, the Company entered into a two-year  employment
agreement  with Mr.  Lorrin  Gale,  the  Company's  former  President  and Chief
Executive Officer. Pursuant to such contract, Mr. Gale was paid a base salary of
$125,000 and was granted incentive stock options to purchase up to 75,000 shares
of common stock.  Options to purchase  15,000 shares of common stock vested upon
the execution of the  agreement and options to purchase  30,000 shares of common
stock vested on each of the first and second anniversaries of the agreement. All
options have an exercise  price of $4.00 per share.  Pursuant to his  employment
agreement,  Mr.  Gale may not compete  with the  Company  during the term of his
employment and for one year  thereafter.  Mr. Gale left the Company as President
and Chief  Executive  Officer in March  1998.  In  September  1998,  the Company
reached a settlement with Mr. Gale which required the Company to pay $150,000 in
severance  pay and an  additional  $45,000 in  increments  of $15,000 over three
years beginning July 1999.

      Effective  January  1,  1997,  the  Company  entered  into  an  employment
agreement with Mr. Duane Mayo, the Company's Chief Financial Officer, for a term
equal to the duration of his employment.  In consideration of the agreement, Mr.
Mayo's  annual  salary  increased  from  $85,000 to  $100,000.  Mr. Mayo may not
compete with the Company  throughout the term of his employment and for one year
thereafter.

     Effective  May  1998,  the  Company  entered  into  a  two-year  employment
agreement with Lawrence  Liebson,  the Company's  President and Chief  Executive
Officer.  Pursuant to the contract,  Mr. Liebson was to be paid a base salary of
$150,000  and was granted  incentive  stock  options to purchase up to 1,763,955
shares of common  stock.  Options to  purchase  563,881  shares of common  stock
vested upon  execution of the agreement and options to purchase  300,019  shares
vested on each of the  first,  second,  third and  fourth  anniversaries  of the
agreement. All options had an exercise price of $1.00 per share.

     Mr.  Liebson left the Company as President and Chief  Executive  Officer in
January 1999.

      In December  1998,  the Company  authorized  the issuance of an additional
3,592,816  shares of common stock to  investors  and the issuance of warrants to
purchase  359,282 shares of common stock to the underwriter who  participated in
the  January and May 1998  private  placements.  The  issuance of the shares and
warrants  was  pursuant to specific  terms of the private  placement  related to
missing certain revenue milestones.
<PAGE>

                             Augment Systems, Inc.
                          Notes to Financial Statements
                                   (Continued)

6.    Related Party Transactions and Subsequent Events

      In February  1997,  the Stanley A. Young Family  Limited  Partnership,  an
entity affiliated with Stanley A. Young, a company director until June 1997, was
issued,  in a private  placement,  promissory  notes in the aggregate  principal
amount of $50,000 and  warrants to purchase  6,375  shares of common stock at an
exercise  price of $2.75 per share and  warrants  to  purchase  6,375  shares of
common stock at an exercise price of $4.125 per share.

      In April 1997, the Company issued to Venture Management  Consultants,  LLC
("Venture  Management"),  of which Fred L. Chanowski,  a director of the Company
until March 1999, is a 20% member,  a promissory note in the principal amount of
$200,000  in  consideration  for a  $200,000  loan.  The  promissory  note bears
interest at 18% per annum with interest and principal payable at maturity on May
31, 1998.  In May 1997,  the Company  issued to Venture  Management a promissory
note in the principal amount of $200,000 in  consideration  for a $200,000 loan.
The promissory  note bears interest at 17% per annum with interest and principal
payable at maturity on June 30, 1998.  In October  1997,  the Company  issued to
Venture  Management,  in  consideration of a $400,000 loan, a promissory note in
the principal amount of $400,000 plus a warrant to purchase up to 100,000 shares
of Common Stock at $3.00 per share. The promissory note bears interest at 9% per
annum with  interest  and  principal  payable at  maturity on the earlier of (i)
December 11, 1997;  or (ii) the  completion  of a financing by the Company.  The
Company subsequently repaid all three of the promissory notes

