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

                                  Form 10-QSB

 Quarterly Report Under Section 13 or 15(d) of Securities Exchange Act of 1934
                 For the quarterly period ended March 31, 2000


                                  Cyco.Net Inc.
                 (Name of Small Business Issuer in its charter)


 Nevada                                       13-3389415
(State or other jurisdiction of               (IRS Employer Identification No.)
 incorporation or organization)

     4201 G. Yale Boulevard, NE Suite G
     Albuquerque, New Mexico                               87107
(Address of principal executive offices)                 (Zip Code)


                                 (505) 344-9425
                           (Issuer's telephone number)

Securities to be registered under Section 12(b) of the Act:

Title of each class                   Name of each exchange on which registered

Common Stock, $0.001 par value                         OTC


Securities to be registered under Section 12(g) of the Act:



                                      None



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CYCO.NET, INCORPORATED


PART I


ITEM 1 - DESCRIPTION OF BUSINESS

Cyco.Net, Incorporated is the successor corporation to AVE, Incorporated.
Cyco.Net is an e-commerce business. The main web site is in the form of an "e"
zine, similar to a magazine except that it is only available on-line. The web
site is www.Cyco.net. It currently has two fully operational ancillary sites
which are in the market of selling cigarettes on-line. Also the Company has
registered the sites of digidarkroom.com, and cyconet.com, psychocigs.com, which
are not operating at this time.


A.  CORE BUSINESS

CYCO.NET, Inc. (hereafter the "Company") was established in December 1998 to
develop a network of web based companies. These companies are centered around a
central web site called cyco.net (www.cyco.net). This site is a lighthearted
destination that presents the Internet to individuals through quick wit,
interesting links and other standard Internet offerings (i.e. stock quotes,
horoscopes, etc.). The goal of this site is to provide the Internet User with a
starting point for their daily excursions into the World Wide Web. It is
intended to put the most interesting of the millions of sites on the web at site
visitors' fingertips. The focus is to provide a virtual atmosphere of
sophistication, intelligence and cunning.

The site is formatted as a weekly, soon to be daily, magazine or "e-zine".
Content varies according to the weekly topic - i.e., interviews, short comical
lists, photographs and stories. Topics vary, and can consist of anything from
contemporary entertainment venues, travel destinations, fashions, sports or
financial markets. The goal is to provide the user information across a wide
range of interests, with striking and informative links relating to the current
topic.

The home page consists of a photograph reflecting the current topic.
Superimposed on the photograph are links to various sites on the Internet. Links
are of three types. First, there are standard links provided by most every
launch site, including news, horoscopes and stock quotes. These links are
provided for the convenience of the viewer, and are not considered the main draw
of the site.

Secondly, are the temporary, topic specific links. Temporary links relate
directly to the topic and will change accordingly. Examples of these links
include historical and cultural information, available activities, photographs,
travel information or discussion groups. For example, when the topic was the Taj
Mahal, the site linked to an Intel site that had a virtual tour of the
structure, a short history of the Taj Mahal, a picture galleries and information
of the surrounding area. Effort is made to provide viewers instant and concise
information they might not search for on their own.


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Last, there are the topic specific e-commerce links. These links take the viewer
to sites that provide products and services directly related to the current
subject. The site will provide links to vendors like Amazon.com, where the
viewer can buy a book for more information, or to Abercrombie & Kent, a travel
web site, in order to purchase an airline ticket or book a cruise on a ship.

In effort to attract loyal viewers, Cyco.Net does not require registration
information or fees to access the site. The Company believes such barriers
inhibit users to peruse the site in depth. Reason being, many people are
reluctant to provide personal data over the Internet.

Cyco.Net will focus on maximizing the number of hits or visitors a day. As more
and more customers visit CYCO.NET, the Company will position itself to take
advantage of the audience that CYCO.NET is attracting. This will be accomplished
by building e-businesses, which will sell products and services to the CYCO.NET
visitors. Every CYCO.NET visitor is a potential customer for a plethora of
products and services that will be provided by the site, its owned companies,
affiliates and advertisers.


B.  CYCOCIGS.COM AND AABAKISMOKES.COM

In November of 1999, the Company opened its first E-Commerce web site. The site,
www.cycocigs.com, sells cigarettes over the Internet. In March 2000, the Company
opened its second E-commerce web site. The site, Aabakismokes.com also sells
cigarettes over the Internet. New Mexico state laws allows the Company to sell
out of state without paying the state excise tax on cigarettes, thus enabling
the Company to provide customers with their favorite name brand cigarettes at
discounted prices.

The first page of each web site, provides a pull down menu listing all available
brands of cigarettes. Once a brand is selected, obtainable styles are listed.
From there, the customer places desired cigarettes into a shopping cart that
details total quantities ordered, unit costs, shipping charges, and the total
cost of the order. This page also provides an opportunity to place additional
orders, and continually scheduled shipments to the customer. To complete the
order, customers enter a secure site to provide form of payment.

The site accepts Visa, Mastercard, Discover Card, and American Express. With
credit card orders, the Company is paid before the order is shipped. Age is
verified because credit card holders must be 18 years old. Any credit cards
issued to minors must be co-signed by a parent or guardian who receives monthly
itemized statements. Faxed photo identification is requested, anytime a
customer's age is in question.

Customers must agree to the following terms of sale to complete their order.

1.   Billing address must be used as shipping address to verify the age of
     recipient.

2.   Billing addresses outside the USA or within the state of New Mexico are
     prohibited.

3.   Purchaser must be 18 years of age.

4.   Purchaser agrees not to resell or retail any part of their order.



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5.   Limit of 10 cartons per brand per customer per order. These terms are
     listed in several places, as well as on the final checkout page.

Orders placed Monday-Thursday before 5pm Mountain Standard Time are shipped the
next day. Orders received Friday-Sunday are shipped on Monday. All orders are
shipped via United States Postal Service 2-3 day priority mail. This has proven
to be the most cost effective method of shipping.

Along with creating e-businesses, the Company has affiliated itself via links,
with several larger e-commerce sites such as Amazon.com, Lobster.net and
Tavalo.com. Being an affiliate entitles the Company to a commission on sales
derived from visitors of Cyco.net. If a user goes to Amazon.com, from the link
on Cyco.net, and makes a purchase, then the Company is entitled to a percentage
of that sale. At this time, no revenues have been realized from any affiliate
programs. Such affiliate programs are not unique to Cyco.net. Currently
Amazon.com has over 500,000 affiliates.

The Company seeks to gain revenue by contracting advertisers on the Cyco.net
site. Although the Company is having ongoing discussions toward this end, there
are currently no agreements with advertisers. No assurance can be given that any
arrangements will be established, or that, if established, the marketing and
operating arrangements proposed to be utilized by the Company can be
successfully implemented.

The Company sees an advantage in targeting the Tobacco and Spirits companies as
its major advertisers. With regards to the Tobacco and Spirits companies, these
advertisers are quickly losing their current mediums, including billboard
advertisements and as major sports sponsors. The only current advertising medium
in the United states for the Tobacco and Spirit industries are print ads and the
Internet. Many of the larger Internet sites, like Yahoo, do not accept
advertising from tobacco and spirit companies because of the unhealthy stigma
associated with these products. Tobacco and spirit companies are shunned by
current major Internet operators, who in turn, are leaving billions of dollars
worth of advertising on the table. In turn, rising anti-alcohol and tobacco
sentiment might cause some Internet users to ban or boycott companies, such as
Cyco.net, who promote products from these industries.


C.  INDUSTRY ANALYSIS

The Internet is a virtual world. In this world a complete society exists. People
work, play, learn, communicate and shop all at the touch of a button from their
home or office. The Internet gives almost unfettered access to communication,
information and products to the user. At the same time, the Internet gives
advertisers almost unlimited access to the consumer. The Internet has become an
open market where anyone can locate almost any product they want.

Explosive Growth

The Internet is the fastest growing medium of communication in History. It has
only taken 5 years to reach 50 million U.S. users, while Cable required 10
years, television took 13 years and radio needed 38 years. By the end of 1998
the Internet had attracted 63 million US viewers, and




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is expected to have 149 million US viewers by the year 2002. At the same time
World Wide Web users are expected to grow from 142 million in 1998 to 399
million by 2002 (Source: Yahoo.com (Source: IDC, March 99)).

Frenzied Spending

According to IDC, the web is projected to grow from around 97.7 million U.S.
users (all ages) at the end of 1999 to 177 million users by the year 2002.
(Source: IDC March 1999, IDC December 1999, Last revised: January 20, 2000)
Spending on the web is also growing exponentially. US ecommerce revenue is
projected to grow from around $80 billion dollars at the end of 1999 to $726
billion by the year 2003. Worldwide ecommerce revenue is expected to increase
from $131 billion in 1999 to $1.6 trillion by year 2003. (Source: IDC, January
2000)

E-Commerce

As stated before, the Internet is like an open-air market where anyone can set
up a booth and trade their wares. People from all over the world open booths
(web sites) and sell everything from photographs to cars. Practically any
product a consumer wants can be bought on the Internet. People in rural areas
have instant access to items without travel.

Advertising

Like all other mediums of communication, a major source of revenues is
advertising. But the Internet is different from all other means of
communication. The difference is in the way people experience the Internet. In
this medium, the viewer is actively involved in what is being presented. Users
make involved choices as to what they are seeing. They do not passively accept
information as they do when watching TV or reading the newspaper. This highly
attentive state creates an interaction that builds brand value even as it drives
consumer action (Source: Yahoo.com (Source: IAB, Oct 1998, Last Revised: Nov.
17, 1998)) Unlike other mediums of communication, the Internet, as a whole, is
experiencing a growth spurt in advertising revenues. Between 1996 and 1997, ad
spending on the Internet rose from $220.5 million to $544.8 million (Source:
AdAge.com). This represents an increase of 147.1%. The second largest growth in
advertising revenues was seen in the outdoor arena with only a 32% increase
(Source: AdAge.com). That is a difference of 115%. No other advertising medium
is near to this type of growth in revenues.

Global Market

While Internet Companies compete with global competitors, they also service a
global market. Along with the million or so web sites on the Internet, there are
several million customers on the Internet. By the end of 1998, there were 63
million U.S. viewers and 142 million global viewers (Source: Yahoo.com (Source:
IDC, March 99)). Another benefit of the Internet is the low capital requirements
to enter the market. For a fraction of the cost of starting a landed store,
Internet companies can set up a web site and begin making sales. Low overhead
enables e-companies to be profitable with smaller profit margins, selling their
products at a considerable savings to the customer, at any hour of the day.
E-companies can deliver products and prices that are not available locally to
many consumers. It is the goal of Cyco.net to find such regularly consumed
products and offer them to customers at competitive prices. Such is the case in
incorporating Cyco.cigs and



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Aabakismokes.com, the Company's fully operational, revenue generating, cigarette
e-business.



