UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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


                                   FORM 10-QSB

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

                For the quarterly period ended September 30, 2000

                                       or

|_|  TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ to _______

                           Commission File No. 0-22947

                                ADATOM.COM, INC.
                       ----------------------------------
            (Exact name of Small Business registrant in its charter)


          Delaware                                             43-1771999
          --------                                             ----------
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                        Identification Number)


920 Hillview Court, Suite 190, Milpitas, CA                       95035
- ------------------------------------------------                -----
  (Address of principal executive offices)                      (Zip Code)


Issuer's telephone number,:                                    (408) 935-7979


Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or for such shorter  period that the  registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
ninety (90) days.
YES  [X]    NO  [_]


State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date: As of November 13, 2000 there were
18,413,877 shares outstanding of the Company's common stock.


                                       1

<PAGE>



TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

     Balance Sheet as of September 30, 2000.......................... 3

     Statement of Operations for the quarter and nine months ended
     September 30, 2000 and 1999 .................................... 4

     Statement of Cash Flows for the nine months ended
     September 30, 2000 and 1999  ................................... 5

     Notes to the Financial Statements .............................. 6

Item 2. Management's Discussion and Analysis or Plan of Operations....7


PART II.  OTHER INFORMATION

Item 1. Legal Proceedings............................................36

Item 2. Changes in Securities and Use of Proceeds ...................36

Item 6. Exhibits and Reports on Form 8-K  .......................... 37

SIGNATURES ......................................................... 38

EXHIBITS............................................................E-1


                                       2

<PAGE>



PART I. FINANCIAL INFORMATION

Item 1 Financial Statements (unaudited)

<TABLE>
<CAPTION>

                                       ADATOM.COM, INC.
                                         BALANCE SHEET
                                          (unaudited)
                                                                         September 30, 2000
                                                                     ---------------------------
Current assets:
<S>                                                                             <C>
      Cash                                                                      $       813,000
      Accounts receivable                                                                 3,000
      Notes from receivable franchisee                                                    8,000
      Inventory                                                                               0
      Prepaid expenses and other                                                          1,000
                                                                     ---------------------------
              Total current assets                                                      825,000
Other assets:
      Fixed assets net                                                                  680,000
      Investment joint venture                                                          500,000
      Deposits                                                                           32,000
      Organization expense, net                                                          32,000
      Web development costs, net                                                              0
                                                                     ---------------------------
              Total other assets                                                      1,244,000
                                                                     ---------------------------
                                                        Total Assets           $      2,069,000
                                                                     ===========================
Current Liabilities:
      Accounts payable                                                          $       267,000
      Accrued payroll liability                                                         384,000
      Current lease contracts payable and notes                                          63,000
      Customer deposits                                                                  55,000
      Accrued expenses                                                                2,053,000
      Note payable to officers                                                          548,000
      Restructuring Reserve                                                             984,000
                                                                     ---------------------------
              Total current liabilities                                               4,354,000
Long-term liabilities                                                                         0
              Total liabilities                                                       4,354,000
Equity
      Preferred stock, $.01 par value; authorized 5,000,000 shares,
              issued and outstanding - 1,200 shares                                   1,200,000
      Common stock $.01 par value; 50,000,000 authorized;                               184,000
              18,428,877 issued; 18,413,877 outstanding
      Paid in capital                                                                19,413,000
      Accumulated Deficit                                                          (23,050,000)
      Common stock notes receivable                                                    (17,000)
      Treasury Stock - at cost (15,000 shares)                                         (15,000)
                                                                     ---------------------------
              Stockholder Equity                                                    (2,285,000)
                                                                     ---------------------------
                              Total Liability and Stockholder Equity           $      2,069,000
                                                                     ===========================


</TABLE>



    The accompanying notes are an integral part of these financial statements



<PAGE>




<TABLE>
<CAPTION>

                                                  ADATOM.COM, INC.
                                               STATEMENT OF OPERATIONS
                                                     (unaudited)


                                                      Three Months     Thee Months      Nine Months     Nine Months
                                                    Ended September  Ended September       Ended           Ended
                                                        30, 2000         30, 1999      September 30,   September 30,
                                                                                           2000            1999
                                                    ------------------------------------------------------------------


Operation expenses:
<S>                                                         <C>              <C>           <C>               <C>
   Selling, general and administrative                      $683,000         $257,000      $1,752,000        $446,000
                                                    ------------------------------------------------------------------

Loss from operations                                       (683,000)        (257,000)     (1,752,000)       (446,000)

Other income (expense)
   Miscellaneous income (expense)                              2,000            1,000           4,000          40,000
   Interest expense, net                                           0          (1,000)           7,000        (33,000)
                                                    ------------------------------------------------------------------
                                                               2,000                0          11,000           7,000

   Loss before discontinued operations                     (681,000)        (257,000)     (1,741,000)       (439,000)

Discontinued operations
   Loss from discontinued operations                       1,799,000          769,000       4,943,000       1,464,000
   Loss on abandonment of discontinued operations          1,727,000                0       1,727,000               0
                                                    ------------------------------------------------------------------
         Total loss on discontinued operations             3,526,000
                                                                              769,000       6,670,000       1,464,000

         Net Loss                                       ($4,207,000)     ($1,026,000)    ($8,411,000)    ($1,903,000)
                                                    ==================================================================


Basic and diluted loss per share
   Loss per share from continuing operations                 ($0.04)          ($0.05)         ($0.11)         ($0.08)
   Loss per share from discontinued operations               ($0.21)          ($0.15)         ($0.42)         ($0.29)
         Net Loss                                            ($0.25)          ($0.20)         ($0.53)         ($0.37)

   Weighted average number of
       common shares outstanding                          17,007,829        5,174,582      15,981,167       5,174,582


</TABLE>


    The accompanying notes are an integral part of these financial statements


                                       4



<PAGE>



<TABLE>
<CAPTION>


                                         ADATOM.COM, INC.
                                     STATEMENT OF CASH FLOWS
                                           (unaudited)
                                                             Nine Months Ended       Nine Months
                                                            September 30, 2000          Ended
                                                                                    September 30,
                                                                                        1999
                                                         ------------------------------------------
Cash flows from operating activities:
<S>                                                         <C>                       <C>
       Net loss                                             $  (8,411,000)            $ (1,903,000)
       Adjustments To reconcile net (loss) to net
             Cash provided (used) by operating activities:
                 Depreciation and amortization                     774,000                  24,000
                 Decrease (increase) in operating assets
                      Accounts receivable                           74,000                (55,000)
                      Inventory                                    240,000                (30,000)
                      Prepaid expenses and other                   165,000                (40,000)
                 Increase (decrease) in operating liabilities
                      Accounts payable                             626,000                 416,000
                      Accrued Expenses                             384,000                (27,000)
                      Customer deposits                          (146,000)                  36,000
                                                         ------------------        ----------------
Net cash used by operating activities                          (6,294,000)             (1,579,000)

Cash flows from investing activities:
       Investment Joint Venture (CPTC)                           (500,000)                       0
       Payments received on franchisee notes receivable              1,000                   2,000
       Acquisition of fixed assets                               (340,000)                (85,000)
                                                         ------------------        ----------------
Net cash provided (used by investing activities)                 (839,000)                (83,000)

Cash flows from financing activities:
       Proceeds from sales and issuance of stock                 7,296,000                       0
       Proceeds from notes and contracts payable                         0               1,290,000
       Proceeds from shareholder                                         0                 554,000
       Net borrowings on line of credit                                  0                (51,000)
       Net borrowings from officers / stockholders                 541,000                 (6,000)
                                                         ------------------        ----------------
Net cash provided by financing activities                        7,837,000               1,787,000

Net increase (decrease) in cash                                    704,000                 125,000
Cash and restricted cash, beginning of period                      109,000                  91,000
                                                         ------------------        ----------------
Cash and restricted cash, end of period                       $    813,000              $  216,000
                                                         ==================        ================

             SUPPLEMENTAL  DISCLOSURE OF CASH FLOW  INFORMATION
        Cash paid during year for:
             Interest                                                    0                  48,000

</TABLE>



    The accompanying notes are an integral part of these financial statements


                                       5

<PAGE>

                                ADATOM.COM, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

                      NINE MONTHS ENDED SEPTEMBER 30, 2000

                                   (Unaudited)

ACCOUNTING POLICIES

Unaudited Interim Financial Information

      The  accompanying  unaudited  condensed  financial  statements  have  been
prepared in conformity with generally accepted accounting principles for interim
financial  information  and  with  the  instructions  to  Form  10-QSB  and  the
applicable  rules of the Securities and Exchange  Commission.  Accordingly,  the
financial  statements  do  not  include  all of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included.  Operating results for the nine-month periods ended September 30, 2000
September  30, 1999 are not  necessarily  indicative  of the results that may be
expected for the year ending December 31, 2000. For further  information,  refer
to the  financial  statements  and footnotes  thereto  included in the Company's
annual report on Form 10-KSB for the year ended December 31, 1999.


Use of Estimates

         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.


Legal Proceedings

         From time to time  Adatom.com,  Inc.  (the Company) is subject to legal
proceedings  and claims in the  ordinary  course of business,  including  claims
alleging infringement of trademarks,  copyrights and other intellectual property
rights.  The Company  currently  is not aware of any such legal  proceedings  or
claims that it believes  will have  individually  or in the aggregate a material
adverse  effect on its  business,  prospects,  financial  condition or operating
results. Please see Part II Item 1.




                                       6

<PAGE>


Net Loss Per Share

      Net loss per share  basic and  diluted is  calculated  using the  weighted
average number of common shares outstanding during the period.  Diluted net loss
per share  excludes the impact of stock options and  warrants,  as the effect of
their inclusion is antidilutive as of the periods reported on.

Abandonment of B2C Business

         Adatom.com,  Inc.  has  decided  to discontinue its retail operation to
focus exclusively on its international  operations by attempting to leverage its
China  partnerships.  This  discontinuance  emphasizes  the  development  of the
Company's   relatively  new  China   business,   while   concurrently   reducing
expenditures  related to the B2C internet  superstore  (www.adatom.com)  and the
Company's B2B E-commerce Solution Program (AESP). The superstore and AESP, which
to date have been the predominant  revenue sources but have not been profitable,
will be refocused primarily to liquidate existing inventory, and thereafter will
be available for licensing by Adatom's  international  partners and others.  The
Company  must  generate  sufficient  revenues  from its China  business to cover
expenses even at its reduced level. No assurance can be given that the change in
the Company's  operations as described herein will generate  sufficient revenues
to make the Company profitable.

         The  estimated  cost of closing  down the  operation  and the write off
assets  associated  with  the  discontinued  operation  have  been  accrued  and
reflected as part of the loss on abandonment.




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

         Statements  in  this  Form  10-QSB  and  the  following   "Management's
Discussion  and  Analysis  or Plan of  Operations"  that are not  statements  or
descriptions of historical facts are forward-looking statements that are subject
to risks and  uncertainties.  Words  such as  "expect,"  "intends,"  "believes,"
"plans,"  "anticipates" and "likely" also identify  forward-looking  statements.
All forward-looking  statements are based on current facts and analyses.  Actual
results may differ  materially from those currently  anticipated due to a number
of  factors  including,  but  not  limited  to,  history  of  operating  losses,
anticipated  future losses,  competition,  future  capital  needs,  the need for
market   acceptance,   dependence  upon  third  parties,   disruption  of  vital
infrastructure  and intellectual  property rights,  government  regulation,  and
other risks.  See the section  entitled  "MANAGEMENT  DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION  -Risk  Factors" for a discussion of some of those risks.  All
forward-looking   statements  are  made  pursuant  to  the  Private   Securities
Litigation Reform Act of 1995. Additional information on factors that may affect
the business and financial results of the Company can be found in filings of the
Company with the Securities and Exchange Commission.

         The following  discussion  and analysis  should be read in  conjunction
with the  financial  statements  and notes thereto  appearing  elsewhere in this
report.


GENERAL

                                       7

<PAGE>



         Adatom.com,  Inc.  is a creator,  enabler and  operator  of  electronic
marketplaces  worldwide,  enabling the most direct interfaces between buyers and
sellers.  Adatom has relationships in China,  including  strategic  partnerships
with the China  Product  Trade Net Center,  the  Yangling  Agricultural  Hi-Tech
Industrial  Demonstration  Zone,  the ShenZhen  Bay  Industrial,  Education  and
Research Center,  the China Federation of Industrial  Economics and the Shanghai
Longwu Fruit Company.