     Issued to Venture  Management.  In October 1997, the Company entered into a
Consulting  Agreement with Venture  Management.  In consideration for consulting
services,  the Company  issued  Venture  Management  a warrant to purchase up to
400,000  shares of common stock at $3.00 per share and agreed to pay  consulting
fees of $4,000 per month, plus out-of-pocket expenses up to $1,000 per month. In
October  1998,  the Company  cancelled  the  consulting  agreement  with Venture
Management  signed in October  1997 and the  warrant to  purchase  up to 400,000
shares of common stock and entered into a new consulting  agreement with Venture
Management.  In  consideration  of  consulting  services,  the Company  issued a
warrant to  purchase  up to 500,000  shares of common  stock at $1.00 per share.
Included in  consulting  expense for 1998 is  approximately  $17,000  related to
these warrants.

     In  January  1998,  Leventhal  Paget LLC,  of which  Jeffrey  Leventhal,  a
director of the Company  until March 1999,  purchased  200,000  shares of Common
Stock for $200,000 in a private placement of the Company's Common Stock.

     On March 11,  2000,  the Company  entered into a Stock  Purchase  Agreement
pursuant to which the Company will sell to Right2web.Com,  Inc ("Right2web"),  a
start-up  business-to-business  internet  venture,  such number of shares of the
Company's Series A Convertible Preferred Stock of the Company subject to various
conditions of closing, including conversion of all outstanding warrants, options
and  convertible  notes into  equity of which  there can be no  assurance.  Upon
conversion of the Preferred Stock,  Right2Web.Com will own 92% of the Company on
a fully diluted basis. After dilution,  current stockholders would receive 3% of
the Company's  common stock and the  convertible  note holders would receive 5%.
This transaction should close within the next sixty days.

     Right2Web.Com, is owned principally by Jeffrey Leventhal, a former director
of the Company who resigned in March 1999. Mr.  Leventhal has  previously  owned
three information  technology  companies,  with his previous venture having been
sold  to  a  public  company,  Netlogics  Communications,   Inc.  (NASDAQ:NETL).
Right2web's  business  model  is  to  build  a   business-to-business   internet
destination  portal  where small to medium  sized  companies  can host their web
sites and  direct  employees  to  procure  information,  productivity  tools and
products.  In addition,  Right2web intends to assist companies in developing and
hosting enabled web sites.  Right2web will seek to establish  services that will
complement  the small business  marketplace.  Right2web has also advised that it
intends to make strategic acquisitions in businesses,  which may provide related
services to small to mid-sized  businesses  such as  advertising,  marketing and
consulting firms as well as other internet ventures.

     Since Right2web is a start-up  business-to-business  e-commerce venture, it
will,  among  other  things,  be subject to  intense  competition,  the need for
financing,  unforeseen technological changes, the risks inherent in any internet
businesses such as security concerns, technological difficulties, development of
new technology,  the need to attract  qualified  personnel,  reliance on Jeffrey
Leventhal, and continuing of favorable market conditions for internet companies,
etc.
<PAGE>
                              Augment Systems, Inc.
                          Notes to Financial Statements
                                   (Continued)

7.    Income Taxes

      Deferred income taxes reflect the net tax effects of temporary differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes.

      At  December  31,  1999 the  Company  had a gross  deferred  tax  asset of
$8,457,000 related to a net operating loss  carryforward,  for which a valuation
allowance of $8,457,000 was recorded.  The Company had no deferred tax liability
at December  31, 1998.  The current year  increase in the deferred tax asset and
the related valuation allowance of $2,957,000 was primarily  attributable to the
increase in the deferred asset related to the net operating loss carryforward.

      Due to operating losses  generated,  there is no provision for federal and
state income taxes for the years ended December 31, 1999 and December 31, 1998:
<TABLE>

                                                       Rate             Amount
                                                       -------         -------
<S>                                                     <C>             <C>

Expected federal tax expense at statutory rate          27%          $  50,989
U.S. State income taxes                                  3               4,369
Tax benefit of loss carryforward                       (30)            (55,358)
                                                       ---              ------
  Provision for income tax                              --            $     --
                                                       ===              ======

</TABLE>

      The  difference  between  the  effective  tax rate and the  United  States
federal  rate of 34 percent for the years ended  December  31, 1999 and December
31,  1998  relates  to the  limitations  applicable  to the  recognition  of tax
benefits from the net operating losses.