D.  RISKS

There are several risks associated with e-commerce businesses. The Internet is a
highly competitive arena. Internet operators are not only competing with
geographically local companies, they must also compete with companies from all
over the world. With the millions of sites already on the Internet, it is easy
to be overlooked. E-Businesses rely on their servers to be operational. Server
failure results in lost business.

FEAR OF THE INTERNET

Additionally, many Internet users view E-businesses as risky. People are often
reluctant to purchase online, despite the promise of secure transactions. People
are wary of relinquishing personal data, including credit card information, over
the Internet. Potential customers may incur difficulty finding particular sites,
due to domain name confusion, i.e. Cyco.com (Cyco Software Company) vs.
Cyco.net. Companies risk losing customers who utilize search engines, because
competitors are listed as well. Cyco.Net is aware of such pitfalls, and attempts
to lessen the impact of these downfalls by providing secure transactions for all
online purchases, and requiring minimal personal customer information to
complete transactions. The company has assured its customers that it will never
sell nor provide customer information to third parties. Additionally, the
Company attempts to make its presence known by continually submitting
information to the many major search engines that service the Internet.

COMPETITION

If competitors are allowed to use buy down promotions to lower their prices and
the manufacturers continue to disallow the Company to participate in such
programs, it will be at a distinct disadvantage and will suffer reduced sales
due to non competitive prices. These buy downs are the cigarette industries
version of a rebate to entice sales. In this case, the rebate goes to the
retailer to mark down the over the counter price. At this time, the
manufacturer's stance is that they will not give these buy downs to internet
companies but currently there are a couple of competitors that are selling their
product with these discounts.

VALIDITY OF THE JENKINS ACT

Currently, there is controversy over validity of the Jenkins Act as applied to
e-commerce sales of cigarettes. The Jenkins Act, United States Code Title 15,
Section 376, was enacted in the 1940s to monitor interstate sales of cigarettes.
This Act requires that companies selling cigarettes report monthly the names and
addresses of their customers with state tobacco tax administrators. It is
uncertain whether the Act applies to e-commerce because Internet sales take
place in a state other than the customer's state of origin. Further, the Jenkins
Act conflicts with other Federal laws, such as the Privacy Act of 1974 and the
Electronics Communications Act of 1986. The Jenkins Act is also considered
discriminatory because it applies to cigarette

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sales only, and not the interstate sale of cigars and tobacco. If it is deemed
that the Jenkins Act is applicable to Internet Cigarette sales, the Company will
report to individual state tax authorities. Such enforcement could adversely
affect sales because the lure of purchasing online is the exemption of state
excise taxes. The cost burden of reporting to every state tax authority could
affect the profitability of the Company.

CONTINUED GROWTH OF THE INTERNET

The Company's future revenues substantially depend upon the increased acceptance
and use of the Internet and other online services as a medium of commerce. Rapid
growth in the use of the Internet, the Web and online services is a recent
phenomenon. As a result, acceptance and use may not continue to develop at
historical rates and a sufficiently broad base of customers may not adopt,
and/or continue to use, the Internet and other online services as a medium of
commerce. Demand and market acceptance for recently introduced services and
products over the Internet are subject to a high level of uncertainty and there
exist few proven services and products.

NECESSARY NETWORK INFRASTRUCTURE FOR THE INTERNET

In addition, the Internet may not be accepted as a viable long-term commercial
marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development of
enabling technologies and performance improvements. If the Internet continues to
experience significant expansion in the number of users, frequency of use or
bandwidth requirements, the infrastructure for the Internet may be unable to
support the demands placed upon it. In addition, the Internet could lose its
viability as a commercial medium due to delays in the development or adoption of
new standards and protocols required to handle increased levels of Internet
activity, or due to increased governmental regulation. Changes in, or
insufficient availability of, telecommunications services to support the
Internet also could result in slower response times and adversely affect usage
of the Internet generally.

The Company's business, financial condition and results of operations would be
seriously harmed if: use of the Internet, the Web and other online services does
not continue to increase or increases more slowly than expected; the
infrastructure for the Internet, the Web and other online services does not
effectively support expansion that may occur; the Internet, the Web and other
online services do not become a viable commercial marketplace; or traffic to the
Web site decreases or fails to increase as expected or if management spends more
than was expected to attract visitors to the Web site.

WEB DOMAINS

The Company may be unable to acquire or maintain Web domain names relating to
the brand in the United States and other countries in which management may
conduct business. As a result, the Company may be unable to prevent third
parties from acquiring and using domain names relating to the Company's brand,
which could damage its brand and reputation and take customers away from its Web
site. Governmental agencies and their designees generally regulate the
acquisition and maintenance of domain names. The regulation of domain names in
the United States and in foreign countries is subject to change in the near
future. The changes




<PAGE>   8

in the United States are 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.

NEW LAWS REGULATING THE INTERNET

The adoption or modification of laws or regulations relating to the Internet
could adversely affect the manner in which the Company proposes to conduct its
business. In addition, the growth and development of the market for online
commerce may lead to more stringent consumer protection laws, both in the United
States and abroad, that may impose additional burdens on the Company. Laws and
regulations directly applicable to communications or commerce over the Internet
are becoming more prevalent. The United States Congress recently enacted
Internet laws regarding children's privacy, copyrights, taxation and the
transmission of sexually explicit material. The European Union recently enacted
its own privacy regulations. Laws regulating the Internet, however, remain
largely unsettled, even in areas where there has been some legislative action.
It may take years to determine whether and how existing laws such as those
governing intellectual property, privacy, libel, and taxation apply to the
Internet.

In order to comply with new or existing laws regulating online commerce, the
Company may need to modify the manner in which it proposes to do business, which
may result in additional expenses. For instance, the Company may need to spend
time and money revising the process by which it intends to fulfill customer
orders to ensure that each shipment complies with applicable laws. The Company
may need to hire additional personnel to monitor compliance with applicable
laws. The Company may also need to modify its software to further protect
customers' personal information.

POTENTIAL LIABILITY

As a publisher of online content, the Company faces potential liability for
defamation, negligence, copyright, patent or trademark infringement, or other
claims based on the nature and content of materials that it publishes or
distributes. If the Company faces liability, then its reputation and its
business may suffer. In the past, plaintiffs have brought these types of claims
and sometimes successfully litigated them against online companies. In addition,
the Company could be exposed to liability with respect to the unauthorized
duplication of content or unauthorized use of other parties' proprietary
technology. Although the Company intends to carry general liability insurance,
such insurance may not cover claims of these types. The Company cannot be
certain that it will be able to obtain insurance to cover the claims on
reasonable terms or that it will be adequate to indemnify the management or the
Company for all liability that may be imposed. Any imposition of liability that
is not covered by our insurance or is in excess of insurance coverage could harm
the business.

FUTURE COLLECTION OF TAXES

If one or more states or any foreign country successfully asserts that the
Company should collect sales or other taxes on the sale of products, net sales
and results of operations could be harmed. The Company does not currently
collect sales or other similar taxes for physical



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shipments of goods into any states. However, one or more local, state or foreign
jurisdictions may seek to impose sales tax collection obligations on the
Company. In addition, any new operation could subject shipments in other states
to state sales taxes under current or future, laws. If the Company becomes
obligated to collect sales taxes, it will need to update its system that
processes customer orders to calculate the appropriate sales tax for each
customer order and to remit the collected sales taxes to the appropriate
authorities. These upgrades will increase operating expenses. In addition,
customers may be discouraged from purchasing products from the Company because
they have to pay sales tax, causing net sales to decrease. As a result, the
Company may need to lower prices to retain these customers.

ABILITY TO CONTINUE AS GOING CONCERN


The Report of Independent Auditors issued a "going concern" warning, stating,
"the Company has suffered a loss from operations and has a working capital
deficit. These factors raise substantial doubt about the Company's ability to
continue as a going concern."

As of March 2000, the business was struggling, as is evident from the monthly
sales of cigarettes disclosed herein. Since that time, the sales have increased
dramatically.


The Company's ability to continue as a going concern is contingent upon its
ability to secure financing, increase ownership equity and attain profitable
operations. In addition, the Company's ability to continue as a going concern
must be considered in light of the problems, expenses and complications
frequently encountered by entrance into established markets and the competitive
environment in which the Company operates.

ADDITIONAL FINANCING

The Company cannot be certain that additional financing will be available on
favorable terms when required, or at all. If the Company raises additional funds
through the issuance of equity, equity-related or debt securities, the
securities may have rights, preferences or privileges senior to those of the
rights of the common stock and those stockholders may experience additional
dilution. The Company expects to require substantial working capital to fund the
business. Since inception, the Company has experienced negative cash flow from
operations and expects to experience significant negative cash flow from
operations for the foreseeable future. Management currently anticipates that the
private financing done to date, together with expected revenues, will be
sufficient to meet anticipated needs for working capital and capital
expenditures through at least the next 12 months. After that, the Company may
need to raise additional funds.


VOLITILE STOCK MARKET

The market price for the Company's common stock is likely to be highly volatile
and subject to wide fluctuations in response to factors including the following,
some of which are beyond the Company's control: actual or anticipated variations
in the quarterly operating results; announcements of technological innovations
or new products or services by the Company or its competitors; changes in
financial estimates by securities analysts; conditions or trends in the Internet
and/or online



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commerce industries; changes in the economic performance and/or market
valuations of other Internet, online commerce or retail companies; announcements
by management or competitors of significant acquisitions, strategic
partnerships, joint ventures or capital commitments; additions or departures of
key personnel; release of lock-up or other transfer restrictions on the
outstanding shares of common stock or sales of additional shares of common
stock; and potential litigation.

In addition, the stock market has from time to time experienced extreme price
and volume fluctuations. These broad market fluctuations may adversely affect
the market price of the Company's common stock.

In the past, following periods of volatility in the market price of their stock,
many companies have been the subject of securities class action litigation. If
the Company was sued in a securities class action, it could result in
substantial costs and a diversion of management's attention and resources and
would cause the stock price to fall.


E.  EMPLOYEES

CYCO.NET, Inc. currently has two full-time employees and one part time employee.
As business increases, it is anticipated that additional employees will be
added.