         Adatom, Inc. launched an Internet website,  www.ADATOM.COM,  in October
1998. Early in 2000 we shifted the focus to Internet  e-commerce,  and attempted
to leverage our proprietary e-commerce infrastructure and efficient distribution
system to reach both the business-to-consumer  ("B2C", the providing of services
by businesses to consumers through the Internet)and business-to-business ("B2B,"
the providing of services by businesses to other individual  businesses  through
the Internet)  markets.  We also developed and implemented a turnkey  e-commerce
solution to provide  individuals,  companies,  and organizations  with "instant"
e-commerce capabilities, including back-end fulfillment, website development and
a full-scale e-commerce infrastructure, providing a comprehensive product mix of
name  brand  products  for the  individual,  the  home,  and the  office.  These
operations  generated  revenue  but were not  profitable.  As noted  below these
operations were discontinued during the third quarter as we decided to emphasize
our China partnerships.

         Recently,  the  Company  has been  advised by Nasdaq  that it no longer
meets the requirements for listing on the Nasdaq SmallCap Market.  Nasdaq held a
hearing on November 2, 2000 during  which Adatom  presented  its plan for curing
and  eliminating  stated  deficiencies  regarding  the listing of the  Company's
stock. A decision is pending.  (See "RISK  FACTORS-IF WE CANNOT SATISFY NASDAQ'S
MAINTENANCE  REQUIREMENTS,  IT MAY  DELIST OUR  COMMON  STOCK FROM ITS  SMALLCAP
MARKET AND WE MAY NOT HAVE AN ACTIVE  PUBLIC  MARKET FOR OUR COMMON  STOCK.  THE
ABSENCE OF AN ACTIVE  TRADING  MARKET  WOULD  LIKELY  MAKE THE  COMMON  STOCK AN
ILLIQUID INVESTMENT" below).



Global Ecommerce Marketmaker Solutions (GEMS)

         Adatom's  role  as a  global  ecommerce  marketmaker  is in  its  early
developmental  stages.  In March 2000,  Adatom signed an exclusive joint venture
agreement  with the China  Product  Trade Net  Center(CPTNC)  to form a US-China
marketplace.  The CPTNC was formed by the Chinese  government to facilitate  the
systematic and efficient  distribution of Chinese  manufactured  goods. A second
agreement  was signed in April 2000  between  Adatom and  Yangling  Agricultural
Hi-Tech  Industrial  Demonstration  Zone  (YAHIDZ) to develop and  implement  an
agricultural  electronic  marketplace  to  source  and  sell  agricultural  farm
machinery,  seeds,  fertilizer,  pesticides and crops.  Adatom has also signed a
third  agreement  with ShenZhen Bay  Industrial,  Education and Research  Center
(SBIERC) to develop and facilitate an electronic  marketplace with China Hi-Tech
Exchange  Network  and  China  IT  Product   Purchasing  Net  for  international
e-commerce.  Adatom.com  signed  a  fourth  agreement  in May  2000  with  China
Federation  of  Industrial   Economics  (CFIE),  to  establish  and  develop  an
electronic  marketplace for a marketing,  sale, and distribution  system between
China and the U.S.  Present  plans are for the GEMS revenues to begin to flow in
the fourth quarter of 2000.

                                       8

<PAGE>


CHINA JOINT VENTURES

         In March 2000, the Company signed an exclusive agreement with the China
Product  Trade  Net  Center  (CPTNC).  The CPTNC is an  organization  officially
launched in 1997 with the support of several  Chinese  governmental  and private
institutions to facilitate  increased sales and ensure  systematic and efficient
worldwide distribution of Chinese manufactured goods.

         The CPTNC initiative covers both consumer and industrial goods and aims
to use Internet technology as its primary  information and distribution  medium.
The Company  and the CPTNC will  establish a joint  venture  company  located in
Beijing,  China, to work directly with the CPTNC. The joint venture company will
develop and implement the systems,  Internet applications,  services and support
to enable the marketing and sale of industrial  and consumer  goods  produced in
China  into the U.S.  as well as goods  produced  in the U.S.  into the  Chinese
marketplace exclusively through Adatom.com.

         The scope of this agreement includes the establishment of an electronic
business-to-business   and   business-to-consumer    marketing,    selling   and
distribution   system  with  back-end  factory  quality  and  level  of  service
standards.  This  electronic  system  will be  accessible  in both  English  and
Chinese.  Additional support will be provided by subsidiary CPTNC  organizations
including  the  centers  for  transportation,  trade,  Internet  and  method  of
payments.

          This joint venture is presently  conducting  business  through  manual
methods,  receiving and sourcing  products and service  requests from both China
and the US.  Implementation of the e-commerce  network is in process and remains
subject to submission of a mutually acceptable business plan.

         In August the Company was selected as an exclusive  agent by the CPTNC,
to obtain a turn-key operation including equipment,  technology and training for
the  implementation  of fiber optics production in China at an estimated cost of
$150,000,000 (150 million dollars) U.S.

         In March 2000, the Company signed a cooperative agreement with Yangling
Agricultural Hi-Tech Industrial Demonstration Zone (YAHIDZ or Yangling) to among
other  things   develop  and   implement  a  Hi-Tech   agricultural   electronic
marketplace.  YAHIDZ is a Chinese agricultural  organization established in 1997
by the China National State council and 14 Chinese  ministries,  commissions and
provincial governments.  In this joint effort, Adatom.com, Inc. is the exclusive
overseas e-commerce partner of YAHIDZ.  Adatom and YAHIDZ will source,  provide,
market and sell industrial and consumer agricultural products between the United
States and China. Adatom has received a Certificate of Approval from the Chinese
government  for its  exclusive  partnership  with YAHDIZ.  This  Certificate  of
Approval is "for the establishment of enterprises with foreign investment in the
People's Republic of China." Significantly, in August 2000, Yangling was awarded
a full import/export license and a share of the national import/export quota for
agriculture.  Yangling is only the second organization in China to have received
such a broad charter.

                                       9

<PAGE>



         Adatom.com has established a joint venture  agreement with the ShenZhen
Bay Industrial, Education and Research Center (SBIERC) to develop and facilitate
an  electronic  marketplace  with China  Hi-Tech  Exchange  Network and China IT
Product Purchasing Net for international e-commerce. This electronic marketplace
will  provide  information  on products and  business  opportunities  related to
hi-tech  products,  electronics and information  technology.  In addition to the
e-commerce enablement,  the cooperation will develop an online hi-tech education
platform and will  establish a venture  capital fund to invest in the activation
of Chinese hi-tech  companies.  Furthermore,  a "Global  Economic Network Forum"
will be  instituted  to educate  and inform on  economic  strategy  development,
industry  orientation,  new  century  network  technology  and human  resources.
Located in South China, SBIERC is an high-tech  industrial park that was founded
by city  government  officials of ShenZhen - the leader in China for  industrial
products; the management team at Peking University - the top University in China
with a strong industrial sector; and Hong Kong Science and Technology University
- the most westernized hi-tech University in China. SBIERC will work exclusively
with Adatom and will  contribute  financial  resources  to enable the Company to
establish  an  instant  e-commerce  presence  for  SBIERC.  The time  table  for
implementation  of this  joint  venture  has not been  finalized,  will  require
various  China  business  licenses  and is also  subject to mutually  acceptable
business plan.

         Adatom.com  has  established  a  joint  venture  agreement  with  China
Federation of Industrial Economics (CFIE) a national  organization that oversees
and coordinates all Chinese trade associations. The network consists of hundreds
of trading associations such as the Electronic Association of China, The Chinese
Textile  Association and the Chinese Toy Manufacturers  Associations,  etc. from
various  industries  and offers the best product  prices on the market.  CFIE is
expecting to enlist 50,000  members for Adatom in its first year and 100,000 the
following year. China Telecom and China  Broadcasting will participate.  CFIE is
unique  as  a  national   organization.   They   coordinate  all  Chinese  trade
associations and most of the large companies in China are members.

         On October 29, 2000  Adatom.com  signed a joint venture  agreement with
SHANGHAI QIFAN Co., Ltd., one of China's  largest  conglomerates.  The pact with
SHANGHAI  QIFAN Co.,  Ltd.,  which  includes 21  companies  under its  corporate
umbrella,  adds extensive access to China's markets for companies using Adatom's
wide ranging Internet network. SHANGHAI QIFAN, has been in business for 35 years
and  owns  an   import/export   company,   a  large  produce  market,   a  large
transportation  center, one of China's largest cement  warehouses,  a rare earth
mineral and chemical trade  operation and China's  largest rice export base. The
agreement  marks the first time SHANGHAI  QIFAN has taken a U.S.  trade partner.
SHANGHAI  QIFAN's top  executive,  Mr. Bao Chi Fan, is one of the most decorated
and revered  businessmen in China.  His credits include twice being elected as a
"national  hero" in the field of  business,  serving  as vice  president  of the
Chinese  Invention  Association  and  teaching  as a  visiting  professor  at 10
universities and colleges.


DISCONTINUED OPERATIONS

         On September 25, 2000, we announced the discontinuance of the Company's
retail operation to focus almost exclusively on international  operations.  This
restructuring  emphasizes the  development of our relatively new China business,
while at the same time significantly reducing expenditures related to the former
B2C

                                       10

<PAGE>



Internet  superstore and B2B E-commerce Solution Program (AESP). As part of this
restructuring,  we decided to cancel all drop-shipped orders due to our analysis
of the marginal  profitability  of these orders versus the anticipated  costs to
fulfill the orders.  The  superstore  and AESP,  which had been the  predominant
revenue  sources but had not been  profitable,  have been refocused to liquidate
existing  inventory,  and are now  available for  licensing.  These actions will
result in an overall  headcount  reduction of 45% and anticipated total spending
reductions of approximately 55%.

         We  anticipate that this change in focus will enable us to focus almost
exclusively on developing our China business while  achieving  significant  cost
reductions through a combination of workforce  reduction and decreased marketing
expenditures  associated  with our former  superstore and AESP  operations.  Our
China partners are government agencies or quasi-government agencies.

         For the near future,  the predominant  focus of our China business will
be to match  non-consumer  buyers and sellers of a  potentially  wide variety of
goods  to be both  exported  from and  imported  to  China.  Sales  efforts  are
presently  being  concentrated  in  various  products  in the  following  areas:
agriculture,  consumer  goods,  automotive,  computers,  electronics,  hardware,
household,  industrial,  office, personal, sports and toys. Adatom plans to take
temporary  title to any such goods  during the  transit and  delivery  phases in
order to be able to  charge  a markup  on the  sold  goods  for its  arrangement
efforts. The range of this markup is uncertain at this time due to lack of sales
and it is anticipated will vary depending on type, segment and category.

         On October 17, 2000, we announced  the launch of our new  international
website focused on direct trade with China (www.adatomchina.com). The new Adatom
site focuses on bringing together U.S. and international  buyers and sellers for
bi-directional trade with China.

         Although the change in operations described above will reduce headcount
and expenses,  we must generate  sufficient  revenues from our China business to
cover  expenses  even at our reduced  level.  No assurance can be given that the
change in our operations as described will generate  sufficient revenues to make
us profitable.




OPERATIONS

         The following  discussion  and analysis  should be read in  conjunction
with the  financial  statements  and notes thereto  appearing  elsewhere in this
report.

         During  the  third  quarter  of  2000,  the  Company   determined  that
continuing  the B2C  business  and the related B2B  business was not in the best
long term interest of either the Company or its stockholders.  While these lines
of business  were  projected to become  profitable  they would not do so quickly
enough to become  self-supporting given the Company's cash position. The cost of
establishing  and  marketing  its Adatom  Ecommerce  Solution  Program (ESP) and
building brand name recognition  through its superstore with affiliate  programs
and agreements with web shopping  portals was just too

                                       11

<PAGE>



costly. During the third quarter the Company discontinued its major promotion of
free shipping on orders and noticed an immediate drop in orders.

         The Company  closely follows the evolution of commerce on the Internet.
With the growing  importance of e-commerce  market places and the integration of
global  trade the Company  has forged  what it believes to be key  relationships
with  companies in China and has  initiated an  electronic  market place for the
trading  of  consumer  goods,  industrial  goods,   agricultural  products,  and
commodities with a particular focus on China.

         As a consequence of the non  profitability of retail operations and the
agreements  the Company has in place,  the Company has decided to terminate  its
retail  operations in the US and focus  exclusively  on its trade with China and
other Global opportunities.