      At December 31, 1998,  the Company had a net operating  loss  carryforward
for federal income tax purposes of  approximately  $20,300,000  which expires in
2012.  Net  operating  loss  carryforwards  are  subject to review and  possible
adjustment  by the Internal  Revenue  Service and may be limited in the event of
certain   cumulative   changes  in  the  ownership   interests  of   significant
stockholders  over a three year period in excess of 50  percent.  As a result of
the change in ownership of the Company in June 1995, the ultimate utilization of
the Company's net operating losses were substantially  eliminated as of June 30,
1995.  As a result of the changes in ownership of the Company in June 1996,  May
1997,  January 1998 and May 1998, the ultimate  utilization of the Company's net
operating losses are expected to be limited.

<PAGE>
                              Augment Systems, Inc.
                          Notes to Financial Statements
                                   (Continued)


8.    Capital Stock

      Preferred Stock

     In July 1995, the Board of Directors  approved an increase in the number of
authorized  shares of preferred  stock from 593,602 shares to 2,000,000  shares.
The preferred stock may be issued in one or more series,  the terms of which may
be determined at the time of issuance by the Board of Directors, without further
action by stockholders,  and may include voting rights, preferences to dividends
and liquidation, conversion and redemption rights and sinking fund provisions.

      Common Stock

     In June 1998, the Board of Directors  approved an increase in the number of
authorized shares of common stock from 30,000,000 shares to 50,000,000 shares.

      In March  1997,  the  Company  issued  47,807  shares of  common  stock in
connection  with the  exercise of a warrant to purchase  common stock for $1.507
per share.

      In May 1997,  the  Company  issued  1,800,000  shares  of common  stock in
connection with an initial public offering.

     In April 1997,  the Board of Directors  declared a  three-for-four  reverse
stock split of the  Company's  common  stock.  All common  stock,  common  stock
options and per share  information  disclosed in the  financial  statements  and
notes thereto, have been adjusted to give effect for this stock split.

      In January 1998, in connection with a $6,180,000  private placement of the
Company's  common stock,  the Company issued  warrants for the purchase of up to
655,891 shares of common stock to the underwriter and 12 of its designees. These
warrants have an exercise  price of $1.00 per share;  rights to purchase  shares
granted by these warrants will expire on January 8, 2003.

      In May 1998,  in  connection  with a  $575,000  private  placement  of the
Company's common stock, the Company issued 51,722 shares of common stock, to the
underwriter. The shares of common stock were issued in lieu of cash compensation
payments to the underwriter.

      At December 31,  1998,  129,850  shares of common stock were  reserved for
issuance under  outstanding stock options and 7,501,681 shares were reserved for
issuance under warrants.
<PAGE>

                              Augment Systems, Inc.
                          Notes to Financial Statements
                                   (Continued)


8.    Capital Stock (continued)

      Warrants

     In January  1998,  in  connection  with a $500,000  bridge  financing,  the
Company issued promissory notes with a stated principal of $500,000 and warrants
to  purchase  up to  250,000  shares at $1.00 per  share.  In April and May 2000
$1,475,000  of the  convertible  note holders  agreed to convert their notes and
warrants into an aggregate of 5% of the equity of the Company after the proposed
reverse stock split.

      In January 1998, in connection with a $6,180,000  private placement of the
Company's  common stock,  the Company issued 378,910 shares of common stock,  to
the underwriter  and 4 of its designees.  The shares of common stock were issued
in lieu of cash compensation payments to the underwriter.

      In May 1998,  in  connection  with a  $575,000  private  placement  of the
Company's  common stock,  the Company issued  warrants for the purchase of up to
62,673 shares of common stock to the underwriter  and 4 of its designees.  These
warrants have an exercise  price of $1.00 per share;  rights to purchase  shares
granted by these warrants will expire May 30, 2003.