F.  COMPANY HISTORY

AVE, Inc., acquired CYCO.NET, Inc. of Albuquerque, New Mexico in a transaction
accounted for as a recapitalization of Cyco.net, Inc. on July 22, 1999. Under
the terms of the agreement, AVE, Inc. changed its name to CYCO.NET, Inc. Mr. R.
Gene Klawetter, former Chairman and CEO of AVE, Inc. became a director of
CYCO.NET, Inc. George Sullivan, former AVE Vice President of Operations
resigned, as did Henri Hornby, former Director of AVE, Inc. In the transaction,
CYCO shareholders received 2.08 shares of AVE (now CYCO) for each share of
Cyco.net stock. This provided the former AVE shareholders with 15% ownership
interest in the surviving company and Cyko.net shareholders with 85% ownership
interest of the surviving company.

On July 28, 1999, amended Articles of Incorporation were filed with the
Secretary of State of Nevada to change the name of AVE, Inc. to CYCO.NET, Inc.
Concurrently, a request was submitted to NASD to change AVE's listing symbol
from AVEN to CYKE.

Cyco has been de-listed from NASD Bulletin Board for failure to comply with the
registration requirements. To be re-listed, Form 10 must be completed and the
Company must comply with all comments by the governing body. Also, Form 10-KSB
for the fiscal year ending December 31, 1999 and Form QSB for September 30,
1999, March 31, 2000 and June 30, 2000 must be filed.


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

The following discussion should be read in conjunction with the financial
statements and notes thereto included herein.



<PAGE>   11


A.  PLAN OF OPERATION

In the next 12 months, the Company plans to tend to sales growth and gain
additional traffic to its e-commerce sites by:

o    locating appropriate facilities in which to conduct shipping of product.

o    Launching an affiliate program to build traffic to its e-commerce sites.

o    Advertising through print ads, e-newsletters and e-mails to target markets.

o    Continue funding efforts

o    Maintain and add features to the Cyco.net site, i.e. location cameras
     providing live feed from worldwide locations of interest.

o    Pursue advertising contracts from major tobacco and spirit manufacturers.

o    Hire additional employees, as needed. The hiring of 1-2 additional
     full-time employees is projected in the next 12 months.

Furthermore, the Company plans to identify other niches in e-commerce to expand
and diversify its business to reduce dependence on a single sector or product.


B.  FINANCIAL CONDITION


Prior to October 2000, the Company was able to meet its cash requirements
partially from the sale of cigarettes, with the balance of cash needs being met
with the sales of stock pursuant to Rule 504, which is disclosed hereinbelow. As
of October 2000, the Company has been able to meet its cash needs solely through
the sales of cigarettes. Immediate raising of capital is needed to expand the
Company's market base. It is the belief of the Company that once it has been
re-listed, that its capital needs to grow the Company will be able to be met
through the May Davis Trust Line of Credit.


In February, 1998, Mr. Adelberg loaned the Company $10,000 at 8% interest.
Neither the interest nor the principal have been repaid.


On December 2, 1999 the Company executed a promissory note with Francisco Urrea
in the amount of $18,000.00. The funds were used for ongoing business
operations. This note was repaid in the third quarter 2000.

Current internal sources of liquidity include 25,000 shares in Prime Company,
Inc. The Prime Stock was restricted pursuant to SEC Rule 144 until April 29,
2000. Restricted securities are non-registered securities acquired from a
company or control person of the company in a non-public transaction. Therefore,
if Prime Co. has fulfilled SEC reporting requirements for the previous 90 day
period, and has filed all required reports during the last 12 months, then the
shares can be registered to be sold. As of June 2000, the shares of Prime Co.
were trading at approximately $1.19 per share. The Company completed the sales
of Prime Co. stock during the third quarter of 2000. The sales were as follows:



<PAGE>   12


         7/7/00   2000 shares @ $1.0625
         7/10/00  2000 shares @ $1.0625
         7/10/00  4000 shares @ $1.1250
         7/11/00  12,500 shares @ $1.1250
         8/31/00  4500 shares @ $.6875

The total funds received from these sales were $24,507.51. The Company carried
the shares of Prime Co. stock at a book value of $50,000. These sales resulted
in a comprehensive loss of $25,492.25.

On August 2, 1999, the Company entered in to a Line of Credit Agreement with GMF
Holdings and May Davis Group whereby the Company shall be entitled to
$890,000.00 in credit. If the Company chooses to draw down on the equity line,
debentures will be issued. At this time, no debentures have been issued.


This transaction was entered into in reliance upon the provisions of Rule 504
Exemption of the Securities Act of 1933, as amended, and the regulations
promulgated thereunder (the "Securities Act") and or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the investments in the Debentures to be made
hereunder.

This Agreement provides that the stock must be trading on the OTC and provides
for incremental advances based upon the 30 day average daily trading.


 The following chart discloses the incremental advances:



<TABLE>
<CAPTION>
30 day Average Daily Trading                      Maximum Advance Amount
<S>                                               <C>
$ 25,000 - $ 50,000                                      $100,000
$ 50,000 - $100,000                                      $200,000
$100,000 - $200,000                                      $300,000
$200,000 - $300,000                                      $500,000
$300,000 - $400,000                                      $600,000
$400,000 - $500,000                                      $700,000
</TABLE>



Because the Company is currently de-listed, no advances may be made on this Line
of Credit. The original Commitment Period was for a 12 month duration, expiring
in August 2000, however, the expiration date was amended by agreement of the
parties to August 2001.


On January 19, 1998 the Company entered into a one year financial consulting
contract with Messrs. Kenneth Adelberg and Larry Fox of Philadelphia. Under the
agreement, the parties were to raise $300,000 immediately and $3.2 million
subsequent to the successful test of the Company's prototype antenna. In return,
the parties were to receive 1,000,000 of the Company's Compensatory Stock
Options at $.01 per share. Due to lack of interest, Messrs. Adelberg and Fox did
not meet the terms of this agreement and, therefore the agreement terminated on
January 18, 1999 with no further obligation by either party.

Commitments for capital expenditures include monthly software and server leases.
The software leases cost the Company $98 per month. The server leases cost the
Company $94 per month.





<PAGE>   13

The Company currently leases office space on a month-to-month basis. The Company
is currently seeking suitable office space for its cigarette shipping business
that may require a long-term contract.

Sales could be adversely affected by any FDA or Congressional regulations, or
decisions of tobacco companies, prohibiting or limiting the sale of cigarettes
over the Internet. Additionally, further legal judgments against tobacco
companies, or increase in anti-tobacco sentiment among the public, could lower
cigarette sales for the Company.

To date, there have been no significant elements of income or loss arising from
the Company's continuing operations. There are no seasonal aspects that could
affect the Company's financial condition or results of operations.

C.  LIQUIDITY AND CAPITAL RESOURCES

Cash on-hand on December 31, 1999 was $10,737. During 1999, The Company obtained
Capital from the following sources. $87,000 in proceeds from stock issuance;
$18,000 increase in amounts due to related party. (See Financial Condition
above) $10,000 in proceeds from a note payable.


Through June 2000, the Company has received $32,000 in proceeds from stock
issuance. On September 15, 2000, the Company sold 50,000 shares of stock for a
total purchase price of $5,000. The total proceeds received by the Company from
stock issuance for the year are $37,000.00.

The Cyco.net web site itself has not produced income through June 2000. The
Company received $26 from Amazon.com which represent commissions from book
sales.


Cycocigs.com and Aabakismokes have produced the following revenue from the sale
of cigarettes:


<TABLE>
<CAPTION>
                         Cost of Goods     Revenue     Gross Margin
<S>                      <C>              <C>          <C>
November 1999               $  1,656      $  1,802      $    146
December 1999               $  7,302      $  7,936      $    634
January 2000                $ 15,399      $ 16,534      $  1,134
February 2000               $ 15,986      $ 17,130      $  1,143
March 2000                  $ 58,683      $ 62,619      $  3,936
April                       $119,587      $126,369      $  6,781
May                         $176,716      $187,281      $ 10,564
June                        $228,167      $242,080      $ 13,913
July 2000                   $219,953      $234,302      $ 14,349
August 2000                 $244,479      $264,964      $ 20,485
September 2000              $262,294      $283,789      $ 21,495
October 2000                $291,477      $315,524      $ 24,047
November 2000               $289,791      $313,935      $ 24,143
December 2000               $262,456      $288,025      $ 25,569
</TABLE>


It is anticipated that the sales will continue to increase monthly.

D. INFLATION

The Company believes that inflation affects the Company's business to no greater
or lesser extent than the general economy.



<PAGE>   14


ITEM 3 - DESCRIPTION OF PROPERTY.


The Company operating from leased office space at 600 Central Avenue SW, 3rd
floor, Albuquerque, New Mexico until August, 2000. The lease was month to month.
There are no outstanding obligations with regard to the lease. The Company moved
its business operations to 4201 G. Yale Boulevard, NE, Albuquerque, NM 87107
effective August, 2000. The lease is for a two year term with a basic monthly
rental of $1,645 during the first year, and an increase to $1,702.60 for the
second year.



ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the names of persons who own of record, or were
known by the Company to own beneficially, more than 5 percent of its issued and
outstanding common stock, and the beneficial ownership of stock as of July 31,
1999 date by officers and directors of the Company and all officers and
directors as a group. Except as otherwise noted, each person listed below is the
sole beneficial owner of the shares and has sole investment and voting power of
such shares. No person listed below has any option, warrant or other rights to
acquire additional securities of the Company, except as may be otherwise noted.


<TABLE>
<CAPTION>
(1)                  (2)                                     (3)                                  (4)
Title of             Name and Address                        Amount and Nature of                 Percent of
Class                Of Beneficial Owner                     Beneficial Owner                     Class
------------         ---------------------------------       ----------------------------         -----------
<S>                  <C>                                     <C>                                  <C>
                     Richard Urrea                           2,496,000 $0.001 Par                 13.2
Common               600 Alcalde SW #4D
                     Albuquerque, NM 87104
------------         ---------------------------------       ----------------------------         -----------
                     Matthew Urrea                           2,496,000 $0.001 Par                 13.2
Common               2213 Matthew NW
                     Albuquerque, NM 87110
------------         ---------------------------------       ----------------------------         -----------
                     Daniel Urrea                            2,496,000 $0.001 Par                 13.2
Common               3009 Charleston NE
                     Albuquerque, NM 87110
------------         ---------------------------------       ----------------------------         -----------
                     Nunzio P De Santis                      2,496,000 $0.001 Par                 13.2
Common               600 Central Ave. SW, 3rd Floor
                     Albuquerque, NM 87102
------------         ---------------------------------       ----------------------------         -----------
                     Francisco Urrea Jr.                     2,184,000 $0.001 Par                 11.5
Common               3009 Charleston NE
                     Albuquerque, NM 87110
------------         ---------------------------------       ----------------------------         -----------
                     Brent Wolford                           2,080,000 $0.001 Par                 11.0
Common               2601 Silver Avenue SE #8
                     Albuquerque, NM 87106
------------         ---------------------------------       ----------------------------         -----------
                     Henri Hornby                            1,082,540 $0.001 Par                 5.6
Common               3653 Hemlock Court
                     Reno, NV 89509
------------         ---------------------------------       ----------------------------         -----------
No. Shares & %                                               11,752,000                           62.1
owned by
directors &
officers as a
whole
------------         ---------------------------------       ----------------------------         -----------
</TABLE>




<PAGE>   15

ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.