RESULTS OF OPERATIONS:

         NINE MONTHS PERIODS ENDING SEPTEMBER 30, 2000 AND 1999.

         In September  2000 the Company  terminated the majority of the expenses
associated with its B2C business. This involved,  among other things, laying off
25 individuals who were exclusively  associated with the B2C business,  reducing
the amount of space it rents to reflect the smaller staff, and canceling various
contracts  with web portals.  The Company will liquidate its inventory at prices
below cost and we are in the process of canceling orders and refunding payments.
Some staff members  remain who will assist with this effort and then will either
be transitioned into the new business or laid off.

         The following  table depicts  staffing  levels at each month end during
the third quarter 2000 and 1999.  The staffing level for September is the number
of personnel left after the reduction in force.


<TABLE>
<CAPTION>

         -----------------------------------------------------------------------------------------
         TOTAL EMPLOYEES
         (BOTH FULL & PART TIME)            Q3-1999          Q3-2000             VARIANCE
         -----------------------------------------------------------------------------------------
<S>                                            <C>             <C>                  <C>
         JULY                                  20              56                   36
         -----------------------------------------------------------------------------------------
         AUGUST                                30              55                   25
         -----------------------------------------------------------------------------------------
         SEPTEMBER                             31              33                   2
         -----------------------------------------------------------------------------------------

</TABLE>


         During the next nine to twelve  months the Company may hire a number of
additional employees who have experience with international trade to assist with
the  development  of the Chinese web site.  Management  will continue to monitor
cost and  staffing  to keep  expenditures  as low as  possible  consistent  with
execution of the business plan.

         The company  recorded  $1,727,000  of  restructuring  costs  related to
inventory write-off, fixed asset write-off, leases and other obligations related
to the  restructure  announced on September  25, 2000 that will help the company
reduce  costs,  eliminate  unprofitable  B2C  business  and  shorten the time to
profitability.

         There have been no sales prior to the fourth  quarter  2000 through our
China  partnerships  and  thus  there  is no  revenue  shown  on  the  Operating

                                       12

<PAGE>



Statement.  There  are  some  costs  shown  both in 1999 and in 2000 on the line
Selling,  general and  administrative.  These cost are  corporate  costs such as
legal, accounting, CPAs, and various administrative functions. There are however
costs in 2000 related to the setting up of the various joint venture  agreements
mentioned  elsewhere in this document and the  functions  necessary to launching
www.adatomchina.com  which was begun in the third quarter.  There are also costs
associated with sales activity and the bringing  together of buyers and sellers.
These activities and will accelerate in the fourth quarter of 2000 and beyond.

         The  company  reported a net loss of $681,000 or $(0.04) per share from
on-going  operations together with a net loss of $1,799,000 or $(0.11) per share
from  discontinued  operations  related  to  B2C  business  and  a net  loss  of
$1,727,000  or  $(0.10)  per  share   resulting  from  its  recently   announced
restructuring.  The total net loss for the period was  $4,207,000 or $(0.25) per
share. Excluding the loss related to discontinued  operations,  the loss for the
third  quarter  was  $681,000  or $(0.04)  per share  compared  to a net loss of
$257,000 or $(0.05) per share for the same period last year.



LIQUIDITY AND CAPITAL RESOURCES

         The Company is dependent upon raising additional capital to finance our
current operations and future plans for expansion. In March 2000, we consummated
a private  placement of  2,000,000  shares of our common  stock  yielding  gross
proceeds of $4 million.  In June, we  consummated  a private  placement of 1,100
shares of Series A Convertible  Preferred  Stock yielding gross proceeds of $1.1
million. In September, we a) consummated private placements of 329,384 shares of
our common  stock  yielding  gross  proceeds of $250,000  and b)  consummated  a
private  placement  of 1,200  shares of  Series B  Convertible  Preferred  Stock
yielding gross  proceeds of $1.2 million.  During the third quarter we also used
our stock as method of settling some outstanding liabilities.  The net amount of
the liabilities  amounted to approximately  $292,000.  The net proceeds of these
three offerings plus the debt  elimination  was  approximately  $6,842,000.  The
remaining proceeds of this capital have been completely committed.

         On October 30, 2000 an  agreement  to  purchase  common  stock was made
between Adatom.com and Mr. Li Yuanhao a private investor.  Mr. Li, has agreed to
purchase  2,344,372  shares at a price of $1.2797 per share for a total infusion
of $3 million.  This listing has not been closed as of the date hereof  because,
among  other  things,  a Nasdaq  listing  application  needs to be  filed.  This
financing  is  expected to close by the end of November  2000.  In addition  the
Company  issued a warrant to Mr. Li for  1,100,000  shares of common  stock at a
price of  $1.2813  per share as  compensation  for his  efforts  to  secure  the
Yangling  Agricultural  Hi  -Tech  Industrial   Demonstration  Zone  cooperative
agreement.

         At September 30, 2000, the Company had cash of approximately  $813,000.
During the second and third  quarters  certain  officers  (see page E- 1 of this
document)  loaned to the  Company a total of  $541,000  for  payroll and working
capital.  $10,000 was repaid to Mr.  Jagannathan  during  October  2000  leaving
$531,000 as the net amount loaned to the Company by Officers.

                                       13

<PAGE>



         On October 31, 2000 all employees elected to defer compensation, in the
aggregate  amount of  approximately  $190,000  for  October,  until such time as
additional funding was available.

         Since its inception,  our business has incurred significant losses, and
as of September 30, 2000, had an approximate accumulated deficit of $23,050,000.
As a result,  there is an uncertainty about the Company's ability to continue as
a going  concern,  which was  stated in our  auditor's  report on the  Company's
financial  statements for the 1999 fiscal year. The Company is expected to incur
operating losses for the foreseeable future.

         We cannot be sure that the Company will generate sufficient revenues to
ever achieve or sustain  profitability.  The operations of the Company are still
subject  to all  the  risks  inherent  in the  establishment  of a new  business
enterprise,  including  the  absence of a  substantial  operating  history.  The
likelihood  of the success of the  Company  must be  considered  in light of the
uncertainties,  expenses,  and delays frequently  encountered in connection with
the development of any new business.


CASH FLOW

         There was a net  increase  in cash during the first nine months of 2000
of $704,000.  Net cash used in operating  activities  primarily consisted of the
Company's net loss from  discontinued  operations of $6,670,000  and  $1,752,000
from  the  on  going  operations  for  a  total  of  approximately   $8,422,000.
Additionally, accounts payable increased by $637,000, accrued expenses increased
by $384,000,  inventory decreased by $240,000 as a result of the discontinuation
of the business.  Customer deposits decreased by $146,000,  and other sources of
cash equaled an increase of $165,000 resulting in net cash used in operations of
$6,294,000.

         Net cash used in investing  activities  during the first nine months of
2000 was approximately $839,000,  $500,000 of which was the Company's investment
in the CPTNC joint venture and $340,000 related to an increase of fixed assets.

         Net cash from financing activities was $7,837,000 for first nine months
of 2000. In December  1999, Mr.  Barton,  the President and CEO made  short-term
non-interest  bearing loans in the amount of $500,000 to the Company for working
capital purposes.  In February 2000,  Adatom.com issued 172,057 shares of common
stock to Mr. Barton in settlement of $500,000 of these notes payable.

         During  March  2000,  the  Company  executed  documents  for a  private
placement of two million shares of common stock yielding proceeds of $4 million.
The sale was made to several accredited investors. The Company used the proceeds
for  working   capital,   including  the  payment  of  accrued   liabilities  of
approximately $1.5 million.

         During June the Company netted proceeds of $1,030,000 from the issuance
of Preferred Stock Series A. During August and September the Company consummated
private placements of 329,384 shares of our common stock yielding gross proceeds
of $250,000 plus the reduction of debt for common stock of $292,000. Also during
September  the  Company  netted  proceeds  of  $1,130,000  from the  issuance of
convertible preferred Series B (discussed below).

                                       14

<PAGE>



         During  September 2000, the Company issued 1,200 shares of its Series B
Convertible Preferred Stock. Each share of Preferred Stock has a stated value of
$1,000 and is convertible  into common stock at a conversion  price equal to 85%
of the average of the two lowest  closing bid prices of the common  stock on the
Nasdaq  SmallCap  Market  over  the  ten  trading  days  preceding  the  date of
conversion ("Market Price") subject to a maximum conversion price of 115% of the
Market Price on the issue date of September 27, 2000, or $0.7906.  The number of
shares of common stock that may be acquired  upon  conversion  is  determined by
dividing  the  stated  value of the  number of shares of  Preferred  Stock to be
converted by the conversion price.  Also,  certain additional amounts calculated
on the basis of 6% of the stated value from  September 27, 2000,  the issue date
of the Preferred  Stock, to the date of conversion  would also be converted into
common stock using the same formula.

         Since  there is no minimum  conversion  price,  the number of shares of
common stock that holders of preferred stock may acquire upon  conversion  would
simply continue to increase if the stock price  declines.  Since upon conversion
holders of Preferred  Stock acquire  common stock for at least a 15% discount to
the market price, they have an incentive to sell these shares of common stock at
market price either concurrently with, or shortly after, conversion, in order to
profit  from  the  difference  between  the  market  price  and  the  discounted
conversion  price. The holders of the preferred stock also could engage in short
sales of our common stock,  after delivering a notice of conversion to us, which
could  contribute  to a decline in the market price of the common stock and give
them the  opportunity  to profit  from that  decrease  by  covering  their short
position with shares acquired upon conversion for at least a 15% discount to the
prevailing  market price.  The conversion of the preferred  stock and subsequent
sale of a large number of shares of common stock acquired upon conversion during
periods when the market price of the common stock  declines,  or the possibility
of such conversions and sales, may exacerbate the decline or impede increases in
the market price of the common stock.

         Mr. Barton made a non-interest-bearing  loan on February 1, 2000 in the
amount  of  $200,000,  also for  working  capital  purposes.  In March  2000 the
$200,000  was repaid.  Mr.  Barton made  another loan to the Company of $200,000
during the month of May 2000.  Michele Ware, Vice President of Global Sales made
a loan of  $115,620  during  the month of June.  During  the month of July,  Mr.
Barton loaned the Company $105,000, Dr. Jagannathan the Executive Vice President
and Chief Technology Officer loaned the Company $10,000, and Ms. Ware loaned the
Company $20,000. During the month of August Ms. Ware loaned the Company $42,000.
During the month of  September  Mr.  Barton  loaned the Company  $40,000 and Dr.
Jagannathan  loaned the Company $9,000.  During the month of October $10,000 was
repaid to Dr.  Jagannathan.  Total loans  outstanding to officers of the Company
amount to $531,000 as of November 14, 2000 all of which are unsecured.  Officers
have no commitment to make  additional  loans in the future.  All of these loans
were outstanding as of September 30, 2000 and represent $541,000 of the net cash
provided by financing activities.

         These  items make up the  balance of the  $7,837,000  cash  provided by
financing activities.

                                       15

<PAGE>



         The Company has signed an agreement  with Mr. Li Yaunhao to purchase $3
million  of the  Company's  stock and  expects  to receive  these  funds  during
November 2000. We are proceeding with  documentation  and  registration of a $30
million Equity Line of Credit.

         Additional  funds will be needed to grow the business.  Adequate  funds
for these and other purposes on terms acceptable to the Company, whether through
additional  equity financing or other sources,  may not be available when needed
or may result in significant dilution to existing stockholders. Furthermore, the
Company's  losses and lack of  tangible  assets to pledge as  security  for debt
financing  could  prevent  the  Company  from  obtaining  bank or  similar  debt
financing.  Failure to obtain adequate  financing would have a material  adverse
effect on the Company and could result in cessation of the  Company's  business.
The  Company  estimates  that it  will  require  between  $5 and $7  million  in
additional  capital to  adequately  implement  its business plan and sustain and
expand its sales and marketing activities through December 31, 2001. The Company
cannot be sure that it will be able to raise these funds.

         The  Company  currently  estimates  that a total  investment  of  $20.0
million will be needed to fund the current joint ventures in China.  The Company
is  pursuing  raising  the  necessary  funds in Asian and  European  markets  in
addition to US markets.  To aid in that  process the Company has engaged  Lanzet
Global  Securities,  Corp. Lanzet Capital plans to introduce Adatom to small cap
money  managers in the U. S. and Asia.  The Company cannot provide any assurance
that it will be able to raise these funds.




RISK FACTORS

         The risks  described  below are not the only ones  facing our  company.
Additional risks not presently, known to us or that we currently deem immaterial
may also impair our business operations.