      In September 1998, in connection with a $1,500,000 bridge  financing,  the
Company issued secured  promissory  notes with a stated  principal of $1,500,000
and warrants to purchase up to 750,000  shares of the Company's  common stock at
$.40 per share.

      In  September  1998,  in  connection  with the  execution  of a consulting
agreement and securing of  $1,500,000  the Company  issued  warrants to purchase
1,000,000  shares of the Company's  common stock to an underwriter  and 4 of its
designees.  These warrants have an exercise  price of $.40 per share;  rights to
purchase shares granted by these warrants will expire on September 30, 2003.

      In October 1998, the Company cancelled  warrants to purchase up to 400,000
in common stock  associated  with a consulting  agreement and entered into a new
consulting  agreement  by issuing  warrants  to purchase  500,000  shares of the
Company's common stock at $1.00 per share expiring in October 2003.

      In December  1998,  the Board of Directors  authorized  the issuance of an
additional  3,592,816  shares of common  stock to 66  accredited  investors  who
participated in private  placements of the Company's common stock during January
and May 1998.  The issuance of the shares was pursuant to specific  terms of the
private placement  relating to missing certain revenue  milestones.  As of April
1999, the Company had not issued those shares.

      In  December  1998,  the Board of  Directors  authorized  the  issuance of
warrants to purchase 359,282 shares of common stock to the underwriter  involved
in private  placements of the Company's common stock during January 1998 and May
1998. The issuance of the warrants was pursuant to specific terms of the private
placement relating to missing certain revenue milestones.  As of April 1999, the
Company has not issued those warrants.
<PAGE>
                              Augment Systems, Inc.
                          Notes to Financial Statements
                                   (Continued)


8.    Capital Stock (continued)

      From  November  1995 to May 1996,  the  Company  issued  (i)  warrants  to
purchase in the aggregate 244,059 shares of common stock at an exercise price of
$1.507,  of which  21,514  have an  expiration  date four years from the date of
issuance  and  222,545  have an  expiration  date  five  years  from the date of
issuance;  and (ii) warrants (to a placement  agent) to purchase an aggregate of
21,966  shares of  common  stock at a price of  $1.507  per  share and  expiring
between  November 22, 2000 and May 31, 2001. In July 1996,  the Company issued a
warrant to purchase  23,904 shares of common stock at an exercise price equal to
one half of the price of the  shares of common  stock in the  Company's  initial
public  offering  and  with an  expiration  date  five  years  from  the date of
issuance.  In October  1996,  the Company  issued a warrant to  purchase  11,952
shares  of common  stock at an  exercise  price of $2.093  per share and with an
expiration  date five years from the date of  issuance.  In December  1996,  the
Company issued a warrant to purchase 37,500 shares of the Company's common stock
at an exercise  price of $4.00 per share and with an expiration  date five years
from the date of issuance. From December 1996 through February 1997, the Company
issued  warrants to purchase in the  aggregate  914,188  shares of common stock,
457,094 of which have an exercise  price of $2.75 per share and 457,094 of which
have an exercise price equal of $4.125 per share. These warrants are exercisable
for a period of three years commencing on December 30, 1997.

      In connection  with an initial public offering  declared  effective on May
12, 1997, 2,070,000 redeemable common stock purchase warrants were issued by the
Company.  Each warrant entitles the holder to purchase one share of common stock
for $6.60 during the four-year  period  commencing one year from the date of the
offering.


9.    Stock Option Plan

      In July 1995, the Company  adopted its 1995 Stock Option Plan.  Under this
plan, the Board of Directors,  at their  discretion,  can issue either incentive
stock options or nonqualified  options to employees and nonqualified  options to
consultants, directors or other nonemployees.