The present directors and executive officer of the Company, their age, positions
held in the Company and duration as such, are listed below. Each director will
serve until the first annual meeting of shareholders to be held on August 22,
2000, 10:00 am at the Albuquerque Country Club, 601 Laguna Blvd. SW,
Albuquerque, NM 87104, or until his or her respective successor has been elected
and duly qualified. Officers hold office at the pleasure of the Board of
Directors, absent any employment agreement. Presently no officers of the company
have an employment agreement.

Francisco Urrea Jr. a Director is the father of the CEO Richard A. Urrea, CFO
Daniel R. Urrea and Chief Council Matthew Urrea.

<TABLE>
<CAPTION>
Name                       Age              Position Held and Tenure

<S>                        <C>              <C>
Richard Urrea              35               President/CEO
                                               (since January 1, 1999)

Daniel Urrea               28               Chief Financial Officer
                                               (since January 1, 1999)

Brent Wolford              23               Chief Technical Officer
                                               (since January 1, 1999)

Matthew Urrea              32               Chief Council
                                               (since January 1, 1999)

Francisco Urrea, Jr.       67               Director
                                               (since January 1, 1999)

R. Gene Klawetter          61               Director
                                               (since July 31, 1999)*
</TABLE>

Mr. Klawetter resigned from the board, effective August 1999.


The following is a brief account of the business experience during at least the
past five years of each director and executive officer, indicating the principal
occupation and employment during that period, and the name and principal
business of the organization in which such occupation and employment were
carried out.

RICHARD URREA

Mr. Urrea's has been president of Sycom International, Inc. since 1997. Sycom is
a data communications company. Mr. Urrea led the company from start up through
national marketing plan and implementation of manufacturing plan. The company
currently manufactures its products and markets them throughout the U.S and is
in the process expanding into foreign markets. From 1996 to 1997 Mr. Urrea was
President of Klaire International Ltd., an export company distributing
automotive parts in Mexico. From 1995-1996 Mr. Urrea served as the managing
member of Toltec Fruit, L.C. a limited liability company involved in the
importation of


<PAGE>   16

fruit into the United States from Mexico and South America. From 1993 to 1995
Mr. Urrea worked on the development and marketing plan for Septima Enterprises
Inc. From 1991 to 1993, Mr. Urrea managed the Albuquerque Office of White
Discount Securities. In 1990, Mr. Urrea was contract administrator for
Foresight, Inc., an Albuquerque, laser-optics, government contractor. In 1989,
Mr. Urrea served as marketing director for HDI System, Inc. where he devised and
implemented an international marketing plan for an ignition system for marine
application. In 1985 and 1986, Mr. Urrea owned and operated Shannon Euro
Motorcars, a European automobile importing and maintenance company. Mr. Urrea
sold the business in 1986 to attend Baylor University. Mr. Urrea received his
Bachelor of Business Administration in Marketing and Business Broadcasting from
Baylor University's Hankammer School of Business in 1989.

FRANCISCO URREA, JR.

Mr. Urrea has founded numerous public companies including Diagnostek, Inc., a
prescription benefits management and hospital pharmacy management company (New
York Stock Exchange), Nuclear Pharmacy Incorporated, a centralized
radiopharmaceutical company servicing several hundred hospitals throughout the
United States (NASDAQ), Summa Medical Corporation, a research and development
company (American Stock Exchange), Septima Enterprises, Inc., a company that has
developed a high voltage automotive ignition system (NASDAQ Bulletin Board) and
Advanced Optics Electronics, Inc., a company developing a high-intensity,
flat-panel display (NASDAQ Bulletin Board). Mr. Urrea served as Chairman of the
Board of Directors of Nuclear Pharmacy Incorporated from 1974 until 1982. Mr.
Urrea served as Chairman of the Board of Summa Medical Corporation from 1978
until 1990, as president from 1978 through April 1982 and as president again
from October 1986 through February 1990. Mr. Urrea served as Chairman of the
Board of Directors of Diagnostek from 1983 through 1985. Mr. Urrea also was a
director of Septima Enterprises and served as president from 1988 through 1992.
Mr. Urrea has served as Vice Chairman of the New Mexico State Investment
Council, Chairman of the New Mexico Game and Fish Department, Commissioner of
the New Mexico State Racing Commission, Member of the New Mexico Industrial
Development Commission, Member of the New Mexico Foreign Trade and Investment
Council, and Member of the United States Department of Commerce's Biotechnology
Advisory Committee. Mr. Urrea graduated from Saint Mary's High School in 1949
after which he served two years in the United States Navy during the Korean War.
He is currently Chairman of the Board of Directors of Klaire International,
Ltd., a company holding the exclusive distribution rights in Mexico for a
patented automotive ignition product developed in the United States by Septima
Enterprises, Inc.

DANIEL URREA

Mr. Urrea has been associated with the CYCO.NET since inception in December of
1998. Prior to his involvement with the CYCO.NET, Mr. Urrea worked with Sycom
International, manufacturer and distributor of Radio Telemetry Units. During
that time Mr. Urrea was responsible for the maintenance of the accounting
records for the company, and was instrumental in the development of the
company's business plan. Before this, Mr. Urrea worked for Klaire International,
an exporter of automotive accessories to Mexico, in the same capacity. From
January 1996 thorough August of 1996 Mr. Urrea worked with Equinox
International. An international marketing and distribution company,



<PAGE>   17


where he was involved in sales and talent recruiting activities. In the Spring
of 1995, Mr. Urrea received a Bachelors in Business Administration with a
concentration in Finance from the Anderson Schools of Management at the
University of New Mexico. Mr. Urrea has also spent several months out of the
country where he studied business and other cultures.

BRENT WOLFORD

Mr. Wolford has been involved in CYCO.NET since inception, and is in charge of
Web page design and maintenance. Mr. Wolford will graduate from the University
of New Mexico with a Major in Computer Science, and a Minor in Business
Management in May of 1999. He is literate in all major operating systems
including DOS 6.2, Macintosh OS8, UN*X, and Windows 95/98/NT, and has extensive
experience with several applications including Microsoft Office + Frontpage,
Adobe Photoshop + Pagemaker, Alias Wavefront, Bryce 3D and many more. Before
becoming involved with CYCO.NET, Mr. Wolford built and continues to maintain
several Web Sites including the Dartmouth Street Gallery
(http://www.dsg-art.com), Mortgage Internet Technologies
(http://www.vlender.com), and Digital Skunk Bud Productions
(http://www.dsbp.cx).

MATTHEW URREA

Mr. Urrea is a tax lawyer with a private law practice in Albuquerque. He
received his Master of Laws in Taxation from New York University School of Law
(May 1993), his Juris Doctor from the University of New Mexico School of Law
(May 1992), and his Bachelors of Business Administration in Finance from the
University of New Mexico's Anderson School of Management (May 1989). From 1993
until April 1996, Mr. Urrea was an associate with the law firm of
Miller,Stratvert, Torgerson & Schlenker, P.A. in Albuquerque, New Mexico where
he practiced primarily in the area of taxation, including individual, estate and
business tax planning, business entity formation, mergers, sales, acquisitions
and reorganizations of business entities, international tax planning, and
like-kind exchanges. Mr. Urrea has lectured before professional and civic groups
on various tax subjects and is a member of the New Mexico, American, and
Albuquerque Bar Associations.

R. GENE KLAWETTER

Mr. Klawetter brings a decade of professional wireless communications experience
and growth to AVE. He was previously Chairman, President and CEO of American
Digital Communications, a company involved in building out 105 channels of 220
MHz spectrum for low-cost analog dispatch applications. Mr. Klawetter
successfully sold the systems to a larger provider and guided the company to a
merger with TrackPower International of Toronto, Canada. The company
subsequently moved its headquarters to Toronto. Prior to ADC he was President
and CEO of Millicom Radio Telephone Company, Inc., a 900 MHz provider in 5
states. Mr. Klawetter has extensive experience in working with the FCC in the
areas of licensing and legal interface. He has successfully negotiated
contracts, management agreements, option, lease and purchase agreements which
gave him the administrative expertise necessary to manage the ADC operation and
his experience with high tech communications systems will be of substantial
benefit to AVE. Subsequent to the decision of Millicom's parent company to exit
the SMR industry, Mr. Klawetter successfully liquidated approximately $5 million
in assets on behalf of Millicom. Mr. Klawetter's extensive experience in the
computer,



<PAGE>   18

communications and information systems environment has given him the executive
skills necessary to successfully implement the strategies of AVE.

Mr. Klawetter is formerly the President and Chief Operating Officer of Pinetree
Computer Systems, a company he helped take public in 1984 (OTC) and was National
Sales Manager of NBI, Inc., of Boulder, Colorado. Mr. Klawetter attended Blinn
College in Brenham, Texas, TCU, Fort Worth, Texas and Pace University, New York.
Graduate-level studies included historical case study analysis at Exeter Academy
in New Hampshire taught by Harvard Business School. This program was sponsored
by Xerox Corp.

Mr. Klawetter resigned from the board in August 1999, and was previously
disclosed in the SEC Form 8K filed in August 2000.

Former Officers and Directors

TOM ATHANS

Mr. Athans served as a Director and President of Ave Inc. from December 28, 1997
to June 1, 1998. Mr. Athans resigned from both positions effective June 1, 1998
to pursue other business interests.

HENRI HORNBY

Mr. Hornby was first elected a Director of Ave Inc. in June of 1995. Since
November, 1989 Mr. Hornby has been engaged in private asset management.
Additionally, from May, 1994 to present he has been an Officer and Director for
Wincanton Corporation, a company which, through its subsidiary Trademan
Industries, is involved in development of specialty motor vehicles. Mr. Hornby
has also been a Director for Adven, Inc., whose business is oil clean-up
products. Mr. Hornby resigned as Director of AVE, Inc. effective July 31, 1999.