         Our business,  financial  condition or results of  operations  could be
materially  adversely  affected by any of these risks.  The trading price of our
common stock could decline due to any of these risks.

         Forward-looking  statements  are not  guarantees of  performance.  They
involve risks, uncertainties and assumptions. The future results and stockholder
values of the  company  may  differ  materially  from those  expressed  in these
forward-looking  statements.  Many of the  factors  that  will  determine  these
results and values are beyond our  ability to control or  predict.  Stockholders
are cautioned not to put undue reliance on any  forward-looking  statements.  In
addition,  the  Company  does not have any  intention  or  obligation  to update
forward-looking  statements,  even if new  information,  future  events or other
circumstances have made them incorrect or misleading.  For those statements, the
Company is  relying on the  protection  of the safe  harbor for  forward-looking
statements  contained in the Private  Securities  Litigation Reform Act of 1995.
The following  important factors could affect the future results of the company,
and could  cause  results  to differ  materially  from those  expressed  in such
forward-looking statements.

                                       16

<PAGE>



WE HAVE A HISTORY  OF LOSSES  AND EXPECT  CONTINUED  LOSSES FOR THE  FORESEEABLE
FUTURE.

         Adatom,  Inc.  was  incorporated  in October  1996 but did not begin to
generate  Internet  revenues  until  October 1998 and did not commence its China
business  until March 2000.  Accordingly,  we have had only a limited  operating
history upon which to evaluate our business  and  prospects.  We will  encounter
risks and difficulties that are frequently  encountered by early stage companies
in new and rapidly evolving  markets.  Many of these risks are described in more
detail in this section.  If we are  unsuccessful  in addressing  these risks and
uncertainties,  our business, results of operations and financial condition will
be harmed. We have incurred significant losses and as of September 30 , 2000 the
accumulated deficit was $23,050,000. The accumulated deficit as of September 30,
1999 was  $3,845,705.  The Company  incurred  net losses of  $2,173,000  for the
quarter  ended March 31, 2000,  and  $2,030,000  for the quarter  ended June 30,
2000,and $4,209,000 for the quarter ended September 30, 2000 of which $3,526,000
was related to  discontinued  operations.  This is inclusive of the  abandonment
charge of  $1,727,000.  Total  losses for year to date  September  30,  2000 are
$8,411,000 . The net loss for the quarter ended March 31, 1999 was $298,000, for
the quarter ended June 30, 1999 the loss was $585,000, and for the quarter ended
September  1999  the  loss  was  $1,025,000.  The  total  loss  for year to date
September 30, 1999 was $1,903,000.  There is an uncertainty about our ability to
continue as a going concern.  We anticipate our losses will continue  because we
intend to expend funds for the following items, in addition to other expenses:


         o  brand  development,  marketing and other  promotional  activities to
            increase our revenue; and

         o  strategic relationship development.

Our ability to become profitable  depends on our ability to generate and sustain
substantially  higher net sales while maintaining  reasonable expense levels. If
we do  achieve  profitability,  we  cannot be  certain  that we would be able to
sustain or increase  profitability on a quarterly or annual basis in the future.
We are an early  stage  company  and  expect to incur  operating  losses for the
foreseeable  future as we incur significant  operating expenses and research and
development expenses and make investments, to establish and enhance our Internet
capabilities.   We  may  never   generate   sufficient   revenues   to   achieve
profitability.


WE WILL NEED ADDITIONAL FINANCING TO FUND OUR BUSINESS AND THE FAILURE TO OBTAIN
FINANCING WOULD MOST LIKELY RESULT IN CESSATION OF OUR BUSINESS.

         We are dependent upon raising  additional  capital for working  capital
and to finance our future plans for expansion.  We estimate that we will require
a minimum of $5 million to $7 million to adequately  implement our business plan
and sustain and expand our sales and marketing  activities  through December 31,
2001. We have experienced  negative cash flow from operations from our inception
and expect to experience  significant negative cash flow from operations for the
foreseeable future. We may need additional funds to sustain and expand our sales
and marketing  activities and arrangements,  particularly if there is a shift in
the type of Internet

                                       17

<PAGE>



services that are developed and ultimately receive customer acceptance. Adequate
funds for these and other purposes on terms  acceptable to us,  whether  through
additional  equity  financing,  debt  financing  or  other  sources,  may not be
available  when  needed  or may  result  in  significant  dilution  to  existing
stockholders.

         Failure to obtain  financing  would most likely  result in cessation of
our business.  Our lack of net income and tangible  assets to pledge has to date
prevented us from  obtaining bank or similar debt  financing,  and will probably
continue to do so in the future. In their reports on the audits of our financial
statements for each of the years in the two-year period ended December 31, 1999,
our  independent  auditors  included an  explanatory  paragraph in each of their
reports because of the uncertainty that we could continue in business as a going
concern. Any raise of additional capital will dilute all of our stockholders.

         We estimate that  approximately  $55.5 million will be required to fund
the full  implementation of the joint venture agreements signed with the Chinese
organizations.


OUR COMMON STOCK PRICE MAY BE VOLATILE.

         The market price for our Common  Stock is likely to be highly  volatile
and subject to wide fluctuations in response to factors including the following:


         o  actual or anticipated variations in our quarterly operating results;
         o  announcements  of  technological  innovations  or  new  products  or
            services by us or our competitors;
         o  changes in financial estimates by securities analysts;
         o  conditions  or  trends  in  the  Internet   and/or  online  commerce
            industries;
         o  changes in the economic  performance  and/or  market  valuations  of
            other Internet, online commerce or retail companies;
         o  announcements by us or our competitors of significant  acquisitions,
            strategic partnerships, joint ventures or capital commitments;
         o  additions or departures of key personnel;
         o  potential litigation.

         The market  prices of the  securities  of  Internet-related  and online
commerce  companies  have been  especially  volatile.  Broad market and industry
factors may adversely affect the market price of our Common Stock, regardless of
our actual operating  performance.  In the past, following periods of volatility
in the market price of their  stock,  many  companies  have been the subjects of
securities  class  action  litigation.  If we were  sued in a  securities  class
action,  we could  incur  substantial  costs  and a  diversion  of  management's
attention and resources could have an adverse affect on our stock price.


IF WE CANNOT SATISFY NASDAQ'S MAINTENANCE REQUIREMENTS, IT MAY DELIST OUR COMMON
STOCK FROM ITS SMALLCAP  MARKET AND WE MAY NOT HAVE AN ACTIVE  PUBLIC MARKET FOR
OUR COMMON STOCK.  THE ABSENCE OF AN ACTIVE TRADING MARKET WOULD LIKELY MAKE THE
COMMON STOCK AN ILLIQUID INVESTMENT.

                                       18

<PAGE>



         Our common stock is quoted on the Nasdaq SmallCap  Market.  To continue
to be listed, we are required to maintain net tangible assets of $2,000,000 or a
market  capitalization  of $35  million  and our common  stock  must  maintain a
minimum  bid  price of $1.00  per  share.  From time to time our stock has had a
minimum bid price of less than $1.00 per share. Currently, the minimum bid price
for our common  stock is below  $1.00 and we may not be able to  satisfy  any of
these Nasdaq listing requirements in the future. If this occurs,  trading in the
common stock would be conducted in the over-the-counter  market in the so-called
"pink sheets" or, if available,  the "OTC Bulletin Board  Service." As a result,
an investor would likely find it significantly  more difficult to dispose of, or
to obtain  accurate  quotations  as to the value of,  our  shares.  The  Company
recently has been advised by Nasdaq that it no longer meets the requirements for
listing on the SmallCap Market.

         Nasdaq  held a hearing on  November  2, 2000 to  determine  whether the
Company's stock should be delisted.  Although our stock's bid price was slightly
above $1 per share at the time of the hearing,  Nasdaq expressed  concerns about
a) the fact  that we had not  sought  prior  approval  of  stockholders  for the
issuance of our Series B Convertible  Preferred Stock which might, under certain
circumstances,  require the  issuance  of common  stock equal to over 20% of the
common  stock  outstanding  and certain  other  proposed  investments  which may
involve similar  issuances at the over 20% level; b) our ability to meet the net
tangible assets test going forward. A decision from Nasdaq is pending.

         The conversion of our convertible preferred stock may have consequences
that could  cause  Nasdaq to delist  our common  stock.  The  conversion  of our
preferred stock and resale of the common stock acquired upon conversion,  or the
possibility  of the  conversion of our preferred  stock and resale of our common
stock, may depress or inhibit increases in the market price of our common stock.

         Nasdaq  also may delist our common  stock if it deems it  necessary  to
protect investors and the public interest. If Nasdaq determines that the returns
on our  convertible  preferred  stock are  excessive  compared  with the returns
received by the  holders of our common  stock,  and those  excess  returns  were
determined to be egregious, Nasdaq could delist our common stock.


IF OUR  COMMON  STOCK IS  DELISTED,  IT MAY BECOME  SUBJECT TO THE SEC'S  "PENNY
STOCK" RULES AND MORE DIFFICULT TO SELL.

         SEC rules  require  brokers to provide  information  to  purchasers  of
securities  traded at less than $5.00 and not  traded on a  national  securities
exchange or quoted on the Nasdaq Stock  Market.  If our common  stock  becomes a
"penny  stock"  that is not  exempt  from  these  SEC  rules,  these  disclosure
requirements  may have the effect of  reducing  trading  activity  in our common
stock and making it more  difficult for  investors to sell.  The rules require a
broker--dealer  to deliver a standardized  risk disclosure  document prepared by
the SEC that provides information about penny stocks and the nature and level of
risks in the penny  market.  The broker must also give bid and offer  quotations
and broker and salesperson compensation information to the customer orally or in
writing before or with the confirmation.  The SEC rules also require a broker to
make a  special  written  determination  that  the  penny

                                       19

<PAGE>



stock is a suitable  investment  for the purchaser  and receive the  purchaser's
written agreement to the transaction before a transaction in a penny stock.


RISK OF INTERNATIONAL EXPANSION.

         We plan to expand our presence in foreign markets  especially China. We
have  relatively  little  experience in purchasing,  marketing and  distributing
products  or  services   for  these   markets  and  may  not  benefit  from  any
first-to-market  advantages.  It  will  be  costly  to  establish  international
facilities  and  operations,  promote  our brand  internationally,  and  develop
localized  Web sites and stores  and other  systems.  We may not  succeed in our
efforts in these  countries.  If revenues from  international  activities do not
offset the expense of  establishing  and  maintaining  foreign  operations,  our
business  prospects,  financial  condition and operating results will suffer. As
the international online commerce market continues to grow,  competition in this
market will likely intensify.

         In addition, governments in foreign jurisdictions may regulate Internet
or other online services in such areas as content,  privacy,  network  security,
encryption  or  distribution.  This may affect our  ability to conduct  business
internationally.


OUR BUSINESS MODEL HAS CHANGED FROM ITS PRIOR EMPHASIS ON INTERNET  RETAILING TO
ITS CURRENT EMPHASIS ON OUR JOINT VENTURES IN CHINA

         On September 25, 2000, we announced the restructuring of the Company to
focus  almost  exclusively  on  international  operations.   This  restructuring
emphasizes the  development of our relatively new China  business,  while at the
same time significantly reducing expenditures related to the former B2C Internet
superstore  and  B2B  E-commerce  Solution  Program  (AESP).  As  part  of  this
restructuring,  we decided to cancel all drop-shipped orders due to our analysis
of the marginal  profitability  of these orders versus the anticipated  costs to
fulfill the orders.  The  superstore  and AESP,  which had been the  predominant
revenue  sources but had not been  profitable,  have been refocused to liquidate
existing inventory,  and are available for licensing.  These actions will result
in an  overall  headcount  reduction  of  45%  and  anticipated  total  spending
reductions of approximately 55%.

         We  anticipate  that our  restructuring  will enable us to focus almost
exclusively on developing our China business while  achieving  significant  cost
reductions through a combination of workforce  reduction and decreased marketing
expenditures  associated  with its  superstore  and AESP  operations.  Our China
partners  are  government  agencies  or  quasi-government   agencies  that  have
information  regarding  the  production  abilities  and  commercial  needs  of a
significant  number of Chinese  businesses,  and therefore can assist to varying
degrees in the matching of purchase and sale transactions.  For the near future,
the predominant focus of our China business will be to match non-consumer buyers
and sellers of a potentially  wide variety of goods to be both exported from and
imported to China. Adatom plans to take temporary title to any such goods during
the  transit and  delivery  phases in order to be able to charge a markup on the
sold goods for its arrangement efforts. The range of this markup is uncertain at
this time due to lack of sales and it is  anticipated  will  vary  depending  on
type, segment and category.