     Incentive  stock  options  may not be granted at a price less than the fair
market  value of the shares at the grant date (or less than 110% of fair  market
value in the case of  employees  or  officers  holding 10% or more of the voting
stock) while the  nonqualified  options may be granted at a price  determined by
the Board of Directors  except that the Company has agreed with the Underwriters
not to grant any  nonqualified  options  at a price  lower  than 85% of the fair
market  value of the shares at the date of the grant.  All grants as of December
31, 1998 were at fair market value or greater.  The options generally vested 10%
after 30 days from the date of grant and the  balance  ratably  over a period of
four years.  Incentive stock options granted under the plan expire not more than
10 years  from the date of grant  and not more  than  five  years in the case of
incentive stock options granted to an employee or officer holding 10% or more of
the voting  stock of the  Company.  All options not  exercised at the end of the
vesting period automatically expire. The aggregate number of shares which may be
granted under this plan may not exceed 4,800,000 shares.
<PAGE>

                              Augment Systems, Inc.
                          Notes to Financial Statements
                                   (Continued)


9.    Stock Option Plan (continued)

      Changes  in  options  outstanding  under the 1995  Stock  Option  Plan are
summarized as follows:
<TABLE>

                                             Weighted-Average
                                       Shares             Exercise Price
<S>                                     <C>                     <C>

 Balance, January 1, 1998             2,265,620                  1.04
 Granted                                     --                    --
 Exercised                                   --                    --
 Cancelled or expired                (2,134,770)                 1.04
                                     ----------                ------
 Balance, December 31, 1998             130,850                 $1.00
                                     ==========                 =====
</TABLE>

      The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>

                                                   Options Outstanding
                                                   -------------------
                                                          Weighted-
                                     Number                Average    Weighted-
     Range of                   Outstanding at            Remaining    Average
     Exercise                     December 31,           Contractual  Exercise
     Prices                          1999               Life (years)    Price
--------------------------------------------------------------------------------
        <S>                       <C>                      <C>          <C>

      $1.00                        130,850                  4.4        $ 1.00


      $1.00                        130,850                  4.4        $ 1.00
      ======                      ========                  ===         =====

</TABLE>

<PAGE>
                              Augment Systems, Inc.
                          Notes to Financial Statements
                                   (Continued)


9.    Stock Option Plan (concluded)

<TABLE>
                                                 Options Exercisable
                                      Number                          Weighted-
        Range of                  Exercisable at                       Average
        Exercise                    December 31,                      Exercise
         Prices                        1999                             Price
         --------------------------------------------------------------------
         <S>                            <C>                             <C>

        $1.00                         130,850                          $1.00

        $1.00                         130,850                          $1.00
        ======                        ========                         =====
</TABLE>

      The  Company  follows the  provisions  of SFAS No.  123,  "Accounting  for
Stock-Based  Compensation".  The  Company has elected to continue to account for
stock  options at intrinsic  value with  disclosure of the effects of fair value
accounting  on net income  (loss) and  earnings  (loss) per share on a pro forma
basis. Had  compensation  costs for the stock option plans been determined using
the fair value method, the Company's pro forma net loss and loss per share would
have been as follows:
<TABLE>

                                                                     December 31,
                                                             --------------------------
                                                                  1999           1998
                                                             -------------    ---------
   <S>                               <C>                        <C>             <C>

  Net profit (loss)                 As reported          $    184,527       $(7,239,529)
                                        Pro forma             184,527       $(7,814,319)

  Basic and diluted loss
   per share                       As reported            $    (0.02)       $   (0.65)
                                        Pro forma         $    (0.02)       $   (0.70)
</TABLE>

      Pro  forma  compensation  cost  may  not be  representative  of that to be
expected in future years.

      The Company has computed the pro forma disclosures required under SFAS No.
123 using the Black-Scholes option pricing model prescribed by SFAS No. 123. The
level  of  outstanding  options  as  of  December  31,  1999  does  support  the
calculation.  The weighted average  assumptions used for the year ended December
31,  1998 are as follows:  risk free  interest  rates  range of 5.67%,  expected
dividend  yield  of 0% and  expected  option  life of 60  months;  and  expected
volatility of 50%. The weighted average fair value of all options granted during
the years ended December 31, 1999 was $0.51.