GEORGE SULLIVAN

Mr. Sullivan served Ave Inc., as Vice President of Operations from January, 1998
and resigned as a part of the reverse merger agreement with CYCO.NET, Inc.

DAN SMITH

Mr. Smith served Ave Inc. as Chief Financial Officer from January, 1998 until
April, 1998 at which time he resigned to pursue other opportunities.

ITEM 6 - EXECUTIVE COMPENSATION

The following table sets forth information regarding compensation authorized for
the Company's Chief Executive Officer and such compensation as has been
authorized board members since January, 1999. The CEO's total annual salary does
not exceed $100,000 nor does that of any other board member.



<PAGE>   19



                           SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>
                                                                          Long Term Compensation
                                    Annual Compensation                         Awards              Payouts
        (a)            (b)      (c)        (d)          (e)              (f)             (g)          (h)           (i)
Name and Principle    Year    Salary ($)  Bonus     Other Annual     Restricted      Securities      LTIP         All Other
     Position                              ($)     Compensation         Stock        Underlying     Payouts     Compensation
                                                        ($)            Award(s)      Options/SARs     ($)            ($)
                                                                         ($)             (#)
<S>                 <C>       <C>         <C>      <C>               <C>            <C>            <C>          <C>
  Richard Urrea,      1998    $  0.00
   President/CEO      1999    $28,666
                      2000    $70,099
   Daniel Urrea       1998    $  0.00
        CFO           1999    $10,000
                      2000    $29,999
   Brent Wolford      1998    $  0.00
        CTO           1999    $ 7,000
                      2000    $  0.00
   Matthew Urrea      1998    $  0.00
   Chief Counsel      1999    $  0.00
 Francisco Urrea,     1998    $  0.00
        Jr.           1999    $  0.00
     Director
R. Gene Klawetter,    1998    $11,000
     Director         1999    $30,000
  George Sullivan     1998    $ 6,000
    Former V.P.       1999    $ 7,500
    Operations
 Secretary of Ave
       Inc.
</TABLE>


(1) Certain of the Company's executive officers may receive personal benefits in
addition to salary and other cash bonuses. The aggregate amount of the personal
benefits, however, will not exceed the lesser of $10,000 or 10% of the total of
the annual salary and bonus reported for the named officers.


Stock Compensation Plan

The Company has adopted a Compensatory Stock Option Plan (the "CSO Plan") for
officers, key employees, potential key employees, non-employee directors and
advisors . The Company has reserved a maximum of 4,000,000 Common Shares to be
issued upon the exercise of options granted under



<PAGE>   20

the CSO Plan. The CSO Plan will not qualify as an "incentive stock option" plan
under Section 422A of the Internal Revenue Code of 1986, as amended. Options
will be granted under the CSO Plan at exercise prices to be determined by the
Board of Directors or other CSO Plan administrator. With respect to options
granted pursuant to the CSO Plan, optionees will not recognize taxable income
upon the grant of options, but will realize income (or capital loss) at the time
the options are exercised to purchase Common Stock. The amount of income will be
equal to the difference between the exercise price and the fair market value of
the Common Stock on the date of exercise.

The Company will be entitled to a compensating deduction in an amount equal to
the taxable income realized by an optionee as a result of exercising the option.
The CSO Plan will be administered by the Board of Directors or a committee of
directors.


COMPENSATION OF DIRECTORS

CYCO.NET, INC. has agreed to a term as Director for a period of one year and to
reimburse Mr. Klawetter $500 per Board meeting plus expenses.



                    OPTION/SAR GRANTS AS OF DECEMBER 31, 1999
                                Individual Grants

<TABLE>
<CAPTION>
             (a)                           (b)                          (c)                    (d)            (e)
             Name                  Number of Securities       % of Total Options/SARs      Exercise or    Expiration
                                  Underlying Options/SARs     Granted to Employees in      Base Price        Date
                                        Granted (#)                 Fiscal Year              ($/Sh)
<S>                               <C>                         <C>                          <C>            <C>
R. Gene Klawetter,                      400,000                         66.6%                 $0.10        Jan. 2003
   Former CEO, Chairman

George Sullivan                         200,000                         33.3%                 $0.10        Jan. 2003
   Former VP,
   Operations, Corp. Secretary
</TABLE>



No options have been exercised since December 28, 1999 and the number of
securities underlying unexercised options is the same as that shown in the above
table. Under the agreement reached in the merger of AVE, Inc. and CYCO.NET,
Inc., and pursuant to an agreement with the Company as detailed in Board minutes
dated January 12, 1999, the Company will purchase the above number of options
for $0.10 per option within 48 hours after receiving proceeds from the
anticipated Section 504 Regulation D funding described later in this document.

The company has no stock appreciation rights (SAR) plan in place and has not
awarded SAR's to any person. The Company has no long-term incentive plans, as
that term is defined in the rules and regulations of the Securities and Exchange
Commission. The Company does not have an Incentive Stock Option Plan though it
is anticipated that such a plan will be adopted in the future as needs of the
business dictate.




<PAGE>   21


ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None

ITEM 8 - DESCRIPTION OF SECURITIES


Cyco.net applied for and received approval to change the symbol from AVEN to
CYKE. The authorized number of shares of common stock is 30,000,000. There are
currently approximately 20,000,000 shares of common stock outstanding. There are
no preferred shares of stock authorized. Pursuant to the terms of the merger
between Cyco.net and Ave, Inc., the shares of Cyco.net stock would not be free
trading until August, 2000.


The Company is currently de-listed and is therefore only trading on the pink
sheets. The OTC Bulletin Board is the principal market where the Company stock
will be traded. For trading on the OTC Bulletin Board to resume, clearance must
be obtained from the Securities and Exchange Commission.


<PAGE>   22




PART II


ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS

<TABLE>
<CAPTION>
QTR Ending        High      Low
----------        ----      ---
<S>               <C>      <C>
Dec 1998          .500     .180
Mar 1999          .843     .281
Jun 1999          .750     .250
Sep 1999          .625     .062
Dec 1999          .750     .093
Mar 2000          .500     .150
Apr 2000
May 2000
June 2000         .40
</TABLE>

The remaining information is unavailable due to the fact that Cyco.net is
currently de-listed.


The total number of shareholders of record is 451.

No dividends have been paid on the existing shares of stock though there is no
restriction limiting dividends in the future.

The market makers for the Company stock are Hill Thompson, Nite Securities,
Fran, Hrzg, Paragon Capital, and Sharpe.


ITEM 2 - LEGAL PROCEEDINGS

The Company is not a party to any pending or threatened litigation.


ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

         N/A


ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES

1998 STOCK ISSUANCES BY AVE, INC.


The following stock issuances are founders events. These events were created
prior to the merger between Cyco.net and Ave, Inc. This information was provided
by the former CEO of Ave, Inc., Gene Klawetter.


On January 5, 1998, 300,000 shares of Ave, Inc.'s common stock was issued to
Marvin Athans at par value of $0.001 per share for Accounting services rendered
from April 97 to December 97.

On January 5, 1998 100,000 shares of Ave, Inc.'s common stock was issued to
Ferris Peery at a par value of $0.001 per share as a finders fee for introducing
the Director of Ave to DMI Inc.



<PAGE>   23

On January 5, 1998 79,675 shares issued to Olympic Capital Group at par value of
$0.001 per share for legal work during the acquisition of the Ave Inc. shell.

On January 5, 1998 For monies received during the calendar years of 1995 and
1996 the following shares of Ave, Inc.'s common stock were issued to the
following investors and directors. At time of issuance there was not a market
for the stock and the shares were valued at the par value of $0.001 per share:

142,500 shares were issued to David B. Evans at the par value of $0.001 per
share

142,500 shares were issued to E-2 Brokers at the par value of $0.001 per
share

373,874 shares were issued to Henry Hornby at the par value of $0.001 per
share

200,000 shares were issued to Neil F. Hornby at the par value of $0.001
per share.


The following options are discussed in detail in Item 6, Compensation of
Directors:


On August 5, 1998, Ave, Inc. granted 200,000 stock compensation options, at an
exercise price of $0.10 per share, as part of a Financial Consulting Agreement.

On July 20, 1998 and September 11, 1998 Ave, Inc. issued a total of 200,000
shares to E-2 Brokers at the option price of $0.10 per share for cash of
$20,000.


The following stock offerings were issued pursuant to the 504D offering of Ave,
Inc. dated October 1998.


On November 6, 1998, Pursuant to its 504D offering at $.01 per share Ave, Inc.
issued 400,000 share of its $0.001 par value common stock to ICS Communications
Corp. at $0.01 per share for a subscription receivable of $4,000.

During November 1998, Pursuant to its 504D offering at $.01 per share Ave, Inc.
issued 200,000 shares of its $0.001 par value common stock to Jim Betnar for a
Note receivable of $2,000 for $0.01 per share.

On November 12, 1998 Ave, Inc. issued 250,000 shares of its $0.001 par value
common stock to KKG Capital of Queensland, Australia at $0.20 per share for cash
of $50,000. Issuance costs were $4,909.

On November 19, 1998 Ave, Inc. issued 250,000 shares of its $0.001 par value
common stock to Mr. Jim Betnar of Vancouver B.C. at $0.01 per share for cash of
$500 and a Note receivable of $2,000. The Note Receivable has been recorded as a
reduction to Stockholders equity at December 31, 1998.

1999 STOCK ISSUANCES BY AVE, INC.


THIS ISSUANCE WAS MADE PURSUANT TO THE SEC RULE 504D STOCK OFFERING DATED
OCTOBER 1998.


On February 18th and 19th of 1999, Ave, Inc. issued a total of 250,000 shares of
its 0.001 par value common stock to Laburnum Investments of Nassau Bahamas for
$50,000 cash or $0.20 per share.


<PAGE>   24




1999 STOCK ISSUANCES BY CYCO.NET


The following stock issuances are founders events for Cyco.net, a private
company:


On May 21, 1999, the Company issued a total of 1,200,000 shares of its no par
value common stock to Richard A. Urrea as Capital Contribution in formation
stage and services rendered. *

On May 21, 1999, the Company issued a total of 1,200,000 shares of its no par
value common stock to Francisco Urrea Jr. as Capital Contribution in formation
stage and fund raising services. Mr. Urrea gifed 150,000 shares of this amount
to a third party, which accounts for the discrepancy in the amount issued and
the amount currently held by Mr. Urrea. *

On May 21, 1999, the Company issued a total of 1,200,000 shares of its no par
value common stock to MAU LLC for legal services rendered.