                                       20

<PAGE>



         Our  relationship  with our China  partnerships to date has yielded one
order for steel from a U.S. steel buyer,  which is currently  pending  delivery.
Other revenue  opportunities with or through these partnerships have to date not
been consummated.  Our current revenue opportunities encompass brokering a fiber
optics  turnkey  manufacturing  capability,  minerals  trade to and from  China,
consumer goods supply and agricultural exports to China.

         On October 17, 2000, we announced  the launch of our new  international
website focused on direct trade with China (www.adatomchina.com). The new Adatom
site focuses on bringing together U.S. and international  buyers and sellers for
bi-directional trade with China.

         Although the change in operations described above will reduce headcount
and expenses,  we must generate  sufficient  revenues from our China business to
cover  expenses  even at our reduced  level.  No assurance can be given that the
change in our operations as described will generate  sufficient revenues to make
us profitable.

         While we reduce our existing  website  operations,  this portion of our
business  will  continue  to be  subject  to the  same  risks  to  which  it has
previously been subject, as discussed above and below.

         Also,  the shift in our business  model makes us less  diversified  and
solely dependent on very few market segments.


WE FACE RISKS AND  UNCERTAINTIES  WITH RESPECT TO OUR PROPOSED JOINT VENTURES IN
CHINA.

         Our  agreements  with the China Product Trade Net Center,  ShenZhen Bay
Industrial  Education  and  Research  Center,  China  Federation  of  Industrial
Economics,  and Yangling  Agricultural  Hi-Tech  Industrial  Demonstration  Zone
contemplate  the formation of joint ventures in China.  We may not be successful
in establishing or funding any of these joint ventures.  We may not succeed with
any of these joint  ventures or in entering the China  market,  and each venture
will be subject to all of the risks attendant to a start-up  business as well as
those specific to operating in China.

         We will be subject to various  risks  relating to  operating  in China,
including:

         o  various new and unfamiliar regulatory requirements;
         o  the risks of being  subject  to a  different  legal  system in which
            prior court decisions may not have as much precedential  value as in
            common law countries;
         o  the risk of inadequate or  inconsistent  enforcement of intellectual
            property rights;
         o  issues relating to currency exchange;
         o  fluctuations  in exchange rates and  restrictions on repatriation of
            funds  and  earnings,   as  it  is  presently   expected  that  most
            transactions will be denominated in Chinese money;
         o  the risks  associated  with doing  business in a country with a more
            volatile economy;
         o  the  effects  of  possible   political  and  economic   changes  and
            disruptions;

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<PAGE>



         o  establishment  of and change in government  policies and regulations
            regarding the use of the internet,  including  taxation,  censorship
            and personal privacy issues;

         o  possible longer accounts  receivable payment cycles and difficulties
            in collecting accounts receivable;

         o  cost of shipping,  including  transportation and insurance,  tariffs
            and other barriers;

         o  difficulties in staffing and managing foreign operations;

         o  potentially adverse tax consequences;

         o  additional unforeseen risks.

If we  are  unsuccessful  in  addressing  these  risks  and  uncertainties,  our
business, results of operations and financial condition will be harmed.


WE DEPEND HEAVILY UPON MARKETING  ARRANGEMENTS.  WITHOUT THEM, OUR BUSINESS WILL
BE ADVERSELY AFFECTED.

         To the extent we continue to operate our Internet retail operations, we
will rely heavily on certain  marketing  arrangements  with other companies that
have websites to attract shoppers to purchase our products. We have entered into
marketing  arrangements with a number of existing organizations with a definable
user base. Our ability to generate revenues from online commerce depends,  among
other  things,   upon  the  increased   traffic,   purchases,   advertising  and
sponsorships that we generate through our marketing  arrangements.  We cannot be
sure that other  companies  will continue  these  relationships  with us, or, if
continued  that they will be on terms  favorable  to us. Our  inability to enter
into new marketing  arrangements or to maintain our existing  arrangements would
have a material adverse effect on us.


WE RELY ON SUPPLIERS FOR OUR RETAIL MERCHANDISE AND SHIPMENTS TO CUSTOMERS. LOSS
OF THESE RELATIONSHIPS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

         We may  continue  to engage in our  website  retailing  business  while
developing our China initiative,  our current suppliers may not continue to sell
merchandise to us on current  terms.  We may not be able to maintain our current
arrangements  with  suppliers  or be able to  establish  new or  extend  current
supplier  relationships  to ensure  acquisition  of  merchandise in a timely and
efficient manner and on acceptable commercial terms. Loss of these relationships
could  have a  material  adverse  effect  on us.  We  also  rely  on most of our
suppliers  to process  and ship  merchandise  directly  to  customers  and where
required to install  merchandise  on our  customers'  premises.  We have limited
control over the shipping  procedures of our  suppliers,  and shipments by these
suppliers  have at times  been  subject  to  delays.  If the  quality of service
provided by such suppliers  falls below a satisfactory  standard or if our level
of returns exceeds our expectations,  our business will be materially  adversely
affected.


OUR FUTURE OPERATING RESULTS ARE UNPREDICTABLE AND FLUCTUATIONS IN OUR QUARTERLY
RESULTS MAY CAUSE VOLATILITY IN OUR STOCK VALUATION.

                                       22

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         As a result of our  limited  operating  history,  and  especially  as a
result of the recently  announced  change in our business model, it is difficult
to accurately  forecast our net sales and we have limited meaningful  historical
financial data upon which to base planned operating  expenses.  We are currently
liquidating  our  inventory  at  prices  below our  original  cost,  which  will
negatively affect our level of revenues and profit margins.  We base our current
and future  expense  levels on our  operating  plans and estimates of future net
sales, and our expenses are to a large extent fixed. Sales and operating results
are difficult to forecast because they generally depend on the volume and timing
of the orders we receive.  As a result,  we may be unable to adjust our spending
in a timely manner to compensate for any unexpected  revenue  shortfall.  We may
also be unable to increase our spending  and expand our  operations  in a timely
manner  to  adequately  meet  customer  demand  to the  extent  it  exceeds  our
expectations.  We expect to experience  significant  fluctuations  in our future
quarterly  operating  results  due to a variety  of  factors,  many of which are
outside of our control which include, without limitation:

         o  our ability to attract new  customers  at  reasonable  cost and at a
            steady  rate,  retain  existing   customers,   or  encourage  repeat
            purchases and maintain customer satisfaction;

         o  seasonality;

         o  our  inability  to  adequately  maintain,  upgrade  and  develop any
            website we may maintain,  transaction-processing  systems or network
            infrastructure;

         o  the announcement or introduction of new sites, services and products
            by our competitors;

         o  price competition in the industry;

         o  the level of merchandise returns experienced by us;

         o  the level of traffic on our website;

         o  fluctuations in the amount of consumer and business spending;

         o  the  failure  to  develop  new  strategic  marketing   relationships
            pursuant to which our  AdatomChina  website can receive  exposure to
            traffic on third-party websites;

         o  increases in the cost of online or offline advertising;

         o  our ability to upgrade  and  develop our systems and  infrastructure
            and attract new personnel in a timely and effective manner or retain
            existing personnel;

         o  the amount and timing of  operating  costs and capital  expenditures
            relating   to   expansion   of   our   business,   operations,   and
            infrastructure;

         o  unexpected increases in shipping costs or delivery times;

         o  the level of use of the Internet and online  services and increasing
            customer  acceptance  of the Internet and other online  services for
            the purchase of products;

         o  technical difficulties, system downtime or Internet brownouts;

         o  changes in gross profit margins or product mix;

         o  effects of acquisitions and other business  combinations and related
            integration issues;

         o  failure to maintain good  relationships  with our business  partners
            and suppliers;

         o  government regulations related to use of the Internet for commerce;

                                       23

<PAGE>



         o  general economic  conditions and economic conditions specific to the
            Internet, online commerce.

A number of factors will cause our gross margins to fluctuate in future periods,
including  the mix of product  sold by us,  shipping  and  handling  costs,  the
liquidation of our present  inventory  below cost, the level of product  returns
and the level of discount pricing and promotional activity. Any change in one or
more of these factors could  materially  and adversely  affect our gross margins
and  operating  results in future  periods.  We expect  that we will  experience
seasonality in our business,  reflecting commercial seasonality patterns. Due to
the foregoing  factors,  we believe that  quarter-to-quarter  comparisons of our
operating  results  are  not  a  good  indication  of  our  future  performance.
Additionally  it is likely that in one or more  future  quarters  our  operating
results may fall below the expectations of securities analysts and investors. In
such event,  the trading  price of our common stock would  likely be  materially
adversely affected.


WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE THE GROWTH OF OUR BUSINESS.

         Our  ability  to  successfully  implement  our new  business  plan in a
rapidly evolving market requires an effective  planning and management  process.
We are in the process of  installing  new  Enterprise  Resource  Planning  (ERP)
systems with new  Accounting  and  Financial  Reporting  Systems which should be
completed  by the  end of  2000.  We  anticipate  expanding  our  financial  and
management   information  systems  to  accommodate  new  data.  If  we  fail  to
successfully  implement and integrate our new financial reporting and management
information  systems with our  existing  systems or if we are not able to expand
these systems to accommodate our anticipated  growth,  we may not have adequate,
accurate or timely financial  information.  Our failure to have such information
would  hinder our ability to manage our business and  operating  results.  If we
grow rapidly,  we will face  additional  challenges in upgrading and maintaining
our financial and reporting  systems.  A failure to  successfully  implement and
integrate these systems would adversely  affect our business.  We expect that we
will need to continue to improve  our  financial  and  managerial  controls  and
reporting systems and procedures.  In addition, we will need to train and manage
our  employee  base  to  successfully   implement  our  new  business  strategy.
Furthermore, we expect that we will be required to manage multiple relationships
with various customers and other third parties. To manage the expected growth of
our  operations,  we will be  required to improve  existing  and  implement  new
transaction-processing,   operational  and  financial  systems,  procedures  and
controls.  Further, we will be required to maintain and expand our relationships
with various merchandise manufacturers,  distributors, Internet and other online
service providers and other third parties  necessary to our business.  If we are
unable to manage growth effectively,  our business will be materially  adversely
affected.


IF WE EXPERIENCE PROBLEMS WITH OUR THIRD PARTY SHIPPING SERVICES,  WE COULD LOSE
CUSTOMERS.

         For our website retailing business,  we rely upon third-party carriers,
primarily  UPS,  for  product  shipments,  including  shipments  to and from our
warehouse. We are therefore subject to the risks, including employee strikes and
inclement  weather  associated with these carriers'  ability to provide delivery
services to meet our shipping needs. In addition, failure to deliver

                                       24

<PAGE>



products to our  customers in a timely  manner would damage our  reputation  and
brand identity.


THE LOSS OF KEY PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON US.

         Our  performance  will  be  substantially  dependent  on the  continued
services and on the performance of our senior management,  particularly  Richard
Barton,  President,  Chief  Executive  Officer,  and Chairman of the Board,  and
Sridhar  Jagannathan,  Chief Technical Officer and Executive Vice President.  In
addition,  Dr. Victor W. Nee, a member of our board of  directors,  has been the
key component of our China strategy,  and introduces us to government  officials
and others in China who are in a position to help us develop our business  plans
in that country. Our performance would be substantially  impacted by the loss of
his services.

         Our Vice  President  of  Operations  joined us during  the last half of
1999,  as did our former  Controller,  who has resigned but will  continue to be
available  to the Company  periodically  as a  consultant.  Several  others have
joined during the year 2000,  including our new Chief Financial Officer who also
serves as our new Controller.  Our future success  depends on these  individuals
effectively  working together with our original  management team. Other than the
President,  none of our  officers  or key  employees  is bound by an  employment
agreement for any specific term. Our  relationships  with these officers and key
employees are at will. We do not have any "key person" life  insurance  policies
covering  any of our  employees.  Our  performance  depends  on our  ability  to
compensate,  retain and motivate our officers and key employees. The loss of the
services of any of our executive  officers or other key  employees  could have a
material adverse effect on us. Our future success also depends on our ability to
identify,  attract,  hire,  train,  retain and  motivate  other  highly  skilled
officers and technical,  managerial,  editorial,  sales,  marketing and customer
service personnel who are familiar with the specifics of our business, including
Internet operations and international trading. Competition for such personnel is
intense, and we may not be able to successfully attract, compensate, assimilate,
or retain sufficiently qualified personnel. This inability could have a material
adverse effect on us.