<PAGE>

                              Augment Systems, Inc.
                          Notes to Financial Statements
                                   (Continued)


10.   Net Loss Per Share of Common Stock

     The Company follows the Statement of Financial  Accounting Standards (SFAS)
No. 128, Earnings per Share, issued by the Financial Accounting Standards Board.
Under SFAS No. 128, the basic and diluted net loss per share of common stock for
the years ended  December 31, 1998 and December 31, 1997 is computed by dividing
the net loss by the weighted average number of common shares  outstanding during
the period.

      The weighted average number of common shares  outstanding is summarized as
follows:

 <TABLE>
                                                             December 31,
                                                     -----------------------------
                                                       1999                 1998
                                                     -----------         ---------
<S>                                                     <C>                 <C>

 Denominator for basic and diluted loss per share:
 Weighted average common stock
  shares outstanding                                 11,898,952           11,105,306
</TABLE>

     The  Company's  convertible  preferred  stock,  unissued  shares  and other
convertible   instruments  are  not  considered   outstanding  for  the  diluted
calculation since their effect is antidilutive.

11.   Initial Public Offering

      During fiscal 1997, the Company  consummated an initial public offering of
its common stock and common stock purchase  warrants under the Securities Act of
1933 with the  Securities  and Exchange  Commission.  Pursuant to the  offering,
1,800,000 shares of common stock and 2,070,000  redeemable common stock purchase
warrants were issued and sold by the Company.  Each warrant  entitles the holder
to purchase  one share of common  stock for $6.60  during the  four-year  period
commencing one year from the date of the offering.  The  Registration  Statement
was declared  effective on May 12, 1997. The Company received net proceeds after
expenses of approximately $8,220,000.

12.   Supplemental Cash Flow Information
<TABLE>

                                                                            December 31,
                                                                     -------------------------
                                                                        1999            1998
                                                                     ----------        -------

      Supplemental schedule of cash payments:
        <S>                                                           <C>                <C>
      Cash paid for interest                                     $    7,088         $        --
      Cash paid for taxes                                                --                  --

      Supplemental schedule of non-cash financing and
       investing activities:

          Conversion of bridge financing into common stock               --              300,000
          Conversion of notes payable into common stock                  --              500,000
          Debt discount paid in warrants                                 --              211,588
          Financing fees paid in warrants                                --               34,668
          Consulting expense paid with warrants                          --               17,138
          Property and equipment acquired by
            capital lease obligations                                    --                   --


<PAGE>

                                BLOOM AND COMPANY
                          50 CLINTON STREET, SUITE 502
                               HEMPSTEAD, NY 11550
                                TEL 516 486-5900
                                FAX 516 486-5476


               Report of Independent Certified Public Accountants
               --------------------------------------------------

     To the Board of Directors
     Augment Systems, Inc.
     North Andover, Massachusetts

     We have audited the accompanying balance sheet of Augment Systems,  Inc. as
     of  December   31,  1999  and  the  related   statements   of   operations,
     stockholders' deficit, and cash flows for the years ended December 31, 1999
     and  1998.  These  financial  statements  are  the  responsibility  of  the
     Company's  management.  Our  responsibility is to report on these financial
     statements based on our audits.

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

     In our opinion,  the financial statements referred to above present fairly,
     in all material respects,  the financial position of Augment Systems,  Inc.
     as of December 31,  1999,  and the results of its  operations  and its cash
     flows for the years ended  December 31, 1999 and 1998, in  conformity  with
     generally accepted accounting principles.

     The  accompanying  financial  statements  have been prepared  assuming that
     Augment  Systems,  Inc. will continue as a going  concern.  As discussed in
     Note 1 to the  financial  statements,  the Company has  suffered  recurring
     losses from  operations  and has a net  working  capital  deficiency  and a
     stockholders'  deficit. In addition,  the Company has suspended  operations
     and liquidated its assets.  These  circumstances  raise  substantial  doubt
     about the  entity's  ability to continue as a going  concern.  Management's
     plans  in  regard  to  these  matters  are  also  described  in Note 1. The
     financial  statements do not include any adjustments that might result from
     the outcome of this uncertainty.

     Bloom and Company

     Hempstead, NY
     June 8, 2000

<PAGE>


</TABLE>