On May 21, 1999, the Company issued a total of 1,200,000 shares of its no par
value common stock to Daniel R. Urrea for Services Rendered/Bookkeeping. *

On May 21, 1999, the Company issued a total of 1,000,000 shares of its no par
value common stock to Brent Wolford for Services Rendered/Built Website. *

On May 21, 1999, the Company issued a total of 1,200,000 shares of its no par
value common stock to Nunzio P. DeSantis Family for their aid in fund Raising
and for their introduction to The May Davis Trust. *

On May 21, 1999, the Company issued a total of 200,000 shares of its no par
value common stock to Trey Urrea for his aid in fund raising and introduction to
possible investors. *

On May 21, 1999, the Company issued a total of 170,000 shares of its no par
value common stock to Con Queso LLC 100,000 at $0.05 per share. Total funds
received $5,000, and 70,000 shares for aid in fund raising.


The following stock issuances were made pursuant to SEC Rule 506 offering dated
May, 1999:


On May 28, 1999, the Company issued a total of 50,000 shares of its no par value
common stock to Max Sonnenberg at $0.10 per share. Total funds received $5,000.

On June 1, 1999, the Company issued a total of 100,000 shares of its no par
value common stock to Larry E. Minarsich at $0.10 per share. Total funds
received $10,000. *


<PAGE>   25


On June 18, 1999, the Company issued a total of 20,000 shares of its no par
value common stock to Doug Fenton at $0.10 per share. Total funds received
$2,000. *

On June 23, 1999, the Company issued a total of 50,000 shares of its no par
value common stock to Daniel J Behles at $0.10 per share. Total funds received
$5,000. *

On June 24, 1999, the Company issued a total of 50,000 shares of its no par
value common stock to Charles B. Elias and Joseph J. Elias at $0.10 share. Total
funds received $5,000. *

On July 8, 1999, the Company issued a total of 100,000 shares of its no par
value common stock to Leon Palmisano as payment for the introduction to Ave Inc.
for merger. *

On July 8, 1999, the Company issued a total of 100,000 shares of its no par
value common stock to Dennis C. Chavez at $0.10 per share. Total funds received
$10,000. *

On July 8, 1999, the Company issued a total of 50,000 shares of its no par value
common stock to Paul J Roney for his aid in fund raising and introduction to
possible investors. *


The following stock issuances were made pursuant to SEC Rule 506 offering dated
July 15, 1999.


On September 10, 1999, the Company issued a total of 50,000 shares of its 0.000
par value common stock to John M & Bobbie A. Love at $0.20 per share. Total
funds received $10,000.


The following stock issuances were made pursuant to SEC Rule 506 dated August
17, 1999:


On September 22, 1999, the Company issued a total of 20,000 units to John O.
Harry 10,000 units at $1.00 per unit funds received $10,000 1 unit = 2 shares of
stock and 1 option exercisable at $1.00. Share price of this private placement
was arbitrarily determined.


The following stock issuances were made pursuant to SEC Rule 506 dated December
1, 1999:


On December 7, 1999, the Company issued a total of 200,000 shares of its 0.001
par value stock to Brenden T. Riccobene at $0.05 per share. Total funds received
$10,000. Share price of this private placement was arbitrarily determined.

On December 9, 1999, the Company issued a total of 200,000 shares of its 0.001
par value stock to Dennis Chavez at $0.075 per share. Total funds received
$15,000. Share price of this private placement was arbitrarily determined.

On December 21, 1999, the Company issued a total of 150,000 shares of its 0.001
par value stock to Don Rehm at$0.10 per share. Total funds received $15,000.
Share price of this private placement was arbitrarily determined.


Total received by Cyco.net for the year 1999 $97,000.




<PAGE>   26

2000 STOCK ISSUANCE BY CYCO.NET


The following stock issuances were made pursuant to SEC Rule 506 dated December
1, 1999:


On January 11, 2000 the Company issued a total of 100,000 shares of its 0.001
par value stock to John T. Badal at $0.10 per share. Total funds received
$10,000

January 31, 2000 the Company issued a total of 200,000 shares of its 0.001 par
value stock to Danny Deaver at $0.05 per share. Total funds received $10,000.

On March 10, 2000 the Company issued a total of 20,000 shares of its 0.001 par
value stock to Edward Fittipaldi at $0.10 per share. Total funds received
$2,000.


On June 8, 2000 the Company issued a total of 50,000 shares of its 0.001 par
value stock to Patrick L. Kinsella at a purchase price of $0.10 per share, total
funds received $5,000.

On June 22, 2000 the Company issued a total of 50,000 shares of its 0.001 par
value stock to Aztec Trust at a purchase price of $0.10 per share, total funds
received $5,000.

On September 15, 2000 the Company issued 6000 shares of its 0.001 par value
common stock to John J. Barnaba Jr. for Electrician Services rendered.

On September 15, 2000 the Company issued 50,000 shares of its 0.001 par value
common stock to Doug Fenton at $.10 per share. Total funds received $5,000.

On December 29, 2000 the Company issued 1,000,000 shares of its 0.001 par value
common stock to Con Queso LLC. For consulting services rendered for the period
of June 2000 through December 2000 associated with technical writing services in
preparing documents for the Securities Exchange Commission.

Total funds received for the year 2000 from the issuance of stock $37,000.

* These shares were issued prior to the merger. Therefore, the number of shares
owned by the above listed shareholders increased upon the completion of the
merger.


ITEM 5 -INDEMNIFICATION OF DIRECTORS AND OFFICERS

Pursuant to the terms of the By-Laws of Cyco.net, indemnification is provided to
the fullest extent of the laws of the State of New Mexico. Further, the By-Laws
of Ave, Inc. (now Cyco.net) provide for indemnification as allowed by the laws
of the State of Nevada. Please refer to the By-laws of each company which are
attached as exhibits.

<PAGE>   27
                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

<S>                                                                                      <C>
         Cyco.net, Inc. and Subsidiary

         Report of Independent Auditors                                                  F-2

         Financial Statements

         Consolidated Balance Sheet as of December 31, 1999                              F-3

         Consolidated Statement of Operations for the period from inception
         (January 25, 1999) to December 31, 1999                                         F-4

         Consolidated Statement of Stockholders' Equity for the period from
         inception (January 25, 1999) to December 31, 1999                               F-5

         Consolidated Statement of Cash Flows for the period from inception
         (January 25, 1999) to December 31, 1999                                         F-6

         Notes to Consolidated Financial Statements                                      F-7

         Unaudited Consolidated Balance Sheet as of June 30, 2000                       F-12

         Unaudited Consolidated Statements of Operations for the six months
          ended June 30, 1999 and 2000                                                  F-13

         Unaudited Consolidated Statements of Cash Flows for the six months
          ended June 30, 1999 and 2000                                                  F-14

         Notes to Unaudited Consolidated Financial Statements                           F-15
</TABLE>



                                       F-1
<PAGE>   28

                         REPORT OF INDEPENDENT AUDITORS


Shareholders and Board of Directors
Cyco.net, Inc.



We have audited the accompanying consolidated balance sheet of Cyco.net, Inc.
and Subsidiary (A Development Stage Company) as of December 31, 1999, and the
related consolidated statements of operations, stockholders' (deficit), and cash
flows for the period from inception (January 25, 1999) to December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cyco.net, Inc. and Subsidiary
(A Development Stage Company) as of December 31, 1999, and the results of its
operations, and its cash flows for the period from inception (January 25, 1999)
to December 31, 1999, in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered a loss from operations and has a
working capital deficit. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also discussed in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.



/s/ Stark Tinter & Associates, LLC


Denver, Colorado
June 30, 2000


                                      F-2
<PAGE>   29


                         Cyco.net, Inc. and Subsidiary
                         (A Development Stage Company)
                           Consolidated Balance Sheet
                               December 31, 1999




<TABLE>
<S>                                                          <C>
ASSETS

Current Assets:
   Cash                                                      $  10,737
    Subscription Receivable                                     15,000
    Other receivables                                           26,607
    Inventory                                                    1,057
    Prepaid expenses                                             4,200
                                                             ---------
      Total Current Assets                                      57,601
                                                             ---------
Other assets
   Available for sale securities                                 7,812
                                                             ---------
                                                             $  65,413
                                                             =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)

Current Liabilities:
   Accounts payable and accrued expenses                     $  45,838
   Note payable                                                 10,000
   Due to officer                                               18,000
                                                             ---------
      Total Current Liabilities                                 73,838
                                                             ---------
Stockholders' (deficit)
Common stock, $0.001 par value,
   30,000,000 shares authorized,
   19,940,419 issued and outstanding                            19,940
Additional paid in capital                                     154,265
Deficit accumulated during the development stage              (140,442)
Accumulated other comprehensive (loss):
   Unrealized (loss) on available for sale securities          (42,188)
                                                             ---------
      Total stockholders' (deficit)                             (8,425)
                                                             ---------
                                                             $  65,413
                                                             =========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>   30


                         Cyco.net, Inc. and Subsidiary
                         (A Development Stage Company)
                      Consolidated Statement of Operations
     For the Period From Inception (January 25, 1999) to December 31, 1999


<TABLE>
<S>                                                                   <C>
Revenue                                                               $      9,671

Operating expenses:
  Cost of sales                                                              8,321
  General and administrative expenses                                      141,689
  Interest Expense                                                             103
                                                                      ------------
                                                                           150,113

Net (loss)                                                                (140,442)

Other comprehensive income:
  Unrealized (loss) on available for sale securities                        (4,688)
                                                                      ------------
Comprehensive (loss)                                                  $   (145,130)
                                                                      ============
Per share information:

 Weighted average shares outstanding - basic and fully diluted          17,366,281
                                                                      ============
 Net (loss) per share - basic and fully diluted                       $      (0.01)
                                                                      ============
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>   31


                         Cyco.net, Inc. and Subsidiary
                         (A Development Stage Company)
               Consolidated Statement of Stockholders' (Deficit)
      For the Period From Inception (January 25,1999) to December 31, 1999