WE MAY BE UNABLE TO PROTECT OUR TRADEMARKS AND PROPRIETARY  RIGHTS,  WHICH WOULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

         Our  performance  and ability to compete are dependent to a significant
degree on our  proprietary  technology.  We  regard  our  copyrighted  material,
service marks,  trademarks,  trade secrets, and similar intellectual property as
critical to our success,  and rely on trademark and copyright  law, trade secret
protection and  confidentiality  and/or license  agreements  with our employees,
customers,  partners and others to protect our proprietary  rights.  We have the
registered  trademarks "Adatom" and "Discovering New Shopping Dimensions" in the
United States and have a trademark application pending for the mark "Adatom Home
Dimensions."  We  cannot  be sure  that we  will be able to  secure  significant
protection for these  trademarks.  It is possible that our competitors or others
will  adopt  product  or  service  names  similar  to  "Adatom"  and  our  other
trademarks,  thereby  impeding our ability to build brand  identity and possibly
leading to  customer  confusion.  We  generally  have  entered  into  agreements
containing  confidentiality and non-disclosure

                                       25

<PAGE>



provisions  with our employees and  consultants  and have limited  access to and
distribution of our software,  documentation and other proprietary  information.
We cannot be sure that the steps taken by us will  prevent  misappropriation  of
our  technology  or that  agreements  entered  into  for  that  purpose  will be
enforceable.  Notwithstanding  the precautions taken by us, it might be possible
for a third  party to copy or  otherwise  obtain and use our  software  or other
proprietary  information  without  authorization  or to develop similar software
independently.  Policing  unauthorized  use  of  our  technology  is  difficult,
particularly  because the global  nature of the  Internet  makes it difficult to
control  the  ultimate  destination  or  security  of  software  or  other  data
transmitted.  The laws of China and other  countries  may afford us little or no
effective protection of our intellectual property.  Effective trademark, service
mark,  copyright  and trade  secret  protection  may not be  available  in every
country in which our products and services  are made  available  online.  In the
future,  we may also need to file lawsuits to enforce our intellectual  property
rights,  protect our trade secrets,  and determine the validity and scope of the
proprietary   rights  of  others.   Such  litigation,   whether   successful  or
unsuccessful,  could result in  substantial  costs and  diversion of  resources,
which could have a material  adverse  effect on us. We also rely on a variety of
technology  that is licensed  from third  parties,  including  our  database and
Internet  server  software,  which  is  used  in our web  site  to  perform  key
functions.  These  third  party  technology  licenses  may  not  continue  to be
available to us on commercially  reasonable  terms.  Our loss of or inability to
maintain or obtain upgrades to any of these technology  licenses could result in
delays in completing our proprietary software  enhancements and new developments
until  equivalent  technology  could be  identified,  licensed or developed  and
integrated. Any such delays would have a material adverse effect on us.


PROTECTION OF DOMAIN NAME IS UNCERTAIN.

         We  currently  hold  various  Web domain  names  relating to our brand,
including  the  "ADATOM.com"  domain  name.   Governmental  agencies  and  their
designees  generally  regulate the  acquisition and maintenance of domain names.
For example, in the United States, the National Science Foundation has appointed
Network Solutions, Inc. as the current exclusive registrar for the ".com",".net"
and ".org"  generic  top-level  domains.  The  regulation of domain names in the
United States and in foreign countries is subject to change. Such changes in the
United  States are presently  expected to include a transition  from the current
system  to a system  that is  controlled  by a  non-profit  corporation  and the
creation  of  additional  top-level  domains.  Governing  bodies  may  establish
additional  top-level  domains,  appoint  additional  domain name  registrars or
modify the requirements for holding domain names. As a result,  we may be unable
to  acquire or  maintain  relevant  domain  names in all  countries  in which we
conduct business.  Furthermore,  the relationship between regulations  governing
domain names and laws protecting  trademarks and similar  proprietary  rights is
unclear.  Therefore,  we may be unable to prevent third  parties from  acquiring
domain names that are similar to, infringe upon or otherwise  decrease the value
of our trademarks and other proprietary rights.


WE  MAY  EXPERIENCE  CAPACITY  CONSTRAINTS  DUE TO OUR  RELIANCE  ON  INTERNALLY
DEVELOPED TRANSACTION-PROCESSING SYSTEMS.

                                       26

<PAGE>



         If we suffer any system interruptions that result in the unavailability
of our service on the Internet or reduced  order  fulfillment  capability,  such
interruptions  would reduce the volume of goods sold and the  attractiveness  of
our product offerings. We have experienced periodic system interruptions,  which
we  believe  will  continue  to  occur  from  time  to  time.  The  satisfactory
performance    and    reliability    of   our    service   on   the    Internet,
transaction-processing  systems and network  infrastructure  are critical to our
reputation and our ability to attract and retain customers.  Our revenues depend
on the number of  visitors  who access our  Internet  website  and the volume of
orders we fulfill.  We expect  that our  revenues in the future will depend more
heavily on our ability to develop and expand our joint  venture  initiatives  in
China by intermediating the sale of goods to and from the Chinese market.  There
will be a significant need to upgrade and expand internationally the capacity of
our Internet services as the business develops.  Our inability to add additional
software and hardware or to develop and upgrade further our existing technology,
transaction-processing   systems  or  network   infrastructure   to  accommodate
increased  traffic  to our  websites  or  increased  sales  volume  through  our
transaction-processing  systems  may  cause  unanticipated  system  disruptions,
slower response times, degradation in levels of service and impaired quality and
speed of order fulfillment, any of which could have a material adverse effect on
us.

         As we expand into the Business to  Enterprise  ("B2E," the providing of
services by businesses to entire industries through the Internet) arena, we will
need to maintain a website which supports these efforts. To this end, on October
17, 2000, we announced the launch of our new  international  website  focused on
direct  trade with China  (www.adatomchina.com).  The new Adatom site focuses on
bringing together U.S. and international  buyers and sellers for  bi-directional
trade with China. There can be no assurance that the new website will accomplish
its objective and generate profitable Business to Enterprise orders.


OUR  BUSINESS  MAY SUFFER IF OUR SYSTEMS  FAIL OR IF THE SYSTEMS OF OUR BUSINESS
PARTNERS FAIL.

         We presently have limited redundant systems.  We do not have a complete
disaster  recovery plan and carry  limited  business  interruption  insurance to
compensate us for losses that may occur.  Despite our  implementation of network
security measures,  our servers are vulnerable to computer viruses,  physical or
electronic break-ins and similar disruptions, which could lead to interruptions,
delays, loss of data or the inability to accept and fulfill customer orders. Our
ability to  successfully  receive  and fulfill  orders and provide  high-quality
customer service largely depends on the efficient and uninterrupted operation of
our computer and communications hardware systems. Our systems and operations are
vulnerable   to  damage  or   interruption   from  fire,   flood,   power  loss,
telecommunications  failure,  break-ins,   earthquake  and  similar  events.  In
addition,  any  disruptions  of those  web  sites  or at the web  sites of other
companies  where we market  goods or have a website  link  could have a material
adverse effect on us and the volume of sales generated. The occurrence of any of
the foregoing risks could have a material adverse effect on us.


IF WE ARE NOT ABLE TO SUSTAIN  RAPID  TECHNOLOGICAL  CHANGES,  OUR  BUSINESS MAY
SUFFER.

                                       27

<PAGE>



         We may not successfully  use new technologies  effectively or adapt our
proprietary   technology   and   transaction-processing   systems  to   customer
requirements or emerging  industry  standards.  Our failure to adapt in a timely
manner for  technical,  legal,  financial or other reasons,  to changing  market
conditions or customer requirements, could have a material adverse effect on us.
To  remain   competitive,   we  must   continue   to  enhance  and  improve  the
responsiveness,  functionality and features of our online service.  The Internet
and the  online  commerce  industry  are  characterized  by rapid  technological
change, changes in user and customer requirements and preferences,  frequent new
product and service  introductions  embodying new technologies and the emergence
of new industry  standards and practices that could render our existing Internet
services  and  proprietary  technology  and systems  obsolete.  Our success will
depend,  in part, on our ability to license leading  technologies  useful in our
business,  enhance our existing  services,  develop new services and  technology
that address the increasingly  sophisticated and varied needs of our prospective
customers, and respond to technological advances and emerging industry standards
and practices on a cost-effective and timely basis.


YEAR 2000 UPDATE

         Through the first nine months of the  calendar  year 2000,  we have not
experienced  any  significant  problems  associated  with the Year  2000  issue.
Although it appears that the Year 2000 issue will not have a significant adverse
affect on us, we continue to monitor the Year 2000  compliance  of our  internal
systems. Undetected errors in our internal systems that may be discovered in the
future could have a material adverse affect on our business,  operating  results
or financial condition.


OUR BUSINESS STRATEGY REQUIRES  CONTINUED GROWTH OF ONLINE COMMERCE,  ESPECIALLY
IN THE BUSINESS TO ENTERPRISE  SEGMENT. IF ON-LINE COMMERCE DOES NOT CONTINUE TO
GROW, OUR BUSINESS COULD BE MATERIALLY ADVERSELY AFFECTED.

         Our future revenues and any future profits are substantially  dependent
upon the widespread  acceptance and use of the Internet and online services as a
significant  medium of commerce by  businesses  in seeking to buy and sell goods
and services both nationally and internationally. Rapid growth in the use of and
interest in the  Internet  and online  services is a recent  phenomenon,  and we
cannot  be sure that  acceptance  and use will  continue  to  develop  or that a
sufficiently  broad base of users will adopt,  and continue to use, the Internet
and  online  services  as a  medium  of  commerce.  We rely on  those  who  have
historically  used  traditional  means of  commerce to acquire the goods and raw
materials they need and to sell the goods they produce. For us to be successful,
these  users must  accept and  utilize  novel ways of  conducting  business  and
exchanging information.  Moreover, critical issues concerning the commercial use
of the Internet, such as ease of access, security,  privacy,  reliability,  cost
and quality of service,  remain unresolved and may affect the growth of Internet
use or the  attractiveness  of  conducting  commerce  online.  In addition,  the
Internet  and  online  services  may  not be  accepted  as a  viable  commercial
marketplace  for reasons  relating to the adequacy of technology.  To the extent
that the Internet and online services continue to experience significant growth,
we cannot be sure that the  infrastructure  of the Internet and online  services
will prove  adequate to

                                       28

<PAGE>



support increased user demands. Difficulties with the telecommunications used to
support the Internet or online  services  also could  result in slower  response
times and adversely affect usage of the Internet.


OUR MARKETS ARE HIGHLY COMPETITIVE.

         The online  commerce  market is new,  rapidly  evolving  and  intensely
competitive. We expect competition to intensify in the future. Barriers to entry
are  minimal,  and  current  and new  competitors  can launch new  websites at a
relatively low cost. In our new business strategy, we will compete with existing
companies  such as China.com  Corporation,  MeetChina.com,  Click2China,  Ariba,
Inc., Commerce One, Inc. and Alibaba.com.  In our Internet retailing business we
currently or potentially  compete with a variety of other  companies,  including
"brick and mortar"  retailers such as Macys,  J.C.  Penney's,  Nordstrom's,  and
Target; catalog retailers;  vendors or manufacturers that currently sell certain
of their products directly online and others.

         Many of our current and potential  traditional  competitors have longer
operating  histories,  larger customer or user bases,  greater brand recognition
and significantly greater financial, marketing and other resources than us. Many
of these  current  and  potential  competitors  can  devote  substantially  more
resources to marketing,  sales efforts and website and systems  development than
we can.  In  addition,  our  online  competitors  may be  acquired  by,  receive
investments  from or enter  into other  commercial  relationships  with  larger,
well-established  and  well-financed  companies as use of the Internet and other
online  services  increases.  Many of our  competitors  may be  able  to  secure
merchandise from manufacturers on more favorable terms,  fulfill customer orders
more  efficiently  and adopt more aggressive  pricing or inventory  availability
policies,  and devote  greater  resources to  marketing  than we can. Our online
competitors  are  able  to use the  Internet  as a  marketing  medium  to  reach
significant numbers of potential  customers.  Finally,  new technologies and the
expansion of existing technologies may direct customers to other online sources,
and may  increase  competition.  Increased  competition  may  result in  reduced
operating  margins,  loss of market share and a diminished brand franchise.  New
technologies  and the  expansion  of  existing  technologies  may  increase  the
competitive pressures on us.


WE MAY ENTER NEW BUSINESS CATEGORIES.

         We may choose to expand our operations by developing new departments or
product  categories,  promoting new or complementary  products or sales formats,
expanding  the breadth and depth of products and  services  offered or expanding
our market presence through  relationships with third parties.  In addition,  we
may pursue the  acquisition  of new or  complementary  businesses,  products  or
technologies.  We may not be successful in our efforts to expand our operations,
and potential  customers may not react favorably to these efforts.  Furthermore,
any new department or product  category that is launched by us but not favorably
received by consumers could damage our brand or reputation.  An expansion of our
business in this manner would also require  significant  additional expenses and
expose us to additional inventory risk and development, operations and editorial
resources and would strain our management, financial and operational resources.

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<PAGE>



WE FACE FULFILLMENT OPERATIONS RISKS.

         Our success depends on our ability to rapidly  fulfill orders.  We must
be able to source product to fulfill demand. This may require us to perform many
tasks manually until automated systems are developed to handle these tasks. This
may  adversely  effect  the speed of  fulfillment  and,  consequently,  customer
satisfaction and the likelihood we will receive future orders.


WE FACE RISKS FROM THE TEMPORARY OWNERSHIP OF GOODS WE BROKER,  SIMILAR TO THOSE
OF A COMMON CARRIER

         When we  receive an order from a  business  to  purchase  goods or sell
goods and identify a interested party, we take title to the goods while they are
in transit. Part of our profit derives from a markup or commission we charge the
parties to the transaction.  While we hold title to the goods, we are subject to
all the risks of ownership,  which include among others:

         o  the risk of loss from fire or other casualty or acts of God,  theft,
            deterioration, and damage during shipping;
         o  the risk of adverse claims of title to merchandise or prior superior
            liens on the merchandise;
         o  the risk of failure  of the  merchandise  to conform to  contractual
            specifications;
         o  the risk of liability for defective merchandise;
         o  the risk of the insolvency or bankruptcy of the buyer or seller,  as
            the case may be;
         o  the risk of  failure by the  commercial  common  carriers  we use to
            deliver merchandise to the ultimate purchaser; and
         o  the risk of  failure to timely  deliver  merchandise,  resulting  in
            partial or complete spoilage, and other risks.

Currently,  we have no insurance  covering us against loss or liability from any
of these risks but plan to seek such policies on an as-needed  basis.  There can
be no assurance  that any such  insurance,  if obtained,  will be  sufficient to
protect us from these risks.


OUR BUSINESS MAY BE MATERIALLY  ADVERSELY  AFFECTED IF THE SECURITY  MEASURES WE
HAVE IMPLEMENTED TO PROTECT CONFIDENTIAL INFORMATION PROVE TO BE INADEQUATE.

         Advances  in computer  capabilities,  new  discoveries  in the field of
cryptography,  or other developments may result in a compromise or breach of the
algorithms used by us to protect  customer  transaction  data. Any compromise of
our security  could have a material  adverse effect on our reputation and on us.
We rely on encryption and authentication  technology licensed from third parties
to  provide  the  security  and   authentication   necessary  to  effect  secure
transmission of confidential information,  such as customer credit card numbers.
A party who is able to circumvent  our security  measures  could  misappropriate
proprietary  information or cause interruptions in our operations.  Furthermore,
our  servers  may be  vulnerable  to computer  viruses,  physical or  electronic
break-ins  and similar  disruptions.  We may be  required to expend  significant
additional capital and other resources to protect against such security breaches
or to alleviate problems caused by such breaches.  Our business may be adversely
affected if our security

                                       30

<PAGE>



measures  do not  prevent  security  breaches  and we cannot  assure that we can
prevent all security breaches.


GROWING  CONCERNS  ABOUT THE USE OF "COOKIES" AND DATA  COLLECTION MAY LIMIT OUR
ABILITY TO DEVELOP USER PROFILES.

         Our current technology uses small files of information,  commonly known
as "cookies", on a user's hard drive to collect information about our customers'
movements  through our Website.  Most  Internet  browsers  allow users to modify
their  browsers  settings  to prevent  cookies  from being  stored on their hard
drive, and small minorities of users are currently  choosing to do so. Users can
also  delete  cookies  from  their  hard  drive  at  any  time.   Some  Internet
commentators  and privacy  advocates have suggested  limiting or eliminating the
use of cookies. The reduction or limitation in the use of cookies could:
         o  reduce the  effectiveness  of our  technology  to gather data on our
            customers;
         o  require us to switch to other potentially less effective  technology
            in order to gather demographic or behavioral information; and
         o  require  us  to  expend  financial  and   technological   resources,
            originally allocated to other purposes,  to create alternatives that
            might be unsuccessful.


WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION.

         Due to the  increasing  popularity  and use of the  Internet  and other
online  services,  it is possible that a number of laws and  regulations  may be
adopted with respect to the Internet covering issues such as user privacy,
pricing, content, copyrights, distribution and quality of products and services.
We  are  not  currently  subject  to  regulation  by  any  domestic  or  foreign
governmental agency, other than regulations  applicable to businesses generally,
and laws or regulations  directly  applicable to access to online commerce.  The
adoption of any additional  laws or  regulations  may decrease the growth of the
Internet or other online services, which could, in turn, decrease the demand for
our products and services and increase our cost of doing business,  or otherwise
have a  material  adverse  effect  on us.  Moreover,  the  applicability  to the
Internet and other  online  services of existing  laws in various  jurisdictions
governing issues such as property ownership,  sales and other taxes and personal
privacy is uncertain and may take years to resolve. In addition,  as our service
is available over the Internet in multiple states and foreign countries,  and as
we sell to  customers  residing  in such  states  and  foreign  countries,  such
jurisdictions  may claim that we are  required  to qualify to do  business  as a
foreign  corporation in each such state and foreign country. We could be subject
to taxes and  penalties  for  failure to qualify as a foreign  corporation  in a
jurisdiction  where  we are  required  to do so.  Any such  new  legislation  or
regulation,  the application of laws and regulations  from  jurisdictions  whose
laws do not currently apply to our business, or the application of existing laws
and  regulations to the Internet and other online services could have a material
adverse effect on us.

         Congress has enacted the Children's  Online  Privacy  Protection Act of
1998  (COPPA)  and the Federal  Trade  Commission  ("FTC")  has issued  rules to

                                       31

<PAGE>



implement  COPPA.  The main goal of COPPA and the rule is to protect the privacy
of  children  using the  Internet.  Under the FTC's  rules,  certain  commercial
websites must obtain parental  consent before  collecting,  using, or disclosing
personal  information  from  children  under 13. The  statute  and rule apply to
commercial  websites and online services  directed to, or that knowingly collect
information  from,  children  under 13. To inform  parents of their  information
practices, these sites are required to provide notice on the site and a separate
notification to parents about their policies with respect to the collection, use
and  disclosure  of  children's  personal  information.  With certain  statutory
exceptions,  sites will also have to obtain "verifiable parental consent" before
collecting,  using or disclosing  personal  information from children.  Websites
have six months  from the rule's  April 21,  2000  effective  date to comply.  A
website  operator  must  post a clear  and  prominent  link to a  notice  of its
information  practices  on  its  home  page  and at  each  area  where  personal
information  is  collected  from  children.  The notice  must state the name and
contact  information  of  all  operators,  the  types  of  personal  information
collected  from  children,  how such personal  information  is used, and whether
personal  information is disclosed to third parties.  The notice also must state
that the operator is prohibited  from  conditioning a child's  participation  in
activity on the child's disclosing more personal  information than is reasonably
necessary.  In  addition,  the notice  must state that the parent can review and
have  deleted the child's  personal  information,  and refuse to permit  further
collection or use of the child's information. The COPPA regulations could reduce
our ability to engage in direct marketing.  The cost to the Company of complying
with COPPA is not known and it is not clear what  impact  the  regulations  will
have on the Company.

         In addition, governments in foreign jurisdictions may regulate Internet
or other online services in such areas as content,  privacy,  network  security,
encryption  or  distribution.  This may affect our  ability to conduct  business
internationally.  For  example,  the  European  Union  recently  enacted its own
privacy regulations.  The European Union Directive on the Protection of Personal
Data, which became  effective in October 1998,  fosters  electronic  commerce by
establishing  a stable  framework to ensure both a high level of protection  for
private  individuals  and the free movement of personal data within the European
Union. The EU and the U.S.  Department of Commerce are currently  negotiating an
agreement under which the privacy policies of American  businesses may be deemed
to be  adequate  under the EU  Directive.  Until  such time as an  agreement  is
reached,  the EU has voluntarily agreed to a moratorium on enforcement of the EU
Directive against U.S. businesses. The European legislation and its adoption via
any agreement could adversely  affect our ability to expand our sales efforts to
Europe by limiting how information about us can be sent over the Internet in the
EU and limiting our efforts to collect information from European users.


WE MAY BE SUBJECT TO SALES AND OTHER TAXES.

         We do not  currently  collect sales or other similar taxes for physical
shipments  of goods into  states  other than  California.  However,  one or more
local, state or foreign jurisdictions may seek to impose sales tax collection
obligations on us. For example, the California legislature passed a bill in 2000
imposing sales tax on Internet sales, but the governor of California vetoed this
bill. No assurance can be given that the legislature will not reintroduce such a
bill or that such a bill will not  eventually  be enacted

                                       32

<PAGE>



into law. In addition,  any new  operation in states  outside  California  could
subject our  shipments  in such  states to state  sales  taxes under  current or
future laws. If one or more states or any foreign country  successfully  asserts
that we should  collect  sales or other  taxes on the sale of our  products,  it
could adversely affect our business.


WE MAY BE LIABLE FOR INFORMATION RETRIEVED FROM THE INTERNET.

         Due to the fact  that  material  may be  downloaded  from web sites and
subsequently  distributed  to others,  there is a potential  that claims will be
made against us for  negligence,  copyright or trademark  infringement  or other
theories  based on the nature and  content of such  material.  Although we carry
general  liability  insurance,  our insurance may not cover potential  claims of
this type or may not be  adequate  to cover all costs  incurred  in  defense  of
potential  claims or to indemnify us for all liability that may be imposed.  Any
costs or imposition  of liability  that is not covered by insurance or in excess
of insurance coverage could have a material adverse effect on us.


INTELLECTUAL  PROPERTY CLAIMS AGAINST US CAN BE COSTLY AND RESULT IN THE LOSS OF
SIGNIFICANT RIGHTS.

         Other  parties may assert  infringement  or unfair  competition  claims
against us. We cannot  predict  whether  third  parties  will  assert  claims of
infringement  against us, or whether any future  assertions or prosecutions will
adversely  affect  our  business.  If we are forced to defend  against  any such
claims,  whether they are with or without merit or are  determined in our favor,
then we may face  costly  litigation,  diversion  of  technical  and  management
personnel,  or product  shipment delays.  As a result of such a dispute,  we may
have to develop  non-infringing  technology  or enter into  royalty or licensing
agreements.   Such  royalty  or  licensing  agreements,   if  required,  may  be
unavailable on terms acceptable to us, or at all. If there is a successful claim
of product infringement  against us and we are unable to develop  non-infringing
technology or license the infringed or similar  technology on a timely basis, it
could adversely affect our business.


OUR  PRINCIPAL  STOCKHOLDERS,  EXECUTIVE  OFFICERS AND  DIRECTORS  COULD CONTROL
STOCKHOLDER VOTES AND OUR MANAGEMENT AND AFFAIRS.

         Our executive officers,  directors and 5% or greater stockholders,  and
their respective  affiliates,  in the aggregate,  own  approximately  47% of our
outstanding  common stock.  As a result,  they could act together to control all
matters  submitted  to  stockholders  for approval  (including  the election and
removal  of  directors  and  any  merger,   consolidation  or  sale  of  all  or
substantially all of our assets).  Accordingly,  such concentration of ownership
may delay, defer or prevent a change in control, impede a merger, consolidation,
takeover or other  business  combination  involving us or discourage a potential
acquirer from making a tender offer or otherwise attempting to obtain control of
us.  This  could,  in turn,  have an adverse  effect on the market  price of our
common stock.


ADDITIONAL FINANCING FOR OUR OPERATIONS COULD ADVERSELY AFFECT HOLDERS OF OUR
COMMON STOCK.