<TABLE>
<CAPTION>
                                                                 Common Stock         Additional
                                                           -----------------------     Paid in
                                                             Shares        Amount      Capital
                                                           ----------   ----------   -----------
<S>                                                        <C>          <C>          <C>
Shares issued at inception for services
 at $.001 per share                                        14,976,000   $    7,200   $       --
Reclassification of paid in capital                                --        7,776       (7,776)
Shares issued for cash at $.05 per share                      208,000          208        4,792
Shares issued for services at $.05 per share                  145,600          146        3,354
Shares issued for cash at $.10 per share                      769,600          770       36,230
Shares issued for services at $.10 per share                  312,000          312       14,688
Shares issued in conjunction with a
 recapitalization                                           2,909,219        2,908       43,597
Shares issued for a receivable at $.10 per share 150,000          150       14,850           --
Shares issued for cash at $.50 per share                       20,000           20        9,980
Shares issued for cash at $.20 per share                       50,000           50        9,950
Shares issued for cash at $.05 per share                      200,000          200        9,800
Shares issued for cash at $.075 per share                     200,000          200       14,800
Unrealized loss on available for sale securities                   --           --           --
Net loss for the year                                              --           --           --
                                                           ----------   ----------   ----------
Balance at December 31, 1999                               19,940,419   $   19,940   $  154,265
                                                           ==========   ==========   ==========

<CAPTION>

                                                                             Other
                                                            Accumulated  Comprehensive
                                                              Deficit        (Loss)        Total
                                                             ----------  -------------   ----------
<S>                                                          <C>           <C>           <C>
Shares issued at inception for services
 at $.001 per share                                          $       --    $       --    $    7,200
Reclassification of paid in capital                                  --            --            --
Shares issued for cash at $.05 per share                             --            --         5,000
Shares issued for services at $.05 per share                         --            --         3,500
Shares issued for cash at $.10 per share                             --            --        37,000
Shares issued for services at $.10 per share                         --            --        15,000
Shares issued in conjunction with a
 recapitalization                                                    --            --        46,505
Shares issued for a receivable at $.10 per share 150,000             --            --        15,000
Shares issued for cash at $.50 per share                             --            --        10,000
Shares issued for cash at $.20 per share                             --            --        10,000
Shares issued for cash at $.05 per share                             --            --        10,000
Shares issued for cash at $.075 per share                            --            --        15,000
Unrealized loss on available for sale securities                     --       (42,188)      (42,188)
Net loss for the year                                          (140,442)           --      (140,442)
                                                             ----------    ----------    ----------
Balance at December 31, 1999                                 $ (140,442)   $  (42,188)   $   (8,425)
                                                             ==========    ==========    ==========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>   32




                         Cyco.net, Inc. and Subsidiary
                         (A Development Stage Company)
                      Consolidated Statement of Cash Flows
     For the Period From Inception (January 25, 1999) to December 31, 1999



<TABLE>
<S>                                                                        <C>
Net (loss)                                                                 $(140,442)
  Adjustments to reconcile net (loss) to net cash (used in)
  operating activities:
  Common stock issued for services                                            40,700
  Common stock issued in conjunction with a recapitalization                  46,505
  Available for sale securities received as payment for license rights       (50,000)
  Issuance of stock in exchange for a subscription receivable                (15,000)
  (Increase) in other receivables                                            (26,607)
  (Increase) in inventory                                                     (1,057)
  (Increase) in prepaid expenses                                              (4,200)
  Increase in accounts payable and accrued expenses                           45,838
                                                                           ---------
Net cash (used in) operating activities                                     (104,263)
                                                                           ---------
Cash flows from investing activities:
Net cash provided by investing activities                                         --
                                                                           ---------
Cash flows from financing activities:
  Proceeds from stock issuance                                                87,000
  Increase in amounts due to related party                                    18,000
  Proceeds from note payable                                                  10,000
                                                                           ---------
Net cash provided by financing activities                                    115,000
                                                                           ---------
Net increase in cash                                                          10,737
Beginning - cash balance                                                          --
                                                                           ---------
Ending - cash balance                                                      $  10,737
                                                                           =========
Supplemental cash flow information:
  Cash paid for income taxes                                               $      --
  Cash paid for interest                                                   $      --
Non-cash investing and financing activities:
  Unrealized loss on available for sale securities                         $  42,188
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>   33


                          Cyco.net, Inc. and Subsidiary
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements
                                December 31, 1999

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

The Company was incorporated on January 25, 1999 in the State of New Mexico. The
Company is in the development stage and it's intent is to develop a network of
web based businesses.

During July, 1999 the Company completed a reorganization with AVE, Inc. a Nevada
corporation, whose net assets aggregated $46,505. In conjunction therewith, AVE,
Inc. issued 16,411,200 shares of its restricted common stock for all of the
issued and outstanding common shares of the Company. This reorganization will be
accounted for as though it were a recapitalization of the Company and sale by
the Company of 2,909,219 shares of common stock in exchange for the net assets
of AVE, Inc.

Basis of reporting

The Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business.

The Company has experienced a loss from operations as a result of its investment
necessary to achieve its operating plan, which is long-range in nature. For the
period ended December 31, 1999 the Company incurred a net loss of $140,442 and
at December 31, 1999, the Company has a working capital deficit of $16,237.

The Company's ability to continue as a going concern is contingent upon its
ability to secure financing, increase ownership equity and attain profitable
operations. In addition, the Company's ability to continue as a going concern
must be considered in light of the problems, expenses and complications
frequently encountered by entrance into established markets and the competitive
environment in which the Company operates.

The Company is pursuing financing for its operations and seeking additional
private placement investments. Failure to secure such financing or to raise
additional equity capital may result in the Company depleting its available
funds and not being able pay its obligations.

The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary. All significant intercompany accounts and
transactions have been eliminated.

Revenue Recognition

The Company's records revenue when products are shipped or services are
performed.

Inventory

Inventory is stated at the lower of cost or market, cost being determined on a
first-in, first-out basis.



                                       F-7
<PAGE>   34


                          Cyco.net, Inc. and Subsidiary
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements
                                December 31, 1999


Advertising. Costs

The Company expenses all costs of advertising as incurred. Advertising costs
included in selling, general and administrative expenses aggregated $2,178 in
1999.

Cash, Cash Equivalents and Short-term Investments

The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.

Financial Instruments

The carrying amounts for the Company's cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses, and notes payable approximate
fair value as they are short term in nature or are receivable or payable on
demand.

Long Lived Assets

The carrying value of long lived assets is reviewed on a regular basis for the
existence of facts and circumstances that suggest impairment. To date, no such
impairment has been indicated. Should there be an impairment in the future, the
Company will measure the amount of the impairment based on the undiscounted
expected future cash flows from the impaired assets.

Net Income (Loss) per Common Share

The Company calculates net income (loss) per share as required by SFAS No. 128,
"Earnings per Share." Basic earnings (loss) per share is calculated by dividing
net income (loss) by the weighted average number of common shares outstanding
for the period. Diluted earnings (loss) per share is calculated by dividing net
income (loss) by the weighted average number of common shares and dilutive
common stock equivalents outstanding. During the periods presented common stock
equivalents were not considered as their effect would be anti dilutive.

Stock-Based Compensation

The Company accounts for stock based compensation in accordance with SFAS No.
123, "Accounting for Stock-Based Compensation." The provisions of SFAS No. 123
allow companies to either expense the estimated fair value of stock options or
to continue to follow the intrinsic value method set forth in APB Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") but disclose the pro forma
effects on net income (loss) had the fair value of the options been expensed.
The Company has elected to continue to apply APB 25 in accounting for its stock
option incentive plans.

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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.



                                      F-8
<PAGE>   35


                          Cyco.net, Inc. and Subsidiary
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements
                                December 31, 1999


Segment Information

The Company follows SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information." Certain information is disclosed, per SFAS No. 131,
based on the way management organizes financial information for making operating
decisions and assessing performance. The Company currently operates in a single
segment and will evaluate additional segment disclosure requirements as it
expands its operations.

Recent Pronouncements

The FASB recently issued Statement No 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of Effective Date of FASB Statement
No. 133". The Statement defers for one year the effective date of FASB Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities". The
rule now will apply to all fiscal quarters of all fiscal years beginning after
June 15, 2000. In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which is required to be adopted
in years beginning after June 15, 1999. The Statement permits early adoption as
of the beginning of any fiscal quarter after its issuance. The Statement will
require the Company to recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. The Company has not
yet determined if it will early adopt and what the effect of SFAS No. 133 will
be on the earnings and financial position of the Company.

Note 2.  MARKETABLE SECURITIES

In conjunction with the recapitalization described in Note 1 the Company
acquired certain marketable securities with a cost of $50,000, an unrealized
(loss) of $37,500 and a fair market value of $12,500.

The Company's marketable securities consist of the above investment in equity
securities and are classified as available for sale. The net unrealized gains
(losses) are included in accumulated other comprehensive income as a component
of stockholders' equity.

Marketable securities consist of the following at December 31, 1999:

<TABLE>
<CAPTION>
                                             Amortized      Fair Market     Unrealized
                                               Cost            Value        Gain (loss)
                                             ---------      -----------     -----------
<S>                                          <C>             <C>             <C>
Prime Companies, Inc. (25,000 shares)        $ 50,000        $  7,812        $(42,188)
</TABLE>



                                      F-9
<PAGE>   36


                          Cyco.net, Inc. and Subsidiary
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements
                                December 31, 1999


Note 3.  STOCKHOLDERS' EQUITY

At inception the Company issued 14,976,000 shares of common stock for services
valued at $7,200 which management believes is the fair market value of the
services provided.

During the period from May 1999 through July 1999 the Company issued 977,600
shares of its $0.001 par value common stock to various investors for cash
aggregating $42,000 and 457,600 shares of its $.001 par value common stock to
various individuals in exchange for services valued at $18,500.

During July 1999 the Company issued 2,909,219 shares of its $0.001 par value
common stock in conjunction with a recapitalization (see Note 1).

During August 1999 the Company commenced a private placement of 2,000,000 units
at $1.00 per unit. Each unit consists of 2 shares of the Company's $0.001 par
value common stock and 1 common stock purchase warrant exercisable at $1.00 per
common share. No shares were sold pursuant to this offering through December 31,
1999.

During the period from August 1999 through December 1999 the Company issued
620,000 shares of its $0.001 par value common stock to various investors for
cash aggregating $45,000 and a receivable of $15,000. The receivable was
collected during January 2000 and is classified as a current asset at December
31, 1999.

During the periods covered by these financial statements the Company issued
shares of common stock without registration under the Securities Act of 1933.
Although the Company believes that the sales did not involve a public offering
of its securities and that the Company did comply with the "safe harbor"
exemptions from registration, it could be liable for rescission of the sales if
such exemptions were found not to apply and this could have a material negative
impact on the Company.

Note 4.  RELATED PARTY TRANSACTIONS

At December 31, 1999 the Company has outstanding a $18,000 non-interest bearing
loan from an officer.