                                       33

<PAGE>



         We may issue common stock or debt or equity securities convertible into
shares  of  common  stock  to  obtain  additional  financing  if  required.  Any
additional  financing may result in substantial  dilution to current  holders of
our common stock.


CONVERSION  OF OUR PREFERRED  STOCK,  EXERCISE OF OUR  OUTSTANDING  WARRANTS AND
OPTIONS AND SUBSEQUENT PUBLIC SALE OF OUR COMMON STOCK WHILE ITS MARKET PRICE IS
DECLINING MAY RESULT IN FURTHER DECREASES IN ITS PRICE.

         As of September 30, 2000, we had outstanding  1,200 shares of Preferred
Stock.  Each share of Preferred Stock has a stated value of $1,000 per share and
is  convertible  into  common  stock at a  conversion  price equal to 85% of the
average of the two lowest  closing bid prices of the common  stock on the Nasdaq
SmallCap  Market  over the ten trading  days  preceding  the date of  conversion
("Market  Price")  subject to a maximum  conversion  price of 115% of the Market
Price on the issue date of September 27, 2000,  or $.7906.  The number of shares
of common stock that may be acquired  upon  conversion is determined by dividing
the stated value of the number of shares of  Preferred  Stock to be converted by
the conversion price.  Also,  certain additional amounts calculated on the basis
of 6% of the  stated  value  from  September  27,  2000,  the issue  date of the
Preferred  Stock, to the date of conversion  would also be converted into common
stock using the same formula.  Since there is no minimum  conversion  price, the
number of shares of common  stock that  holders of  preferred  stock may acquire
upon  conversion  would simply continue to increase if the stock price declines.
Since upon  conversion  holders of Preferred  Stock acquire  common stock for at
least a 15% discount to the market  price,  they have an incentive to sell these
shares of common  stock at market  price either  concurrently  with,  or shortly
after,  conversion,  in order to profit from the  difference  between the market
price and the discounted  conversion  price.  The holders of the preferred stock
also could engage in short sales of our common stock,  after delivering a notice
of conversion to us, which could  contribute to a decline in the market price of
the common stock and give them the  opportunity  to profit from that decrease by
covering their short position with shares  acquired upon conversion for at least
a 15% discount to the prevailing  market price.  The conversion of the preferred
stock and  subsequent  sale of a large number of shares of common stock acquired
upon  conversion  during  periods  when the  market  price of the  common  stock
declines,  or the possibility of such  conversions and sales, may exacerbate the
decline  or  impede  increases  in the  market  price of the  common  stock.  In
addition, we have other warrants and stock options exercisable at various prices
for a total of, respectively, 6,530,402 and 1,194,550 shares of common stock.


OTHER ISSUANCES OF PREFERRED STOCK COULD  ADVERSELY  AFFECT EXISTING  HOLDERS OF
OUR COMMON STOCK.

         Under our  certificate  of  incorporation,  our Board of Directors may,
without further stockholder approval, issue up to an additional 4,998,900 shares
of  preferred  stock with  dividend,  liquidation,  conversion,  voting or other
rights  that could  adversely  affect the  voting  power or other  rights of the
holders of common stock. We could use new classes of preferred stock as a method
of discouraging,  delaying or preventing a change in persons that control us. In
particular,  the terms of the  preferred  stock could  effectively

                                       34

<PAGE>



restrict  our ability to  consummate  a merger,  reorganization,  sale of all or
substantially all of our assets,  liquidation or other  extraordinary  corporate
transaction without the approval of the holders of the preferred stock. We could
also create a class of preferred  stock with rights and  preferences  similar to
those of our  outstanding  convertible  preferred  stock,  which could result in
substantial  dilution  to holders of our common  stock or  adversely  affect its
market price.


CONVERSION OF OUR OUTSTANDING PREFERRED STOCK AND THE EXERCISE OF OUR
OUTSTANDING  WARRANTS AND STOCK OPTIONS AND SUBSEQUENT PUBLIC SALE OF OUR COMMON
STOCK WILL RESULT IN SUBSTANTIAL DILUTION TO EXISTING STOCKHOLDERS.

         Existing  stockholders  will experience  substantial  dilution in their
percentage ownership of our common stock if the preferred stock is converted and
warrants and stock options are exercised.



                                       35

<PAGE>



PART II  OTHER INFORMATION



Item 1.  Legal Proceedings

On August 30,  2000 a lawsuit  was filed  against the Company for non payment of
goods and services in the amount of $85,609.19,  by Wallop Marketing Group Inc.,
a California company.  While the Company  acknowledges that some monies are due,
the total amount is in dispute.  It is felt by management that this suit will be
resolved. (WALLOP MARKETING GROUP INC. v. ADATOM.COM,  INC., case number 414086,
Superior Court of California County of San Mateo, filed August 30, 2000).

On October 10, 2000, a lawsuit was filed  against the Company for non payment of
services in the amount of $58,325,  by MySimon,  Inc., an Internet  portal which
the  Company  formerly  used.  The  Company  is  evaluating  the  merits of this
litigation. It is felt by management that this suit will be resolved.  (MYSIMON,
INC., v. ADATOM.COM, INC., County of Santa Clara, October 10, 2000).



Item 2. Changes in Securities and Use of Proceeds

In addition to transactions previously reported, the foregoing transactions were
done under Section 4(2) of the Securities Act of 1933 based, among other things,
on  representations  and warranties made by the investors,  the small numbers of
investors  solicited and the absence of any advertising or general  solicitation
in the process of raising funds.

         (i)      On July 13, 2000,  the Company issued a warrant to purchase up
                  to 810,000  shares of common stock to Swartz  Private  Equity,
                  LLC at an exercise price which varied  depending on the market
                  price  of  the  Company's   common  stock,  in  return  for  a
                  commitment to engage in a private equity  transaction with the
                  Company.  The  warrant  included a net  exercise  feature  and
                  certain  registration  rights for the underlying common stock.
                  Pursuant  to the  terms of the  arrangements  under  which the
                  warrant was issued,  on August 23, 2000, the Company  canceled
                  the warrant;

         (ii)     On August 31,  2000 the  Company  issued a Warrant for 100,000
                  shares of common  stock to Global  Impact  Communications,  as
                  compensation  under a  public  relations  agreement  with  the
                  Company;

         (iii)    On September  14,  2000,  the Company  entered  into  separate
                  subscription  agreements for the sale of 149,254 shares of its
                  common  stock to  Jessup & Lamont  and  74,626  shares  of its
                  common  stock to Frank  Madkins,  for  aggregate  proceeds  of
                  $150,000;

         (iv)     On  September  27,  2000,  the  registrant  issued to  private
                  investors  1,200 shares of its Series B Convertible  Preferred
                  Stock.  The gross  purchase  price of the Preferred  Stock was
                  $1,200,000.  The proceeds of this capital have been completely
                  committed. The

                                       36

<PAGE>



                  registrant  also  issued to  investors  warrants  to  purchase
                  272,725  common  shares at an  exercise  price of $.89375  per
                  share and  warrants to purchase  272,725  common  shares at an
                  exercise  price of $.825 per share and issued to the placement
                  agent in the  transaction a warrant to purchase  54,545 common
                  shares at an exercise  price of $.825 per share.  The warrants
                  expire on September 27, 2005.

         (v)      The  Company  entered  into the  following  transactions  with
                  affiliates:


<TABLE>
<CAPTION>


                  ------------------------------------ -------------------------------------------------------------------
                               AFFILIATE                                     NATURE OF TRANSACTION
                  ------------------------------------ -------------------------------------------------------------------
<S>                                                    <C>
                  Richard S. Barton                    Loan of $15,085.92 to Company authorized by Board of Directors on
                  Chairman and Chief Executive         September 21, 2000 and funded on  September 8, 2000
                  Officer
                  ------------------------------------ -------------------------------------------------------------------
                  Richard S. Barton                    Loan of $20,000 to Company authorized by Board of Directors on
                                                       September 21, 2000 and funded on  September 15, 2000
                  ------------------------------------ -------------------------------------------------------------------
                  Richard S. Barton                    Loan of $4,719.23 to Company authorized by Board of Directors on
                                                       September 21, 2000 and funded on  September 21, 2000
                  ------------------------------------ -------------------------------------------------------------------
                  David   Cannon                       Board   resolutions   of  September  1,  2000 authorizing  issuance of
                  Vice  President                      100,000 shares  of  common  stock  to David  Cannon  in  repayment  of
                  Information Technology               amounts  owed  to   WebMediaMasters,   a  company previously  owned by
                  and Web Design                       Mr.  Cannon.  These shares have not yet been issued.
                  ------------------------------------ -------------------------------------------------------------------
                  Ralph K. Frasier                     Issuance of 105,504 common shares to Ralph K. Frasier for
                  Director                             $100,000 at a 15% discount to market price, authorized by Board
                                                       of Directors on September 8, 2000, along with piggyback registration
                                                       rights. These shares have not yet been issued.
                  ------------------------------------ -------------------------------------------------------------------
                  Sridhar Jagannathan                  Loan of $8,710.02 to Company authorized by Board of Directors on
                  Chief Technology                     August 31, 2000 and funded on August 15, 2000
                  Officer
                  Executive Vice
                  President and
                  Secretary
                  ------------------------------------ -------------------------------------------------------------------
                  Sridhar Jagannathan                  Warrant for 300,000 common shares, exercisable from August 31,
                                                       2003 to August 31, 2006
                  ------------------------------------ -------------------------------------------------------------------
                  Sridhar Jagannathan                  Warrant for 200,000 common shares, exercisable from August 31,
                                                       2005 to August 31, 2008
                  ------------------------------------ -------------------------------------------------------------------

</TABLE>



(vi)              On October 30, 2000 the Company issued a warrant for 1,100,000
                  shares of common stock to Mr. Li Yaun Hao as compensation  for
                  his  efforts  to  secure  the  Yangling  Agricultural  Hi-Tech
                  Industrial Demonstration Zone cooperative agreement.


Item 6.  Exhibits and Reports on Form 8-K.

                                       37

<PAGE>



         (a)      List of Exhibits.  An Exhibit Index has been filed starting on
                  page  E-1  of  this  Report  and  is  incorporated  herein  by
                  reference.

         (b)      Reports On Form 8-K.

Registrant filed Current Reports on Form 8-K dated September 5, September 25 and
September 27, 2000 (Items 5 and 7, as to all three reports).




                                   SIGNATURES



         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
Adatom.com,  Inc.  has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                       ADATOM.COM, INC.

Date: November 14, 2000


                                       /s/ Richard S. Barton
                                       -------------------------

                                       By: Richard S. Barton
                                       President and Chief Executive Officer








                                       38


<PAGE>



                                  EXHIBIT INDEX

EXHIBIT
NUMBER                  DESCRIPTION
-------                 -----------

4.44                    Subscription Agreement for shares of common stock to be
                        purchased by Jessup & Lamont dated September 14, 2000

4.45                    Subscription Agreement for shares of common stock to be
                        purchased by Frank Madkins dated September 14, 2000

4.46                    Warrant issued to Global Impact Communications for
                        100,000 shares of common stock, dated August 31, 2000

4.47                    Securities Purchase Agreement relating to sale of Common
                        Stock to Li Yuan Hao, dated October 30, 2000

4.48                    Registration Rights Agreement relating to sale of Common
                        Stock to Li Yuan Hao, dated October 30, 2000

4.49                    Promissory Note issued to Richard Barton for $15,085.92
                        dated September 8, 2000

4.50                    Promissory Note issued to Richard Barton for $20,000
                        dated September 15, 2000

4.51                    Promissory Note issued to Richard Barton for $4,719.23
                        dated September 21, 2000

4.52                    Promissory Note issued to Sridhar Jagannathan for
                        $8,710.02 dated August 16, 2000

4.53                    Warrant   dated   August  31,  2000  issued  to  Sridhar
                        Jagannathan   for  300,000   shares  of  common   stock,
                        exercisable from August 31, 2003 to August 31, 2006

4.54                    Warrant   dated   August  31,  2000  issued  to  Sridhar
                        Jagannathan   for  200,000   shares  of  common   stock,
                        exercisable from August 31, 2005 to August 31, 2008

4.55                    Warrant dated October 30, 2000 issued to Li Yaun Hao for
                        1,100,000 shares of common stock

10.26                   Joint Venture Agreement with Shanghai Qifan Co., Ltd.,
                        dated October 29, 2000

10.27                   Offer Letter from the registrant to Tuan V. Phan, dated
                        September 20, 2000

27                      Financial Data Schedule



                                      E-1