Note 5.  NOTE PAYABLE

During 1998 the Company borrowed $10,000 from an unrelated party at 8% interest.
The principle and interest aggregating are due on demand.

Note 6.  INCOME TAXES

The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (FAS 109), "Accounting for Income Taxes", which requires use
of the liability method. FAS 109 provides that deferred tax assets and
liabilities are recorded based on the differences between the tax bases of
assets and liabilities and their carrying amounts for financial reporting
purposes, referred to as temporary differences. Deferred tax assets and
liabilities at the end of each period are determined using the currently enacted
tax rates applied to taxable income in the periods in which the deferred tax
assets and liabilities are expected to be settled or realized.

The provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate to income before provision for income taxes.
The sources and tax effects of the differences are as follows:



                                      F-10
<PAGE>   37


                          Cyco.net, Inc. and Subsidiary
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements
                                December 31, 1999


<TABLE>
<S>                                              <C>
         Income tax provision at
          the federal statutory rate             35 %
         Effect of operating losses             (35)%
                                                ----
                                                  --%
                                                ====
</TABLE>

As of December 31, 1999, the Company has a net operating loss carryforward of
approximately $140,000 for tax purposes, which will be available to offset
future taxable income. If not used, this carryforward will expire in 2019. To
the extent that net operating loss carryforwards, when realized, relate to stock
option deductions, the resulting benefits will be credited to stockholders'
equity. The deferred tax asset relating to the operating loss carryforward of
approximately $49,000 has been fully reserved at December 31, 1999.

Note 7.  STOCK BASED COMPENSATION

The Company has a compensatory stock option plan. Under the plan, the Company
may grant options for up to 4,000,000 shares of common stock. The exercise price
of each option shall be determined by the Compensation Committee or by the CEO
with reference to factors such as current fair market value of the Stock, net
book value per share, regular or other remuneration already being received by
the optionee. The maximum term of the options is five years and they vest on the
date granted.

The Company granted 600,000 options exercisable at $.10 per share to officers of
the Company. These options are exercisable at any time through January 31, 2003.
The Company has agreed, to repurchase these 600,000 options for $60,000 upon the
receipt of proceeds from a Regulation D, Rule 504 offering.

The effect of applying SFAS No. 123 pro forma net loss is not necessarily
representative of the effects on reported net income (loss) for future years due
to, among other things, the vesting period of the stock options and the fair
value of additional stock options in future years. Had compensation cost for the
Company's stock option plans been determined based upon the fair value at the
grant date for awards under the plans consistent with the methodology prescribed
under SFAS No. 123, the Company's net (loss) would be unchanged.

At December 31, 1999 the Company had outstanding 600,000 stock options which
were all exercisable, through January 31, 2003, with a weighted average exercise
price of $.10 and a weighted average fair value of $.10.

Note 8. COMMITMENTS

In August 1999 the Company entered into a line of credit agreement ("the
agreement") . Pursuant to the terms of the agreement the Company may issue and
sell to an investor up to $890,000 of debentures. The investments in the
debentures may be made in reliance upon the provisions of Rule 504 of the
Securities Act of 1933 and other exemptions from registration of the Securities
Act as may be available.

As of the date of these financial statements no debentures have been issued.



                                      F-11
<PAGE>   38


                         Cyco.net, Inc. and Subsidiary
                           Consolidated Balance Sheet
                                 June 30, 2000
                                  (Unaudited)



<TABLE>
<S>                                                       <C>
ASSETS

Current Assets:
   Cash                                                   $  70,875
    Accounts receivable                                      68,474
    Other receivables                                        33,204
    Inventory                                                 1,724
                                                          ---------
      Total Current Assets                                  174,277
                                                          ---------
Other assets
   Available for sale securities                             29,688
                                                          ---------
                                                          $ 203,965
                                                          =========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Accounts payable and accrued expenses                  $ 139,310
   Note payable                                              10,000
   Due to officers                                           25,482
                                                          ---------
      Total Current Liabilities                             174,792
                                                          ---------
Stockholders' equity
Common stock, $0.001 par value,
   30,000,000 shares authorized,
   20,360,419 issued and outstanding                         20,360
Additional paid in capital                                  185,845
Accumulated deficit                                        (156,720)
Accumulated other comprehensive income:
   Unrealized (loss) on available for sale securities       (20,312)
                                                          ---------
      Total stockholders' equity                             29,173
                                                          ---------
                                                          $ 203,965
                                                          =========
</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-12
<PAGE>   39


                         Cyco.net, Inc. and Subsidiary
                     Consolidated Statements of Operations
                For the Six Months Ended June 30, 1999 and 2000
                                  (Unaudited)



<TABLE>
<CAPTION>
                                                                        1999             2000
                                                                   -------------     ------------
<S>                                                                <C>               <C>
Revenue                                                            $         --      $    652,029

Operating expenses:
  Cost of sales                                                              --           578,091
  General and administrative expenses                                    26,638            90,216
                                                                   ------------      ------------
                                                                         26,638           668,307

Net income (loss)                                                       (26,638)          (16,278)

Other comprehensive income:
  Unrealized gain (loss) on available for sale securities                    --            21,876
                                                                   ------------      ------------

Comprehensive income (loss)                                        $    (26,638)     $      5,598
                                                                   ============      ============

Per share information:

 Weighted average shares outstanding - basic and fully diluted        7,327,033        20,219,210
                                                                   ============      ============

 Net income (loss) per share - basic and fully diluted             $      (0.00)        $ (0.00))
                                                                   ============      ============
</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-13
<PAGE>   40


                         Cyco.net, Inc. and Subsidiary
                     Consolidated Statements of Cash Flows
                For the Six Months Ended June 30, 1999 and 2000
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                              1999          2000
                                                            --------      --------
<S>                                                         <C>           <C>
Cash flows from operating activities:
    Net cash provided by (used in) operating activities     $(20,031)     $  5,656
                                                            --------      --------
Cash flows from investing activities:
    Net cash provided by investing activities                     --            --
                                                            --------      --------
Cash flows from financing activities:
      Net cash provided by financing activities               32,000        54,482
                                                            --------      --------
Net increase (decrease) in cash                               11,969        60,138

Beginning - cash balance                                          --        10,737
                                                            --------      --------
Ending - cash balance                                       $ 11,969      $ 70,875
                                                            ========      ========
</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-14
<PAGE>   41


                                 Cyco.net, Inc.
                   Notes to Consolidated Financial Statements
                                  June 30, 2000
                                   (Unaudited)

(1) Basis Of Presentation

The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") for interim financial
information and Item 310(b) of Regulation SB. They do not include all of the
information and footnotes required by GAAP for complete financial statements. In
the opinion of management, all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation have been included.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. For further
information, refer to the financial statements of the Company as of December 31,
1999 including notes thereto included in the Company's Form 10-SB.

The accompanying consolidated financial statements include the accounts of the
Company and its subsidiary. Intercompany transactions and balances have been
eliminated in consolidation.

(2) Earnings Per Share

The Company calculates net income (loss) per share as required by SFAS No. 128,
"Earnings per Share." Basic earnings (loss) per share is calculated by dividing
net income (loss) by the weighted average number of common shares outstanding
for the period. Diluted earnings (loss) per share is calculated by dividing net
income (loss) by the weighted average number of common shares and dilutive
common stock equivalents outstanding. During the periods presented common stock
equivalents were not considered as their effect would be anti dilutive.

(3) Impairment of Long Lived Assets

Long lived assets and certain identifiable intangibles held and used by the
Company are reviewed for possible impairment whenever events or circumstances
indicate the carrying amount of an asset may not be recoverable or is impaired.
Management has not identified any impairment losses as of June 30, 2000.

(4) Reclassifications

Certain amounts included in the accompanying financial statements from the
previous year have been reclassified to conform to the current year's
presentation.

(5)      Marketable Securities

The Company's marketable securities consist of an investment in equity
securities and are classified as available for sale. The net unrealized gains
(losses) are included in accumulated other comprehensive income as a component
of stockholders' equity.

Marketable securities consist of the following at June 30, 2000:

<TABLE>
<CAPTION>
                                         Amortized   Fair Market    Unrealized
                                           Cost         Value      Gain (loss)
                                         ---------   -----------   -----------
<S>                                      <C>          <C>          <C>
Prime Companies, Inc (25,000 shares)     $ 50,000     $ 29,688     $(20,312)
</TABLE>



                                      F-15
<PAGE>   42


                                 Cyco.net, Inc.
                   Notes to Consolidated Financial Statements
                                  June 30, 2000
                                   (Unaudited)
                                   (Continued)

(6) Stockholders' Equity

During the period from January through June, 2000, the Company issued 420,000
shares of its $0.001 par value common stock to various investors at prices
ranging from $0.05 to $0.10 per share for cash aggregating $32,000.




                                      F-16
<PAGE>   43
PART III


INDEX TO EXHIBITS

     2.1  Acquisition Agreement between Ave and DMI

     2.2  Majority Written Consent of Directors of Ave Inc. dated July 9, 1999

     2.3  Letter of Intent between Ave and CyCo.Net dated July 9, 1999

     2.4  Stock Specimen

     2.5  Board of Directors Resolution dated January 5, 1998

     2.6  Resolution of the Directors of Walsh Communications Group dated May 4,
          1990 to change name to Ave, Inc.

     2.7  Certificate of Amendment to Change name to Ave, Inc. dated 5/7/90

     2.8  Certificate of Agreement of Merger of DeLuxe Onyx Company dated
          January 23, 1987.

     2.9  Certificate and Agreement of Merger of DeLuxe dated 1/23/87.

     2.10 Certificate Amending Certificate of Incorporation dated January 23,
          1987.

     3.   Ave, Inc. By Laws

     2.1  Majority Written Consent of Directors of Ave, Inc. Dated January 20,
          1998

     21.1 Articles in Incorporation of Cyco,Net the Wholly Owned Subsidiary of
          Cyco.Net (formerly Ave, Inc.)

     21.2 Certificate of Amendment to Articles of Cyco.Net to change name from
          Ave, Inc. to Cyco.Net.

     21.3 Certificate of Amendment of Cyco.Net

     21.4 Organizational Minutes of Cyco.Net

     21.5 By-Laws of Cyco.Net, Inc.

     99.1 Line of Credit Agreement dated August 9, 1999

     99.2 Promissory note from Cyco.net to Francisco Urrea Jr.

     27.  Financial Data Schedule


SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.



                                    Cyco.Net

Date: 2/16/01                       By: /s/ RICHARD URREA
     ---------------------             ---------------------------------------
                                              Richard Urrea, President